UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, DC 20549

 FORM 10-K

 (Mark One)

 ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended November 30, 2023

 TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from _______ to _______

 Commission File No. 000-27688

 (Exact name of registrant as specified in its charter)

 Nevada

 11-2602030

 (State or Other Jurisdiction of

Incorporation or Organization)

 (I.R.S. Employer

Identification No.)

 95 East Jefryn Boulevard
 Deer Park, New York

 11729

 (Address of principal executive offices)

 (Zip Code)

 (631) 595-1818

 (Registrant's telephone number, including area code)

 Securities registered pursuant to Section 12(b)
of the Exchange Act:

 Title of Each Class to be so Registered:

 Name of each exchange on which registered

 None

 None

 Securities registered under Section 12(g) of the
Act:

 Common Stock, Par Value $0.001

 Preferred Stock Purchase Rights

 (Title of Class)

 Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No

 Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No

 Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.
See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large Accelerated Filer

 Accelerated Filer

 Non-accelerated Filer

 Smaller reporting company

 Emerging growth company

 If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.

 Indicate by check mark whether the registrant
has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.

 If securities are registered pursuant
to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements.

 Indicate by check mark whether any
of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

 Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 As of May 31, 2023, the aggregate market value
of the issued and outstanding common stock held by non-affiliates of the registrant, based upon the closing price of the common stock,
was approximately $ 10.1 million.

 The registrant's common stock outstanding as of February 24,
2024, was 5,577,698 shares of common stock.

 Item 1.

 Business

 Item 1A.

 Risk
 Factors

 Item 1B.

 Unresolved
 Staff Comments

 Item 2.

 Properties.

 Item 3.

 Legal
 Proceedings.

 Item 4.

 Mine
 Safety Disclosures.

 Item 5.

 Market
 For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 Item 6.

 [Reserved]

 Item 7.

 Management's
 Discussion and Analysis of Financial Condition and Results of Operations.

 Item 7A.

 Quantitative
 and Qualitative Disclosures About Market Risk.

 Item 8.

 Financial
 Statements and Supplementary Data.

 Item 9.

 Changes
 in and Disagreements With Accountants on Accounting and Financial Disclosure.

 Item 9A.

 Controls
 and Procedures.

 Item 9B.

 Other
 Information.

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

 Item 10.

 Directors,
 Executive Officers, and Corporate Governance.

 Item 11.

 Executive
 Compensation.

 Item 12.

 Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 Item 13.

 Certain
 Relationships and Related Transactions, and Director Independence.

 Item 14.

 Principal
 Accounting Fees and Services.

 Item 15.

 Exhibits
 and Financial Statement Schedules.

 Item 16.

 Form
 10-K Summary.

 SIGNATURES

 Consolidated Financial
 Statements

 i

 FORWARD-LOOKING STATEMENTS

 This report contains forward-looking statements.
All statements other than statements of historical facts contained in this report, 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. We have based these forward-looking statements largely
on our current expectations and projections about future events and financial trends that we believe may affect our business, financial
condition and results of operations. We discuss many of the risks in greater detail under the heading "Risk Factors." Also,
these forward-looking statements represent our estimates and assumptions only as of the date of the filing of this report. Except as
required by law, we assume no obligation to update any forward-looking statements after the date of the filing of this report.

 This report also contains estimates and other
statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves
a number of assumptions and limitations, and investors are cautioned not to give undue weight to such estimates. We have not independently
verified the statistical and other industry data generated by independent parties and contained in this report and, accordingly, we cannot
guarantee their accuracy or completeness. In addition, projections, assumptions and estimates of our future performance and the future
performance of the industries in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including
those described in "Risk Factors" and elsewhere in this report. These and other factors could cause results to differ materially
from those expressed in the estimates made by the independent parties and by us.

 ii

 Item 1. Business.

 References to "we,"
"us," "our", "our company" and "the company" refer to Surge Components, Inc. ("Surge"
or the "Company") and, unless the context indicates otherwise, includes Surge's wholly-owned subsidiaries, Challenge/Surge,
Inc. ("Challenge"), and Surge Components, Limited ("Surge Limited").

 We were incorporated under
the laws of the State of New York on November 24, 1981, and re-incorporated in Nevada on August 26, 2010. In February 2019, we converted
into a Delaware corporation. Effective on the close of December 30, 2021, we converted into a Nevada corporation. We completed an initial
public offering of our securities in 1984 and a second offering in August 1996. Our principal executive offices are located at 95 East
Jefryn Boulevard, Deer Park, New York 11729 and our telephone number is (631) 595-1818.

 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 $106,885 and $249,248
for the fiscal years ended November 30, 2023 ("Fiscal 2023) and November 30, 2022 ("Fiscal 2022"), respectively.

 Challenge is engaged
in the sale of electronic components. In 1999, Challenge began as a division to sell audible components. We have been able to increase
the types of products that we sell because some of our suppliers introduced new products, and we also located other products from new
suppliers. Our core products include buzzers, speakers, microphones, resonators, alarms, chimes, filters, and discriminators. We now
also work with our suppliers to have our suppliers customize many of the products we sell for many customers through the customers'
own designs and those that we work with our suppliers to have our suppliers redesign for them at our suppliers' factories. We have
engineers on our staff who work with our suppliers on such redesigns and assists with the introduction of new product lines. We
are continually looking to expand the line of products that we sell. We sell these products through independent representatives that
earn a commission on the products we sell. We are also working with local, regional, and national distributors to sell these products
to local accounts in every state Challenge also at times handles the brokering of certain products, helping their customers find parts
that regular suppliers can't deliver.

 In order for us to grow,
we will depend on, among other things, the continued growth of the electronics and semiconductor industries, our ability to withstand
intense price competition, our ability to obtain new clients, our ability to retain and attract sales and other personnel in order to
expand our marketing capabilities, our ability to secure adequate sources of products, which are in demand on commercially reasonable
terms, our success in managing growth, including monitoring an expanded level of operations.

 Industry Background

 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.

 Products

 Surge supplies a wide variety
of electronic components (some of which bear our private "Surge" label) which can be broadly divided into two categories—capacitors
and discrete components. For Fiscal 2023 and Fiscal 2022, capacitors accounted for approximately 31% and 30% of Surge's sales,
respectively, of which approximately 75% for each year was Lelon capacitors (discussed below). Discrete components accounted for Surge's
remaining sales in Fiscal 2023 and Fiscal 2022. Capacitors and discrete components can be categorized based on various factors, including
function, construction, fabrication and capacity.

 We sell, under the name of
the manufacturer, Lelon Electronics, aluminum electrolytic capacitors, which are capacitors that store and release energy into a circuit
incrementally and are used in various applications, including but not limited to, computers, appliances, automotive, lighting, telecommunications
devices and various consumer products. Our sales of products under the Lelon Electronics name accounted for approximately 31% of our
total sales (and approximately 75% of our capacitor sales as noted above) in Fiscal 2023.

 The principal products sold
by Surge are sold under the Surge name (except with respect to capacitors, which the Company also sells under the Lelon Electronics name
as noted above) or by Challenge are set forth below.

 Capacitors

 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.

 Discrete Components

 Discrete components, such
as semiconductor rectifiers, transistors and diodes, are packaged individually to perform a single or limited function, in contrast to
integrated circuits, such as microprocessors and other "chips", which contain from only a few diodes to as many as several
million diodes and other elements in a single package, and are usually designed to perform complex tasks. Surge almost exclusively distributes
discrete, low power semiconductor components rather than integrated circuits.

 The product line of discrete
components we sell includes:

 Rectifiers- Low power semiconductor
rectifiers are devices that convert alternating current, or AC power, into one directional current, or DC power, by permitting current
to flow in one direction only. They tend to be found in most electrical apparatuses, especially those drawing power from an AC wall outlet.
All products are available in traditional leaded as well as surface mount (chip) packages. Surge's rectifier suppliers all have
the aforementioned certifications, giving us an opportunity to market the products that we sell to the automotive industry.

 Transistors- These products
send a signal to the circuit for transmission of waves. They are commonly used in applications involving the processing or amplification
of electric current and electric signals, including data, television, sound and power. All products are available in traditional leaded
as well as surface mount (chip) packages. Surge sells many types of ISO 9002 transistors, including power transistors, designed for large
currents to safely dissipate large amounts of power.

 Diodes- Diodes are two-lead
or surface mount components that allow electric current to flow in only one direction. They are used in a variety of electronic applications,
including signal processing and direction of current. All products are available in traditional leaded as well as surface mount (chip)
packages. Diodes sold include:

 Circuit Protection Devices-
Our circuit protection devices include transient voltage suppressors and metal oxide varistors, which protect circuits against switching,
lightening surges and other uncontrolled power surges and/or interruptions in circuits. Transient voltage suppressors, which offer a
higher level of protection for the circuit, are required in telecommunication products and are typically higher priced products than
the metal oxide varistors, which are more economically priced and are used in consumer products. All products are available in traditional
leaded as well as surface mount (chip) packages.

 Audible Components- These
include audible transducers, Piezo buzzers, speakers, and microphones, which produce an audible sound for, and are used in back-up power
supplies for computers, alarms, appliances, smoke detectors, automobiles, telephones and other products which produce sounds. Challenge
has initiated marketing relationships with certain Asian manufacturers of audible components to sell these products worldwide. All products
are available in traditional leaded as well as surface mount (chip) packages.

 New Products- We periodically
introduce new products, which are intended to complement our existing product lines. These products are ones that are commonly used in
the same circuit designs as other of the products that we sell and will further provide a one- stop-shop for the customer. Some of these
products are common items used in all applications and others are niche items with a focus towards a particular application. These new
products include fuses, printed circuit boards and switches. All products are available in traditional leaded as well as surface mount
(chip) versions. In 2019 we were issued a patent on a new pinpoint alarm designed to improve an individual's ability to determine
the location of the alarm. The improved alarm can be used in a wide variety of applications including reversing vehicles, medical emergency
notification and hardware devices that use Bluetooth or other wireless communication protocols in combination with mobile software applications
to locate lost items.

 Inventory

 In order to adequately service
our customers' needs, we believe that it is necessary to maintain large inventories, which makes us more susceptible to price and
technology changes. At any given time, we attempt to maintain a one-to-two month inventory on certain products in high demand for customers
and at least one month for other products. Our inventory currently contains more than 100 million component units consisting of more
than 3,000 different part numbers. The products that we sell range in sales price from less than one cent for a commercial diode to more
than $2.00 for high power capacitors and semiconductors. As of November 30, 2023, we maintained inventory valued at $5,422,824.

 Because of the experience
of our management, including Ira Levy and Steven Lubman, we believe that we know the best prices to buy the products we sell and as a
result we generally waive rights to manufacturers' inventory protection agreements (including price protection and inventory return
rights), and thereby bear the risk of increases in the prices charged by our manufacturers and decreases in the prices of products held
in our inventory or covered by purchase commitments. If prices of components, which we hold in inventory decline, or if new technology
is developed that displaces products that we sell, our business could be materially adversely affected. The Company has experienced very
little impact from customer design changes and slowdown but this can potentially increase due to economic conditions and customer-specific
business conditions. If our customers experience these changes, our business could be adversely affected.

 Product Availability

 Surge and Challenge obtain
a significant amount of their products from manufacturers in Asia. Of the total goods purchased by Surge and Challenge in Fiscal 2023,
those foreign manufactured products were supplied from manufacturers in Taiwan (34%), Hong Kong (21%), elsewhere in Asia (38%) and overseas
outside of Asia (less than 1%). The Company purchases the balance of its products from the United States. The Company purchases its products
from approximately sixteen different manufacturers.

 Most of the facilities that
manufacture products for Surge have obtained International Quality Standard ISO 9002 and other certifications. We typically purchase
the products that we sell in United States currency in order to minimize the risk of currency fluctuations. In most cases, Surge
utilizes two or more alternative sources of supply for each of its products with one primary and one complementary supplier for each
product. Surge's relationships with many of its suppliers date back to the commencement of our import operations in 1983. We have
established payment terms with our manufacturers of between 30 and 60 day open account terms.

 We only have one agreement with
a supplier, Lelon Electronics, which is terminable by either party upon six months' notice to the other party. We have
an agreement to act as the sales agent in North America for one of our manufacturers, Lelon Electronics. While we believe that we
have established close working relationships with our principal manufacturers, our success depends, in large part, on maintaining these
relationships and developing new supplier relationships for our existing and future product lines. Because of the lack of long- term
contracts, we may not be able to maintain these relationships.

 For Fiscal 2023 and Fiscal
2022, one of Surge's vendors, Lelon Electronics, accounted for approximately 31% and 33% of Surge's consolidated purchases,
respectively. The loss of or a significant disruption in the relationship with Lelon Electronics, which is our major supplier, could
have a material adverse effect on our business and results of operations until a suitable replacement could be obtained.

 The Company has a written
agreement with Lelon Electronics regarding the supply of inventory for the Company's customers. The Company purchases products
under both the Company's name and Lelon's brand name for the Company's inventory in order to supply the Company's
customers. For the majority of purchases from Lelon Electronics, the Company takes title to the products, houses them in the Company's
warehouse and sells directly to the Company's customers. There is no right of return on the products purchased from Lelon and the
Company accepts all credit risk with regards to sales of these products.

 The components business has,
from time to time, experienced periods of shortages in product supply, usually as the result of demand exceeding available supply. When
these shortages occur, suppliers tend to either increase prices and or reduce the number of units sold to given customers. Should there
be shortages in the future, such shortages may benefit our business if we get preferential supply from our manufacturers. It could also
have an adverse effect upon our business, in the case that our manufacturers don't have enough capacity to provide enough components.
Conversely, due to poor market demand, there could be an excess of components in the market, causing stronger competition and an erosion
of prices. In cases of shortages, customers may purchase more than they need and thus reducing future demand for their products while
they use up their excess inventory.

 Marketing and Sales

 Surge's sales efforts
are directed towards Original Equipment Manufacturer (OEM) customers in numerous industries where the products that we sell have wide
application. Surge currently employs ten sales and marketing personnel, not including two of its executive officers, who are responsible
for certain key customer relationships. In addition, Surge has expanded its sales team, hiring a Europe manager based in London as well
as one based in China.

 We also use independent sales
representatives or organizations, which often specialize in specific products and areas and have specific knowledge of and contacts in
particular markets. We currently have representation agreements with approximately 30 sales representative organizations. Sales representative
organizations, which are generally paid a 5% commission on net sales, are generally responsible in their respective geographic markets
for identifying customers and soliciting customer orders. Pursuant to arrangements with our independent sales representatives, they are
permitted to represent other electronics manufacturers, but are generally prohibited from carrying a line of products competitive with
the products that we sell. These arrangements can be terminated on written notice by either party or if breached by either party. These
organizations normally employ between one and twelve sales representatives. The individual sales representatives employed by the sales
organizations generally possess an expertise which enhances the scope of our marketing and sales efforts. This permits us to avoid the
significant costs associated with creating a direct marketing network. We have had relationships with certain sales organizations since
1988 and continue to engage new sales organizations as needed. We believe that additional sales organizations and representatives are
available to us, if required.

 We have initiated a formal
national distribution program to attract more distributors to promote the products that we sell. We expect this market segment to contribute
significantly to our sales growth over time.

 Many customers require their
suppliers to have a local presence and Surge's network of independent sales representatives are responsive to these needs. Surge
formed a Hong Kong corporation, Surge Components, Limited and hired a regional sales manager to service the Hong Kong/Greater China region
customers.

 Other marketing efforts include
generation and distribution of catalogs and brochures of the products we sell and attendance at trade shows. We have produced an exhibit
for display at electronics trade shows throughout the year. The products that we sell have been exhibited at the electronic distribution
show in Las Vegas, and we intend to continue our commitment and focus on the distribution segment of the industry by our visibility at
the Electronic Distributor Trade Show. In addition, we have updated our website to make it more informative and user friendly. Our search
engines have been improved so that customers can find us more easily and we have developed a new portal system to help with lead management
and disbursement.

