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 United States electronics distribution industry is composed of manufacturers,
national and international distributors, as well as regional and local distributors.
Electronics distributors market numerous products, including active components
(such as transistors, microprocessors, integrated circuits and semiconductors),
passive components (such as capacitors and audibles), and electro mechanical,
interconnect (such as connectors and wire) and computer products. Surge focuses
its efforts on the sale of capacitors, discrete components, and audible products.
The electronics industry has been characterized by intense price cutting and
rapid technological changes and development, which could materially adversely
affect our future operating results. In addition, the industry has been affected
historically by periodic economic downturns, which have had an adverse economic
effect upon manufacturers and end-users of the products that we sell, as well
as distributors. Furthermore, the life-cycle of existing electronic products
and the timing of new product development and introduction can affect the demand
for electronic components, including the products that we sell. Accordingly,
any downturn in the electronics industry in general could adversely affect our
business and results of operations. Due to rising transportation and employment
costs in Asia, we have seen some U.S. manufacturers start moving their manufacturing
facilities to Mexico to reduce transportation costs and bring manufacturing
much closer to home. At this time, however, none of our customers has moved
its manufacturing facilities to Mexico.
A capacitor is an electrical energy storage device used in the electronics
industry for varied applications, principally as elements of resonant circuits,
coupling and bypass applications, blockage of DC current, frequency determining
and timing elements, filters and delay-line components. All products are available
in traditional leaded as well as surface mount (chip) packages. The product
line of capacitors we sell includes:
Aluminum Electrolytic Capacitors- These capacitors, which are Surge’s
principal product, are storage devices used in power applications to store and
release energy as the electronic circuitry demands. They are commonly used in
power supplies and can be found in a wide range of consumer electronics products.
Our supplier has one of the largest facilities for these products in Taiwan
and China. These facilities are fully certified for the International Quality
Standard ISO 9001 and QS9000, and TS16949, which means that they meet the strictest
requirements established by the automotive industry and adopted throughout the
world to ensure that the facility’s manufacturing processes, equipment
and associated quality control systems will satisfy specific customer requirements.
This system is also intended and designed to facilitate clear and thorough record
keeping of all quality control and testing information and to ensure clear communication
from one department to another about the information (i.e., quality control,
production or engineering). This certification permits us to monitor quality
control/manufacturing process information and to respond to any customer questions.
Ceramic Capacitors- These capacitors are the least expensive, and are widely
used in the electronics industry. They are commonly used to bypass or filter
semiconductors in resonant circuits and are found predominantly in a wide range
of low cost products including computer, telecom, appliances, games and toys.
Mylar Film Capacitors- These capacitors are frequently used for noise suppression
and filtering. They are commonly used in telecommunication and computer products.
Surge’s suppliers in China have facilities fully certified for all of
the above mentioned quality certifications.
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