<PAGE>
As filed with the Securities and Exchange Commission on August 5, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM S-8
REGISTRATION STATEMENT
Under the Securities Act of 1933
SURGE COMPONENTS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 11-2602030
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1016 Grand Boulevard, Deer Park, New York 11729
(Address of principal executive offices) (Zip Code)
1995 Stock Option Plan, as amended
(Full Title of the Plan)
Ira Levy
Surge Components, Inc.
1016 Grand Boulevard
Deer Park, New York 11729
(516) 595-1818
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
A copy of all communications, including communications sent to the agent
for service should be sent to:
Elliot H. Lutzker, Esq.
Snow Becker Krauss P.C.
605 Third Avenue
New York, N.Y. 10158-0125
(212) 687-3860
-------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Per Share Aggregate Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options 850,000 (1) $ -- $ -- (2)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, par value 163,000 (3)(4) $ 1.25(5) $ 203,750 $60.11
$.001 per share
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, par value 100,000 (3)(4) $ 1.53(5) $ 153,000 $45.14
$.001 per share
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, par value 35,000 (3)(4) $ 3.20(5) $ 112,000 $33.04
$.001 per share
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, par value 546,000 (4)(6) $ 1.72(7) $ 939,120 $277.04
$.001 per share
- ------------------------------------------------------------------------------------------------------------------------
Common stock, par value 6,000 (8) $ 1.25(5) $ 7,500 $2.21
$.001 per share
- ------------------------------------------------------------------------------------------------------------------------
Total 850,000 $ 1,415,370 $ 417.54 (9)
========================================================================================================================
</TABLE>
(1) Represents options granted or to be granted pursuant to the 1995 Stock
Option Plan, as amended (the "1995 Plan") of Surge Components, Inc.
(the "Registrant"). Each option entitles the holder thereof to purchase
one share of Common Stock, $.001 par value (the "Common Stock"), of the
Registrant.
<PAGE>
(2) No registration fee is required pursuant to Rule 457(h)(2).
(3) Shares issuable upon exercise of options previously granted pursuant to
the 1995 Plan.
(4) Pursuant to Rule 416, includes an indeterminable number of shares of
Common Stock which may become issuable pursuant to the anti-dilution
provisions of the 1995 Plan and the options granted or to be granted.
(5) Calculated solely for the purpose of determining the registration fee
pursuant to Rule 457(h)(1) based upon the per share exercise price.
(6) Shares issuable upon exercise of options available for grant under the
1995 Plan.
(7) Calculated solely for the purposes of determining the registration fee
pursuant to Rule 457(c) based on the closing sale price of the Common
Stock on the Nasdaq SmallCap Market on July 31, 1998.
(8) Shares issued upon exercise of options previously granted pursuant to
the 1995 Plan.
(9) The registration fee of $417.54 is submitted herewith.
-ii-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents By Reference.
The Registrant's Annual Report on Form 10-KSB for the fiscal year ended
November 30, 1997, Quarterly Report on Form 10-QSB for the quarter ended May 31,
1998; the description of the Company's Common Stock contained in the Company's
Registration Statement on form 8-A (file No. 001-14188) filed pursuant to
Section 12(b) of the Exchange Act, including any amendment or report filed for
the purpose of updating such information, and the Company's Proxy Statement on
Schedule 14a filed on June 4, 1998 with the Securities and Exchange Commission
(the "Commission") by Surge Components, Inc., a New York corporation (the
"Registrant"), pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), incorporated by reference in this registration statement.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this registration statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
registration statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel
None.
Item 6. Indemnification of Directors and Officers.
Under Section 722 of the New York Business Corporation Law ("NYBCL"),
directors and officers may be indemnified against judgments, fines and amounts
paid in settlement and reasonable expenses (including attorneys' fees), actually
and necessarily incurred as a result of specified actions or proceedings
(including appeals), whether civil or criminal (other than an action by or in
the right of the corporation--a "derivative action") if they acted in good faith
and for a purpose which they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to amounts paid in settlement and reasonable
expenses (including attorneys' fees) actually and necessarily incurred by them
in connection with the defense or settlement of such an action (including
appeals), except in respect of a (1) threatened action, or pending action which
is settled or otherwise disposed of and (2) any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent a court of competent jurisdiction deems proper.
The Company maintains insurance, at its expense, to reimburse itself
and directors and officers of the Company and of its direct and indirect
subsidiaries against any expense, liability or loss arising out of
indemnification claims against directors and officers and to the extent
otherwise permitted under the NYBCL.
In accordance with Section 402(b) of the NYBCL, Article EIGHTH of the
Company's Certificate of Incorporation, as amended, eliminates the personal
liability of the Company's directors to the Company or its shareholders for
monetary damages for breach of their fiduciary duties as directors, with certain
limited exceptions set forth in said Section 402(b).
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS OF THE
REGISTRANT
II-1
<PAGE>
PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, THE REGISTRANT HAS BEEN
ADVISED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND
IS, THEREFORE, UNENFORCEABLE.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
4.1 Surge Components, Inc. 1995 Stock Option Plan(1),
and *Amendment (the "1995 Plan").
5.1 Opinion of Snow Becker Krauss P.C.*
23.1 Consent of Snow Becker Krauss P.C.*
(included in Exhibit 5.1 hereto).
23.2 Consent of Seligson & Giannattasio, LLP.*
24.1 Powers of Attorney (included on the signature*
page of this Registration Statement).
(1) Incorporated by reference from the Company's Registration Statement on
Form SB-2 (No. 333-630 NY) declared effective by the Securities and
Exchange Commission on July 31, 1996.
* Filed herewith.