 Customers

 The products that we sell
are sold to distributors and OEMs in such diverse industries as the automotive, computer, communications, cellular telephones, consumer
electronics, garage door openers, security equipment, audio equipment, telecomm products, computer related products, power supply products,
utility meters and household appliances industries. We request our distributors to provide point of sales reporting, which enables us
to gain knowledge of the breakdown of industries into which the products that we sell are sold. Two of our customers accounted for 20%
and 18% of net sales for Fiscal 2023, and 12% and 21% of net sales for Fiscal 2022. Our discrete components are often sold to the
same clients as our capacitors. These OEM customers typically accept samples for evaluation and, if approved, we work towards procuring
the next orders for these items.

 Typically, we do not maintain
contracts with our customers and generally sell products pursuant to customer purchase orders. Although our customer base has increased,
the loss of our largest customers as well as, to a lesser extent, the loss of any other material customer, could have a materially adverse
effect on our operations during the short-term until we are able to generate replacement business, although we may not be able to obtain
such replacement business. Because of our contracts and good working relationships with our distributors, we offer the OEMs, when purchasing
through distributors, extended payment terms, just-in- time deliveries and one-stop shopping for many types of electronic products.

 Competition

 We conduct business in the
highly competitive electronic components industry. We expect this industry to remain competitive. We face intense competition in both
our selling efforts and purchasing efforts from the many companies that manufacture or distribute electronic components. Our principal
competitors in the sale of capacitors include Nichicon, Panasonic, Illinois Capacitor, NIC, AVX, Murata, Epcos, United Chemicon, Rubycon,
Vishay and Kemet. Our principal competitors in the sale of discrete components include Vishay, General Semiconductor Division, General
Instrument Corp., OnSemi, Inc., Microsemi Corp., Diodes, Inc. and Littlefuse, and Copper Bussman Division. Our principal competition
in the audible business include AVX, Murata, Panasonic, Projects Unlimited, International Components Corp. and Star Micronics. Many of
these companies are well established with substantial expertise, and have much greater assets and greater financial, marketing, personnel,
and other resources than we do. Many larger competing suppliers also carry product lines which we do not carry. Generally, large semiconductor
manufacturers and distributors do not focus their direct selling efforts on small to medium sized OEMs and distributors, which constitute
many of our customers. As our customers become larger, and as the market becomes more competitive, our competitors may find it beneficial
to focus direct selling efforts on those customers, which could result in our facing increased competition, the loss of customers or
pressure on our profit margins. We are finding increased competition from manufacturers located in Asia due to the increased globalization
nature of the business. There can be no assurance that we will be able to continue to compete effectively with existing or potential
competitors. Other factors that will affect our success in these markets include our continued ability to attract additional experienced
marketing, sales and management talent, and our ability to expand our support, training and field service capabilities. Additionally,
since the tsunami and earthquake in Japan in 2012, our competitors have established manufacturing facilities in China enabling them to
be more competitive by lowering their labor rates and manufacturing costs. Also, as the world continues to become global and customers
have easier access to suppliers in Asia, our business could be adversely affected since the internet enables customers to meet and
interact with suppliers through Google and other search engines which customers had not previously done.

 Customer Service

 We have customer service
employees whose time is dedicated largely to responding to customer inquiries such as price quote requests, delivery status of new or
existing purchase orders, changes of existing order dates, quantities, dates, etc. We intend to increase our customer service capabilities,
as necessary.

 Foreign Trade Regulation

 Most products sold by Surge
are manufactured in Asia, including such countries as Taiwan, South Korea, Hong Kong, India, Japan and China. The purchase of goods manufactured
in foreign countries is subject to a number of risks, including economic disruptions, transportation delays and interruptions, foreign
exchange rate fluctuations, impositions of tariffs and import and export controls, and changes in governmental policies, any of which
could have a material adverse effect on our business and results of operations. Potential concerns may include drastic devaluation of
currencies, loss of supplies and increased competition within the region.

 From time to time, protectionist
pressures have influenced United States trade policy concerning the imposition of significant duties or other trade restrictions upon
foreign products. We cannot predict whether additional United States customs quotas, duties, taxes or other charges or restrictions will
be imposed upon the importation of foreign components in the future or what effect such actions could have on our business, financial
condition or results of operations.

 Our ability to remain competitive
with respect to the pricing of imported components could be adversely affected by increases in tariffs or duties, changes in trade treaties,
strikes in air or sea transportation, and possible future United States legislation with respect to pricing and import quotas on products
from foreign countries. Our ability to remain competitive could also be affected by other governmental actions related to, among other
things, anti-dumping legislation and international currency fluctuations. While we do not believe that any of these factors adversely
impact our business at the present time, there can be no assurance that these factors will not materially adversely affect us in the
future. Since July 2018, when tariffs started to impact some of the Company's sales, the Company has been able to pass on the tariffs
to its U.S. and Canadian customers. We have also changed our shipping terms with our Mexico customers to Free Carrier, which means we
deliver the goods to the customers' Hong Kong freight forwarder, who then becomes responsible for the transportation and tariff
costs. Any significant disruption in the delivery of merchandise from our suppliers, substantially all of whom are foreign, could have
a materially adverse impact on our business and results of operations.

 Government Regulation

 Various laws and regulations
relating to safe working conditions, including the Occupational Safety and Health Act, are applicable to our Company. We believe we are
in substantial compliance with all material federal, state and local laws and regulations regarding safe working conditions. We believe
that the cost of compliance with such governmental regulations is not material.

 We are subject to the United
States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete
with us, are not subject to these prohibitions. If our employees or other agents are found to have engaged in such practices, we could
suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results
of operations. To the Company's knowledge, none of our employees or other agents have engaged in such practices.

 The Company has been impacted
by the tariffs in effect or being considered by the United States to impose on Chinese goods being imported into the United States, which
includes the Company's products. The imposition of such tariffs will likely cause our costs, as well as the prices we charge customers,
to increase.

 Environmental and Regulatory Compliance

 We are subject to various
environmental laws and regulations relating to the protection of the environment, including those governing the handling and management
of certain chemicals used in electronic components.

 We do not believe that compliance
with these laws and regulations will have a material adverse effect on our capital expenditures, earnings, or competitive position.

 Patents, Trademarks and Proprietary Information

 In September 2018, we were
issued a U.S. patent application with the United States Patent and Trademark Office for an improved pinpoint alarm designed to improve
an individual's ability to determine the location of an alarm versus standard single, multi-frequency, or broadband alarms. The
improved alarm can be used in a wide variety of applications, including reversing vehicles, medical emergency notification, and hardware
devices that use Bluetooth or other wireless communications protocols in combination with mobile software applications to locate lost
items, including phones, wallets, and keys. Our patent issued on December 31, 2019, as United States Patent No. 10,522,008. With regard
to our other products, although we have no knowledge that such products infringe patents or trademarks, or violate proprietary rights
of others, it is possible that alleged infringement of existing or future patents, trademarks or proprietary rights of others may
occur. In the event that the products that we sell are alleged to infringe proprietary rights of others, these products may have to be
modified or redesigned. However, there can be no assurance that any infringing products will be able to be modified or redesigned in
a way that does not infringe on the proprietary rights of others, which could have a material adverse effect upon our operations. In
addition, there can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement
or proprietary rights violation action. Moreover, if the products we sell infringe patents, trademarks or proprietary rights of others,
we could, under certain circumstances, become liable for damages, which also could have a material adverse effect on our business.

 With respect to the other
products that we sell, we have no patents, trademarks or copyrights registered in the United States Patent and Trademark Office or in
any state. Additionally, to the best of our knowledge the manufacturers of the products that we sell do not have patents, trademarks
or copyrights registered in the United States Patent and Trademark Officer or in any state. We rely on the know-how, experience and capabilities
of our management personnel.

 Backlog

 As of November 30, 2023,
our backlog was approximately $11,427,000, as compared with $18,408,000 at November 30, 2022. Substantially all backlog is expected to
be shipped by us within 365 days of booking date. Due to the economic downturn, some of the Company's customers have cancelled
orders while others are not placing as many new orders. Year to year comparisons of backlog are not necessarily indicative of future
operating results.

 Employees

 As of November 30, 2023,
Surge and Challenge employed 44 persons, two of whom are employed in executive capacities, ten are engaged in sales, five in engineering,
four in purchasing, five in administrative capacities, twelve in customer service, two in accounting and four in warehousing. None of
our employees are covered by a collective bargaining agreement, and we consider our relationship with our employees to be good.

 Competitive pay and benefits.
The Company's compensation programs are designed to provide the proper incentives to attract, retain and motivate employees to
achieve superior results. We provide employee wages that are competitive and consistent with employee positions, skill levels, experience,
knowledge and geographic location. Annual increases and incentive compensation are based on merit, which is communicated to the employees
at the time of hiring. Employees are eligible for paid and unpaid leaves, a retirement plan, and disability/accident coverage.

 Health and safety. The health
and safety of our employees is our highest priority. Our safety focus is also evident in our response to the COVID-19 pandemic.

 Adding work from home flexibility.

 Adjusting attendance policies
 to encourage those who are sick to stay home.

 Increasing cleaning protocols
 across all locations.

 Providing additional personal
 protective equipment and cleaning supplies.

 Item 1A. Risk Factors

 An investment in our common
stock involves a high degree of risk. An investor should carefully consider the risks described below as well as other information contained
in this annual report on Form 10-K. If any of the following risks actually occur, our business, financial condition or results of operations
could be materially adversely affected, the value of our common stock could decline, and an investor may lose all or part of his or her
investment.

 Risks Related to our Business

 We have an agreement with only one of our
suppliers and we depend on a limited number of suppliers

 We have an agreement with
only one of our suppliers (Lelon Electronics), which agreement is terminable by either party upon notice to the other party. Lelon Electronics
accounted for approximately 31% and 33% of the Company's consolidated purchases in the years ending November 30, 2023 and November
30, 2022. We also act as the exclusive sales agent in North America for Lelon Electronics. While we believe that we have established
close working relationships with our principal suppliers, our success depends, in large part, on maintaining these relationships and
developing new supplier relationships for our existing and future product lines. There is no assurance that we will be able to maintain
these relationships. While we believe that there are alternative semiconductor and capacitor suppliers whose replacement products may
be acceptable to our customers, the loss of, or a significant disruption in the relationship with, one or more of our major suppliers
would likely have a material adverse effect on our business and results of operations.

 We need to maintain large inventories in
order to succeed and as a result, price fluctuations could harm us.

 In order to adequately service our customers,
we believe that it is necessary to maintain a large inventory of products. Accordingly, we attempt to maintain a one-to-two month
inventory of those products which we supply to our customers. As a result of our strategic inventory purchasing policies, under which
we order products to obtain preferential pricing, we generally waive the right to manufacturers' inventory protection agreements
(including price protection and inventory return rights). As a result, we bear the risk of increases in the prices charged by our manufacturers
to the Company and decreases in the prices we are able to charge our customers. If prices of components which we hold in inventory decline
or if new technology is developed that displaces products which we sell, our business could be materially adversely affected. Typically
the Company has experienced very little impact from customer design changes and slowdown but this can potentially increase due to economic
conditions and specific customers business conditions. If our customers experience these changes, our business could be adversely affected.
We recorded an adjustment to Inventory reserves in 2023 totaling $99,583 due to some inventory we held that will be outdated and may
not be saleable.. There can be no assurances that we will be required to take additional reserves in the future.

 Our operations would be adversely effected
if we lose certain of our customers.

 For Fiscal 2023, approximately
20% and 18% of our net sales were derived from sales to two customers. Although our customer base has increased, the loss of our
largest customers as well as, to a lesser extent, the loss of any other material customer, would be expected to have a materially adverse
effect on our operations until we are able to generate replacement business, although we may not be able to obtain such replacement business.

 We may not be able to compete against large
competitors who have better resources.

 We face intense competition,
in both our selling efforts and purchasing efforts, from the many companies that manufacture or distribute electronic components and
semiconductors. Our principal competitors in the sale of capacitors include Nichicon, Panasonic, Illinois Capacitor, NIC, AVX, Murata,
Epcos, United Chemicon, Rubycon, Vishay and Kemet, General Semiconductor Division, General Instrument Corp., OnSemi, Inc., Microsemi
Corp., Diodes, Inc. and Littlefuse, and Copper Bussman Division. Many of these companies are well established with substantial expertise,
and have much greater assets and greater financial, marketing, personnel, and other resources than we do. Many larger competing suppliers
also carry product lines which we do not carry. Generally, large semiconductor manufacturers and distributors do not focus their direct
selling efforts on small to medium sized OEMs and distributors, which constitute most of our customers. As our customers become larger,
however, our competitors may find it beneficial to focus direct selling efforts on those customers, which could result in our facing
increased competition, the loss of customers or pressure on our profit margins. There can be no assurance that we will be able to continue
to compete effectively with existing or potential competitors. The Company periodically introduces new products to the market.

 System failure or cybersecurity breaches
of our network security could subject us to increased operating costs, as well as litigation and other potential losses.

 The computer systems and
network infrastructure that we use could be vulnerable to unforeseen hardware and cybersecurity issues, including "hacking"
and "identity theft." Our operations are dependent upon our ability to protect our computer equipment against damage from
fire, power loss, telecommunications failure or a similar catastrophic event. Any damage or failure that causes an interruption in our
operations could have an adverse effect on our financial condition and results of operations. In addition, our operations are dependent
upon our ability to protect our computer systems and network infrastructure against damage from physical break-ins, cybersecurity breaches
and other disruptive problems caused by the Internet or other users. Such computer break-ins and other disruptions would jeopardize the
security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant
liability to us and damage our reputation.

 Despite efforts to ensure
the integrity of our systems, we will not be able to anticipate all security breaches of these types, nor will we be able to implement
guaranteed preventive measures against such security breaches. Persistent attackers may succeed in penetrating defenses given enough
resources, time and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate
from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations
or hostile foreign governments.

 A successful attack to our
system security could cause us serious negative consequences, including significant disruption of operations, misappropriation of confidential
information, or damage to our computers or systems or those of our customers. A successful security breach could result in violations
of applicable privacy and other laws, financial loss to us or to our customers, loss of confidences in our security measures, significant
litigation exposure, and harm to our reputation, all of which could have a material adverse effect on our business and results of operations.

 In April 2021, the Company
launched an investigation into a ransomware attack on the Company's systems. Based on the review of the forensic files, it was
determined that the threat actor used ransomware to access Company files. No ransom was paid to the threat actors and all parties associated
with the compromised files were notified.

 Our business will be adversely affected
if there is a shortage of components.

 The components business has,
from time to time, experienced periods of extreme shortages in product supply, generally as the result of demand exceeding available
supply. When these shortages occur, suppliers tend to either increase prices or reduce the number of units sold to customers. We believe
that because of our large inventory and our relationships with our manufacturers, we have not been adversely affected by shortages in
certain discrete semiconductor components. However, future shortages may have an adverse effect upon our business especially if we were
to reduce inventory to cut costs and reduce risks of obsolescence. Currently, the Company believes that its lead time is better
than their competitors and we have been able to maintain the customers we have as well as in some instances acquire new customers. However,
our business could be affected if the Company is unable to maintain the levels of inventory needed to keep our customers lines running.
In addition, customers could order extra inventory of products from several suppliers when they are concerned about a possible shortage
and then not reorder such products in the future for such time as they work off their excess inventory purchased.

 Our success depends on key personnel whose
continued service is not guaranteed.

 Our continued success and
our ability to manage anticipated future growth depend, in large part, upon the efforts of key personnel, particularly Ira Levy and Steven
Lubman, our chief executive officer and vice president, respectively, who have extensive industry knowledge and relationships and exercise
substantial influence over our operations. The loss of services of one or both of these individuals, or our inability to attract and
retain highly qualified personnel, could adversely affect our business, and weaken our relationships with suppliers, business partners,
and industry personnel, which could adversely affect our financial condition, results of operations, cash flow and trading price of our
common stock.

