Surge Components Inc's Business Segments

We are a supplier of electronic products and components. These products include capacitors, which are electrical energy storage devices, and discrete components, such as semiconductor rectifiers, transistors and diodes, which are single function low power semiconductor products that are packaged alone as compared to integrated circuits such as microprocessors. The products that we sell are typically utilized in the electronic circuitry of diverse products, including, but not limited to, automobiles, telecomm, audio, cellular telephones, computers, consumer electronics, garage door openers, household appliances, power supplies and security equipment. The products that we sell are sold to both original equipment manufacturers, commonly referred to as OEMs, who incorporate them into their products, and to distributors of the lines of products we sell, who resell these products within their customer base. Surge sells its products through three of the top four distributors for electronic components in the world and also supplies its products to subcontractors who manufacture for their customers. These channels open doors to Surge at customers which Surge may not have access to otherwise. The products that we sell are manufactured predominantly in Asia by approximately sixteen independent manufacturers. We only have one binding long-term supply agreement with one of our manufacturers, Lelon Electronics. We have an agreement to act as the exclusive sales agent utilizing independent sales representative organizations in North America to sell and market the products for one of such manufacturers, Lelon Electronics. When we act as a sales agent, we receive a commission from our supplier who sold the product to the customer that we introduced to our supplier. The amount of the commission is determined on a sale by sale basis depending on the profit margin of the product. Commission revenue totaled $244,631 and $303,968 for the fiscal years ended November 30, 2017 (“Fiscal 2017”) and November 30, 2016 (“Fiscal 2016”), respectively.

The Company operates through two divisions, Surge and Challenge. The Chief Executive Officer, serving as the Chief Operating Decision Maker (CODM), reviews financial information for each division separately to assess performance and allocate resources. Both divisions acquire and distribute substantially similar products to similar customer types and operate within the same economic environment, sharing comparable production processes, distribution methods, and regulatory frameworks. Although financial information is reviewed separately, Surge and Challenge meet the aggregation criteria under ASC 280, Segment Reporting, and are combined into a single reportable segment. Consequently, the Company reports one segment, with segment disclosures presented as entity-wide disclosures. Revenue by geographic region is detailed in Note M, and the majority of long-lived assets are located in the United States and Hong Kong.