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10
(a) (3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth in the
Registration Statement;
(iii) Include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) For the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) Remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13 (a) or Section 15 (d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
II-2
<PAGE>
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or controlling
persons of the Registrant pursuant to any arrangement, provision or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II - 3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this 4th day of
August, 1998.
SURGE COMPONENTS, INC.
By: /s/ Ira Levy
--------------------------
Ira Levy, President
POWERS OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ira Levy as his true and lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) and supplements to
this Registration Statement, and to file the same with the Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933 this
registration statement has been signed below by the following persons, in the
capacities indicated, on August 4, 1998.
/s/ Ira Levy /s/ David Siegel
- -------------------------------------- --------------------------
Ira Levy, David Siegel, Chairman of
President (Principal Executive Officer) the Board
and Director
/s/ Steven J. Lubman /s/ Mark Siegel
- -------------------------------------- --------------------------
Steven J. Lubman, Vice President, Mark Siegel, Director
Principal Financial Officer, Secretary
and Director
II - 4
<PAGE>
PROSPECTUS
SURGE COMPONENTS, INC.
850,000 SHARES
This Prospectus has been prepared by Surge Components, Inc., a New York
corporation (the "Company"), for use upon resale of shares of the Company's
common stock, par value $.001 per share (the "Common Stock"), by certain
officers and directors of the Company who may be considered "affiliates" (as
defined in Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act")) of the Company and certain other individuals named herein
(collectively, the "Selling Stockholders") who have acquired or may acquire
Common Stock upon exercise of options ("Options") granted or to be granted under
the Surge Components, Inc. 1995 Stock Option Plan, as amended (the "1995 Plan")
to purchase an aggregate of 850,000 shares of Common Stock (the "Shares") . The
maximum number of Shares which may be offered or sold hereunder is subject to
adjustment in the event of stock splits or dividends, recapitalizations and
other similar changes affecting the Common Stock.
The shares of Common Stock offered hereby may be sold or transferred
for value by the Selling Stockholders, or by pledgees, donees, transferees or
other successors in interest to the Selling Stockholders, in one or more
transactions, from time to time directly to purchasers, or through
broker-dealers who may receive compensation in the form of commissions or
discounts from the Selling Stockholders or purchasers. Sales of shares of Common
Stock may be effected by broker-dealers in ordinary brokerage transactions or
block transactions on the Nasdaq SmallCap Market or Boston Stock Exchange (or
any successor stock exchange) through sales to one or more dealers who may
resell as principals, in privately negotiated transactions or otherwise, at the
market price prevailing at the time of sale, a price related to such prevailing
market price or at a negotiated price. Usual and customary or specifically
negotiated brokerage fees may be paid by the Selling Stockholders in connection
therewith. To the Company's knowledge, none of the Selling Stockholders has
entered into any underwriting arrangements for the sale of the shares of Common
Stock offered hereby. See "Plan of Distribution."
The Common Stock is quoted on the Nasdaq SmallCap Market under the
symbol "SRGE" and on the Boston Stock Exchange under the symbol "SRG".
The Company will not receive any proceeds from the sale of the shares
of Common Stock by the Selling Stockholders, however, will receive the proceeds
from the exercise of the Options.
----------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. FOR A DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN THE
COMPANY, SEE "RISK FACTORS" COMMENCING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION. NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------------
The Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act and any profits realized by them may be deemed to
be underwriting commissions. Any broker-dealers that participate in the
distribution of shares of Common Stock also may be deemed to be "underwriters",
as defined in the Securities Act, and any commissions or discounts paid to them,
or any profits realized by them upon the resale of any securities purchased by
them as principals, may be deemed to be underwriting commissions or discounts
under the Securities Act. The sale of the shares of Common Stock by the Selling
Stockholders is subject to the prospectus delivery and other requirements of the
Securities Act.
The date of this Prospectus is August 6, 1998.
<PAGE>
All costs, expenses and fees in connection with the registration of the
shares of Common Stock offered by the Selling Stockholders will be borne by the
Company. The Selling Stockholders are responsible for the payment of brokerage
commissions and discounts incurred in connection with the sale of their shares
of Common Stock.
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
any offer to sell or sale of the securities to which this Prospectus relates,
and if given or made, such information or representations must not be relied
upon as having been authorized. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, imply that there has been no
change in the facts herein set forth since the date hereof. This Prospectus does
not constitute an offer to sell to or a solicitation of any offer to buy from
any person in any state in which any such offer or solicitation would be
unlawful.
2
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES
OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
THIS DOCUMENT AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
CONTAIN FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE STATEMENTS
THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS, ARE NOT BASED ON HISTORICAL FACT
AND ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS MAY BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY", "WILL",
"EXPECT" "ESTIMATE", "ANTICIPATE", "PROBABLE", "CONTINUE", OR SIMILAR TERMS,
VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE "RISK FACTORS" SET
FORTH IN THIS DOCUMENT AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS DOCUMENT HAVE BEEN
COMPILED BY MANAGEMENT OF THE COMPANY ON THE BASIS OF ASSUMPTIONS MADE BY
MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. FUTURE OPERATING
RESULTS OF THE COMPANY, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO
REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE
FORWARD-LOOKING STATEMENTS. THEREFORE, PROSPECTIVE PURCHASERS OF SHARES OF
COMMON STOCK ARE URGED TO CONSULT WITH THEIR ADVISORS (THE OPINIONS OF WHICH MAY
DIFFER FROM THOSE SPECIFIED IN THOSE FORWARD-LOOKING STATEMENTS) WITH RESPECT TO
THOSE ASSUMPTIONS OR HYPOTHESES.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS DOCUMENT AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE,
REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO
POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS
A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION
AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE
ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED
EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR
PROJECTED RESULTS, AND ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY
OF THOSE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE REVENUE PROJECTIONS.