 Our business is subject to risks from trade
regulation and foreign economic conditions.

 Approximately 93% of the
total goods which we purchased in Fiscal 2023 were manufactured in foreign countries, with the majority purchased from Taiwan (34%),
Hong Kong (21%), elsewhere in Asia (38%) and outside of Asia (less than 1%). These purchases subject us to a number of risks, including
economic disruptions, transportation delays and interruptions, foreign exchange rate fluctuations, imposition of tariffs and import and
export controls and changes in governmental policies, any of which could have a materially adverse effect on our business and results
of operations. Potential concerns may include drastic devaluation of currencies, loss of supplies and increased competition within the
region.

 The ability to remain competitive
with respect to the pricing of imported components could be adversely affected by increases in tariffs or duties, changes in trade treaties,
strikes in air or sea transportation, and possible future United States legislation with respect to pricing and import quotas on products
from foreign countries. For example, it is possible that political or economic developments in China, or with respect to the United States'
relationship with China, could have an adverse effect on our business. Our ability to remain competitive could also be affected by other
governmental actions related to, among other things, anti-dumping legislation and international currency fluctuations. While we do not
believe that any of these factors have adversely impacted our business in the past, there can be no assurance that these factors will
not materially adversely affect us in the future. Because the China internal consumption market is depressed, this will increase competition,
as there is now a smaller market potential target. Therefore, we believe certain of our competitors will reduce their pricing to capture
more market share.

 Electronics industry cyclicality may adversely
affect our operations.

 The electronics industry
has been affected historically by general economic downturns, which have had an adverse economic effect upon manufacturers and end-users
of capacitors and semiconductors. In addition, the life-cycle of existing electronic products and the timing of new product developments
and introductions can affect demand for semiconductor components. Any downturns in the electronics distribution industry could adversely
affect our business and results of operations.

 Most of our products are not protected
by patents, trademarks and proprietary information.

 On December 31, 2019, a U.S.
patent which was issued by the United States Patent and Trademark Office for an improved pinpoint alarm designed to improve an individual's
ability to determine the location of an alarm versus standard single, multi-frequency, or broadband alarms, which can be used in a wide
variety of applications, including reversing vehicles, medical emergency notification, and hardware devices that use Bluetooth or other
wireless communications protocols in combination with mobile software applications to locate lost items, including phones, wallets, and
keys. We have no other patents, trademarks or copyrights registered with the United States Patent and Trademark Office.

 Although we have no knowledge
that our products infringe patents or trademarks, or violate proprietary rights of others, it is possible that alleged infringement
of existing or future patents, trademarks or proprietary rights of others may occur. In the event that the products that we sell are
alleged to infringe proprietary rights of others, these products may have to be modified or redesigned. However, there can be no assurance
that any infringing products will be able to be modified or redesigned in a way that does not infringe on the proprietary rights of others,
which could have a material adverse effect upon our operations. In addition, there can be no assurance that we will have the financial
or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. Moreover, if the products
we sell infringe patents, trademarks or proprietary rights of others, we could, under certain circumstances, become liable for damages,
which also could have a material adverse effect on our business.

 Additionally to the best
of our knowledge the manufacturers of the products that we sell do not have patents, trademarks or copyrights registered in the United
States Patent and Trademark Officer or in any state.

 Risks Related to our Common Stock

 Our common stock is quoted on the OTC Market,
which may limit the liquidity and price of our common stock more than if our common stock were listed on the Nasdaq Stock Market or another
national exchange.

 Our securities are currently
quoted on the OTC Market, an inter-dealer electronic quotation and trading system or equity securities. Quotation of our securities
on the OTC Market may limit the liquidity and price of our securities more than if our securities were listed on The Nasdaq Stock Market
or another national exchange. Some investors may perceive our securities to be less attractive because they are traded in the over-the-counter
market. In addition, as an OTC quoted company, we do not attract the extensive analyst coverage that accompanies companies listed on
national exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in
securities traded on the OTC Market. These factors may have an adverse impact on the trading and price of our common stock.

 The market price of our common
stock may fluctuate significantly in response to the following factors, most of which are beyond our control:

 variations in our quarterly
 operating results;

 changes in general economic
 conditions;

 changes in market valuations
 of similar companies;

 announcements by us or
 our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments;

 loss of a major supplier
 or customer; and

 the addition or loss of
 key managerial and collaborative personnel.

 Any such fluctuations may
adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may
be unable to sell their shares, or may be forced to sell them at a loss.

 The application of the "penny stock"
rules could adversely affect the market price of our common stock and increase an investor's transaction costs to sell those shares.

 Rule 3a51-1 of the Exchange
Act defines "penny stock," in part, as any equity security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9
of the Exchange Act requires that a broker or dealer:

 approve a person's
 account for transactions in penny stocks; and

 receive from the investor
 a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 In order to approve a person's
account for transactions in penny stocks, the broker or dealer must:

 obtain financial information
 and investment experience and objectives of the person; and

 make a reasonable determination
 that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial
 matters to be capable of evaluating the risks of transactions in penny stocks.

 The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market,
which:

 sets forth the basis on
 which the broker or dealer made the suitability determination; and

 that the broker or dealer
 received a signed, written agreement from the investor prior to the transaction.

 Generally, brokers may be
less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our common stock and cause a decline in the market value of our stock.

 Anti-takeover provisions in our organizational
documents and the shareholder rights plan that we have adopted may discourage or prevent a change of control, even if an acquisition
would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace
or remove our current management.

 Our articles of incorporation
and bylaws currently contain provisions that could delay or prevent a change of control of our company or changes in our Board of Directors
that our stockholders might consider favorable. Some of these provisions:

 authorize the issuance
 of preferred stock which can be created and issued by the Board of Directors without prior stockholder approval, with rights senior
 to those of our common stock;

 prohibit our stockholders
 from calling special stockholder meetings or taking action by written consent; and

 require advance written
 notice of stockholder proposals and director nominations.

 We have also adopted a shareholder
rights plan that could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, us or a
large block of our common stock. A third party that acquires 5% or more of our common stock could suffer substantial dilution of its
ownership interest under the terms of the shareholder rights plan through the issuance of our shares to all stockholders other than the
acquiring person. These and other provisions in our articles of incorporation and bylaws could make it more difficult for stockholders
or potential acquirers to obtain control of our Board of Directors or initiate actions that are opposed by our then-current Board of
Directors, including a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction
or changes in our Board of Directors could cause the market price of our common stock to decline.

 Item 1B. Unresolved Staff
Comments

 Not applicable.

 Item 2. Properties.

 Our executive offices and
warehouse facilities are located at 95 East Jefryn Boulevard, Deer Park, New York, 11729. We lease our facilities from Great American
Realty of Jefryn Blvd., LLC ("Great American"), an entity that is 50% owned by Ira Levy, Surge's president and Steven
Lubman, Surge's vice president. Our lease is through September 30, 2030 and our monthly rent for the year ended November 30,
2023 was $16,850 We occupy approximately 23,250 square feet of office space and warehouse space. The rental rate is typical for
the type and location of Surge's and Challenge's facilities.

 The Company has a lease to
rent office space and a warehouse in Hong Kong Through June 2025. Annual minimum rental payments for this space are approximately $73,580.

 The Company has a lease to
rent additional warehouse space in Hong Kong through November 30, 2025. Annual minimum rental payments for this space are approximately
$76,170.

 Item 3. Legal Proceedings.

 None.

 Item 4. Mine Safety Disclosures.

 Not applicable.

 Item 5. Market For Registrant's
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Shares of our common stock
are quoted on the OTC Pink Market maintained by OTC Markets Group under the symbol "SPRS". Trading in our common stock is
limited. Quotations represent inter-dealer prices without retail mark-up, mark-down, or commission and may not necessarily represent
actual transactions.

 As of the date of the filing
of this report, there are 5,584,521 shares of common stock issued and outstanding.

 As of the date of the filing
of this report, there are approximately 176 holders of record of our common stock.

 Purchases of Equity Securities by the Issuer
and Affiliated Purchasers

 None.

 Equity Compensation Plan Information

 The following table provides
information as of November 30, 2023 with respect to the shares of common stock that may be issued under our existing equity compensation
plans:

 Plan Category

 Number of
 securities to be

 issued upon
 exercise of
 outstanding
 options,
 warrants
 and rights

 (a)

 Weighted-

 average

 exercise
 price of

 outstanding
 options,
 warrants
 and
 rights
 (b)

 Number of
 securities

 remaining
 available for
 future
 issuance under

 equity

 compensation

 plans

 (excluding

 securities

 reflected in

 column a
 (c)

 Equity compensation plan approved by security holders
 (1)

 345,000

 $
 2.54

 1,162,436

 Equity compensation plan not yet approved
 by security holders

 -

 -

 -

 Total

 345,000

 $
 2.54

 1,162,436

 (1)

 Represents the Company's 2015
 Incentive Stock Plan.

 Recent Sales of Unregistered Securities.

 None.

 Dividend Policy

 We have never declared or
paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future for our common
stock. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable
laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other
factors that our board of directors may deem relevant.

 Item 6. [Reserved]

 We are a smaller reporting
company and therefore, we are not required to provide information required by this Item of Form 10-K.

 Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations

 This report 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. We have based these forward-looking statements largely
on our current expectations and projections about future events and financial trends that we believe may affect our business, financial
condition and results of operations. We discuss many of the risks in greater detail under the heading "Risk Factors." Also,
these forward-looking statements represent our estimates and assumptions only as of the date of the filing of this report. Except as
required by law, we assume no obligation to update any forward-looking statements after the date of the filing of this report.

 Overview

 The Company operates with
two sales groups, Surge Components ("Surge") and Challenge Electronics ("Challenge"). Surge is a supplier of
electronic products and components. These products include capacitors, which are electrical energy storage devices, and discrete semiconductor
components, such as 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 sold by Surge are typically utilized in the electronic
circuitry of diverse products, including, but not limited to, automobiles, audio products, temperature control products, lighting products,
energy related products, computer related products, various types of consumer products, garage door openers, household appliances, power
supplies and security equipment. These products 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. These products are manufactured predominantly in Asia by approximately sixteen independent manufacturers. We act as the master
distribution agent utilizing independent sales representative organizations in North America to sell and market the products for one
such manufacturer pursuant to a written agreement. When we act as a sales agent, our supplier who sold the product to the customer that
we introduced to our supplier pays us a commission. The amount of the commission is determined on a sale by sale basis depending on the
profit margin of the product. Commission revenue totaled $106,885 and $249,248 for the fiscal year ended November 30, 2023 and November
30, 2022 respectively.

 Challenge is engaged
in the sale of electronic components. In 1999, Challenge began as a division to sell audible components. We have been able to increase
the types of products that we sell because some of our suppliers introduced new products, and we also located other products from new
suppliers. Our core products include buzzers, speakers, microphones, resonators, alarms, chimes, filters, and discriminators. We now
also work with our suppliers to have our suppliers customize many of the products we sell for many customers through the customers'
own designs and those that we work with our suppliers to have our suppliers redesign for them at our suppliers' factories. We have
engineers on our staff who work with our suppliers on such redesigns and assists with the introduction of new product lines. We
are continually looking to expand the line of products that we sell. We sell these products through independent representatives that
earn a commission on the products we sell. We are also working with local, regional, and national distributors to sell these products
to local accounts in every state. Challenge also at times handles the brokering of certain products, helping their customers find parts
that that regular suppliers can't deliver.

 The Company has a Hong Kong
office to effectively handle the transfer business from United States customers purchasing and manufacturing in Asia after designing
the products in the United States. This office has strengthened the Company's global position, improving our capabilities and service
to our customer base.

 The world of business continues
to change because of "disruptors," which are significant changes in traditional business practices that did not previously
exist. For example, customers continue to centralize purchasing from regional purchasing and are stretching their payment terms. These
changes also include customers moving their manufacturing operations from North America to Asia, and the trend of globalization. Some
of our customers have been involved in mergers and acquisitions, causing consolidation. This trend makes business more complicated and
costly for the Company. The Company must have a presence in Asia to service and further develop the business. For these reasons, we established
Surge Ltd., our Hong Kong subsidiary. Currency fluctuations may also have an effect on doing business outside of North America. Customers
have moved to reduce their supply chain, which could adversely affect the Company. In some market segments, demand for electronic components
has decreased, and in other segments, the demand is still strong. Some technologies have become obsolete, while customers develop new
products using different kinds of components. One division in the Company has had success in designing new products for customers to
better their products performance capabilities. This proactive approach separates the Company from selling commodity products to also
selling more customized products Management expects 2024, to be a period of continued challenge, in regard to inflation and general economic
conditions, in maintaining consistent flow of products during shortages of certain products, and growth as we see our customers return
to full production pace. These challenges could affect the Company in negative ways, possibly reducing sales and or profitability. Because
of a labor shortage, our customers engineering staff has been challenged, so getting our products approved has been and will continue
to take longer to achieve. Additionally, the cost of raw materials has continued to increase, therefore our costs have increased. In
the first half of the year of 2023, the Company has been able to handle the brokering of certain semiconductor products, helping their
customers to keep product lines up and running by locating products that their regular suppliers can't deliver, and the Company
is positioned to do this in the future as needed. In order for the Company to continue to grow, we will depend on, among other things,
the continued growth of the electronics and semiconductor industries, our ability to withstand intense price competition, our ability
to obtain new customers, our ability to retain and attract sales and other key personnel in order to expand our marketing capabilities,
our ability to secure adequate sources of products, which are in demand on commercially reasonable terms, our success in executing and
managing growth, including monitoring an expanded level of operations and systems, controlling costs, the availability of adequate cash
flow, the continued supply of products from our factories, the ability to withstand higher transportation costs and longer travel times
and our ability to deal successfully, with new and future disruptors. The tariffs continue to impact the Company, although less now then
previously. The general supply chain challenges present both a challenge and opportunity to the Company. The Company is cautiously optimistic
about its ability to meet these challenges with continued growth unless the general global or electronics industry economic conditions
deteriorate. Financial news has been talking about the decreases in consumer demand which impacts negatively the demand for the Company's
products, as the customers are producing less of their products. These economic conditions could have a negative impact on sales into
202. The combination of possible disruptors such as increased costs and longer lead times from factories to the Company could also have
negative impacts on the business in the future. The tense relations between America and China could also impact the Company's business.
China could impose rules and laws that make it more difficult to do business in Hong Kong and China. The Company is taking steps to be
well prepared in case of any actions from China that would cause us business disruption. For example, many of the Company's factory
partners have opened production facilities outside of China. As economic conditions have deteriorated, it has impacted the Company's
business. Customers have pushed back delivery dates, and in some cases required cancellations because they over ordered in 2022 creating
a significant excess inventory. We are watching closely as customers consume their excess inventory levels to reflect this new business
demand, and the Company will respond accordingly. We expect that it could take four to six quarters for these customers to consume this
excess inventory and start ordering products again which will reflect in the Company's sales.

 Critical Accounting Policies

 Accounts Receivable

 The allowance for doubtful
accounts is based on the Company's assessment of the collectability of specific customer accounts and an assessment of international,
political and economic risk as well as the aging of the accounts receivable. If there is a change in actual defaults from the Company's
historical experience, the Company's estimates of recoverability of amounts due could be affected and the Company would adjust
the allowance accordingly.

 Revenue Recognition

 Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, collectability is reasonably
assured and title and risk of loss have been transferred to the customer. This occurs when product is shipped from the Company's
warehouse. For direct shipments from our suppliers to our customer, revenue is recognized when product is shipped from the Company's
supplier. The Company acts as a sales agent for certain customers buying direct from one of its suppliers. The Company reports these
commissions as revenues in the period earned.

 The Company performs ongoing
credit evaluations of its customers and maintains reserves for potential credit losses.

