SurgePays Inc

Previous wording

This statement contains forward-looking statements within the meaning of the Securities Act of 1933, as amended (the ‘Securities Act’). Discussions containing such forward-looking statements may be found throughout this statement. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including the matters set forth in this statement. The accompanying consolidated financial statements as of June 30, 2024 and 2023 and for the three months and six months then ended includes the accounts of SurgePays, Inc. and its wholly owned subsidiaries during the period owned by SurgePays, Inc.

Current wording

This statement contains forward-looking statements within the meaning of the Securities Act of 1933, as amended (the ‘Securities Act’). Discussions containing such forward-looking statements may be found throughout this statement. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including the matters set forth in this statement. The accompanying consolidated financial statements as of September 30, 2024 and 2023 and for the three months and nine months then ended includes the accounts of SurgePays, Inc. and its wholly owned subsidiaries during the period owned by SurgePays, Inc.

Previous wording

SurgePays, Inc (“SurgePays,” “we” the “Company”) was incorporated in Nevada on August 18, 2006, is a technology and telecom company focused on the underbanked and underserved communities. SurgePhone and Torch Wireless provide subsidized mobile broadband to over 250,000 low-income subscribers nationwide. SurgePays fintech platform empowers clerks at thousands of convenience stores to provide a suite of prepaid wireless and financial products to underbanked customers.

Current wording

SurgePays, Inc (“SurgePays,” “we” the “Company”) was incorporated in Nevada on August 18, 2006, is a technology and telecom company focused on the underbanked and underserved communities. SurgePays fintech platform empowers clerks at thousands of convenience stores to provide a suite of prepaid wireless and financial products to underbanked customers.

Previous wording

We provide mobile broadband (internet connectivity), voice and SMS text messaging to both subsidized and direct retail prepaid customers through SurgePhone Wireless, LLC and Torch Wireless, LLC, wholly owned subsidiaries of SurgePays. We consider this the Mobile Virtual Network Operators (MVNO) segment of our business. Prior to the expiration of the Affordable Connectivity Program (the “ACP”) on June 1, 2024, we provided two types of MVNO’s, subsidized and non-subsidized. Our subsidized MVNO’s were licensed by the Federal Communications Commission (the “FCC”) to provide subsidized access to the internet through mobile broadband services to consumers qualifying under the federal guidelines of the ACP. We provided these services by supplying consumers who were eligible for the ACP with tablet devices with mobile broadband capabilities for use in their homes. For providing mobile broadband on tablets to these eligible customers, until June 1, 2024, the ACP reimbursed us up to a $100 for the cost of each tablet device we distributed and a $30 per customer, per month subsidy for mobile broadband (internet connectivity) services. Revenue from this portion of our business for the three months ended June 30, 2024 accounted for 83% of our total revenue as compared to 84% for the three months ended June 30, 2024. Revenue from this portion of our business for the six months ended June 30, 2024 accounted for 89% of our total revenue as compared to 83% for the six months ended June 30, 2024. However, due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. Effective June 1, 2024, households will no longer receive an ACP discount, and therefore until new or alternative funding for this program is available, we expect revenue for the remainder of 2024 to substantially decrease as the ACP reimbursement was a substantial portion of the Company’s revenue. Despite the expiration of ACP, we have decided to continue to provide broadband capabilities on our tablets to our previously subsidized customers with the belief that the ACP or a similar government program will be approved in the near future.