THESE FORWARD-LOOKING STATEMENTS HAVE BEEN COMPILED AS OF THE DATE OF
THIS DOCUMENT OR THE DATE OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, AS
THE CASE MAY BE, AND SHOULD BE EVALUATED WITH CONSIDERATION OF ANY CHANGES
OCCURRING AFTER THE DATE HEREOF OR THEREOF. NO ASSURANCE CAN BE GIVEN THAT ANY
OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS
DOCUMENT OR IN ANY DOCUMENT INCORPORATED HEREIN BY REFERENCE, ARE ACCURATE OR
THAT THEY WILL PROVE TO BE APPLICABLE TO A PARTICULAR PURCHASER OF THE SHARES OF
COMMON STOCK. IT IS THE RESPONSIBILITY OF THE PURCHASERS OF THE COMMON STOCK AND
THEIR ADVISORS TO REVIEW THOSE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE
REVENUE PROJECTIONS, TO CONSIDER THE ASSUMPTIONS ON WHICH THOSE FORWARD-LOOKING
STATEMENTS ARE BASED AND TO ASCERTAIN THEIR REASONABLENESS.
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices located at Seven
World Trade Center, New York, New York 10048 and 500 West Madison Street,
Chicago, Illinois 60611. Information on the operation of the Public Reference
Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of such
material may be obtained, at prescribed rates, by writing to the Commission,
Public Reference Room, 450 Fifth Street, N.W. Washington, D.C. 20549. The
Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically. The Common Stock is listed on the Nasdaq Smallcap
Market, and Boston Stock Exchange.
A registration statement on Form S-8 with respect to the Shares (the
"Registration Statement") has been filed with the Commission under the
Securities Act. This Prospectus constitutes the Prospectus of the Company that
is filed with such Registration Statement with respect to the sale of the Shares
by the Selling Stockholders. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in the
Registration Statement and reference is hereby made to the Registration
Statement for further information with respect to the Company and the Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-KSB for the fiscal year ended November 30,
1997 ("Form 10-K"), Quarterly Report on Form 10-QSB for the quarter ended May
31, 1998 ("Form 10-QSB"); the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A (File No.
001-14188) filed pursuant to Section 12(b) of the Exchange Act, including any
amendment or report filed for the purpose of updating such information; and
Proxy Statement on Schedule 14a filed on June 4, 1998.
All documents subsequently filed by the Company after the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents. Any statement contained in a
previously filed document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement herein modifies or supersedes such statement; and any statement
contained herein shall be deemed to be modified or superseded to the extent that
a statement in any document subsequently filed, which is incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the information that has been incorporated by reference in
this Prospectus (not including exhibits to such information, unless such
exhibits are specifically incorporated by reference into the information which
this Prospectus incorporates). Written requests for copies of such information
should be directed to the Company at 1016 Grand Boulevard, Deer Park, New York,
11729, Attention: Corporate Secretary. Telephone requests may be directed to the
Corporate Secretary at (516) 595-1818.
4
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, financial statements and the notes thereto appearing elsewhere in,
or incorporated by reference into, this Prospectus.
The Company
Surge Components, Inc. ("Surge" or the "Company") is 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 Company's products are typically utilized
in the electronic circuitry of diverse products, including, but not limited to,
automobiles, cellular telephones, computers, consumer electronics, garage door
openers, household appliances, power supplies and smoke detectors. The Company's
products are sold to both original equipment manufacturers ("OEMs") who
incorporate them into their products and to distributors of Surge's product
lines.
Surge's products are manufactured predominantly in Asia by
approximately 20 independent manufacturers. The Company does not have any
written long-term supply, distribution or franchise agreements with it
distributors. The Company acts as the exclusive sales agent through independent
sales representative organizations in North America for many of its
manufacturers pursuant to oral agreements. Through the Company's wholly-owned
subsidiary, Challenge/Surge, Inc., the Company also engages in the broker
distribution business. In such business, Challenge purchases name brand
electronic components and products, typically from domestic manufacturers and
authorized distributors to fill specific customer orders. Challenge purchases
such components and products in the open market on the best available terms and
generally does not keep inventories. Although it expects to maintain inventories
if it is able to obtain product rights to certain brand name product lines.
Challenge operates as a separate entity and has certain sales representatives of
its own, but generally shares management and facilities with the Company.
The Company's products are marketed by independent sales representative
organizations with which the Company has exclusive written agreements for the
sale of its products to both end users and authorized distributors. Sales
representatives market the Company's products to their customers. The sales
representatives sell other companies' products, but are prohibited from selling
competitive products.
In 1982, the Company commenced operations as a distributor of passive
electronic components, such as capacitors, which were purchased domestically and
sold principally to OEMs, and to a lesser extent, to other distributors. The
Company began marketing its own brand of ceramic capacitors in the United States
in 1983 and shortly thereafter introduced a broad line of capacitor products
under the "Surge" private label. Based on Management's experience, the Company
believes that these capacitor product types are among the more popularly used
items in electronic circuitry.
The Company supplies a wide variety of electronic components bearing
the Company's private "Surge" label which can be broadly divided into two
categories--capacitors and discrete components. For the fiscal years ended
November 30, 1996 ("Fiscal 1996") and November 30, 1997 ("Fiscal 1997"),
capacitors accounted for approximately 83% and 75%, respectively, of the
Company's sales while discrete components accounted for approximately 17% and
25%, respectively. The Company does not claim its reputation is based on name
recognition. As the Company intensifies its marketing efforts, the Company will
continue to attempt to increase its market share for its various products. The
Company's business strategy is to offer one-stop shopping for its customers'
needs by promoting both capacitors and discrete components to the same
customers. Management believes that the Company's reputation is based on its
history of providing high quality products at competitive prices, as well as its
providing "creative services" normally available only from companies with much
greater resources. These creative services which are currently available from
the Company include factory to factory shipments and just-in-time deliveries.