 Inventory Valuation

 Inventories are recorded
at the lower of cost or net realizable value. Write-downs of inventories to net realizable value are based on stock rotation, historical
sales requirements and obsolescence as well as in the changes in the backlog. Reserves required for obsolescence were not material in
any of the periods in the financial statements presented. Reserves related to stock rotation and future sales requirements for specific
inventory parts involve subjective estimates to be made by management based on current and expected market conditions. If market conditions
are less favorable than those projected by management, additional write-downs of inventories could be required. For example, each additional
1% of obsolete inventory would reduce operating income by approximately $58,000.

 The Company does not have
price protection agreements with any of its vendors and assumes the risk of changes in the prices of its products. The Company does not
believe there to be a significant risk with regards to the lack of price protection agreements as many of its inventory items are purchased
to fulfill purchase orders received.

 Income Taxes

 We have made a number of
estimates and assumptions relating to the reporting of a deferred income tax asset to prepare our financial statements in accordance
with generally accepted accounting principles. These estimates may have a significant impact on our valuation allowance relating to deferred
income taxes. Our estimates could materially impact the financial statements.

 Results of Operations

 Consolidated net sales for
the fiscal year ended November 30, 2023 decreased by $15,634,248 or 30.1%, to $36,276,542 as compared to net sales of $51,910,790 for
the fiscal year ended November 30, 2022. We attribute the decrease to a decrease in business with new customers as well as a decrease
in business with existing customers. We can also attribute the decrease to customers pushing out orders due to them over ordering in
2022. The customers have excess inventory that they need to consume before re-ordering those products. Additionally, many customers,
because of having this excess inventory have not launched new product development as their cash is tied up in the inventory. We can also
attribute some of the decrease in sales during the fiscal year ended November 30, 2023, to one of the Company's divisions reduction
in brokering certain products of only $217,000 in Fiscal 2024 from $3.9 million in Fiscal
2022. In Brokering, the Company helps customers find parts that their regular suppliers can not deliver. Net sales for the fiscal years
ended November 30, 2023 and November 30, 2022 reflect $1,032,198 and $1,477,031, respectively of tariff costs that the Company was able
to pass on to its customers.

 Our gross profit for the
fiscal year ended November 30, 2023 decreased by $4,388,733 to $9,928,688, or 30.7%, as compared to $14,317,421 for the fiscal year ended November
30, 2022. Gross margin as a percentage of net sales decreased to 27.4% for the fiscal year ended November 30, 2023 compared to 27.6%
for the fiscal year ended November 30, 2022. The decrease can be attributed to the decrease in sales volume as well as certain products
being sold at a lower profit margin. 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. During Fiscal 2023, the Company was impacted by tariff
costs on certain products imported from China, which went into effect as of July 6, 2018. 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.

 Selling and shipping expenses
for the fiscal year ended November 30, 2023 was $3,010,509, a decrease of $295,205, or 8.9%, as compared to $3,305,714 for the fiscal
year ended November 30, 2022. We attribute the decrease to decreases in sales and the resulting selling expenses such as commission
expenses, messenger and delivery and entertainment expenses, offset by the hiring of new salespeople which increased sales payroll, and growing travel and trade show expenses as well as auto and
freight out expenses.

 General and administrative
expenses for the fiscal year ended November 30, 2023 was $5,337,395, a decrease of $873,497, or 14.1%, as compared to $6,210,892 for
the fiscal year ended November 30, 2022. The decrease is due primarily to decreases in officer salaries and office expenses as well as
health insurance expenses and temporary help expenses and directors fees and bad debt expenses offset by increases in salaries and related
payroll tax expenses, pension expense, general insurance, and maintenance expenses as well as consulting and public company expenses.

 Depreciation expense for
the fiscal year ended November 30, 2023 was $70,247, a decrease of $8,151, or 10.4%, as compared to $78,398 for the fiscal year ended
November 30, 2022. The decrease is due to the company purchasing less new equipment during the fiscal year ended November 30, 2023.

 Tax expense for the fiscal
year ended November 30, 2023 was $653,397, a decrease of $518,165 as compared to a tax expense of $1,171,562 for the fiscal year
ended November 30, 2022. The changes result from our decrease in net income for the 2022 period.

 As a result of the foregoing,
net income for the fiscal year ended November 30, 2023 was $972,110, compared to a net income of $3,736,146 for the fiscal year ended
November 30, 2022.

 Liquidity and Capital Resources

 As of November 30, 2023 we
had cash of $7,634,799, marketable securities in the amount of approximately $3.2 million,
and working capital of $17,908,922. We believe that our working capital levels are adequate to meet our operating requirements during
the next twelve months. The Company is exploring and evaluating opportunities for growth and expansion using the Company's
cash resources.

 During the fiscal year ended November
30, 2023, we had net cash flow provided by operating activities of $2,192,899, as compared to net cash flow provided by operating activities
of $2,235,298 for the fiscal year ended November 30, 2022. The decrease in cash flow from operating activities was primarily the
result of lower net income and related noncash items of deferred taxes, stock based compensation and depreciation as well as accounts
receivable and accounts payable and accrued expenses as offset by higher inventory levels in 2023.

 We had net cash flow used
in investing activities of $(3,248,140) for the fiscal year ended November 30, 2023, as compared to net cash flow used in investing activities
of $(48,351) for the fiscal year ended November 30, 2022. We attribute the change to acquisition of approximately
$3.2 million of marketable debt securities in the form of Treasury bills and notes issued by the United States Treasury.

 We had net cash flow used
in financing activities of $0 during the fiscal year ended November 30, 2023 as compared to $(8,495) provided by financing activities
for the fiscal year ended November 30, 2022.

 As a result of the foregoing,
the Company had a net decrease in cash of $1,055,241 for the fiscal year ended November 30, 2023, as compared to a net increase in cash
of $2,178,452 for the fiscal year ended November 30, 2022.

 The table below sets forth
our contractual obligations, including long-term debt, operating leases and other long-term obligations, as of November 30, 2023:

 Payments
 due

 0 – 12

 13 – 36

 37 – 60

 More than

 Contractual Obligations

 Total

 Months

 Months

 Months

 60 Months

 Financing Lease Obligations

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Operating
 leases

 $
 1,733,504

 351,957

 535,715

 433,452

 412,380

 Total
 obligations

 $
 1,733,504

 $
 351,957

 $
 535,715

 $
 433,452

 $
 412,380

 Inflation

 In the past two fiscal years,
inflation has not had a significant impact on our business. The Company has been able to pass along increases in purchasing costs to
their Customers. However, some logistics costs such as ocean and air freight are not passed along to customers. Any significant increase
in inflation and interest rates could have a significant effect on the economy in general and, thereby, could affect our future operating
results.

 Off Balance Sheet Arrangements

 We do not have any off balance
sheet arrangements.

 Item 7A. Quantitative
and Qualitative Disclosures About Market Risk.

 We are a smaller reporting
company and therefore, we are not required to provide information required by this Item of Form 10-K.

 Item 8. Financial
Statements and Supplementary Information

 Our financial statements,
together with the independent registered public accounting firm's report of Seligson & Giannattasio, LLP, begin on page F-1,
immediately after the signature page.

 Item 9. Changes in
and Disagreements with Accountants on Accounting and Financial Disclosure.

 None.

 Item 9A. Controls and
Procedures.

 Evaluation of Disclosure Controls and Procedures.

 We maintain "disclosure
controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange
Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating
our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.
Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part
upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.

 As of November 30, 2023 we
carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective.

 Management's Report of Internal Control
over Financial Reporting.

 We are responsible for establishing
and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation
of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal
control over financial reporting as of November 30, 2023 based on the criteria established in Internal Control-Integrated Framework
 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that
our internal control over financial reporting was effective as of November 30, 2023. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.

 Changes in Internal Controls.

 During the quarter ended
November 30, 2023, there were no changes in our internal control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

 Item 9B. Other Information

 None.

 Item 9C. Disclosure Regarding Foreign Jurisdictions
That Prevent Inspections

 None.

 Item 10. Directors, Executive
Officers, and Corporate Governance.

 Our board of directors have
a term of office of one year and were all reelected at the 2023 annual meeting of stockholders. In 2024, each director will be up for
reelection for a term of one year to end at the next annual meeting of shareholders.

 Our executive officers and
directors, and their ages, positions and offices with us are as follows:

 Name

 Age

 Position

 Chief Executive Officer,
 Chief Financial Officer, President and Director

 Vice President, Secretary,
 Treasurer and Director

 Alan Plafker* (2)(3)

 Martin Novick* (2)(3)

 Lawrence
 Chariton* (2)(3)

 Gary Jacobs* (1)(2)(3)

 Peter Levy* (1)(2)(3)

 *
 Independent
 director

 (1)
 Member
 of Compensation Committee.

 (2)
 Member
 of Audit Committee

 (3)
 Member
 of Nominating and Corporate Governance Committee

 Directors

 Ira Levy has
served as our President, Chief Executive Officer and director since our inception in November 1981, and as our Chief Financial Officer
since March 2010. From 1976 to 1981, Mr. Levy was employed by Capar Components Corp., an importer and supplier of capacitor and resistor
products. Mr. Levy has served on the board of trustees of the Bellmore Jewish Center since 2002 and served as its president from 2006
to 2008. From 2000 to 2004, he served as a member of the board of trustees of METNY, the governing body of the Conservative movement
of Judaism for New York, New Jersey, and Connecticut. Mr. Levy studied Business Management at Hofstra University. Mr. Levy's experience
in, and knowledge of, the electronics components business led to the conclusion that he should serve on our board.

 Steven J. Lubman has
served as our Vice President, Secretary and a director since our inception in November 1981. In June 1988, Mr. Lubman founded Challenge
Electronics, a division of the Company. From 1980 through 1981, he served as the sales manager for NIC Components Corp., a division of
Nu Horizons Electronics Corp., a distributor of electronic components which was acquired by Arrow Electronics, Inc. (NYSE: ARW) in January
2011. From 1976 through 1980, Mr. Lubman served as both an inside and then outside salesperson for Capar Components Corp., a division
of Diplomat Electronics Inc., a broad line distributor of electronic components including integrated circuits, diodes, transistors, and
capacitor products. Mr. Lubman's more than 35 years of experience in, and knowledge of the electronics components business, led
to the conclusion that he should serve on our board.

 Alan Plafker
has served as a director since June 2001. Since November 2016, he has served as Vice President of Garber Atlas Fries & Associates,
Inc., an insurance agency providing commercial and personal insurance coverage. From July 2000 to November 2016, Mr. Plafker served as
President and Chief Executive Officer of Member Brokerage Service LLC, a credit union service organization, and also served as director
of business services for the Credit Union. From January 1993 to July 2000, he served as a member of the credit union's board of
directors and supervisory committee. Mr. Plafker has more than 35 years of executive and management experience in the insurance and credit
union industries. He is a New York State licensed insurance agent and broker. Mr. Plafker has earned certification as a Certified Professional
Insurance Agent from the AIMS Society and earned the CIC designation from the Society of Certified Insurance Counsellors. He has also
earned the CUBLP (Credit Union Business Lending Professional) designation from the CUNA Business Lending Certification Institute. In
addition, he is a past President of the Professional Insurance Agents Association of New York State. He currently serves as Treasurer
and as a member of the Board of Directors for the New York Independent Livery Drivers Benefit Fund, a New York State benefit fund providing
injury benefits for livery drivers, to comply with the Workers' Compensation Board regulations. Mr. Plafker received a Bachelor's
degree in business administration from Adelphi University. Mr. Plafker's experience in the insurance industry, knowledge of financial
matters, and Board Member experience led to the conclusion that he should serve on our board.

 Martin Novick is
a real estate investor and was appointed to the Board in September 2016. He served as a vice president of Audiovox Electronic Corp.,
an international distributor and value-added service provider in the accessory, mobile and consumer electronics industries, from 1969
to 2008. He previously served on the board of directors of Audiovox Electronic Corp., Nu Horizons Electronics Corp., a distributor of
electronic components which was acquired by Arrow Electronics, Inc. (NYSE: ARW) in January 2011 and Arielle Electronics, a company that
sold bluetooth and wireless products. Mr. Novick holds a Bachelor's Degree in Marketing from New York University. Mr. Novick's
significant experience in the electronics industry and as a director of a public company led to the conclusion that he should serve on
our board.

 Lawrence Chariton has
served as a director since 2001. He worked for 50 years in the retail jewelry industry at Linda Shop Jewelry and Great American Jewelry
as Chief Operating Officer. Since February 2018 Mr. Chariton has served as a member of the Board of Trustees of the State University
of Old Westbury in New York. Mr. Chariton has served previously from 1998 as a member of the Board of Directors of New Island Hospital
in Bethpage, N.Y. Subsequently he remained after the merger as a member of the Board of Directors with St. Joseph's Hospital until
December 2010. Mr. Chariton served as a member of The Board of Directors of the Jewish National Fund of Long Island. Mr. Chariton has
a Bachelor's Degree in Accounting from Hofstra University. He is a graduate of The Gemological Institute of America in Diamonds
and Color Stones. Mr. Chariton's experience on several Boards of Directors as well as running a small business led to the conclusion
that he should serve on our board.

 Gary M. Jacobs has
served as a director since July 2003. Since October 2014, Mr. Jacobs has served as President of Bar Bakers, LLC, a commercial food manufacturer
of nutritional bars, cookies and other baked goods. From March 2011 to October 2014, he served as a consultant to several companies,
providing advisory services in the areas of turn-around and financial and operational efficiencies. Mr. Jacobs served as the Chief Financial
Officer of Chem Rx from June 2008 until March 2011. From May 2005 to June 2008, Mr. Jacobs was the Chief Financial Officer and Chief
Operating Officer of Gold Force International, Ltd., a supplier of gold, silver and pearl jewelry to U.S. retail chains, and Karat Platinum
LLC, a developer of an alternative to platinum. From July 2003 to April 2005, Mr. Jacobs served as President of The Innovative Companies,
LLC, a supplier of natural stone. From October 2001 to February 2003, Mr. Jacobs served as Executive Vice President of Operations and
Corporate Secretary of The Hain Celestial Group, Inc., a food and personal care products company. Mr. Jacobs also served as Executive
Vice President of Finance, Chief Financial Officer and Treasurer of The Hain Celestial Group, Inc. from September 1998 to October 2001.
Prior to that, Mr. Jacobs was the Chief Financial Officer of Graham Field Health Products, Inc., a manufacturing and distribution company.
Mr. Jacobs served for 13 years as a member of the audit staff of Ernst & Young LLP, where he attained the position of senior manager.
He is a certified public accountant and holds a Bachelor's of Business Administration in Accounting from Adelphi University. Mr.
Jacobs's experience as a certified public accountant and as a chief financial officer led to the conclusion that he should serve
on our board.

 Peter A. Levy
has been a director of the Company since April 2017. He is an equity shareholder at the law firm of Mandelbaum Barrett, one of the region's
oldest and most renowned law firms. He joined Mandelbaum as a member in September of 2015, and now serves on the firm's Executive
Committee with the responsibility for all department practices within the firm. In addition to practicing law for 15 years, Mr. Levy
spent 12 years as a partner at a regional accounting firm, Sobel & Company, and has served as the chief operating officer of two
different public companies, The Empire Sports & Entertainment and MYOS Corporation. As the president of MYOS Corporation, he successfully
positioned the company on the NASDAQ stock exchange. Mr. Levy has significant experience in mergers and acquisitions, joint venture
partnering, corporate governance, business processes, and strategic planning. Community service is an important aspect of Mr. Levy's
life. For over 20 years he has been on the Board and also served as the Corporate Liaison to Easter Seals – Camp ASCCA, America's flagship
camp for People with Disabilities, and he is the co-builder of the Roswal-Levy Tower, the world's largest wheelchair-accessible
interactive climbing tower for the disabled. For over a decade, Mr. Levy has been on the Board of Hamp's Camp, a charity
founded by former N.Y. Giants running back Rodney Hampton, which is dedicated to providing leadership tools to underprivileged children
in Atlanta, Newark, and Houston. Mr. Levy's financial experience led to the conclusion that he should serve on our board.