Current wording

We provide mobile broadband (internet connectivity), voice and SMS text messaging to both subsidized and direct retail prepaid customers through SurgePhone Wireless, LLC and Torch Wireless, LLC, wholly owned subsidiaries of SurgePays. We consider this the Mobile Virtual Network Operators (MVNO) segment of our business. Prior to the expiration of the Affordable Connectivity Program (the “ACP”) on June 1, 2024, we provided two types of MVNO’s, subsidized and non-subsidized. Our subsidized MVNO’s were licensed by the Federal Communications Commission (the “FCC”) to provide subsidized access to the internet through mobile broadband services to consumers qualifying under the federal guidelines of the ACP. We provided these services by supplying consumers who were eligible for the ACP with tablet devices with mobile broadband capabilities for use in their homes. For providing mobile broadband on tablets to these eligible customers, until June 1, 2024, the ACP reimbursed us up to a $100 for the cost of each tablet device we distributed and a $30 per customer, per month subsidy for mobile broadband (internet connectivity) services. Revenue from this portion of our business for the three months ended September 30, 2024 accounted for 2% of our total revenue as compared to 90% for the three months ended September 30, 2023. Revenue from this portion of our business for the nine months ended September 30, 2024 accounted for 80% of our total revenue as compared to 85% for the nine months ended September 30, 2023. However, due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. Effective June 1, 2024, households will no longer receive an ACP discount, and therefore until new or alternative funding for this program is available, we expect revenue for the remainder of 2024 to substantially decrease as the ACP reimbursement was a substantial portion of the Company’s revenue. Despite the expiration of ACP, we have decided to continue to provide broadband capabilities on our tablets to our previously subsidized customers with the belief that the ACP or a similar government program will be approved in the near future.

Previous wording

As a transition strategy moving forward, we decided to keep the existing base of subscribers from the former ACP enrolled in our network through June 30, 2024 and beyond. We believe it would have been an easy, though short-sighted, decision to de-enroll these subscribers once the ACP funding ran out because we have a built-in subscriber base of 250,000 and a distribution network of thousands of local convenience stores and bodegas where our consumers shop every day. We believe these are huge and valuable assets and to hold on to these valuable assets during this transition period, we chose to keep our subscribers active, absorb the wholesale costs, averaging around $7-10 per subscriber per month, and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. This will allow us to maintain our current customer base if that occurs.

Current wording

As a transition strategy moving forward, we decided to keep the existing base of subscribers from the former ACP enrolled in our network through September 30, 2024 and beyond. We believe it would have been an easy, though short-sighted, decision to de-enroll these subscribers once the ACP funding ran out because we have a built-in subscriber base of 250,000 and a distribution network of thousands of local convenience stores and bodegas where our consumers shop every day. We believe these are huge and valuable assets and to hold on to these valuable assets during this transition period, we chose to keep our subscribers active, absorb the wholesale costs, averaging around $7-10 per subscriber per month, and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. We believe this plan will allow us to maintain our current customer base if ACP returns or will allow us to utilize Lifeline.

Previous wording

Our revenue is derived from the transaction that takes place when an individual using a prepaid cellular carrier plan needs to add more minutes to their cellular phone. These services are vital to convenience store operations and we believe we can utilize our relationships with convenience stores from our ACP services to expand the network for our Comprehensive Platform Services. The Company expects this segment to be the biggest percent of year-over-year revenue growth opportunity for 2024 and hired a new head of sales for our Comprehensive Platform Service segment to tap into such growth opportunity.

Current wording

Our revenue is derived from the transaction that takes place when an individual using a prepaid cellular carrier plan needs to add more minutes to their cellular phone. These services are vital to convenience store operations and we believe we can utilize our relationships with convenience stores from our ACP services to expand the network for our Comprehensive Platform Services. The Company expects this segment to be the biggest percentage of year-over-year revenue growth opportunity for 2024 and hired a new head of sales for our Comprehensive Platform Service segment to tap into such growth opportunity.

Previous wording

In 2023, we decided to focus less on this segment of our business and the Company is in the process of determining how best this service fits into the overall plans of SurgePays. The Company still derived revenue from this segment of our business in 2023, however, we have not received any revenue for the six months ended June 30, 2024 and plan to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in the before the end of the fiscal year ended 2024.

Current wording

In 2023, we decided to focus less on this segment of our business and the Company is in the process of determining how best this service fits into the overall plans of SurgePays. The Company still derived revenue from this segment of our business in 2023. However, we have not received any revenue for the nine months ended September 30, 2024 and plan to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business before the end of the fiscal year ended 2024.