5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
The Company was incorporated on November 24, 1981 in the State of New
York. The Company's executive offices are located at 1016 Grand Boulevard, Deer
Park, New York, 11729, and the telephone number is (516) 595-1818.
The Offering
------------
Securities Offered........................ 850,000 shares of Common Stock
acquired or which may be acquired by
the Selling Stockholders upon
exercise of options granted or to be
granted pursuant to the 1995 Plan
including 6,000 shares issued upon
exercise of options previously
granted. See "Selling Stockholders"
and "Plan of Distribution".
Common Stock Outstanding (1).............. 4,829,958 shares of Common Stock.
Risk Factors.............................. The Securities offered hereby involve
a high degree of risk. Only investors
who can bear the loss of their entire
investment should invest. See "Risk
Factors".
Nasdaq SmallCap Market Symbol............. SRGE
Boston Stock Exchange Symbol.............. SRG
- ----------------
(1) As of July 31, 1998. Excludes an aggregate of 844,000 shares of
Common Stock consisting of 298,000 shares of Common Stock reserved for issuance
upon the exercise of options granted and an additional 546,000 available for
grant under the 1995 Plan.
6
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<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. The following risk factors should be considered carefully.
In addition to the other information in this Prospectus before purchasing the
Common Stock offered by this Prospectus.
The securities offered hereby are speculative and involve a high degree of risk
and should not be purchased by persons who cannot afford the loss of their
entire investment. Prospective investors should carefully consider the following
risk factors, as well as all other information set forth elsewhere in this
Prospectus.
This Prospectus contains certain forward-looking statements. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this Prospectus including, but not limited to, the timely
introduction and acceptance of new products by the Company, the impact of
competitive products and pricing, market conditions in the electronics industry
and the Company's ability to manage its growth.
Absence of Substantial Historical Profitability; and Future Operating
Results. The Company achieved increasing levels of sales during the last several
years prior to a decrease in sales from $4,619,856 in the six-month period ended
May 31, 1997 ("Fiscal 1997 Period") to $4,255,124 in the six-month period ended
May 31, 1998 ("Fiscal 1998 Period"). Further, net income for the fiscal year
ended November 30, 1997 ("Fiscal 1997") was only $75,350 and the Company
incurred a net loss of $124,369 for the Fiscal 1998 Period as compared with net
income of $1,339 in the Fiscal 1997 Period. Inasmuch as the Company will
continue to have a high level of operating expenses, and is required to make
significant up-front expenditures in connection with the continuing expansion of
its operations the Company's future profitability will depend upon corresponding
increases in revenues from operations which have not occurred.
The electronics and semiconductor industries have been characterized by
intense price cutting which could materially adversely affect the Company's
future operating results. Given the Company's limited financial resources, its
anticipated expenses and the highly competitive environment in which the Company
operates, there can be no assurance that the Company's current rate of revenue
growth will continue in the future or that the Company's future operations will
remain profitable.
Lack of Written Long-Term Supply Contracts with Manufacturers and
Dependence on Three Suppliers. The Company does not have any written long-term
supply, distribution or franchise agreements with any of its manufacturers. The
Company acts as the exclusive sales agent in North America for many of its
manufacturers, pursuant to oral agreements. While the Company believes that it
has established close working relationships with its principal manufacturers,
the Company's success depends, in large part, on maintaining these relationships
and developing new supplier relationships for its existing and future product
lines. Because of the lack of long-term contracts, there can be no assurance
that the Company will be able to maintain these relationships. For Fiscal 1997,
two suppliers and for 1996, three suppliers, respectively, each accounted for in
excess of 10% of the Company's net purchases. Purchases from these two suppliers
in Fiscal 1997 were $1,376,457 and $1,034,783 or 18.1% and 13.6% of total
purchases, respectively. During Fiscal 1996 purchases from these three suppliers
were $1,154,262, $1,085,932 and $794,267, or 18%, 17% and 13%, respectively, of
the Company's total purchases. While the Company believes that there are
alternative semiconductor and capacitor manufacturers whose replacement products
may be acceptable to its customers, the loss of, or a significant disruption in
the relationship with, one or both of the Company's two major suppliers would
most likely have a material adverse effect on the Company's business and results
of operations.
Need to Maintain Large Inventory; Price Fluctuations. In order to
adequately service its customers, the Company believes that it is necessary to
maintain a large inventory of its products. Accordingly, the Company attempts to
maintain a [three to four] month inventory of those products it offers which are
in high demand. As a result of the Company's strategic inventory purchasing
policies, under which the Company, in order to obtain preferential pricing,
waives the rights to manufacturers' inventory protection agreements (including
price protection and inventory return rights), the Company bears the risk of
increases in the prices charged by its manufacturers and decreases in the prices
7
<PAGE>
of products held in its inventory or covered by purchase commitments. If prices
of components held in inventory by the Company decline or if new technology is
developed that displaces products sold by the Company and held in inventory, the
Company's business could be materially adversely affected.
Dependence on Certain Customers. For Fiscal 1996 approximately 13.2% of
the Company's net sales were derived from sales to the Company's only customer
which accounted for in excess of 10% of the Company's revenues. During Fiscal
1997 two new customers accounted for approximately 16.8% and 13.1% of the
Company's net sales. Although the Company's customer base has increased, the
loss of its largest customers as well as, to a lesser extent, the loss of any
other principal customer, would be expected to have a materially adverse effect
on the Company's operations during the short-term until the Company is able to
generate replacement business, although there can be no assurance of obtaining
such replacement business.