 The Board has determined
that each of Messrs. Chariton, Jacobs, Plafker, Novick and Peter Levy qualify as "independent" under the Nasdaq Stock Market
Rules as well as Rule 10A-3 promulgated under the Exchange Act.

 Board and Committee Meetings

 During the fiscal year ended
November 30, 2023, the Board held five meetings. Each of the directors attended at least 75% of the aggregate of (i) the total number
of meetings of the Board (held during the period for which he served as a director), and (ii) the total number of meetings held by all
committees of the Board on which he served (during the periods that he served on such committees). We have no written policy regarding
director attendance at annual meetings of stockholders. Our last annual meeting of stockholders was held on November 30, 2023 and all
of our directors attended such meeting.

 Board Committees

 The composition and responsibilities
of each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are described below.
Members will serve on these committees until their resignation or until otherwise determined by the Board. Each committee operates under
a charter that has been approved by the Board, and which is available on our website at

 Audit Committee

 Our Audit Committee is comprised
of Messrs. Chariton, Plafker, Novick, Jacobs and Peter Levy, each of whom is an independent director of the Board. Mr. Jacobs serves
as chairman of the Audit Committee. Our Board has determined that Mr. Jacobs is an "audit committee financial expert" as
defined in Item 407(d)(5)(ii) of Regulation S-K. The audit committee members are "independent" as that term is defined under
the Nasdaq Stock Market Rules. During the fiscal year ended November 30, 2023, the Audit Committee held four meetings.

 The Audit Committee is authorized
to:

 approve
 and retain the independent auditors to conduct the annual audit of our books and records;

 review
 the proposed scope and results of the audit;

 review
 and pre-approve the independent auditor's audit and non-audit services rendered;

 approve
 the audit fees to be paid;

 review
 accounting and financial controls with the independent auditors and our financial and accounting
 staff;

 review
 and approve transactions between us and our directors, officers and affiliates;

 recognize
 and prevent prohibited non-audit services;

 establish procedures for
 complaints received by us regarding accounting matters;

 oversee
 internal audit functions; and

 prepare
 the report of the Audit Committee that SEC rules require to be included in our annual meeting
 proxy statement.

 Compensation Committee

 Our Compensation Committee
is comprised of Peter Levy and Gary Jacobs, each of whom is an independent director. Mr. Levy serves as chairman of the Compensation
Committee. During the fiscal year ended November 30, 2023, the Compensation Committee held two meetings.

 The Compensation Committee
is authorized to:

 review and recommend the
 compensation arrangements for management, including the compensation for our chief executive officer;

 establish and review general
 compensation policies with the objective of attracting and retaining superior talent, rewarding individual performance and achieving
 our financial goals;

 administer our stock incentive
 plans; and

 prepare the report of the
 Compensation Committee that SEC rules require to be included in our annual meeting proxy statement.

 Nominating and Corporate Governance Committee

 Our Nominating and Corporate
Governance Committee is comprised of Messrs. Chariton, Plafker Novick, Peter Levy and Jacobs, each of whom is an independent director.
Mr. Jacobs serves as chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee
held one meeting during the fiscal year ended November 30, 2023.

 The Nominating and Corporate
Governance Committee is authorized to:

 identify and nominate members
 of the board of directors;

 oversee the evaluation
 of the board of directors and management;

 develop and recommend corporate
 governance guidelines to the board of directors;

 evaluate the performance
 of the members of the board of directors; and

 make recommendations to
 the board of directors as to the structure, composition and functioning of the board of directors and its committees.

 Director Nominations

 In evaluating and determining
whether to nominate a candidate for a position on the Board, the Nominating and Corporate Governance Committee utilizes a variety of
methods and considers criteria such as high professional ethics and values, experience on the policy-making level in business or experience
relevant to our product candidates and a commitment to enhancing stockholder value. Candidates may be brought to the attention of the
Nominating and Corporate Governance Committee by current Board members, stockholders, officers or other persons. The Nominating and Corporate
Governance Committee will review all candidates in the same manner regardless of the source of the recommendation.

 We have no formal policy
regarding board diversity. Our Nominating and Corporate Governance Committee and Board may therefore consider a broad range of factors
relating to the qualifications and background of nominees, which may include diversity, which is not only limited to race, gender or
national origin. Our Nominating and Corporate Governance Committee's and Board's priority in selecting board members is identification
of persons who will further the interests of our stockholders through his or her established record of professional accomplishment, the
ability to contribute positively to the collaborative culture among board members and professional and personal experiences and expertise
relevant to our growth strategy.

 The Nominating and Corporate
Governance Committee also considers stockholder recommendations for director nominees that are properly received in accordance with our
Bylaws and applicable rules and regulations of the SEC. In order to validly nominate a candidate for election or reelection as a director,
stockholders must give timely notice of such nomination in writing to our Corporate Secretary and include, as to each person whom the
stockholder proposes to nominate, all information relating to such person that is required to be disclosed in solicitations of proxies
for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange
Act, and the rules and regulations thereunder (including such person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected). For more information on director candidate nominations by stockholders, see "Procedures
for Nominating Directors".

 Procedures for Nominating Directors

 Effective December 30, 2021,
the Company began to be governed by newly adopted bylaws (the "Bylaws").The Bylaws provide, among other things, for advance
notice of director nominations.

 The exclusive means by which
a stockholder may nominate a director is as follows: (1) was a stockholder of record at the time of the giving of the notice required
by Section 2.4(ii) of the Bylaws and on the record date for the determination of stockholders entitled to vote at the annual
meeting and (2) has complied with the notice procedures set forth in this Section 2.4(ii) of the Bylaws. In addition to any
other applicable requirements, for a nomination to be made by a stockholder, the stockholder must have given timely notice thereof in
proper written form to the secretary of the corporation. To comply with clause (B) of Section 2.4(ii) of the Bylaws, a
nomination to be made by a stockholder must set forth all information required under Section 2.4(ii) of the Bylaws and must
be received by the secretary of the corporation at the principal executive offices of the corporation at the time set forth in, and in
accordance with, the final three sentences of Section 2.4(i)(a) of the Bylaws. This includes how a stockholder's notice
a stockholder's notice must set forth all information required under this Section 2.4(i) and must be timely received
by the secretary of the corporation. To be timely, a stockholder's notice must be received by the secretary at the principal executive
offices of the corporation not later than the 45 th day nor earlier than the 75 th day before the one-year
anniversary of the date on which the corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever
is earlier) for the preceding year's annual meeting; provided, however, that in the event that no annual
meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more
than 60 days after the one-year anniversary of the date of the previous year's annual meeting, then, for notice by the stockholder
to be timely, it must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting
and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth day
following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall
any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder's
notice as described in this Section 2.4(i)(a). " Public Announcement " shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

 Additionally, to be in proper
written form, such stockholder's notice to the secretary must set forth: (1) as to each person (a " nominee ")
whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence
address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the
corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by
the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into
by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement
or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss
to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a
description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nominations are to be made by the stockholder, (F) a written statement executed by the
nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Nevada law with respect to the
corporation and its stockholders, and (G) any other information relating to the nominee that would be required to be disclosed about
such nominee if proxies were being solicited for the election or re-election of the nominee as a director, or that is otherwise required,
in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee's written consent to being
named in the proxy statement, if any, as a nominee and to serving as a director if elected or re-elected, as the case may be); and (2)
as to such stockholder giving notice, (A) the information required to be provided pursuant to clauses (2) through (5) of
Section 2.4(i)(b) above, and the supplement referenced in the second sentence of Section 2.4(i)(b) above (except
that the references to "business" in such clauses shall instead refer to nominations of directors for purposes of this paragraph),
and (B) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of
proxy to holders of a number of the corporation's voting shares reasonably believed by such stockholder or Stockholder Associated
Person to be necessary to elect or re-elect such nominee(s) (such information provided and statements made as required by clauses
(A) and (B) above, a " Nominee Solicitation Statement ").

 In addition to all other
requirements set forth in the Bylaws, a nominating stockholder (including its affiliates) and each director nominee must also comply
with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters
set forth in the Bylaws.

 Board Leadership Structure and Role in Risk
Oversight

 Although we have not adopted
a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined
that it is in our best interests and in the best interests of our stockholders to combine these roles. Mr. Levy has served as our Chairman
since November 1981. Due to our small size, we believe it is currently most effective to have the Chairman and Chief Executive Officer
positions combined.

 Our board of directors is
primarily responsible for overseeing our risk management processes. The Board receives and reviews periodic reports from management,
auditors, legal counsel, and others, as considered appropriate regarding our assessment of risks. The Board focuses on the most significant
risks facing us and our general risk management strategy, and also ensures that risks undertaken by management are consistent with the
board's appetite for risk. While the Board oversees our risk management, management is responsible for day-to-day risk management
processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing us and that our
board leadership structure supports this approach.

 Code of Ethics

 We have adopted a code of
ethics that applies to our officers, directors and employees. A copy of the code of ethics is accessible on our website at
Additional copies of the code of ethics may be obtained without charge, from us by writing or calling: 95 East Jefryn Blvd., Deer Park,
New York 11729, Attention: Corporate Secretary, Telephone: (631) 595-1818.

 Stockholder Communications with the Board

 Stockholders who wish to
do so may communicate directly with the Board or specified individual directors by writing to:

 Board of Directors (or name of individual
director)

 c/o Corporate Secretary

 Surge Components, Inc.

 95 East Jefryn Blvd.

 Deer Park, New York 11729

 The Board of Directors maintains
a process for stockholders or other interested parties to communicate with the Board or any Board member. Stockholders or interested
parties who desire to communicate with the Board should send any communication to the Company's Corporate Secretary, Surge Components,
Inc., 95 East Jefryn Blvd., Deer Park, New York 11729. We will forward all communications from security holders and interested parties
to the full Board, to non-management directors, to an individual director or to the chairperson of the Board committee that is most closely
related to the subject matter of the communication, except for the following types of communications: (i) communications that advocate
that we engage in illegal activity; (ii) communications that, under community standards, contain offensive or abusive content; (iii)
communications that have no relevance to our business or operations; and (iv) mass mailings, solicitations and advertisements. The Corporate
Secretary will determine when a communication is not to be forwarded. Our acceptance and forwarding of communications to directors does
not imply that directors owe or assume any fiduciary duties to persons submitting the communications.

 Additionally, the Audit Committee
has established procedures for the receipt, retention and confidential treatment of complaints received by Surge regarding accounting,
internal accounting controls or auditing matters, including procedures for confidential, anonymous submissions by employees with respect
to such matters. Employees and stockholders may raise a question or concern to the Audit Committee regarding accounting, internal accounting
controls or auditing matters by writing to:

 Chairman, Audit Committee

 c/o Corporate Secretary

 Surge Components, Inc.

 95 East Jefryn Blvd.

 Deer Park, New York 11729

 Section 16(a) Beneficial Ownership Reporting
Compliance

 Section 16(a) of the Securities
Exchange Act of 1934 requires that our officers and directors, and persons who own more than ten percent of a registered class of our
equity securities, file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors
and persons owning more than ten percent of such securities are required by Commission regulation to file with the Commission and furnish
the Company with copies of all reports required under Section 16(a) of the Exchange Act. To our knowledge, based solely upon our review
of the copies of such reports furnished to us, during the fiscal year ended November 30, 2022, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% beneficial owners were complied with.

 Item 11. Executive Compensation.

 Summary Compensation Table

 The following table sets
forth information regarding compensation paid to our executive officers for the years ended November 30, 2023 and November 30, 2022:

 Name and Position

 Fiscal
 Year

 Salary

 ($)

 Bonus

 ($)

 Stock

 Awards
 ($)

 Option

 Awards
 ($)

 All Other

 Compensation
 ($)(1)

 Total

 ($)

 2023

 300,000

 150,000

 -

 -

 64,957

 514,957

 President CEO and CFO

 2022

 300,000

 318,400

 60,000

 -

 61,473

 739,873

 2023

 250,000

 112,000

 -

 -

 48,331

 410,331

 Vice President and Secretary

 2022

 250,000

 192,877

 37,500

 -

 48,308

 528,685

 (1)

 Amounts in this column
 include payments for medical insurance, automobile allowance and life and personal insurance. With respect to Fiscal 2023,
 the amounts were comprised of the following items:

 Medical

 Insurance

 Automobile

 Allowances

 Life
 and
 Personal
 Insurance

 $
 36,724

 $
 18,756

 $
 9,477

 $
 28,216

 $
 12,300

 $
 7,815

 2022 Base Salary and Bonus

 In February 2016, the Company
entered into revised employment agreements with two officers of the Company. Pursuant to these agreements, the base salary for Ira Levy
is $275,000 and the base salary for Steven Lubman is $225,000. The agreements continue until terminated by either party. In April
2021, the employment agreements for Ira Levy and Steven Lubman were amended to increase the base salary to $300,000 and $250,000, respectively.

 The Company's compensation
committee may award these officers with bonuses and will review the base salary amounts for each of the officers on an annual basis to
determine if any changes to the base salary amounts need to be made. Pursuant to the employment agreements, the officers are prohibited
from engaging in activities which are competitive with those of the Company during their employment with the Company and for one year
following termination. If the agreement is terminated other than for cause, the officer would be entitled to all base salary earned through
the date of termination, accrued but unused vacation, all vested equity, and bonus amounts payable to the officer through the date of
termination. The officers would also be entitled to receive an additional thirty-six months of annual compensation equal to the average
of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company's
regular payroll practice over a 52-week period.

 The bonus granted to the
named executive officers for 2022 was based on certain performance goals that were set prior to the year by the Compensation Committee
and the executive, but ultimately the bonus is discretionary, as the Compensation Committee has the authority to make all final decisions
regarding the amount and form of bonuses provided to the executive officers. For Mr. Levy, his target bonus amount is equal to fifty
percent (50%) of his base salary, and Mr. Lubman's target is equal to forty-five percent (45%) of his base salary.

 In 2022 the Compensation
Committee used four performance markers to guide their decisions regarding bonus amounts. The performance guidelines that were applicable
to Messrs. Levy and Lubman's bonuses for the 2022 year included individual performance goals, revenue growth, achieving the operating
plan goals for specific divisions of the company, and achieving the operating plan for the company as a whole. Each performance guideline
was generally intended to make up twenty-five percent of the potential bonus amount for each executive. Based upon the Company's
and the executives' performance during the 2022 year, the Compensation Committee granted awards that were approximately one hundred
percent (100%) of the executives' target award amount.

 2023 Equity Compensation Awards

 We have historically granted
fully vested stock awards and stock option awards. The amount of awards granted in any given year is determined based on the performance
of the company and the executive in the previous year. Performance is generally based upon the same performance guidelines that are used
for the annual cash bonus award for that year. The Compensation Committee sets a target award amount based upon a percentage of the executive's
base salary. At the end of the year, the Compensation Committee determines the cash amount that resulted from the previous year's
performance, with any discretionary adjustments that the Compensation Committee deems to be appropriate, and converts that cash amount
into a number of shares of stock awards or stock option awards, as applicable.

 During the 2022 year, the
Compensation Committee set a target amount of twenty percent (20%) of base salary for Mr. Levy and a target of fifteen percent (15%)
of base salary for Mr. Lubman. Following the end of the 2022 year, the Compensation Committee determined that Messrs. Levy and Lubman
should receive equity awards equal in value to one hundred percent (100%) of their target award amount. The Compensation Committee used
the Company's stock price of $3.46 on April 10, 2023 to convert the resulting cash award into 17,341 stock awards for Mr. Levy
and 10,838 stock awards for Mr. Lubman. The equity awards, if any, that will be granted to the named executive officers with respect
to 2023 year performance will not be granted until the 2024 year, therefore they will be included in the compensation disclosures that
we file for the 2024 year.

 Employment Agreements

 In February 2016, the Company
entered into revised employment agreements (the "Levy Agreement" and the "Lubman Agreement", individually, and
collectively, the "Employment Agreements") with Ira Levy and Steven Lubman, respectively, which provides the executives with
a base salary of $275,000 and $225,000, respectively ("Base Salary"). In April 2021, the employment agreements for Ira Levy
and Steven Lubman were amended to increase their base salaries to $300,000 and $250,000, respectively.

