Surge Components, Inc. Announces Third Quarter 2026 Results

• Delivered Q3 Net Sales of $10.1 Million, Gross Profit of $2.7 Million, and earnings per share of $0.04
• For the nine-month period ended August 31, 2026, on a year-over-year basis, Net Sales rose 4.6%, Gross Profit rose 6.1%, and Gross Margin rose 40 basis points
• Maintained profitability while continuing to invest in global sales expansion, engineering talent, and future growth initiatives
• Ended the quarter with approximately $14.2 million of cash and marketable securities

DEER PARK, N.Y.--(BUSINESS WIRE)--Surge Components, Inc. (“Surge” or the “Company”) (OTC Pink: SPRS), a leading supplier of capacitors, discrete semi-conductors, switches, and audible/sounding devices, today announced financial results for the third fiscal quarter ended August 31, 2026.

Operational Highlights

• Expands global commercial reach across Europe and Asia
• Continues to invest in growth including the hiring of new engineering talent

Financial Highlights for the Third Quarter Ended August 31, 2026

• Net sales of $10.1 million, compared to $10.3 million in the prior-year period
• Gross profit of $2.7 million, compared to $2.8 million in the prior-year period
• Net income available to common shareholders of $218,032; earnings per share of $0.04 compared to net income available to common shareholders of $469,705; earnings per share of $0.08 in the prior-year-period

“We are pleased to deliver another profitable quarter while continuing to invest in global sales expansion, engineering talent, and long-term growth initiatives,” said Ira Levy, President and Chief Executive Officer of Surge.

“During the quarter, we continued to actively expand our global reach in Europe and Asia, adding regional offices and sales talent to support long-term growth opportunities.”

“Beyond our direct customer relationships, distribution channels and sales through subcontractors that manufacture on behalf of customers continue to represent an important avenue for expanding our reach to a broad base of end customers."

“We would also like to touch on industry trends. As demand across the AI ecosystem continues to grow, supply constraints and longer lead times may emerge across parts of the industry. With shorter lead times from our manufacturing partners, we believe we are well positioned to help customers secure critical products and expect to pursue opportunities within the AI ecosystem.”

“Furthermore, industry-wide shortages of certain electronic components, including memory devices, have resulted in not only longer lead times across the market, but also higher prices. Against this backdrop, our competitive pricing and shorter lead times position us well to support customers, gain market share, and capitalize on growth opportunities.”

“Moreover, our strong balance sheet provides ample flexibility to support investments in growth initiatives and expand commercial capabilities. We believe our strategic initiatives and unique value proposition that combines speed, competitive pricing, cutting-edge products, and ease of doing business position us well for continued growth and value creation through 2026 and beyond.”

Results of Operations for the Three and Nine Months Ended August 31, 2026

Consolidated net sales for the nine months ended August 31, 2026 increased by $1,223,092 or 4.6%, to $27,645,586 as compared to net sales of $26,422,494 for the nine months ended August 31, 2025. Consolidated net sales for the three months ended August 31, 2026 decreased by $184,046 or 1.8%, to $10,089,985 as compared to net sales of $10,274,031 for the three months ended August 31, 2025. We attribute the increase for the nine months ended August 31, 2026 to an increase in business with new customers as well as an increase in business with existing customers. We attribute the decrease for the three months ended August 31, 2026 to a decrease in volume of sales for certain customers during the three months ended August 31, 2026. Net sales for the nine months ended August 31, 2026 and August 31, 2025 reflect $443,759 and $700,253, respectively of tariff costs that the Company was able to pass on to its customers.

