SurgePays, Inc.
For the period ended Jun 30, 2026. Filed Aug 19, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 19, 2026
SURG$0.17+2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-20.
0001493152-26-024591
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-19.
0001493152-26-039250
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 93 previous paragraphs and 151 current paragraphs.
53 unchanged; 35 reworded; 45 added; 5 removed; 0 previous and 18 current paragraphs rearranged.
Tables are not compared: 9 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (45)
Current report
● Contractors and consultants expense increased by $567,475 or 113.4% from $500,448 in the three months ended June 30, 2025, to $1,067,923 in the three months ended June 30, 2026. This increase is primarily due to stock issuances to certain consultants made during the three months ended June 30, 2026.
Current report
● Professional services decreased by $125,750 or 40.6% in the three months ended June 30, 2026, as compared to the same period in 2025.
Current report
● Compensation increased slightly from $1,929,704 in the three months ended June 30, 2025, to $1,921,917 in the comparable period in 2026, or by 6.4%.
Current report
● Computer and internet costs decreased by 21.2% to $195,360 in the three months ended June 30, 2026, from $247,771 in the comparable period in 2025.
Current report
● Insurance expense increased to $494,948 in the three months ended June 30, 2026, from $283,377 in the comparable period in 2025.
Current report
● Contract settlement gain expenses increased from $0 in the three months ended June 30, 2025, to $8,511,672 in the comparable period in 2026 as a product of the MVNx Reseller Agreement and Related Amendments. See Note 8 - Commitments and Contingencies for more details on this settlement gain.
Current report
Interest expense, including amortization of debt discount, was $1,026,341 for the three months ended June 30, 2026, compared to $279,306 for the three months ended June 30, 2025. Of these amounts, interest expense was $533,520 in the three months ended June 30, 2026, and $212,419 in the comparable period in 2025, and amortization of debt discount recognized in interest expense was $492,821 in the three months ended June 30, 2026, and $66,887 in the comparable period in 2025. The increases were driven primarily by the higher level of convertible notes payable outstanding during the 2026 comparative period, including notes issued during the quarter, together with amortization of the debt discounts established on those notes.
Current report
During the three months ended June 30, 2026, the Company advanced an additional $500,000 of principal under its $6,999,999 senior secured convertible note pursuant to the amendment entered into earlier in 2026. The advance was accounted for as a modification of the existing note and did not result in any gain or loss or the issuance of additional warrants.
Current report
During the three months ended June 30, 2026, the Company issued Convertible Notes #18, #21 and #22 together with warrants to purchase 285,000 shares of common stock at an exercise price of $1.25 per share. The warrants provide for settlement in cash at the holder’s election upon specified fundamental transactions and therefore do not qualify for equity classification under ASC 815-40-25; their aggregate issuance-date fair value of $78,989 was recorded as a component of debt discount. The conversion features of Convertible Notes #21 and #22, neither of which carries a fixed conversion price, were separated from their debt hosts and recorded as derivative liabilities at an aggregate issuance-date fair value of $176,510, also as a component of debt discount. No derivative expense arose on these issuances, because the debt discount recorded on each note did not exceed the proceeds received.
Current report
The Company recognized derivative expense of $1,168,511 for the three months ended June 30, 2026, with no comparable amount in the prior-year period. Scheduled amortization payments came due on Convertible Notes #2, #3, #4 and #5 during the quarter and were not paid in cash, which made a market-based conversion rate available to each holder and required the conversion feature of each note to be separated from its debt host under ASC 815-15-25-1. Because each host note was already outstanding, no proceeds remained to be allocated and no debt discount arose, and the aggregate fair value of the separated features on their separation dates was charged to earnings. The expense reflects the initial recognition of these features and does not represent a cash payment or any change in the principal or interest payable under the notes.
Current report
The Company recognized a gain on the change in fair value of derivative liabilities of $292,577 for the three months ended June 30, 2026, with no comparable amount in the prior-year period, reflecting remeasurement at each conversion date during the quarter and at the reporting date, and attributable principally to the decline in the market price of the Company’s common stock and to shorter expected terms. Five conversions at the market-based rate settled $385,880 of principal and capitalized guaranteed interest through the issuance of 935,843 shares of common stock, and $208,606 of the related derivative carrying amount was reclassified to additional paid-in capital with no effect on earnings.
Current report
Derivative liabilities were $1,107,421 at June 30, 2026, comprising $127,114 attributable to the warrants and $980,307 attributable to the separated conversion features, compared to none at December 31, 2025. These liabilities are measured using the Black-Scholes-Merton option pricing model, are classified within Level 3 of the fair value hierarchy, and will continue to fluctuate with the market price of the Company’s common stock and the other inputs to the model. Several of the Company’s other convertible notes payable carry the same market-based conversion rate, which becomes available on a failure to pay a scheduled amortization payment when due or on an event of default; either event would require separation of that note’s conversion feature and a further charge to derivative expense. See Note 6.