 The executives shall receive
an annual bonus as shall be determined by the Board or the Compensation Committee, as applicable, in its sole discretion, based upon
criteria to be established in its sole discretion. The executives shall also be entitled to receive additional cash, equity or other
compensation or benefits in consideration for their services to the Company, at such times and in such amounts as shall be determined
in the sole discretion of the Board or the Compensation Committee. In addition, the executives shall be entitled to receive grants of
stock options, stock and/or any other equity incentive awards available to senior executives, under the Company's equity incentive
plans, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee.

 The Employment Agreements
will remain in effect until terminated by either the Company or the executive. In the event an executive's employment is terminated
by the Company for Cause (as defined in the Employment Agreements), or if an executive resigns other than for Good Reason (as defined
in the Employment Agreements), he shall be entitled to receive (i) any earned but unpaid salary, all vested equity, and any earned but
unpaid bonus awards through the date of termination, and (ii) reimbursement for any unreimbursed business expenses incurred by him in
accordance with the Company's policy prior to the date of termination.

 In the event an executive's
employment is terminated by the Company other than for Cause or if an executive resigns for Good Reason, including a Change of Control
(as defined in the Employment Agreements) that is accompanied by the executive's resignation within a twelve month period following
that Change of Control, such executive shall be entitled to any earned but unpaid salary, all vested equity, and any earned but unpaid
bonus awards through the date of termination. Such executive will also be paid an additional thirty-six months of annual compensation
equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance
with the Company's regular payroll practice over a 52-week period. The Company shall also (i) accelerate the vesting on any of
the executive's unvested stock options, restricted stock grants or other equity incentive awards; and (ii) reimburse the executive
for any unreimbursed business expenses incurred by him in accordance with the Company's policy prior to the date of termination.
In the event that the executive is terminated without Cause due to our inability to pay our debts when they generally become due, we
will not be liable for the cash severance payments or the payment of annual bonuses due to the executive. The severance benefits potentially
payable upon a termination other than for Cause or for Good Reason will be provided subject to the executive signing a general release
of claims in our favor prior to payment.

 In the event an executive's
employment is terminated by the Company upon death or disability, the executive or his estate shall be entitled to receive his salary
then in effect along with all other fringe benefits (including, without limitation, family medical benefits) for a period of one year
following the date of such termination. In addition, the executive or his estate shall have the right to exercise any unexercised and
vested options for a period of ninety days following the date of termination and to receive payment for any accrued but unpaid vacation
time.

 The Employment Agreements
contain customary non-competition and non-solicitation provisions that extend to one year after the date of termination of the executives'
employment with the Company. The executives also agreed to customary terms regarding confidentiality and ownership of product ideas.

 Outstanding Equity Awards at November 30,
2023

 Name

 Number
 of
 securities
 underlying
 options,
 Unexercisable
 (#)

 Number
 of
 Securities
 Underlying
 Unexercised
 Options,
 Exercisable
 (#)

 Option

 Exercise

 Price
 ($)

 Option
 Expiration

 Date

 50,000

 50,000

 1.41

 04/23/2025

 Steven Lubman

 50,000

 50,000

 1.41

 04/23/2025

 40,000

 40,000

 3.55

 03/15/2027

 Steven Lubman

 40,000

 40,000

 3.55

 03/15/2027

 Director Compensation for Year Ending November
30, 2023

 The following table summarizes
the compensation for our non-employee board of directors for the fiscal year ended November 30, 2023. All compensation paid to our employee
directors is included under the summary compensation table above. With respect to the 2023 fiscal year, the director compensation program
consisted of a monthly cash fee of $2,500 per month, with the amount increased to $3,500 per month for a non-employee director that serves
as the chairman of more than two committees on the Board of Directors. The non-employee directors are also eligible to receive equity
awards, although there is no annual target amount set for the non-employee directors. In July 2021 the directors received an increase
making the new monthly cash fee $3,000 per month and the amount for a non-employee director that serves as a chairman on more than two
committees on the Board of Directors $4,000 per month.

 Name

 Fees

 Earned or
 Paid in
 Cash
 ($)

 Total

 ($)

 Alan Plafker

 Martin Novick

 Lawrence Chariton

 Gary Jacobs

 48,000

 48,000

 Peter Levy

 Item 12. Security Ownership
of Certain Beneficial Owners and Management.

 Under Rule 13d-3, a beneficial
owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned
by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares
are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these
acquisition rights.

 The following table sets
forth as of February 21, 2024, information regarding the beneficial ownership of our common stock by: (i) each person known by the Company
to be the beneficial owner of than five percent of the outstanding shares of common stock, (ii) each of our directors and officers and
(iii) all officers and directors, as a group:

 Amount and

 Nature of

 Percentage of

 Common

 Stock

 Common

 Stock

 Beneficially

 Beneficially

 Name
 and address of Beneficial Owner (1)

 Owned

 Owned (2)

 1,365,202
 (3)

 24.4
 %

 1,111,952
 (3)

 19.9
 %

 Lawrence Chariton

 192,573
 (5)

 3.5
 %

 Alan Plafker

 46,334
 (6)

 -

 Martin Novick

 20,000
 (6)

 -

 Gary Jacobs

 182,000
 (4)

 3.3
 %

 Peter Levy

 35,000
 (5)

 -

 All directors and executive officers as a group (7 persons)

 2,953,061

 52.9
 %

 *

 Less than 1%

 (1)

 Except as otherwise indicated,
 the address of each beneficial owner is c/o Surge Components, Inc., 95 East Jefryn Boulevard, Deer Park, NY 11729.

 (2)

 Applicable percentage ownership is based on 5,577,698 shares of common
stock outstanding as of February 21, 2024.

 (3)

 Includes 50,000 shares
 issuable upon exercise of options with an exercise price of $1.41, which are exercisable within 60 days. Also includes 40,000 shares
 issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

 (4)

 Includes 25,000 shares
 issuable upon exercise of options with an exercise price of $1.41, which are exercisable within 60 days. Also includes 30,000 shares
 issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

 (5)

 Includes 15,000 shares
 issuable upon exercise of options with an exercise price of $1.41, which are exercisable within 60 days. Also includes 20,000 shares
 issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

 (6)

 Includes 20,000 shares
 issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

 Item 13. Certain Relationships
And Related Transactions, and Director Independence.

 Certain Relationships and Related Transactions

 Surge and Challenge each
lease their current executive offices from Great American Realty of Jefryn Blvd., LLC, an entity owned 50% by Ira Levy, our Chief Executive
Officer, and President and Steven Lubman, our Vice President, Secretary and Treasurer. Our lease is through September 2030 and our annual
rent payments were approximately $278,599 and $275,042 for Fiscal 2023 and Fiscal 2022, respectively.

 Item 14. Principal Accounting
Fees And Services

 Fees Billed by Our Independent Registered
Public Accounting Firm During Fiscal 2021 and 2022

 The following table sets
forth the aggregate fees billed to us for the fiscal years ended November 30, 2022 and 2023 by Seligson & Giannattasio, LLP (PCAOB
ID 759)

 2022

 2023

 Audit Fees (1)

 $
 171,650

 $
 171,650

 Tax Fees (2)

 $
 12,600

 $
 12,600

 (1)
 Audit
 Fees represent the aggregate fees for professional services for the audit of our annual financial
 statements and review of financial statements included in our quarterly reports on Form 10-Q
 or services that are normally provided in connection with statutory and regulatory filings
 or engagements for those fiscal years.

 (2)
 Tax
 fees represent the aggregate fees billed for tax compliance, tax advice, and tax planning.

 Audit Committee Pre-Approval Policies and
Procedures

 Pursuant to its charter,
the Audit Committee is responsible for the pre-approval of all audit and permissible non-audit services provided by our principal independent
accountants on a case-by-case basis. Our Audit Committee has established a policy regarding approval of all audit and permissible non-audit
services provided by our principal independent accountants. Our Audit Committee pre-approves these services by category and service.
Our Audit Committee has preapproved all of the services provided by our principal independent accountants in the fiscal year ending November
30, 2023.

 Item 15. Exhibits and
Financial Statement Schedules.

 The following documents are
filed as a part of this report or incorporated herein by reference:

 1.

 Our Consolidated Financial
 Statements commencing on page F-1 of this Annual Report.

 2.

 Exhibits:

 The following documents are
included as exhibits to this Annual Report:

 Exhibit

 Number

 Description

 3.1

 Articles
 of Incorporation of Surge Components, Inc. (filed as exhibit 3.3 to Form 8-K filed on January 24, 2022 and incorporated herein by
 reference).

 3.2

 Bylaws
 of Surge Components, Inc. (filed as exhibit 3.4 to Form 8-K filed on January 24, 2022 and incorporated herein by reference).

 4.1

 Rights
 Agreement dated as of October 7, 2016 between Surge Components, Inc., as the Company, and Continental Stock Transfer & Trust
 Company, as Rights Agent (filed as exhibit to Form 8-K filed on October 7, 2016 and incorporated herein by reference).

 10.1

 Lease
 between Surge Components and Great American Realty of 95 Jefryn Blvd., LLC (filed as exhibit to Amendment No. 1 to Form 10 filed
 on August 20, 2010 and incorporated herein by reference)

 10.2

 Lease
 between Challenge Electronics and Great American Realty of 95 Jefryn Blvd., LLC (filed as exhibit to Amendment No. 1 to Form 10 filed
 on August 20, 2010 and incorporated herein by reference)

 10.3

 Employment
 Agreement between Surge Components, Inc. and Ira Levy (filed as exhibit to Form 8-K filed on February 24, 2016 and incorporated herein
 by reference)

 10.4

 Employment
 Agreement between Surge Components Inc. and Steven Lubman (filed as exhibit to Form 8-K filed on February 24, 2016 and incorporated
 herein by reference)

 10.5

 Declaration
 of Trust (filed as exhibit to Amendment No. 1 to Form 10 filed on August 20, 2010 and incorporated herein by reference)

 10.6

 2010
 Incentive Stock Plan (filed as exhibit to Amendment No. 2 to Form 10 filed on November 4, 2010 and incorporated herein by reference)

 10.7

 2015
 Incentive Stock Plan (filed as exhibit to Form 10-K filed on February 26, 2016 and incorporated herein by reference)

 10.8

 Lease
 Agreement, dated October 1, 2010, between Great American Realty of Jefryn Boulevard, LLC and Surge Components, Inc. (filed as exhibit
 to Amendment No. 2 to Form 10 filed on November 4, 2010 and incorporated herein by reference)

 10.9

 Lease
 Agreement, dated October 1, 2010, between Great American Realty of Jefryn Boulevard, LLC and Challenge Electronics, Inc. (filed as
 exhibit to Amendment No. 2 to Form 10 filed on November 4, 2010 and incorporated herein by reference)

 10.10

 dated March 18, 1999 between Surge Components, Inc. and Future Electronics Incorporated (filed as exhibit to Amendment No. 3 to Form
 10 filed on January 11, 2011 and incorporated herein by reference)

 10.11

 Addendum
 A, dated March 18, 1999, between Surge Components, Inc. and Future Electronics (filed as exhibit to Amendment No. 3 to Form 10 filed
 on January 11, 2011 and incorporated herein by reference)

 10.12

 dated October 21, 2009, between Challenge Electronics, Inc. and Cam RPC Electronics (filed as exhibit to Amendment No. 3 to Form
 10 filed on January 11, 2011 and incorporated herein by reference)

 Exhibit

 Number

 Description

 10.13

 dated October 21, 2009, between Challenge Electronics, Inc. and Nu-Way Electronics (filed as exhibit to Amendment No. 3 to Form 10
 filed on January 11, 2011 and incorporated herein by reference)

 10.14

 dated October 19, 2009 between Challenge Electronics, Inc. and Aesco Electronics (filed as exhibit to Amendment No. 3 to Form 10
 filed on January 11, 2011 and incorporated herein by reference)

 10.15

 dated May 5, 2009, between Challenge Electronics, Inc. and TLC Electronics, Inc. (filed as exhibit to Amendment No. 3 to Form 10
 filed on January 11, 2011 and incorporated herein by reference)

 10.16

 Distributor
 Agreement, dated August 14, 2012, between Surge Components, Inc. and TTI, Inc. (filed as exhibit to Form 10-K filed on February 28,
 2013 and incorporated herein by reference)

 10.17

 Sole
 Agent Agreement, dated January 1, 2007, between Surge Components, Inc. and Lelon Electronics (filed as exhibit to Form 10-K
 filed on February 28, 2012 and incorporated herein by reference)

 10.18

 Master
 Distributor Agreement, dated February 7, 2011, between Surge Components, Inc. and Avnet, Inc. (filed as exhibit to Form 10-K filed
 on February 28, 2012 and incorporated herein by reference)

 10.19

 First
 Amendment to Master Distributor Agreement, dated February 17, 2011, between Surge Components, Inc. and Avnet, Inc. (filed as exhibit
 to Form 10-K filed on February 28, 2012 and incorporated herein by reference)

 10.20

 Rental
 Agreement with Adcock Investment Company Limited dated May 5, 2013 (filed as exhibit to Form 10-Q filed on July 15, 2013
 and incorporated herein by reference)

 10.21

 Settlement
 Agreement, dated as of December 22, 2016, by and among Surge Components, Inc., Ira Levy, Steven
 J. Lubman, Alan Plafker, Lawrence Chariton, Gary Jacobs and Martin Novick, and Messrs. Michael D. Tofias and Bradley P. Rexroad (filed
 as exhibit to Form 8-K filed on December 23, 2016 and incorporated herein by reference).

 10.22

 Amendment
 to Settlement Agreement, dated as of August 16, 2018, by and among Surge Components, Inc., Ira
 Levy, Steven J. Lubman, Alan Plafker, Lawrence Chariton, Gary Jacobs and Martin Novick, and Messrs. Michael D. Tofias and Bradley
 P. Rexroad (filed as exhibit 10.1 to Form 8-K filed on August 22, 2018 and incorporated herein by reference).

 21.1

 Subsidiaries
 (filed as exhibit to Amendment No. 1 to Form 10 filed on August 20, 2010 and incorporated herein by reference)

 23.1

 Consent of Seligson & Giannattasio, Independent Registered Public Accounting Firm

 Certification of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 101.INS

 101.SCH

 101.CAL

 Document.

 101.DEF

 Document.

 101.LAB

 101.PRE

 Document.

 Cover Page Interactive Data File (formatted as Inline

 Item 16. Form 10-K Summary.

 None.

 SIGNATURES

 Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

 Date: February 28, 2024

 By:

 /s/ Ira Levy

 Chief Executive Officer and Chief Financial Officer

 Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

 /s/

 Chief Executive Officer,
 Chief Financial Officer and

 Chairman of the Board (Principal Executive Officer,

 Principal Financial Officer and Principal Accounting Officer)

 /s/

 Vice President, Secretary,
 Treasurer and

 /s/ Alan Plafker

 Alan Plafker

 /s/ Martin
 Novick

 Martin Novick

 /s/ Lawrence
 Chariton

 Lawrence Chariton

 /s/ Peter
 A. Levy

 Peter A. Levy

 /s/ Gary M.
 Jacobs

 Gary M. Jacobs

 REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

 To the Board of Directors and

Stockholders of Surge Components, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated
balance sheets of Surge Components, Inc. and subsidiaries (the "Company") as of November 30, 2023 and 2022, and the
related consolidated statements of operations, comprehensive income, changes in shareholders' equity, and cash flows for each of
the years in the two-year period ended November 30, 2023, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November
30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended November 30,
2023, in conformity with accounting principles generally accepted in the United States of America.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters

 The critical audit matters communicated below
are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 We identified the determination of the valuation
of the inventory reserves as a critical audit matter because of the subjectivity in the estimates related to the creation of the inventory
reserves.

