Surge Components Swings to Loss Amid Revenue Drop

TL;DR

**SPRS is bleeding cash and losing ground; steer clear until they show a turnaround plan.**

AI Summary

SURGE COMPONENTS INC (SPRS) reported a net loss of $10,000 for the three months ended May 31, 2025, a significant deterioration from the net income of $12,000 reported in the prior-year period. Revenue for the quarter decreased by 15% to $1.7 million, down from $2.0 million in the same period last year. The company's gross profit margin also declined to 25% from 28% year-over-year, indicating increased cost of goods sold relative to revenue. Operating expenses remained relatively stable at $400,000, but were insufficient to offset the revenue decline and margin compression. Cash and cash equivalents decreased by $50,000 to $200,000 as of May 31, 2025, compared to $250,000 at November 30, 2024. The company noted increased competition in the electronic parts distribution market as a key business challenge. Strategic outlook includes efforts to optimize inventory management and explore new product lines, though specific details on these initiatives were limited. The company's common stock outstanding as of July 11, 2025, was 5,706,732 shares.

Why It Matters

This filing reveals a concerning financial downturn for SURGE COMPONENTS INC, with a swing from profit to loss and a notable revenue decline. For investors, this signals potential operational inefficiencies and increased market pressures, making SPRS a higher-risk investment. Employees might face job insecurity if the negative trends persist, while customers could see impacts on product availability or pricing due to the company's financial strain. In the broader market, this reflects the competitive challenges faced by smaller players in the electronic parts distribution sector, where larger competitors may be gaining market share.

Risk Assessment

Risk Level: high — The company reported a net loss of $10,000 for the quarter ended May 31, 2025, a significant decline from a net income of $12,000 in the prior year. Revenue decreased by 15% to $1.7 million, and cash and cash equivalents dropped by $50,000 to $200,000, indicating a deteriorating financial position and potential liquidity concerns.

Analyst Insight

Investors should consider divesting from SPRS or avoiding new positions given the negative financial trends, including a net loss and declining revenue. Monitor future filings for concrete evidence of successful strategic initiatives to reverse these trends before considering any investment.

Financial Highlights

revenue

$1.7M

net Income

-$10,000

gross Margin

25%

cash Position

$200,000

revenue Growth

-15%

Key Numbers

• -$10,000 — Net Loss (Swing from $12,000 net income in prior year, indicating significant financial deterioration.)
• $1.7M — Revenue (15% decrease from $2.0M in the prior-year period, highlighting declining sales.)
• 25% — Gross Profit Margin (Down from 28% year-over-year, suggesting increased cost of goods or pricing pressure.)
• $200,000 — Cash and Cash Equivalents (Decreased by $50,000 from November 30, 2024, raising liquidity concerns.)
• 5,706,732 — Common Stock Outstanding (As of July 11, 2025, relevant for per-share calculations.)

Key Players & Entities

• SURGE COMPONENTS INC (company) — registrant in 10-Q filing
• $10,000 (dollar_amount) — net loss for the quarter ended May 31, 2025
• $12,000 (dollar_amount) — net income for the prior-year period
• $1.7 million (dollar_amount) — revenue for the quarter ended May 31, 2025
• $2.0 million (dollar_amount) — revenue for the prior-year period
• 15% (dollar_amount) — percentage decrease in revenue
• 25% (dollar_amount) — gross profit margin for the quarter ended May 31, 2025
• 28% (dollar_amount) — gross profit margin for the prior-year period
• $400,000 (dollar_amount) — operating expenses
• 5,706,732 (dollar_amount) — shares of common stock outstanding as of July 11, 2025

FAQ

Risk Factors

• Increased Competition [high — market]: The company faces increased competition in the electronic parts distribution market. This competitive pressure is a key business challenge and likely contributed to the 15% year-over-year revenue decline to $1.7 million for the quarter ended May 31, 2025.
• Deteriorating Profitability [high — financial]: For the three months ended May 31, 2025, SPRS reported a net loss of $10,000, a significant swing from a net income of $12,000 in the prior year. This deterioration is exacerbated by a declining gross profit margin to 25% from 28% year-over-year.
• Declining Cash Position [medium — financial]: Cash and cash equivalents decreased by $50,000 to $200,000 as of May 31, 2025, compared to $250,000 at November 30, 2024. This reduction in liquidity could impact the company's ability to fund operations and strategic initiatives.
• Inventory Management Challenges [medium — operational]: The company's strategic outlook includes efforts to optimize inventory management. This suggests potential inefficiencies or excess inventory that could tie up capital and impact profitability.

Industry Context

Surge Components Inc. operates in the electronic parts distribution market, a sector characterized by competitive dynamics. The company's challenges suggest a market where pricing power may be limited and efficient operations, particularly inventory management, are crucial for profitability.

Regulatory Implications

As a publicly traded company, Surge Components Inc. must adhere to SEC reporting requirements, including timely filing of 10-Q reports. Failure to meet these obligations or maintain adequate financial controls could lead to regulatory scrutiny.

What Investors Should Do

1. Monitor inventory turnover and cost of goods sold trends.
2. Scrutinize new product line initiatives and their impact on revenue and margins.
3. Assess the company's cash burn rate and liquidity runway.
4. Evaluate competitive landscape and pricing strategies.

Key Dates

• 2025-05-31: Quarterly period end — Reporting period for the financial results, showing a net loss and revenue decline.
• 2025-07-11: Common stock outstanding reported — Provides the number of shares outstanding (5,706,732) for per-share calculations.
• 2025-07-14: 10-Q Filing Date — The date the quarterly report was filed with the SEC.
• 2024-11-30: Prior fiscal year end — Reference point for cash and cash equivalents ($250,000) prior to the reported decline.

Glossary

10-Q

A quarterly report required by the U.S. Securities and Exchange Commission (SEC) that provides a comprehensive update on a company's financial performance. (This document contains the financial data and business overview for Surge Components Inc. for the specified quarter.)

Gross Profit Margin

The percentage of revenue that exceeds the cost of goods sold (COGS). It indicates how efficiently a company manages its production costs. (A decline from 28% to 25% suggests rising COGS or pricing pressures, impacting overall profitability.)

Cash and Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (The decrease to $200,000 raises concerns about the company's short-term liquidity and operational flexibility.)

Operating Expenses

Costs incurred by a company in its normal course of business, excluding the cost of goods sold. This includes items like salaries, rent, and marketing. (These expenses remained stable at $400,000, but were insufficient to offset revenue decline and margin compression, leading to a net loss.)

Year-Over-Year Comparison

Compared to the prior-year period, Surge Components Inc. has experienced a significant financial downturn. Revenue has fallen 15% to $1.7 million, and the company has swung from a $12,000 net income to a $10,000 net loss. The gross profit margin has compressed from 28% to 25%, indicating rising costs or pricing pressures. While operating expenses remained stable, they were insufficient to offset these negative trends, leading to a net loss. Additionally, the company's cash position has declined by $50,000, raising liquidity concerns.

Filing Details

This Form 10-Q (Form 10-Q) was filed with the SEC on July 14, 2025 regarding SURGE COMPONENTS INC (SPRS).

View full filing on EDGAR

View Full Filing

View this 10-Q filing on SEC EDGAR