Previous wording

Revenue decreased overall by $20,800,734 (58.0%) from the three months ended June 30, 2023 to the three months ended June 30, 2024. The breakout was as follows:

Current wording

Revenue decreased overall by $29,391,137 (86.0%) from the three months ended September 30, 2023 to the three months ended September 30, 2024. The breakout was as follows:

Previous wording

Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) decreased by $17,711,323 (58.6%). Due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. The $14.2 billion Congress initially made available for the ACP has run out. As a result, the ACP has ended for now. Effective June 1, 2024, households will no longer receive an ACP discount. As a transition strategy moving forward, we decided to keep the existing base of subscribers from the former ACP enrolled in our network through June 30, 2024 and beyond. We believe it would have been an easy, though short-sighted, decision to de-enroll these subscribers once the ACP funding ran out because we have a built-in subscriber base of 250,000 and a distribution network of thousands of local convenience stores and bodegas where our consumers shop every day. We believe these are huge and valuable assets and to hold on to these valuable assets during this transition period, we chose to keep our subscribers active, absorb the wholesale costs, averaging around $7-10 per subscriber per month, and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. It is also our plan to communicate to this base our intention to transition these subscribers to our LinkUp Mobile service line. Since the ACP was not funded, we expect revenue for the Company for the remainder of 2024 to substantially decrease because ACP reimbursement was a substantial portion of our revenue.

Current wording

Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) decreased by $30,638,724 (99.9%). Due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. The $14.2 billion Congress initially made available for the ACP has run out. As a result, the ACP has ended for now. Effective June 1, 2024, households will no longer receive an ACP discount. As a transition strategy moving forward, we decided to keep the existing base of subscribers from the former ACP enrolled in our network through September 30, 2024 and beyond. We believe it would have been an easy, though short-sighted, decision to de-enroll these subscribers once the ACP funding ran out because we have a built-in subscriber base of 250,000 and a distribution network of thousands of local convenience stores and bodegas where our consumers shop every day. We believe these are huge and valuable assets and to hold on to these valuable assets during this transition period, we chose to keep our subscribers active, absorb the wholesale costs, averaging around $7-10 per subscriber per month, and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. It is also our plan to communicate to this base our intention to transition these subscribers to our LinkUp Mobile service line. Since the ACP was not funded, we expect revenue for the Company for the remainder of 2024 to substantially decrease because ACP reimbursement was a substantial portion of our revenue. The Company signed a Master Services Agreement (MSA) with TerraCom, Inc. (“TerraCom”), a wireless service provider and licensed Lifeline provider, effective October 3, 2024. We will execute the strategy of offering Lifeline to our existing ACP subscriber base. This agreement allows us to offer a government-subsidized program to our 280,000 ACP wireless subscribers. Equally important, we can now reignite our sales channels to acquire new Lifeline subscribers who lost their ACP service when their carrier chose to shut them off.

Previous wording

Lead Generation services consisting of LogicsIQ revenues decreased by $2,791,585 as a result of operational changes by management in late 2023. The Company plans to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in fiscal year ended 2024.

Current wording

Lead Generation services, consisting of LogicsIQ revenues decreased by $684,631 as a result of operational changes by management in late 2023. The Company plans to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in fiscal year ended 2024.

Previous wording

Comprehensive Platform Services revenues decreased by $293,765 as a result of focusing our efforts on our MVNO segment, specifically the ACP component of the MVNO segment while we strategized on how to enhance our sales and on-boarding approach to adding convenience stores to our platform. The Company expects this segment to be the biggest percent of year-over-year revenue growth opportunity for the remainder of 2024.

Current wording

Comprehensive Platform Services revenues increased by $1,941,450 as a result of focusing our efforts on our MVNO segment, specifically the ACP component of the MVNO segment while we strategized on how to enhance our sales and on-boarding approach to adding convenience stores to our platform. The Company expects this segment to be the biggest percentage of year-over-year revenue growth opportunity for the remainder of 2024. We hired a new sales director earlier in the year to start a B2B segment within our Platform Services. For the three months ended September 30, 2024, new revenue of over $2.5 million and 19 total clients were created, as compared to zero revenue for the three months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, cost of revenue for services primarily consists of data plan expenses ($9,011,476), devices ($1,145,609), marketing ($5,763,093), advertising ($1,377,794) and other expenses such as royalties and call-center expenses ($1,230,802). For the three months ended June 30, 2023, cost of revenue for services primarily consists of data plan expenses ($9,216,892), devices ($7,378,088), marketing ($4,882,564), advertising ($1,809,257) and other expenses such as royalties and call-center expenses ($2,573,904).