 The primary procedures performed to address this
critical audit matter included the following: We identified inventory parts for reserve through the inspection of parts and packaging
during the observation of the Company inventory counts to identify potential inventory that may be old. We performed significant testing
for parts that were slow moving by obtaining schedules for inventory by part number and the number of sales for each part for the past
year. Inventory parts were tested for slow moving reserves by testing all parts with inventory in excess of one year and were tested
further to determine if there were sales orders for the part that would cover the excess amount.

 A calculated reserve was prepared from those
parts where the inventory in excess of one year and that did not have sales orders for all or any part of that excess. The calculated
amount was compared with the reserve as recorded by the Company. We proposed an adjustment totaling $99,583 for this difference in the
reserves.

 /s/ Seligson & Giannattasio, LLP

 We have served as the Company's auditor since 2002.

 White Plains, New York

 February 28, 2024

 F- 1

AND SUBSIDIARIES

 Consolidated Balance Sheets

 2023

 2022

 ASSETS

 Current assets:

 Cash

 $
 7,634,799

 $
 8,690,040

 Marketable Securities

 3,204,772

 -

 Accounts receivable - net of allowance for doubtful accounts of $ 79,341 and $ 173,565

 6,097,411

 7,230,635

 Inventory, net

 5,422,824

 6,408,551

 Prepaid expenses and income taxes

 520,104

 470,847

 Total current assets

 22,879,910

 22,800,073

 Fixed assets – net of accumulated depreciation and amortization of $ 1,757,772 and $ 1,687,525

 170,120

 196,999

 Operating Lease Right of Use Asset

 1,350,998

 1,362,305

 Deferred income taxes

 241,328

 229,098

 Other assets

 34,299

 34,299

 Total assets

 $
 24,676,655

 $
 24,622,774

 F- 2

AND SUBSIDIARIES

 Consolidated Balance Sheets

 (Continued)

 2023

 2022

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities:

 Accounts payable

 $
 3,216,590

 $
 4,147,595

 Operating lease liabilities, current maturities

 351,957

 309,216

 Accrued expenses and taxes

 735,383

 899,259

 Accrued salaries

 667,058

 598,519

 Total current liabilities

 4,970,988

 5,954,589

 Operating lease liabilities net of current
 maturities

 1,136,766

 1,164,722

 Total liabilities

 6,107,754

 7,119,311

 Commitments and contingencies

 Shareholders' equity:

 Preferred stock - $.001 par value, 5,000,000 shares authorized:

 Series C– 100,000 shares authorized, 10,000 and 10,000 shares issued and outstanding, redeemable, convertible, and a liquidation preference of $ 5 per share

 Series D – 75,000 shares authorized, none issued or outstanding, voting, convertible, redeemable.

 Common stock - $.001 par value, 50,000,000 shares authorized, 5,577,698
and 5,541,342 shares issued and outstanding

 5,576

 5,541

 Additional paid-in capital

 17,710,525

 17,613,060

 Accumulated other comprehensive income – unrealized gain
 on marketable debt securities

 -

 Accumulated equity (deficit)

 851,962

 ( 115,148
)

 Total shareholders' equity

 18,568,901

 17,503,463

 Total liabilities and shareholders'
 equity

 $
 24,676,655

 $
 24,622,774

 F- 3

 Consolidated Statements of Operations

 Year Ended

 2023

 2022

 Net sales

 $
 36,276,542

 $
 51,910,790

 Cost of goods sold

 26,347,854

 37,593,369

 Gross profit

 9,928,688

 14,317,421

 Operating expenses:

 Selling and shipping expenses

 3,010,509

 3,305,714

 General and administrative expenses

 5,337,395

 6,210,892

 Depreciation and amortization

 70,247

 78,398

 Total operating expenses

 8,418,151

 9,595,004

 Income before other income and income taxes

 1,510,537

 4,722,417

 Other income (expense):

 Interest expense

 -

 ( 405
)

 Other income

 114,970

 185,696

 Other income (expense):

 114,970

 185,291

 Income before income taxes

 1,625,507

 4,907,708

 Income taxes

 653,397

 1,171,562

 Net income

 $

 $

 Dividends on preferred stock

 5,000

 5,000

 Net income available to common shareholders

 $
 967,110

 $
 3,731,146

 Net income per share available to common shareholders:

 Basic

 $
.17

 $
.67

 Diluted

 $
.17

 $
.65

 Weighted Shares Outstanding:

 Basic

 5,559,609

 5,534,361

 Diluted

 5,745,058

 5,734,852

 See notes to consolidated financial statements.

 F- 4

 Consolidated Statements of Comprehensive Income

 (Unaudited)

 Year Ended

 2023

 2022

 Net income

 $

 $

 Other comprehensive income:

 Unrealized gain on marketable debt securities,net of tax

 -

 Net comprehensive income

 $
 972,938

 $

 See notes to Consolidated financial statements

 F- 5

 Consolidated Statements of Changes in Shareholders'
Equity

 Years ended November 30, 2022 and November 30,
2023

 Series C
 Preferred

 Common

 Additional Paid-In

 Other Comprehensive

 Accumulated

 Shares

 Amount

 Shares

 Amount

 Capital

 Income

 Equity (Deficit)

 Total

 Balance – December 1, 2021

 10,000

 $

 5,515,342

 $
 5,515

 $
 17,023,454

 $
 -

 $
 ( 3,846,294
)

 $
 13,182,685

 Preferred stock dividends

 -

 -

 -

 -

 -

 -

 ( 5,000
)

 ( 5,000
)

 Issuance of shares as compensation

 -

 -

 26,000

 97,474

 -

 -

 97,500

 Stock option exercise

 -

 -

 -

 -

 492,132

 -

 -

 492,132

 Net Income

 -

 -

 -

 -

 -

 -

 Balance – November 30, 2022

 10,000

 5,541,342

 5,541

 17,613,060

 -

 ( 115,148
)

 17,503,463

 Preferred stock dividends

 -

 -

 -

 -

 -

 -

 ( 5,000
)

 ( 5,000
)

 Issuance of shares as compensation

 -

 -

 28,179

 97,473

 -

 -

 97,500

 Change in unrealized gain in available for sale debt securities

 -

 -

 -

 -

 -

 -

 Stock option exercise

 -

 -

 8,177

 ( 8
)

 -

 -

 Net Income

 -

 -

 -

 -

 -

 -

 Balance – November 30, 2023

 10,000

 $

 5,577,698

 5,576

 $
 17,710,525

 $

 $
 851,962

 $
 18,568,901

 F- 6

 Consolidated Statements of Cash Flows

 Year Ended

 2023

 2022

 CASH FLOWS FROM OPERATING ACTIVITIES:

 Net Income

 $

 $

 Adjustments to reconcile net income to net cash provided by
 operating activities:

 Depreciation and amortization

 70,247

 78,398

 Deferred income taxes

 ( 12,230
)

 178,152

 Allowance for doubtful accounts

 ( 94,224
)

 23,072

 Stock Compensation Expense

 97,500

 589,632

 CHANGES IN OPERATING ASSETS AND LIABILITIES:

 Accounts receivable

 1,227,448

 245,059

 Inventory

 985,727

 ( 1,115,466
)

 Prepaid expenses and income taxes

 ( 49,257
)

 ( 225,570
)

 Other assets

 26,092

 37,580

 Accounts payable

 ( 931,005
)

 ( 1,300,954
)

 Accrued expenses

 ( 99,509
)

 ( 10,751
)

 NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

 2,192,899

 2,235,298

 CASH FLOWS FROM INVESTING ACTIVITIES:

 Acquisition of fixed assets

 $
 ( 43,368
)

 $
 ( 48,351
)

 Acquisition of
 marketable securities

 ( 3,204,772
)

 -

 NET CASH FLOWS USED IN INVESTING ACTIVITIES

 $
 ( 3,248,140
)

 $
 ( 48,351
)

 F- 7

 Consolidated Statements of Cash Flows

 (Continued)

 Year Ended

 2023

 2022

 CASH FLOWS FROM FINANCING ACTIVITIES:

 Repayment of financing lease obligations

 $
 -

 $
 ( 8,495
)

 NET CASH FLOWS USED IN FINANCING ACTIVITIES

 -

 ( 8,495
)

 NET CHANGE IN CASH

 ( 1,055,241
)

 2,178,452

 CASH AT BEGINNING OF PERIOD

 8,690,040

 6,511,588

 CASH AT END OF PERIOD

 $
 7,634,799

 $
 8,690,040

 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 Income taxes paid

 $
 797,378

 $
 992,563

 Interest paid

 $
 -

 $

 NONCASH INVESTING AND FINANCING ACTIVITIES:

 Accrued dividends on preferred stock

 $
 5,000

 $
 5,000

 See notes to consolidated financial statements.

 F- 8

 Notes to Consolidated Financial Statements

 NOTE A – ORGANIZATION, DESCRIPTION OF
COMPANY'S BUSINESS AND BASIS OF PRESENTATION

 Surge Components, Inc. ("Surge")
was incorporated in the State of New York and commenced operations on November 24, 1981 as an importer of electronic products, primarily
capacitors and discrete semi-conductors selling to customers located principally throughout North America. On June 24, 1988, Surge formed
Challenge/Surge Inc. ("Challenge"), a wholly-owned subsidiary to engage in the sale of electronic component products and
sounding devices from established brand manufacturers to customers located principally throughout North America.

 In May 2002, Surge and an officer of Surge founded
and became sole owners of Surge Components, Limited ("Surge Limited"), a Hong Kong corporation. Under current Hong Kong law,
Surge Limited is required to have at least two shareholders. Surge owns 999 shares of the outstanding common stock and the officer of
Surge owns 1 share of the outstanding common stock. The officer of Surge has assigned his rights regarding his 1 share to Surge. Surge
Limited started doing business in July 2002. Surge Limited operations have been consolidated with the Company. Surge Limited is responsible
for the sale of Surge's products to customers located in Asia.

 On August 31, 2010, the Company changed its corporate
domicile by merging into a newly-formed corporation, Surge Components, Inc. (Nevada), which was formed in the State of Nevada for that
purpose. Surge Components Inc. is the surviving entity.

 In February 2019, the Company converted into
a Delaware corporation. The number of authorized shares of common stock was decreased to 50,000,000 shares.

 In December 2021, the Company changed its corporate
domicile to Nevada.

 NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

 (1) Principles of Consolidation:

 The consolidated financial statements include
the accounts of Surge, Challenge, and Surge Limited (collectively the "Company"). All material intercompany balances and
transactions have been eliminated in consolidation.

 (2) Accounts Receivable:

 Trade accounts receivable are recorded at the
net invoice value net of the allowance for credit losses in the consolidated balance sheet and are not interest bearing. The Company
considers receivables past due based on the payment terms. The Company reviews its exposure to accounts receivable and reserves specific
amounts if collectability is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based
on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such
reserves on a regular basis and adjusts its reserves as needed. Based on the Company's operating history and customer base, bad
debts to date have not been material.

 (3) Revenue Recognition:

 In May 2014, the Financial Accounting Standards
Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers:
Topic 606." This ASU replaces nearly all existing U.S. generally accepted accounting principles guidance on revenue recognition.
The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment by the
Company. The Company adopted the standard using the modified retrospective approach in its fiscal year beginning December 1, 2017. The
preponderance of the Company's contracts with customers are standard ship and bill arrangements where revenue is recognized at
the time of shipment.

 F- 9

 Notes to Consolidated Financial Statements

 NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)

 (3) Revenue Recognition (continued):

 Revenue is recognized for products sold by the
Company when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, collectability
is reasonably assured and title and risk of loss have been transferred to the customer. This occurs when product is shipped from the
Company's warehouse.

 For direct shipments, revenue is recognized when
product is shipped from the Company's supplier. The Company has a long term supply agreement with one of our suppliers. The Company
purchases the merchandise from the supplier and has the supplier directly ship to the customer through a freight forwarder. Title passes
to customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $ 4,192,768 and $ 3,198,000
for the years ended November 30, 2023 and November 30, 2022 respectively.

 The Company also acts as a sales agent to certain
customers in North America for one of its suppliers. The Company reports these commissions as revenues in the period earned. Commission
revenue totaled $ 106,885 and $ 249,248 for the years ended November 30, 2023 and November 30, 2022 respectively.

 The Company performs ongoing credit evaluations
of its customers and maintains reserves for potential credit losses.

 The Company and its subsidiaries currently have
agreements with several distributors. There are no provisions for the granting of price concessions in any of the agreements. Revenues
under these distribution agreements were approximately $ 7,810,000 and $ 13,858,000 for the years ended November 30, 2023 and November
30, 2022 respectively.

 (4) Inventories:

 Inventories, which consist solely of products
held for resale, are stated at the lower of cost (first-in, first-out method) or net realizable value. Products are included in inventory
when the Company obtains title and risk of loss on the products, primarily when shipped from the supplier. Inventory in transit principally
from foreign suppliers at November 30, 2023 was $ 1,532,374. The Company, at November 30, 2023 has a reserve against slow moving and obsolete
inventory of $ 440,645. From time to time the Company's products are subject to legislation from various authorities on environmental
matters.

 (5) Depreciation and Amortization:

 Fixed assets are recorded at cost. Depreciation
is generally calculated on a straight line method and amortization of leasehold improvements is provided for on the straight-line method
over the estimated useful lives of the various assets as follows:

 Furniture,
 fixtures and equipment

 5 - 7 years

 Computer
 equipment

 5 years

 Leasehold
 Improvements

 Estimated useful life or lease term, whichever is shorter

 Maintenance and repairs are expensed as incurred
while renewals and betterments are capitalized.

 (6) Concentration of Credit Risk:

 Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of accounts receivable. The Company maintains substantially all of its
cash balances in a limited number of financial institutions. At November 30, 2023 and November 30, 2022, the Company's uninsured
cash balances totaled $ 6,569,806 and $ 7,375,544, respectively.

 F- 10

 SURGE

 Notes

 NOTE
B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 (7)
 Income Taxes:

 The
Company's deferred income taxes arise primarily from the differences in the recording of allowances for bad debts, inventory reserves
and depreciation expense for financial reporting and income tax purposes. A valuation allowance is provided when it has been determined
to be more likely than not that the likelihood of the realization of deferred tax assets will not be realized. See Note I.

 The
Company follows the provisions of the Accounting Standards Codification topic, ASC 740, "Income Taxes" (ASC 740). There have
been no unrecognized tax benefits and, accordingly, there has been no effect on the Company's financial condition or results of
operations as a result of ASC 740.

 The
Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer
subject to U.S. federal tax examinations for years before fiscal years ending November 30, 2019, and state tax examinations for
years before fiscal years ending November 30, 2018. Management does not believe there will be any material changes in our unrecognized
tax positions over the next twelve months.

 The
Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
As of the date of adoption of ASC 740, there was no accrued interest or penalties associated with any unrecognized benefits, nor was
any interest expense recognized during the years ended November 30, 2023 and November 30, 2022.

 (8)
 Cash Equivalents:

 The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

 (9)
 Use of Estimates:

 The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

 (10)
 Marketing and promotional costs:

 Marketing
and promotional costs are expensed as incurred and have not been material to date. The Company has contractual arrangements with several
of its distributors which provide for cooperative advertising rights to the distributor as a percentage of sales. Cooperative advertising
is reflected as a reduction in revenues and has not been material to date.

 (11)
 Fair Value of Financial Instruments:

 The
carrying amount of cash balances, accounts receivable, accounts payable and accrued expenses approximate their fair value based on the
nature of those items. Estimated fair values of financial instruments are determined using available market information and appropriate
valuation methodologies. Considerable judgment is required to interpret the market data used to develop the estimates of fair value,
and accordingly, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange.

 (12)
 Marketable securities and other investments

 Our
marketable securities are stated at fair value in accordance with ASC Topic 321, Investments- Equity Securities. Any changes in
the fair value of the Company's marketable debt securities are included in the statement of other comprehensive income. The
market value of the securities is determined using prices as reflected on an established market. Realized and unrealized gains and losses
are determined on an average cost basis. The marketable securities are investments predominately in Treasury bills treasury notes which
are being invested until such time the funds are needed for operations and reflected as available for sale debt securities.