Competition. The Company faces intense competition, in both its selling
efforts and purchasing efforts, from the significant number of companies that
manufacture or distribute electronic components and semiconductors. Many of
these companies are well established with substantial expertise, and possess
substantially greater assets and possess substantially greater financial,
marketing, personnel, and other resources than does the Company. Many larger
competing suppliers also carry product lines which the Company does 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 the majority of the Company's customers. As the Company's customers
increase in size, however, competitors may find it cost effective to focus
direct selling efforts on those customers, which could result in increased
competition, the loss of customers or pressure on profit margins for the
Company. There can be no assurance that the Company will be able to continue to
compete effectively with existing or potential competitors.
Availability of Components. The semiconductor component 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. While the Company believes that, due to the depth of
its inventory and its relationship with its manufacturers, it has not been
adversely affected by recent shortages in certain discrete semiconductor
components, no assurance can be given that future shortages will not adversely
impact the Company.
Proposed Expansion. The Company is currently expanding its current
level of operations through the opening of additional sales/stocking offices,
the expansion of its headquarters office and warehouse facility and an increase
in inventories. The Company believes that it has sufficient funds to carry out
its planned expansion, although there can be no assurance it will be able to do
so. While the Company has grown during the last several years, there can be no
assurance that the Company will be able to further expand its operations
successfully. Expansion of the Company's operations will depend on, among other
things, the continued growth of the electronics and semiconductor industries,
the Company's ability to withstand intense price competition, its ability to
obtain new clients, retain sales and other personnel in order to expand its
marketing capabilities, secure adequate sources of products which are then in
demand on commercially reasonable terms, successfully manage growth (including
monitoring an expanded level of operations and controlling costs) and the
availability of adequate financing.
The Company may also seek to expand its operations through potential
acquisitions. The Company may acquire all or a portion of existing companies in
businesses which the Company believes are compatible with its business
including, but not limited to, competitors of the Company. Any decision to make
an acquisition will be based upon a variety of factors, including, among others,
the purchase price and other financial terms of the transaction, the business
prospects and the extent to which any acquisition would enhance the Company's
prospects. To the extent that the Company may, depending upon the opportunities
available to it, finance an acquisition with a combination of cash and equity
securities, any such issuance of equity securities could result in dilution to
the interests of the Company's shareholders. Additionally, to the extent that
the Company, or the acquisition or merger candidate itself, issues debt
securities in connection with an acquisition, the Company may be subject to
risks associated with incurring indebtedness, including the risks of interest
rate fluctuations and insufficiency of cash flow to pay principal and interest.
The Company is not currently engaged in identifying any potential acquisition
and has no plans, agreements,
8
<PAGE>
understandings or arrangements for any acquisitions. There can be no assurance
that the Company will be able to successfully consummate any acquisition or
successfully integrate into its business any acquired business or portion
thereof.
Product Mix; Profit Margins. The Company's gross profit margins in 1997
decreased by 3.4 percentage points from 1996 as a result of increased
competition in the electronics industry. The unavailability of products at
favorable prices and the inability of the Company to continue its favorable
sales mix, could adversely impact sales and gross profit margins. The
electronics industry has historically been cyclical and has experienced periodic
downturns, as well as price cutting trends. The semiconductor industry is
experiencing a decline reflecting a slowdown in personal computer sales and
rapidly falling prices for memory chips. These factors are difficult to predict
and as the electronics industry is currently experiencing price cutting, the
Company's future performance, particularly its profit margin, may be adversely
affected.
Possible Need for Additional Financing. The Company intends to expand
its facilities over the next several years in order to achieve and maintain the
growth expected primarily through the increased penetration of the OEM and
distribution market, the introduction of new products and the upgrade of
existing product lines. In order to effect this expansion, the Company is
expending funds toward the expansion of office and warehouse space at its
current facilities in addition to establishing additional sales/stocking
facilities in other strategic locations. The Company is renovating the office
facilities to allow for expansion of the sales department, clerical, finance and
purchasing departments. The Company believes the new working environment will
lead to greater productivity. Additionally, the renovations include additional
space for test labs, which will allow the Company to provide customers with
prompt information regarding the specifications of its products and additional
sales staff expected to manage the Company's sales growth.
In addition to the costs associated with the expansion of the Company's
facilities, the Company expects to continue to incur significant operating
costs. These costs consist principally of payroll, marketing and facilities
related charges. Upon the updating of its current facilities and the opening of
new facilities, facilities related charges are expected to rise dramatically.
Staffing requirements for any new facilities may substantially increase payroll
related costs. The future profitability of the Company will therefore depend on
increased future sales levels. In that regard the Company does not plan on
opening new facilities unless demand warrants such opening. In the event that
future sales levels do not increase or in the event that the Company is unable
to obtain such additional financing as it becomes necessary, the Company will
not be able to achieve all of its business plans. Any inability to obtain
additional financing could have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail its planned
expansion.
Foreign Trade Regulation. Approximately 49% of the total goods
purchased by the Company in 1997 were manufactured in foreign countries, with
the majority purchased in Taiwan (24.2%), China (18.7%), South Korea (3.6%),
India (1.4%) and Hong Kong (1.2%). The purchase of goods manufactured in foreign
countries, such as the foregoing, is subject 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 the Company's business and results of operations. In addition, the
current economic conditions in Southeast Asia may severely impact the Company's
business. 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 the Company's
business. The Company's 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 the Company does not
believe that any of these factors have adversely impacted its business in the
past, there can be no assurance that these factors will not materially adversely
affect the Company in the future.
9
<PAGE>
Electronics Industry Cyclicality. 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 the Company's business and results of operations.
Lack of Patents, Trademarks and Proprietary Information. The Company
holds no patents and has no trademarks or copyrights registered in the United
States Patent and Trademark Office or in any state. The Company relies on the
know-how, experience and capabilities of its management personnel. Without
trademark and copyright protection, however, the Company has no protection from
other parties attempting to offer similar services.