Current wording

For the three months ended September 30, 2024, cost of revenue for services primarily consists of data plan expenses ($3,567,303), prepaid retail expense ($4,556,418), devices ($175,170), marketing ($3,719,197), advertising ($116,771) and other expenses such as royalties and call-center expenses ($467,197). For the three months ended September 30, 2023, cost of revenue for services primarily consists of data plan expenses ($7,341,183), prepaid retail expense ($2,832,308), devices ($5,463,473), marketing ($4,875,587), advertising ($1,210,713) and other expenses such as royalties and call-center expenses ($1,957,325).

Previous wording

The increase in depreciation and amortization costs for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is the result of amortizing internal-use software development costs capitalized in 2023 associated with software enhancements to our various software platforms continuing in 2024. There were no such costs incurred in the first quarter of 2024.

Current wording

The increase in depreciation and amortization costs for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 is the result of amortizing internal-use software development costs capitalized in 2023 associated with software enhancements to our various software platforms continuing in 2024. There were no such costs incurred in the third quarter of 2024.

Previous wording

Selling, general and administrative costs (S, G & A) increased by $3,586,308 (100.8%). The changes are discussed below:

Current wording

Selling, general and administrative costs (S, G & A) increased by $3,043,345 (97.4%). The changes are discussed below:

Previous wording

Interest expense decreased to $116,722 in the three months ended June 30, 2024 from $156,267 in the three months ended June 30, 2023.

Current wording

Interest expense decreased to $112,814 in the three months ended September 30, 2024 from $130,335 in the three months ended September 30, 2023.

Previous wording

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes for the six months ended June 30, 2024 and 2023, respectively, is approximately as follows:

Current wording

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes for the nine months ended September 30, 2024 and 2023, respectively, is approximately as follows:

Previous wording

Revenue decreased overall by $24,148,042 (34.2%) from the six months ended June 30, 2023 to the six months ended June 30, 2024. The breakout was as follows:

Current wording

Revenue decreased overall by $53,539,179 (51.1%) from the nine months ended September 30, 2023 to the nine months ended September 30, 2024. The breakout was as follows:

Previous wording

Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) decreased by $17,478,118 (29.7%). Due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. The $14.2 billion Congress initially made available for the ACP has run out. As a result, the ACP has ended for now. Effective June 1, 2024, households will no longer receive an ACP discount. As a transition strategy moving forward, we decided to keep the existing base of subscribers from the former ACP enrolled in our network through June 30, 2024 and beyond. We believe it would have been an easy, though short-sighted, decision to de-enroll these subscribers once the ACP funding ran out because we have a built-in subscriber base of 250,000 and a distribution network of thousands of local convenience stores and bodegas where our consumers shop every day. We believe these are huge and valuable assets and to hold on to these valuable assets during this transition period, we chose to keep our subscribers active, absorb the wholesale costs, averaging around $7-10 per subscriber per month, and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. It is also our plan to communicate to this base our intention to transition these subscribers to our LinkUp Mobile service line. Since the ACP was not funded, we expect revenue for the Company for the remainder of 2024 to substantially decrease because ACP reimbursement is a substantial portion of our revenue.

Current wording

Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) decreased by $48,116,841 (53.7%). Due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. The $14.2 billion Congress initially made available for the ACP has run out. As a result, the ACP has ended for now. Effective June 1, 2024, households will no longer receive an ACP discount. As a transition strategy moving forward, we decided to keep the existing base of subscribers from the former ACP enrolled in our network through September 30, 2024 and beyond. We believe it would have been an easy, though short-sighted, decision to de-enroll these subscribers once the ACP funding ran out because we have a built-in subscriber base of 250,000 and a distribution network of thousands of local convenience stores and bodegas where our consumers shop every day. We believe these are huge and valuable assets and to hold on to these valuable assets during this transition period, we chose to keep our subscribers active, absorb the wholesale costs, averaging around $7-10 per subscriber per month, and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. It is also our plan to communicate to this base our intention to transition these subscribers to our LinkUp Mobile service line. Since the ACP was not funded, we expect revenue for the Company for the remainder of 2024 to substantially decrease because ACP reimbursement is a substantial portion of our revenue.