Current report
The Company recognized a loss on present value measurement of long-term accounts receivable of $415,067 during the three months ended June 30, 2026, with no comparable charge in the prior-year period, upon the reclassification of $3,613,561 of reimbursements withheld under programs administered by the Universal Service Administrative Company from current to non-current accounts receivable. Because the withheld amounts do not bear interest and are not expected to be collected within twelve months, the receivable was measured at its present value by discounting the face amount over an estimated collection period of thirty-six (36) months at a discount rate of 4.15%. The discount is accreted to income using the effective interest method, and accretion of $132,727 was recognized during the quarter and is presented as accretion of discount on accounts receivable within other income (expense).
Current report
The Company issued 385,000 shares of common stock for services rendered during the three months ended June 30, 2026, having an aggregate fair value of $509,935, based upon the quoted closing trading price on each grant date.
Current report
Stock Issued for Services – Related Party
Current report
On April 1, 2026, the Company issued its Chief Executive Officer 500,000 shares of common stock for services rendered under his employment agreement, having a fair value of $360,000, or $0.72 per share. On June 1, 2026, the Company issued its Chief Executive Officer an additional 500,000 shares of common stock for services rendered under the same agreement, having a fair value of $297,900, or $0.5958 per share. An aggregate compensation expense of $657,900 was recognized.
Current report
Recognition of Stock Based Compensation – Non-Vested Shares – Related Parties
Current report
The Company recognized $60,313 in compensation expense during the three months ended June 30, 2026, related to non-vested shares of common stock awarded to members of the Board of Directors under their respective agreements.
Current report
Board of Directors Grant
Current report
On June 24, 2026, the Company granted an aggregate of 945,537 shares of common stock to three members of its Board of Directors, having an aggregate fair value of $375,000, or $0.3966 per share, based upon the quoted closing trading price on the grant date. Subject to the holder’s continuous service as a director of the Company, the restricted shares become fully vested upon the earliest to occur of: (i) the date on which the holder no longer serves as a director for any reason (including the death of the holder or the occurrence of a disability that renders the holder incapable of providing services to the Company), other than a termination of service for cause; (ii) the occurrence of a change of control (as defined in the Plan); or (iii) June 24, 2029.
Current report
During the three months ended June 30, 2026, holders of convertible notes payable converted an aggregate of $385,880 of principal and capitalized guaranteed interest into 935,843 shares of common stock, at effective conversion prices ranging from $0.3587 to $0.4490 per share. The conversions were effected under the original conversion terms of the respective notes, and accordingly the carrying amount of the notes converted, net of the related unamortized debt discount, was credited to common stock and additional paid-in capital, with no gain or loss recognized. See Note 5.
Current report
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2026 AND 2025
Current report
Revenues and expenses during the six months ended June 30, 2026 and 2025, consisted of the following:
Current report
● Professional services decreased by 131,399 or 27.7% in the six months ended June 30, 2026 as compared to the same period in the prior fiscal year.
Current report
● Advertising and marketing costs increased to $158,802 in the six months ended June 30, 2026, from $37,623 in the comparable period in 2025 primarily due to additional marketing of the Clearline platform.
Current report
Interest expense, including amortization of debt discount, was $1,907,348 for the six months ended June 30, 2026, compared to $398,740 for the six months ended June 30, 2025. Of these amounts, interest expense was $976,749 in the six months ended June 30, 2026, and $331,853 in the comparable period in 2025, and amortization of debt discount recognized in interest expense was $930,599 in the six months ended June 30, 2026, and $66,887 in the comparable period in 2025. The increases were driven primarily by the higher level of convertible notes payable outstanding during the 2026 comparative period, including notes issued during the period, together with amortization of the debt discounts established on those notes.
Current report
During the six months ended June 30, 2026, the Company advanced an additional $1,000,000 of principal under its $6,999,999 senior secured convertible note pursuant to amendments entered into during the period. The advances were accounted for as modifications of the existing note and did not result in any gain or loss or the issuance of additional warrants.
Current report
During the six months ended June 30, 2026, the Company issued Convertible Notes #7, #8, #18, #21 and #22 together with warrants to purchase an aggregate of 660,000 shares of common stock at an exercise price of $1.25 per share. The warrants provide for settlement in cash at the holder’s election upon specified fundamental transactions and therefore do not qualify for equity classification under ASC 815-40-25; their aggregate issuance-date fair value of $294,125 was recorded as a component of debt discount. The conversion features of Convertible Notes #21 and #22, neither of which carries a fixed conversion price, were separated from their debt hosts and recorded as derivative liabilities at an aggregate issuance-date fair value of $176,510, also as a component of debt discount. No derivative expense arose on these issuances, because the debt discount recorded on each note did not exceed the proceeds received.