Although the Company believes that its products do not and will not
infringe patents or trademarks, or violate proprietary rights of others, it is
possible that infringement of existing or future patents, trademarks or
proprietary rights of others may occur. In the event the Company's products
infringe proprietary rights of others, the Company may be required to modify the
design of its products, change the name of its products and/or obtain a license.
There can be no assurance that the Company will be able to do so in a timely
manner, upon acceptable terms and conditions or at all. The failure to do any of
the foregoing could have a material adverse effect upon the Company or its
operations. In addition, there can be no assurance that the Company will have
the financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action. Moreover, if the Company's
products infringe patents, trademarks or proprietary rights of others, the
Company could, under certain circumstances, become liable for damages, which
also could have a material adverse effect on the Company.
Control by Management and Current Shareholders. As of May 20, 1998,
Management of the Company beneficially owned 701,887 Common Shares, or
approximately 14% of the then issued and outstanding Common Shares. In view of
the Shareholder Rights Protection Plan described below, the Company's present
Management may be able to effectively control the Company, elect all of the
Company's directors, increase the authorized capital, dissolve, merge or sell
all of the assets of the Company, and generally direct the affairs of the
Company. Ira H. Levy and Steven J. Lubman, President and Vice President,
respectively, entered into a stock purchase agreement pursuant to which each
agreed to vote their shares, for as long as the other party continues to own
voting shares of the Company, in such manner as to elect each of them as a
director of the Company.
Dependence Upon Key Personnel. The Company is highly dependent upon the
services of Ira Levy, and Steven J. Lubman. The success of the Company, to date,
has been largely dependent upon the efforts and abilities of Messrs. Levy and
Lubman, and the loss of either of their services for any reason could have a
material adverse effect upon the Company. In addition, the Company's work force
includes executives and employees with significant knowledge and experience in
the electronics distribution industry. The Company's future success will be
strongly influenced by its ability to continue to recruit, train and retain a
skilled work force. While the Company believes that it would be able to locate
suitable replacements for its executives or other personnel if their services
were lost to the Company, there can be no assurance that the Company would be
able to do so on terms acceptable to the Company.
On February 1, 1996, the Company entered into five-year employment
agreements with Messrs. Levy and Lubman commencing on July 31, 1996.
Nevertheless, should either of their services become unavailable for any reason,
the location and hiring of a suitable replacement for Mr. Levy and/or Mr. Lubman
could be very difficult. The Company has purchased key-man life insurance
policies on Mr. Levy and Mr. Lubman with benefits of $1,000,000 payable to the
Company in the event of each person's death. The benefits received under these
policies might not be sufficient to compensate the Company for the loss of Mr.
Levy's or Mr. Lubman's services should a suitable replacement not be employed.
Risk of Loss of Uninsured Cash Balances. The Company maintains its cash
balances in several financial institutions. Accounts at each financial
institution are secured by the FDIC for up to $100,000. Uninsured balances at
November 30, 1997 were approximately $1,190,696 which could be lost if any of
these banks fail.
10
<PAGE>
No Dividends. The Company does not intend, for the foreseeable future,
to declare or pay any dividends and intends to retain earnings, if any, for the
future operation and expansion of the Company's business.
Shares Eligible for Future Sale. The Company as of July 31, 1998, had
4,829,958 Common Shares outstanding. Of the Common Shares issued and
outstanding, an aggregate of 4,123,393 Common Shares consisting of the 1,725,000
Common Shares sold in the July 1996 Public Offering, the 1,215,060 Common Shares
and 850,000 Units privately sold to Selling Securityholders which were
separately registered and 333,333 Common Shares sold in the Company's initial
public offering, which closed in September of 1984 are freely tradable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), except for any shares purchased by an "affiliate" of the
Company within the meaning of Rule 144 under the Securities Act ("Rule 144").
The remaining 706,565 Common Shares are "restricted securities," as that term is
defined under Rule 144, and may not be sold in the absence of registration under
the Securities Act unless an exemption from registration is available, including
the exemption provided by Rule 144. All of such shares are currently eligible
for sale under Rule 144(k).
No prediction can be made as to the effect, if any, that market sales
of Common Shares or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Shares may be sold in the public market may
adversely affect prevailing market prices for the Common Shares and could impair
the Company's ability to raise capital through the sale of its equity
securities.
Effect of Outstanding Warrants and Options. Commencing on August 1,
1998, all of the Company's Class A Common Stock Purchase Warrants (the
"Warrants") became exercisable. The exercise of the Warrants and the
Underwriters's Warrants (from its July 1996 Public Offering) (and the Warrants
included therein) may adversely affect prevailing market prices for the Common
Shares and may dilute the interests of existing shareholders. Moreover, the
terms upon which the Company will be able to obtain additional equity capital
may be adversely affected since the holders of such outstanding securities can
be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the Warrants and the Underwriters's Warrants. The
Company has granted certain demand and "piggy-back" registration rights to the
Underwriters with respect to the securities issuable upon exercise of the
Underwriters's Warrants.
Blank Check Preferred Stock, "Poison Pill" and Control of Company. The
Company's Certificate of Incorporation authorizes the issuance of preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered without further shareholder approval, but subject to the
Representative's prior written consent during the next two years, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Common Shares. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
current intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
On June 30, 1997, the Board of Directors of the Company unanimously
adopted a Shareholder Rights Protection Plan, commonly referred to as a poison
pill (the "Plan"). The Plan is not intended to prevent a tender offer or proxy
contest to take-over the Company, but rather to prevent a party from gaining
control in the open market at currently less than fair prices.