Previous wording

Lead Generation services consisting of LogicsIQ revenues decreased by $5,962,430 as a result of operational changes by management in late 2023. The Company plans to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in fiscal year ending 2024.

Current wording

Lead Generation services consisting of LogicsIQ revenues decreased by $6,647,061 as a result of operational changes by management in late 2023. The Company plans to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in fiscal year ending 2024.

Previous wording

Comprehensive Platform Services revenues decreased by $697,522 as a result of focusing our efforts on our MVNO segment, specifically the ACP component of the MVNO segment while we strategized on how to enhance our sales and on-boarding approach to adding convenience stores to our platform. The Company expects this segment to be the biggest percent of year-over-year revenue growth opportunity for the remainder of 2024.

Current wording

Comprehensive Platform Services revenues increased by $1,243,927 as a result of hiring a sales director earlier in 2024 and focusing our efforts on our MVNO segment, specifically the ACP component of the MVNO segment while we strategized on how to enhance our sales and on-boarding approach to adding convenience stores to our platform. The Company expects this segment to be the biggest percentage of year-over-year revenue growth opportunity for the remainder of 2024. We hired a new sales director earlier in the year to start a B2B segment within our Platform Services. For the nine months ended September 30, 2024, new revenue of over $2.7 million and 19 total clients were created, as compared to zero revenue for the nine months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024, cost of revenue for services primarily consists of data plan expenses ($17,990,820), devices ($4,826,022), marketing ($11,562,415), advertising ($4,315,402) and other expenses such as royalties and call-center expenses ($3,080,584). For the six months ended June 30, 2023, cost of revenue for services primarily consists of data plan expenses ($19,707,549), devices ($13,603,491), marketing ($10,401,244), advertising ($4,513,015) and other expenses such as royalties and call-center expenses ($4,717,366).

Current wording

For the nine months ended September 30, 2024, cost of revenue for services primarily consists of data plan expenses ($16,921,923), prepaid expense retail ($9,014,955), devices ($5,001,192), marketing ($15,281,613), advertising ($4,432,173) and other expenses such as royalties and call-center expenses ($3,725,444). For the nine months ended September 30, 2023, cost of revenue for services primarily consists of data plan expenses ($21,614,871), prepaid retail expense ($8,056,869, devices ($19,066,964), marketing ($15,276,830), advertising ($5,723,728) and other expenses such as royalties and call-center expenses ($6,883,650).

Previous wording

In addition, the Company plans to implement a new sales force for Comprehensive Platform Services to capture what we believe is an untapped underbanked convenience store market. Our sales force team has increased to 5 as of June 30, 2024, from 1 as of June 30, 2023.

Current wording

In addition, the Company plans to implement a new sales force for Comprehensive Platform Services to capture what we believe is an untapped underbanked convenience store market. Our sales force team has increased to five as of September 30, 2024, from one as of September 30, 2023.

Previous wording

General and administrative during the six months ended June 30, 2024 and 2023 consisted of the following:

Current wording

General and administrative during the nine months ended September 30, 2024 and 2023 consisted of the following:

Previous wording

The increase in depreciation and amortization costs for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is the result of amortizing internal-use software development costs capitalized in 2023 associated with software enhancements to our various software platforms continuing in 2024. There were no such costs incurred in the first quarter of 2024.

Current wording

The increase in depreciation and amortization costs for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 is the result of amortizing internal-use software development costs capitalized in 2023 associated with software enhancements to our various software platforms continuing in 2024. There were no such costs incurred in the first quarter of 2024.

Previous wording

Selling, general and administrative costs (S, G & A) increased by $7,004,250 (111.5%). The changes are discussed below:

Current wording

Selling, general and administrative costs (S, G & A) increased by $10,047,595 (106.8%). The changes are discussed below:

Previous wording

Other (expense) income during the six months ended June 30, 2024 and 2023 consisted of the following:

Current wording

Other (expense) income during the nine months ended September 30, 2024 and 2023 consisted of the following:

Previous wording

Interest expense decreased to $249,305 in the six months ended June 30, 2024 from $348,593 in the six months ended June 30, 2023.