Our gross profit for the nine months ended August 31, 2026 increased by $459,176 to $8,037,984, or 6.1%, as compared to $7,578,808 for the nine months ended August 31, 2025. Gross margin as a percentage of net sales increased to 29.1% for the nine months ended August 31, 2026 compared to 28.7% for the nine months ended August 31, 2025. Gross profit for the three months ended August 31, 2026 decreased by $105,451 to $2,739,252, or 3.7%, as compared to $2,844,703 for the three months ended August 31, 2025. Gross margin as a percentage of net sales decreased to 27.1% for the three months ended August 31, 2026 compared to 27.7% for the three months ended August 31, 2025. The increase in gross profit and gross profit as a percentage of sales for the nine months ended August 31, 2026 can be attributed to the increase in sales volume and to certain products being sold at a higher profit margin. The decrease in gross profit and gross profit as a percentage of sales for the three months ended August 31, 2026 can be attributed to a decrease in business with existing customers as well as certain products with lower gross profit being sold during this period. Our industry will continue to receive pressure from customers for price reductions. Some of them further demand periodic price reductions on a quarterly or semi-annual basis, as opposed to annual fixed pricing. We work with electronic manufacturing service subcontractor customers who manufacture products for other customers who do not have their own manufacturing operations. At times we are not able to recover these price reductions from our suppliers. The Company has agreements with these subcontractor customers to provide periodic cost reductions through rebates in the amount of 5%. These reductions only affect future shipments of our products and do not affect existing orders. These reductions can have a negative impact on our profit margins since they reduce the amount of commissions we can earn. Even though this rebate can impact the Company’s gross profit margin, these subcontractor customers represent very significant potential growth for the Company because they can help the Company become an approved supplier at the customers they manufacture for and they purchase our components for these customers. We believe it would be very difficult for the Company to achieve business at these customers without the help of these subcontractor customers. The Company was impacted by tariff costs on certain products imported from China, which went into effect as of July 6, 2018 as well as the new tariffs that went into effect as of February 4, 2025. The Company has been able to pass along a portion of these costs to its customers. The Company is also moving some customer deliveries directly to Hong Kong in order to mitigate some of these costs. However, there can be no assurance that we will be able to pass along the new costs or the effects if any it will have on our revenue in the future.

Selling and shipping expenses for the nine months ended August 31, 2026 was $2,588,796, an increase of $535,303, or 26.1%, as compared to $2,053,493 for the nine months ended August 31, 2025. Selling and shipping expenses for the three months ended August 31, 2026 was $866,605, an increase of $145,331, or 20.1%, as compared to $721,274 for three months ended August 31, 2025. We attribute the increases in selling and shipping expenses for the nine and three months ended August 31, 2026, primarily to higher selling expenses, such as commission expenses, sales payroll, due to the hiring of additional sales personnel and travel and entertainment expenses, as well as auto expenses, freight out and trade show expenses.

General and administrative expenses for the nine months ended August 31, 2026 was $4,872,994, an increase of $117,503, or 2.5% as compared to $4,755,491 for the nine months ended August 31, 2025. General and administrative expenses for the three months ended August 31, 2026 was $1,613,912, an increase of $167,124, or 11.6%, as compared to $1,446,788 for the three months ended August 31, 2025. The increase for the nine months ended August 31, 2026 is due to increases in officers’ salaries and other salaries, rent expenses as well as maintenance, office expenses. Additionally, increases in consulting and directors fees as well as public company expenses and pension expenses, partially offset primarily to decreases in non-cash stock based compensation of $518,954 in the nine and three months ending August 31, 2025, as well as decreases in warehouse, utilities and insurance expenses as well as decreases in computer expenses and professional fees and bank charges and bad debt expenses. The increase for the three months ended August 31, 2026 can be attributed to increases in officer salaries and other salaries as well as rent, maintenance, computer expenses, consulting expenses, directors fees, public company expenses and pension expenses as partially offset by decreases in utilities, general insurance, professional fees expenses and bad debt expenses.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements. All statements other than statements of historical facts contained herein, including statements regarding global economic conditions, our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, forward-looking statements can be identified by terms such as "may," "will," "should," "expected," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar words. These statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that may affect our business, financial condition and results of operations. We discuss many of the risks in greater detail under the heading "Risk Factors" in our Annual Report on Form 10-K. These forward-looking statements represent our estimates and assumptions only as of the date of this press release. We assume no obligation to update any forward-looking statements for events or circumstances occurring after the date of this press release, except as required by law.