Under the Plan, each shareholder of record on July 10, 1997 (the
"Record Date"), except someone who becomes a 20% shareholder, will receive two
common share purchase rights (each, a "Right") for each Common Share held on the
Record Date. Each Right entitles the holder to purchase one Common Share, at
$.01 per share, in the event a person acquires 20% or more of the Company's
outstanding shares other than through a tender offer, proxy contest or other
exempt transactions, where shareholders enjoy statutory safeguards. Unless a
person limits his holdings to less than 20% or is prepared to pay fair value to
all shareholders, the Plan will deter someone from acquiring 20% or more of the
Common Share at very low prices. The Board may redeem the Rights prior to an
event occurring under the Plan.
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<PAGE>
Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current prices and volume information with respect to
transactions in such securities are provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's securities become subject to the penny stock
rules, investors in this Offering may find it more difficult to sell their
securities.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. However, the Company expects to use the proceeds from the exercise of
the Options to purchase such Shares for working capital and other general
corporate purposes.
SELLING STOCKHOLDERS
The shares of Common Stock to which this Prospectus relates are being
registered for reoffers and resales by the Selling Stockholders who have
acquired or may acquire such Shares pursuant to the exercise of Options. The
Selling Stockholders named below may resell all, a portion or none of such
Shares from time to time.
Participants under the Plans who are deemed to be "affiliates" of the
Company who may acquire Common Stock under the Plans may be added to the Selling
Stockholders listed below from time to time by use of a prospectus supplement
filed pursuant to Rule 424(b) under the Securities Act of 1933. An "affiliate"
is defined in Rule 405 under the Securities Act as a "person that directly, or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with," the Company.
The table below sets forth with respect to each Selling Stockholder,
based upon information available to the Company as of July 31, 1998, the number
of shares of Common Stock beneficially owned before and after the sale of the
shares offered hereby, the number of shares to be sold, and the percent of the
outstanding shares of Common Stock owned before and after the sale of the Common
Stock offered hereby.
<TABLE>
<CAPTION>
Number of Percentage
Number of Shares Percentage of Shares Bene- of Shares
Beneficially Shares Owned Number of ficially Owned
Owned Before Shares to be Owned After
Selling Stockholders(4) Before Reoffer(1) Reoffer(2) Reoffered(3) After Reoffer Reoffer (2)
- -------------------- ----------------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Phyllis Van Capelle 2000 (5) * 2000 * *
Alison McSweeney 2000 (5) * 2000 * *
Warren Buehler 5000 (6) * 5000 * *
Marie Chimirri 5000(6) * 5000 * *
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage
Number of Shares Percentage of Shares Bene- of Shares
Beneficially Shares Owned Number of ficially Owned
Owned Before Shares to be Owned After
Selling Stockholders(4) Before Reoffer(1) Reoffer(2) Reoffered(3) After Reoffer Reoffer (2)
- -------------------- ----------------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Lorraine Hack 5000(6) * 5,000 * *
Eric Steier 20,000(7) * 20,000 * *
Dale Tracy 20,000(7) * 20,000 * *
Shana Maruca 20,000(7) * 20,000 * *
Tsung-Ming Chen 20,000(7) * 20,000 * *
Linda Chen 5000(8) * 5,000 * *
Belinda Lin 5000(8) * 5,000 * *
Palymra Lin 5000(8) * 5,000 * *
Sandy Sussman 10,000(9) * 10,000 * *
T.C. Wu 10,000(9) * 10,000 * *
Ira Levy 330,000(10) 6.7% 75,000 255,000 5.3%
Steven J. Lubman 330,000(10) 6.7% 75,000 255,000 5.3%
Mark Siegel 31,887(11) * 10,000 21,887 *
David Siegel 10,000(11) * 10,000 * *
</TABLE>
- -----------------------
* Represents less than 1% of the issued and outstanding Common Stock.
(1) Unless indicated, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
the Company Common Stock beneficially owned by them. For purposes of this
table, any security which such person has the right to acquire within 60
days after such date is deemed to be outstanding for the purpose of
computing the percentage ownership for such person, but is not deemed to
be outstanding for the purpose of computing the percentage of any other
person.
(2) Based on 4,829,958 shares of Common Stock outstanding as of July 31,
1998.
(3) Does not include shares that may be acquired by the individuals listed
upon exercise of options which subsequently may be granted pursuant to
the 1995 Plan which shares (if any) will be added to the number of shares
listed by one or more supplements to this Prospectus. Furthermore, the
inclusion in this Prospectus of the stated number of shares does not
constitute a commitment to sell any or all of such shares. The number of
shares offered shall be determined from time to time by each Selling
Stockholder at his or her sole discretion.
(4) This person's address is c/o the Company, 1016 Grand Boulevard, Deer
Park, New York 11729.
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<PAGE>
(5) Includes 2000 shares of Common Stock issuable upon exercise of a like
number of options.
(6) Includes 5000 shares of Common Stock issuable upon exercise of a like
number of options.
(7) Includes 10,000 shares of Common Stock issuable upon exercise of a like
number of options. Also includes 10,000 shares of Common Stock underlying
options which are not currently exercisable.
(8) Includes 2,500 shares of Common Stock issuable upon exercise of a like
number of options. Also includes 2,500 shares of Common Stock underlying
options which are not currently exercisable.
(9) Includes 5,000 shares of Common Stock issuable upon exercise of a like
number of options. Also includes 5,000 shares of Common Stock underlying
options which are not currently exercisable.
(10) Includes 75,000 shares of Common Stock issuable upon exercise of a like
number of options.
(11) Includes 10,000 shares of Common Stock issuable upon exercise of a like
number of options.