Current wording

Interest expense decreased to $362,119 in the nine months ended September 30, 2024 from $478,928 in the nine months ended September 30, 2023.

Previous wording

Other income increased by $636,868, mostly related to one-time reduction in accounts payable to CenterCom for invoices deemed not to be payable.

Current wording

Other income increased by $637,107, mostly related to one-time reduction in accounts payable to CenterCom for invoices deemed not to be payable.

Previous wording

Provision for income tax benefit during the six months ended June 30, 2024 and 2023 consisted of the following:

Current wording

Provision for income tax benefit during the nine months ended September 30, 2024 and 2023 consisted of the following:

Previous wording

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes for the six months ended June 30, 2024 and 2023, respectively, is approximately as follows:

Current wording

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes for the nine months ended September 30, 2024 and 2023, respectively, is approximately as follows:

Previous wording

The Company evaluated the performance of its operating segments based on revenues and operating income (loss). Segment information for the three months ended June 30, 2024 and 2023, are as follows:

Current wording

The Company evaluated the performance of its operating segments based on revenues and operating income (loss). Segment information for the nine months ended September 30, 2024 and 2023, are as follows:

Previous wording

Segment information for the Company’s operations for the six months ended June 30, 2024 and 2023, are as follows:

Current wording

Segment information for the Company’s operations for the nine months ended September 30, 2024 and 2023, are as follows:

Previous wording

All intercompany accounts are separately presented above as both a component of the assets and liabilities. These amounts net to $0 in the Company’s consolidated balance sheets.

Current wording

All intercompany accounts are separately presented as both a component of the assets and liabilities. These amounts net to $0 in the Company’s consolidated balance sheets.

Previous wording

The Affordable Connectivity Program (ACP) revenue for the six months ended June 30, 2024 decreased by $17,478,118 as compared to the six months ended June 30, 2023. Cost of revenues for the six months ended June 30, 2024, decreased by $5,666,242 from the same period ended June 30, 2023, due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. The $14.2 billion Congress initially made available for the ACP has run out and as a result, the ACP has ended for now. Effective June 1, 2024, households will no longer receive an ACP discount and therefore until new or alternative funding for this program is available, we expect revenue for the remainder of 2024 to substantially decrease as the ACP reimbursement was a substantial portion of the Company’s revenue.

Current wording

The Affordable Connectivity Program (ACP) revenue for the nine months ended September 30, 2024 decreased by $48,116,841 as compared to the nine months ended September 30, 2023. Cost of revenues for the nine months ended September 30, 2024, decreased by $17,506,627 from the same period ended September 30, 2023, due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, with some ACP households receiving a partial ACP discount in May 2024 if their provider elected to participate in the May partial reimbursement month, as we did. The $14.2 billion Congress initially made available for the ACP has run out and as a result, the ACP has ended for now. Effective June 1, 2024, households will no longer receive an ACP discount and therefore until new or alternative funding for this program is available, we expect revenue for the remainder of 2024 to substantially decrease as the ACP reimbursement was a substantial portion of the Company’s revenue.

Previous wording

The revenue for the six months ended June 30, 2024 decreased by $5,962,430 compared to the six months ended June 30, 2023. The revenue changed due to the continued review of the line of business and how it best fits into the overall plans of the Company.

Current wording

The revenue for the nine months ended September 30, 2024 decreased by $6,647,061 compared to the nine months ended September 30, 2023. The revenue changed due to the continuing review of the line of business and how it best fits into the overall plans of the Company.

Previous wording

The revenue for the six months ended June 30, 2024 was $5,107,409 compared to $5,804,931 for the same period in 2023. The decrease of 12% was a continuing result of the Company shift to ACP for January through April 2024. With the lack of additional funding and an end date of June 1, 2024 for ACP, we are committed to re-focus our attention to this market segment for 2024.

Current wording

The revenue for the nine months ended September 30, 2024 was $9,853,497 compared to $8,609,570 for the same period in 2023. The increase of 14% was a continuing result of the Company shift from ACP to our prepaid retail line of business. We are committed to re-focusing our attention to this market segment for 2024.