 The
value of these marketable securities at November 30, 2023 and November 30, 2022 is as follows:

 2023

 2022

 Cost

 $
 3,203,944

 $
 -

 Gross unrealized gain

 -

 Gross unrealized loss

 -

 -

 Fair value

 $
 3,204,772

 $
 -

 F- 11

 SURGE

 Notes

 NOTE
B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 (13)
 Shipping Costs

 The
Company classifies shipping costs as a component of selling expenses. Shipping costs totaled $ 2,182 and $ 4,206 for the years ended
November 30, 2022 and November 30, 2021 respectively.

 (14)
 Earnings Per Share

 Basic
earnings per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average
number of common shares outstanding for the period. The difference between reported basic and diluted weighted-average common shares
results from the assumption that all dilutive stock options and convertible preferred stock exercised into common stock. Total potentially
dilutive shares excluded from diluted weighted shares outstanding at November 30, 2023 and November 30, 2022 totaled 266,282 and 259,509,
respectively.

 (15)
 Stock Based Compensation

 Stock
Based Compensation to Employees

 The
Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification ("ASC")
718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation
issued to employees and non-employees over the related vesting period.

 Stock
Based Compensation to Other than Employees

 The
Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance
with ASC 718. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the
equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than
employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services.
In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting
agreement.

 (16)
 Leases:

 In
February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("Topic 842").
Topic 842 requires the entity to recognize the assets and liabilities for the rights and obligations created by leased assets. Leases
will be classified as either finance or operating, with classification affecting expense recognition in the income statement.

 On
December 1, 2019, the Company adopted Topic 842 applying the optional transition method, which allows an entity to apply the new standard
at the adoption date with a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. As a
result of adopting Topic 842, the Company recognized assets and liabilities for the rights and obligations created by operating leases
totaling approximately $ 290,000.

 The
Company determines if a contract contains a lease at inception based on whether it conveys the right to control the use of an identified
asset. Substantially all of the Company's leases are classified as operating leases. The Company records operating lease right-of-use
assets within "Other assets" and lease liabilities are recorded within "current and noncurrent liabilities" in
the consolidated balance sheets. Lease expenses are recorded within "General and administrative expenses" in the consolidated
statements of operations. Operating lease payments are presented within "Operating cash flows" in the consolidated statements
of cash flows.

 F- 12

 SURGE

 Notes

 NOTE
B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 (16)
 Leases (continued):

 Operating
lease right-of-use assets and lease liabilities are recognized based on the net present value of future minimum lease payments over the
lease term starting on the commencement date. The Company generally is not able to determine the rate implicit in its leases and, as
such, applies an incremental borrowing rate based on the Company's cost of borrowing for the relevant terms of each lease. Lease
expense for minimum lease payments is recognized on a straight-line basis over the lease term. Lease terms may include an option to extend
or terminate a lease if it is reasonably certain that the Company will exercise such options. The Company has elected the practical expedient
to not separate lease components from non-lease components, and also has elected not to record a right-of-use asset or lease liability
for leases which, at inception, have a term of twelve months or less. Variable lease payments are recognized in the period in which the
obligation for those payments is incurred.

 NOTE
C – FIXED ASSETS

 Fixed
assets consist of the following:

 2023

 2022

 Furniture and Fixtures

 $
 329,186

 $
 327,971

 Leasehold Improvements

 1,070,044

 1,062,449

 Computer Equipment

 528,662

 494,104

 Less-Accumulated Depreciation

 ( 1,757,772
)

 ( 1,687,525
)

 Net Fixed Assets

 $
 170,120

 $
 196,999

 Depreciation
and amortization expense for the years ended November 30, 2023 and November 30, 2022 was $ 70,247 and $ 78,398, respectively.

 NOTE
D – FINANCING LEASE OBLIGATIONS

 The
Company is obligated under financing leases for telephone equipment. The Company leases equipment under two capital lease arrangements
with NEC Financial Services. Pursuant to the leases, the lessor retains actual title to the leased property until the termination of
the lease, at which time the equipment can be purchased for one dollar for each lease. The terms of the leases are 60 months with a combined
monthly payment of $ 815, respectively. The assumed interest rates on the leases are 9.342 %. The leases terminated in 2022.

 F- 13

 SURGE

 Notes

 NOTE
E – LOANS PAYABLE

 In
February 2017, the Company obtained a line of credit with a bank for up to $ 3,000,000 (the "Credit Line"). Borrowings under
the Credit Line are due upon demand and accrue interest at the greater of the prime rate or the LIBOR rate plus two percent (and may
be increased by three percent in the event the Company fails to (i) repay all amounts due on the Credit Line upon demand or (ii) comply
with any terms or conditions relating to the Credit Line). The Credit Line is collateralized by substantially all the assets of the Company.
As of November 30, 2023, the balance on the Credit Line was $ 0. As of November 30, 2023, the Company was in compliance with the covenant
for the debt service coverage ratio for the Credit Line. Effective July 1, 2023, the use of the LIBOR rate was discontinued and
replaced with the secured overnight financing rate (SOFR).

 NOTE
F – ACCRUED EXPENSES

 Accrued
expenses consist of the following:

 2023

 2022

 Commissions

 $
 229,882

 $
 366,766

 Preferred stock dividends

 166,569

 161,569

 Other accrued expenses

 338,932

 370,924

 $
 735,383

 $
 899,259

 NOTE
G – RETIREMENT PLAN

 In
June 1997, the Company adopted a qualified 401(k) retirement plan for all full-time employees who are twenty-one years of age and have
completed twelve months of service. The plan allows total employee contributions of up to fifteen percent ( 15 %) of the eligible employee's
salary through salary reduction. The Company makes a matching contribution of twenty percent ( 20 %) of each employee's contribution
for each dollar of employee deferral up to five percent ( 5 %) of the employee's salary. Net assets for the plan, as estimated by
Axa Equitable, Inc., which maintains the plan's records, were approximately $ 2,069,000 at November 30, 2023. Pension expense for
the years ended November 30, 2023 and November 30, 2022 was $ 64,864 and $ 2,491, respectively, The increase is due in part to the implementation of a new safe harbor plan..

 F- 14

 SURGE

 Notes

 NOTE
H – SHAREHOLDERS' EQUITY

 [1]
 Preferred Stock:

 In
February 1996, the Company amended its Certificate of Incorporation to authorize the issuance of 1,000,000 shares of preferred stock
in one or more series. In August 2010, the number of preferred shares authorized for issuance was increased to 5,000,000 shares.

 In
November 2000, the Company authorized 100,000 shares of preferred stock as Non-Voting Redeemable Convertible Series C Preferred Stock
("Series C Preferred"). Each share of Series C Preferred is automatically convertible into 10 shares of our common stock
upon shareholder approval. If the Series C Preferred were converted into common stock on or before April 15, 2001, these shares were
entitled to cumulative dividends at the rate of $.50 per share per annum commencing April 15, 2001 payable on June 30 and December 31
of each year. In November 2000, 70,000 shares of the Series C Preferred were issued in payment of financial consulting services to its
investment banker and a shareholder of the Company.

 Dividends
aggregating $ 166,569 have not been paid for the semi-annual periods ended December 31, 2001 through the semi-annual payment due June
30, 2023. The Company has accrued these dividends. At November 30, 2023, there are 10,000 shares of Series C Preferred issued and outstanding.

 In
October 2016, the Company authorized 75,000 shares of preferred stock as Voting Non-Redeemable Convertible Series D Preferred Stock ("Series
D Preferred"). None of the Series D Preferred Stock is outstanding as of November 30, 2023.

 [2]
 2015 Incentive Stock Plan

 In
November 2015, the Company adopted and the shareholders ratified, the 2015 Incentive Stock Plan ("2015 Stock Plan"). The
2015 Stock Plan provides for the grant of options to officers, employees, directors or consultants to the Company to purchase an aggregate
of 1,500,000 common shares.

 In
April 2021, a total of 26,786 shares were issued to the Company's officers as a part of their 2021 bonus compensation under the
2015 stock plan. The Company recorded a cost of $ 75,000 relating to the issuance of these shares in the second quarter of 2021.

 In
March 2022, a total of 26,000 shares were issued to the Company's officers as part of their bonus compensation under the 2015 stock
plan. The Company recorded a cost of $ 97,500 relating to the issuance of these shares in the second quarter of 2022.

 In
March 2022, the Company granted stock options to (a) four non-employee directors to each purchase 20,000 shares of common stock, (b)
one non-employee-director to purchase 30,000 shares of common stock, and (c) two Company officers to each purchase 40,000 shares of common
stock at an exercise price of $ 3.55 per share, the market price of the common stock on the date of the grant. These options vest immediately
and expire five years from the grant date. The Company recorded a cost of $ 492,132 related to the granting of these options.

 In
April 2023, a total of 28,179 shares were issued to the Company's officers as part of their bonus compensation under the 2015 stock
plan. The Company recorded a cost of $ 97,500 relating to the issuance of these shares in the second quarter of 2023.

 F- 15

 SURGE

 Notes

 NOTE
H – SHAREHOLDERS' EQUITY (Continued)

 [2]
 2015 Incentive Stock Plan (continued)

 Activity
in the Company's stock plans for the period ended November 30, 2023 is summarized as follows:

 Shares

 Weighted
 Average
 Exercise

 Price

 Options outstanding December 1, 2022

 360,000

 $
 2.59

 Options issued in the fiscal year ended November 30, 2023

 -

 $
 -

 Options exercised in the fiscal year ended November 30, 2023

 ( 15,000
)

 $
 -

 Options cancelled in the fiscal year ended November 30, 2023

 -

 $
 -

 Options outstanding at November 30, 2023

 345,000

 $
 2.59

 Options exercisable at November 30, 2023

 345,000

 $
 2.59

 The
intrinsic value of the exercisable options at November 30, 2023 totaled $ 178,250. At November 30, 2023 the weighted average remaining
life of the stock options is 2.40 years. At November 30, 2023, there was no unrecognized compensation cost related to the stock options
granted under the plan.

 [3]
 Compensation of Directors

 Compensation
for each non-employee director is $ 3,000 per month (and $ 4,000 per month for a non-employee director that serves as the chairman of more
than two committees of the Board of Directors).

 NOTE
I – INCOME TAXES

 Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes using the enacted tax rates in effect in the years in which the differences
are expected to reverse.

 The
Company's deferred income taxes are comprised of the following:

 2023

 2022

 Deferred Tax Assets

 Depreciation

 $
 35,684

 $
 35,771

 Allowance for bad debts

 17,309

 36,651

 Inventory

 84,450

 81,523

 Facilities rental

 35,473

 28,523

 Other

 68,412

 46,630

 Total deferred tax assets

 241,328

 229,098

 Valuation allowance

 -

 -

 Deferred Tax Assets

 $
 241,328

 $
 229,098

 F- 16

 SURGE

 Notes

 NOTE
I – INCOME TAXES (Continued)

 A
valuation allowance for the deferred tax assets relates principally to the uncertainty of the utilization of deferred tax assets and
was calculated in accordance with the provisions of ASC 740, which requires that a valuation allowance be established or maintained when
it is "more likely than not" that all or a portion of deferred tax assets will not be realized.

 The
Company's income tax expense consists of the following:

 Years Ended

 2023

 2022

 Current:

 Federal

 $
 444,557

 $
 723,992

 States

 221,070

 269,418

 665,627

 993,410

 Deferred:

 Federal

 ( 9,662
)

 138,959

 States

 ( 2,568
)

 39,193

 ( 12,230
)

 178,152

 Provision for income taxes

 $
 653,397

 $
 1,171,562

 The
Company files a consolidated income tax return with its wholly-owned subsidiaries. A reconciliation of the difference between the
expected income tax rate using the statutory federal tax rate and the Company's effective rate is as follows:

 Years ended

 2023

 2022

 U.S Federal Income tax statutory rate

 %

 %

 State income taxes

 %

 %

 Other

 %

 ( 4
)%

 Effective tax rate

 %

 %

 F- 17

 SURGE

 Notes

 NOTE
J – OPERATING LEASE COMMITMENTS

 The
Company leases its office and warehouse space through 2030 from a corporation that is partly owned by officers/shareholders of the Company
("Related Company"). Annual minimum rental payments to the Related Company approximated $ 194,000 for the year ended November
30, 2023, and increase at the rate of two per cent per annum throughout the lease term.

 Pursuant
to the lease, rent expense charged to operations differs from rent paid because of scheduled rent increases. Accordingly, the Company
has recorded deferred rent. Rent expense is calculated by allocating to rental payments, including those attributable to scheduled rent
increases, on a straight line basis, over the lease term.

 The
Company has a lease to rent office space and a warehouse in Hong Kong through June 2025. Annual minimum rental payments for this space
are approximately $ 73,580.

 The
Company has a lease to rent additional warehouse space in Hong Kong through November 30, 2025. Annual minimum rental payments for this
space are approximately $ 76,170.

 The
Company's future minimum rental commitments at November 30, 2023 are as follows:

 Twelve
Months Ended November 30,

 2024

 $
 351,957

 2025

 325,343

 2026

 210,372

 2027

 214,580

 2028

 218,872

 2029 and after

 412,380

 $
 1,733,504

 Net
rental expense for the years ended November 30, 2023 and November 30, 2022 were $ 449,057 and $ 446,474 respectively, of which $ 278,599
and $ 275,042 respectively, was paid to the Related Company.

 NOTE
K – EMPLOYMENT AND OTHER AGREEMENTS

 In
February 2016, the Company entered into revised employment agreements with two officers of the Company. Pursuant to these agreements,
the base salary for one officer is $ 275,000 and the base salary for the other officer is $ 225,000. The agreements continue until terminated
by either party. In April 2021, the base salaries for the two officers were amended to $ 300,000 for one officer and $ 250,000 for
the other officer.

 The
Company's compensation committee may award these officers with bonuses and will review the base salary amounts for each of the
officers on an annual basis to determine if any changes to the base salary amounts need to be made and may also award these officers
with annual bonuses. Pursuant to the employment agreements, the officers are prohibited from engaging in activities which are competitive
with those of the Company during their employment with the Company and for one year following termination. If the agreement is terminated
other than for cause, the officer would be entitled to all base salary earned through the date of termination, accrued but unused vacation,
all vested equity, and bonus amounts payable to the officer through the date of termination. The officers would also be entitled to receive
an additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years
prior to the date of termination, payable in accordance with the Company's regular payroll practice over a 52-week period.

 F- 18

 SURGE

 Notes

 NOTE
L – MAJOR CUSTOMERS

 The
Company had two customers who respectively accounted for 20 % and 18 % of net sales for the year ended November 30, 2023 and two customers
who accounted for 12 % and 21 % of net sales for the year ended November 30, 2022. The Company had one customer who accounted for 27 % of
accounts receivable at November 30, 2023 and one customer who accounted for 26 % of accounts receivable at November 30, 2022.

 NOTE
M – MAJOR SUPPLIERS

 During
the years ended November 30, 2023 and November 30, 2022 there was one foreign supplier accounting for 31 % and 33 % of total inventory
purchased.

 The
Company purchases substantially all of its products overseas. For the year ended November 30, 2023, the Company purchased 34 % of
its products from Taiwan, 21 % from Hong Kong, 38 % from elsewhere in Asia and less than 1 % overseas outside of Asia. The Company purchases
the balance of its products in the United States.

 NOTE
N – EXPORT SALES

 The
Company's export sales were as follows:

 Years Ended

 2023

 2022

 Canada

 5,606,222

 9,211,350

 China

 5,869,886

 8,302,001

 Other Asian Countries

 1,288,598

 2,674,309

 South America

 188,220

 149,225

 Europe

 1,133,838

 2,120,165

 Revenues
are attributed to countries based on location of customer.

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