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<PAGE>
PLAN OF DISTRIBUTION
The Shares may be sold or transferred for value by the Selling
Stockholders, or by pledgees, donees, transferees or other successors in
interest to the Selling Stockholders, in one or more transactions on the Nasdaq
SmallCap Market, the Boston Stock Exchange (or any successor stock exchange), in
negotiated transactions or in a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at prices otherwise negotiated. The Selling Stockholders may
effect such transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agent (which
compensation may be less than or in excess of customary commissions). The
Selling Stockholders and any broker-dealers that participate in the distribution
of the Shares may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commissions received by them and any profit
on the resale of the Shares sold by them may be deemed to be underwriting
discounts and commissions under the Securities Act. The sale of the Shares of
the Common Stock by the Selling Stockholders is subject to the prospectus
delivery and other requirements of the Securities Act.
Upon the Company's being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker or dealer for the sale
of shares through a secondary distribution, or a purchase by a broker or dealer,
a supplemented Prospectus will be filed, if required, pursuant to Rule 424(b)
under the Securities Act, disclosing (a) the name of each of such Selling
Stockholder and the participating broker-dealers, (b) the number of Shares
involved, (c) the price at which such Shares are being sold, (d) the commissions
paid or the discounts or concessions allowed to such broker-dealers, (e) where
applicable, that such broker-dealers did not conduct any investigation to verify
the information set out or incorporated by reference in the Prospectus, as
supplemented, and (f) other facts material to the transaction.
In addition to any such number of Shares sold hereunder, a Selling
Stockholder may, at the same time, sell any Common Shares, including the Shares,
owned by him in compliance with all of the requirements of Rule 144 under the
Securities Act, regardless of whether such shares are covered by this
Prospectus.
There is no assurance that any of the Selling Stockholders will sell
any or all of the Shares offered hereby.
The Company will pay all expenses in connection with this offering,
other than commissions and discounts of underwriters, dealers or agents. All
selling and other expenses incurred by individual Selling Stockholders will be
borne by such Selling Stockholders.
LEGAL MATTERS
The validity of the Common Shares offered hereby has been passed upon
for the Company by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York
10158.
EXPERTS
The financial statements of Surge Components, Inc. at November 30, 1997
and for each of the two years in the period ended November 30, 1997, appearing
in the Company's Annual Report (Form 10-K) for the year ended November 30, 1997
have been audited by Seligson & Giannattasio, LLP, independent auditors, as set
forth in their reports thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
4.1 Amendment to the Surge Components, Inc. 1995 Stock
Option Plan.
5.1 Opinion of Snow Becker Krauss P.C.
23.1 Consent of Snow Becker Krauss P.C. (included in
Exhibit 5.1 hereto).
23.2 Consent of Seligson & Giannattasio, LLP.
24.1 Powers of Attorney (included in the signature page
of this Registration Statement).
<PAGE>
EXHIBIT 4.1
Amendment to the
Surge Components, Inc.
1995 STOCK OPTION PLAN
Pursuant to Section 10 of the Surge Components, Inc. ("Surge") 1995
employee Stock Option Plan (the "Option Plan"), the Option Plan is hereby
amended to reflect an increase in the number of shares of common stock included
therein from 350,000 to 850,000 shares.
The Board of Directors and a majority of Surge stockholders approved
the amendment of the Option Plan at meetings held on March 4, 1998 and July 6,
1998, respectively.
/s/ Steven J. Lubman
- ----------------------------
Steven J. Lubman, Secretary
<PAGE>
EXHIBIT 5.1
OPINION OF SNOW BECKER KRAUSS P.C.
<PAGE>
EXHIBIT 5.1
August 4, 1998
Surge Components, Inc.
1016 Grand Boulevard
Deer Park, New York 11729
Re: Registration Statement on Form S-8 Relating to 850,000 Shares of
Common Stock, Par Value $. 001 Per Share, of Surge Components,
Inc. Issuable Under the 1995 Stock Option Plan, as amended
----------------------------------------------------------------
Gentlemen:
We are counsel to Surge Components, Inc., a New York corporation (the
"Company"), in connection with the filing by the Company with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), of a registration statement on Form S-8 (the "Registration
Statement") relating to 298,000 shares (the "Shares") of the Company's common
stock, par value $.001 per share (the "Common Stock"), issuable upon the
exercise of options granted, 6,000 shares issued upon exercise of options as
well as 546,000 stock options to be granted, pursuant to the Company's 1995
Stock Option Plan, as amended (the "Plan").
We have examined and are familiar with originals or copies, certified
or otherwise identified to our satisfaction, of the Certificate of Incorporation
and By-Laws of the Company, as each is currently in effect, the Registration
Statement, the Plan, resolutions of the Board of Directors of the Company
relating to the adoption of the Plan and the proposed registration and issuance
of the Shares and such other corporate documents and records and other
certificates, and we have made such investigations of law as we have deemed
necessary or appropriate in order to render the opinions hereinafter set forth.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to any facts material
to the opinions expressed herein which were not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Company and others.
Based upon and subject to the foregoing, we are of the opinion that the
Shares to be issued upon exercise of any options duly granted pursuant to the
terms of the Plan have been duly and validly authorized and, when the Shares
have been paid for in accordance with the terms of the Plan and certificates
therefore have been duly executed and delivered, such Shares will be duly and
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference in the Registration Statement to
this firm under the heading "Interests of Named Experts and Counsel." In giving
this consent, we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Snow Becker Krauss P.C.
---------------------------
SNOW BECKER KRAUSS P.C.
<PAGE>
EXHIBIT 23.2
CONSENT OF SELIGSON & GIANNATTASIO LLP
<PAGE>
Exhibit 23.2
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
January 26, 1998 included in Surge Components, Inc.'s Form 10-KSB for the year
ended November 30, 1997, and to all references to our Firm included in this
Registration Statement.
SELIGSON & GIANNATTASIO, LLP
N. White Plains, New York
July 31, 1998