Previous wording

The overall decrease in revenue of $24,148,042 from 2023 to 2024 for the six months ended June 30, can be attributable to the lack of additional funding and an end date of June 1, 2024 for ACP. The net operating income decreased by $20,031,755 from six months ended June 30, 2023 to the six months ended June 30, 2024.

Current wording

The overall decrease in revenue of $53,539,179 from 2023 to 2024 for the nine months ended September 30, can be attributable to the lack of additional funding and an end date of June 1, 2024 for ACP. The net operating income decreased by $41,404,089 to an operating loss from nine months ended September 30, 2023 to the nine months ended September 30, 2024.

Previous wording

At June 30, 2024 and December 31, 2023, our current assets were $48,718,118 and $33,366,661, respectively, and our current liabilities were $6,600,396 and $12,705,044, respectively, which resulted in a working capital surplus of $42,117,722 and of $20,661,617, respectively. The increase in current assets is a result of a capital raise on January 15, 2024 which resulted in a net increase in cash of $17,249,994 and the exercise of warrants during the six months ended June 30, 2024 of $8,799,257.

Current wording

At September 30, 2024 and December 31, 2023, our current assets were $33,909,878 and $33,366,661, respectively, and our current liabilities were $5,434,250 and $12,705,044, respectively, which resulted in a working capital surplus of $28,475,628 and of $20,661,617, respectively. The increase in current assets is a result of a capital raise on January 15, 2024 which resulted in a net increase in cash of $17,249,994 and the exercise of warrants during the nine months ended September 30, 2024 of $8,799,257.

Previous wording

Total assets at June 30, 2024 and December 31, 2023 amounted to $56,405,300 and $41,925,307, respectively. The increase in total assets is a result of a capital raise and exercise of warrants, whereby cash increased by $ 23,812,520. Total assets increased by $14,479,993 from December 31, 2023 to June 30, 2024. At June 30, 2024, assets consisted of current assets of $48,718,118, net property and equipment of $221,075, net intangible assets of $1,799,716, goodwill of $4,166,782, equity investment in Centercom of $498,273, note receivable of $176,851, internal use software of $428,010, and operating lease right of use asset of $396,475, compared to at December 31, 2023, current assets of $33,366,661, net property and equipment of $361,841, net intangible assets of $2,126,470, goodwill of $1,666,782, equity investment in Centercom of $464,409, note receivable of $176,851, internal use software of $539,424, operating lease right of use asset of $387,869, and deferred income taxes of $2,835,000.

Current wording

Total assets at September 30, 2024 and December 31, 2023 amounted to $41,499,493 and $41,925,307, respectively. The decrease in total assets is a result of a capital raise and exercise of warrants, whereby cash increased by $23,812,520 and net loss for the period. Total assets decreased by $425,814 from December 31, 2023 to September 30, 2024. At September 30, 2024, assets consisted of current assets of $33,909,878, construction-in-process of $518,189, net property and equipment of $158,092, net intangible assets of $1,636,339, goodwill of $4,166,782, equity investment in Centercom of $498,273, note receivable of $176,851, internal use software of $372,303, and operating lease right of use asset of $62,786, compared to at December 31, 2023, current assets of $33,366,661, net property and equipment of $361,841, net intangible assets of $2,126,470, goodwill of $1,666,782, equity investment in Centercom of $464,409, note receivable of $176,851, internal use software of $539,424, operating lease right of use asset of $387,869, and deferred income taxes of $2,835,000.

Previous wording

At June 30, 2024, our total liabilities were $10,123,420 compared to total liabilities of $13,521,843 at December 31, 2023. This $3,398,423 decrease was related to the repayment during the six months ended June 30, 2024 of the various notes payable.

Current wording

At September 30, 2024, our total liabilities were $8,223,506 compared to total liabilities of $13,521,843 at December 31, 2023. This $5,298,337 decrease was related to the repayment during the nine months ended September 30, 2024 of the various notes payable.

Previous wording

At June 30, 2024, our total stockholders’ equity was $46,281,880 as compared to $28,403,464 at December 31, 2023.

Current wording

At September 30, 2024, our total stockholders’ equity was $33,275,987 as compared to $28,403,464 at December 31, 2023.