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Surge Components, Inc. Announces Fiscal Second Quarter 2017 Results

Surge Components, Inc. (“Surge” or “the Company”) (OTC Pink:SPRS), a leading supplier of capacitors, discrete semi-conductors and audible/sounding devices, today announced financial results for the fiscal second quarter ended May 31, 2017.

Ira Levy, President and Chief Executive Officer of Surge, said, “We delivered another solid operational performance in the second quarter. On a year-over-year basis, net sales increased 5.0% driven by a strong sales pipeline, the successful introduction of new product lines to the market, and continued growth in our distribution sales channels. Gross profit increased 9.6% year-over-year, due to our focus on our efficient management of the business and higher margin customers. We also saw growth in revenue and gross profit margins over the fiscal first quarter ended February 28, 2017, which was significantly impacted by costs associated with our previously settled proxy contest and tender offer.

“Leveraging a robust customer base, including Fortune 500 technology companies, we remain focused on maximizing profitability globally and across industries. We have established a world-class supply chain with strong relationships and productivity capabilities that are enabling us to win new customers. We also have an international footprint that continues to grow with strong sales in Asia and Europe. Importantly, our innovative pipeline of new products continues to drive strong customer acquisition. We believe we are well positioned for continued growth and to deliver long-term value for our shareholders.”

Results of Operations for the Three Months Ended May 31, 2017

Net sales for the three months ended May 31, 2017 increased by 5.0% to $7.4 million, as compared to net sales of $7.1 million for the three months ended May 31, 2016. The increase in net sales is primarily attributable to increases in product orders from customers.

Gross profit for the three months ended May 31, 2017 increased by 9.6% to $1.8 million, as compared to $1.6 million for the three months ended May 31, 2016. Gross profit margin as a percentage of net sales increased to 24.1% for the three months ended May 31, 2017, as compared to 23.1% for the three months ended May 31, 2016. The increases in both metrics are primarily attributable to business with new and existing customers with higher profit margins.

Selling and shipping expenses for the three months ended May 31, 2017 decreased by 0.8% to $660,198, as compared to $665,300 for the three months ended May 31, 2016. The decrease in selling and shipping expenses is attributable to decreases in commissions and advertising expense as well as travel, entertainment and auto expenses, offset by increases related to hiring additional salespeople and freight expenses.

General and administrative expenses for the three months ended May 31, 2017 increased by 11.5% to $1.2 million, as compared to $1.1 million for the three months ended May 31, 2016. The increase in general and administrative expenses is primarily attributable to $54,000 in costs related to the tender offer completed by the Company in March 2017 and related expenses. Also contributing to the increase were higher health insurance, investor relations, insurance and computer expenses, offset by decreases in temporary help, utilities, consulting and bad debt expenses.

Net loss for the three months ended May 31, 2017 was $103,334, as compared to net loss of $107,799 for the three months ended May 31, 2016.

This press release should be read in conjunction with the consolidated financial statements included in the Company’s most recent quarterly report on Form 10-Q, which can be found at www.surgecomponents.com and at www.sec.gov.

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 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," "expects," "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.

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