Current report
The Company recognized derivative expense of $1,168,511 for the six months ended June 30, 2026, all of which arose during the three months then ended, with no comparable amount in the prior-year period. Scheduled amortization payments came due on Convertible Notes #2, #3, #4 and #5 during the second quarter and were not paid in cash, which made a market-based conversion rate available to each holder and required the conversion feature of each note to be separated from its debt host under ASC 815-15-25-1. Because each host note was already outstanding, no proceeds remained to be allocated and no debt discount arose, and the aggregate fair value of the separated features on their separation dates was charged to earnings. The expense reflects the initial recognition of these features and does not represent a cash payment or any change in the principal or interest payable under the notes.
Current report
The Company recognized a gain on the change in fair value of derivative liabilities of $323,120 for the six months ended June 30, 2026, with no comparable amount in the prior-year period, reflecting remeasurement at each conversion date during the period and at the reporting date, and attributable principally to the decline in the market price of the Company’s common stock and to shorter expected terms. Five conversions at the market-based rate settled $385,880 of principal and capitalized guaranteed interest through the issuance of 935,843 shares of common stock, and $208,606 of the related derivative carrying amount was reclassified to additional paid-in capital with no effect on earnings.
Current report
Derivative liabilities were $1,107,421 at June 30, 2026, comprising $127,114 attributable to the warrants and $980,307 attributable to the separated conversion features, compared to none at December 31, 2025. These liabilities are measured using the Black-Scholes-Merton option pricing model, are classified within Level 3 of the fair value hierarchy, and will continue to fluctuate with the market price of the Company’s common stock and the other inputs to the model. Several of the Company’s other convertible notes payable carry the same market-based conversion rate, which becomes available on a failure to pay a scheduled amortization payment when due or on an event of default; either event would require separation of that note’s conversion feature and a further charge to derivative expense. See Note 6.
Current report
The Company recognized a loss on present value measurement of long-term accounts receivable of $415,067 during the six months ended June 30, 2026, with no comparable charge in the prior-year period, upon the reclassification of $3,613,561 of reimbursements withheld under programs administered by the Universal Service Administrative Company from current to non-current accounts receivable. Because the withheld amounts do not bear interest and are not expected to be collected within twelve months, the receivable was measured at its present value by discounting the face amount over an estimated collection period of thirty-six (36) months at a discount rate of 4.15%. The discount is accreted to income using the effective interest method, and accretion of $132,727 was recognized during the period and is presented as accretion of discount on accounts receivable within other income (expense).
Current report
Other income was $20,290 for the six months ended June 30, 2026, compared to $6,785 for the six months ended June 30, 2025. The Company invested excess cash in various instruments during 2025, resulting in interest, dividends, and gains resulting in interest income of $64,267 in the six months ended June 30, 2025, compared to $0 in the comparable period in 2026.
Current report
The warrants were determined to be indexed to the Company’s common stock and settleable in the Company’s common stock and are therefore classified within stockholders’ deficit. The grant-date fair value of the warrants was recorded as a cost of the offering with a corresponding credit to additional paid-in capital, resulting in no net effect on total stockholders’ deficit.
Current report
Stock Issued for Services - Related Party
Current report
On April 1, 2026, the Company issued its Chief Executive Officer 500,000 shares of common stock for services rendered under his employment agreement, having a fair value of $360,000, or $0.72/share.
Current report
On June 1, 2026, the Company issued its Chief Executive Officer an additional 500,000 shares of common stock for services rendered under the same agreement, having a fair value of $297,900, or $0.5958/share.
Current report
An aggregate compensation expense of $657,900 was recognized.
Current report
On December 16, 2025, the Company granted 54,331 restricted shares of common stock to employees, having an aggregate grant-date fair value of $93,449, or $1.72/share, which vest in full on the third anniversary of the grant date, with compensation cost recognized on a straight-line basis over the thirty-six (36) month requisite service period. The Company recognized $7,787 and $15,574 in compensation expense related to these awards during the three and six months ended June 30, 2026, respectively
Current report
Recognition of Stock Based Compensation - Non-Vested Shares - Related Parties
Showing the first 40 of 45 passages. Open the source sections for the rest.
Removed paragraphs (5)
Previous report
● Professional services remained fairly steady, decreasing by 5,649 or 3.4% in 2026.
Previous report
Interest expense increased to $881,908 in 2026 from $119,434 in 2025 primarily due to additional notes entered into during the latter three quarters of 2025 and first quarter of 2026.
Previous report
In connection with the issuance of a $6,999,999 convertible promissory note, the Company issued warrants to purchase 700,000 shares of common stock. The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants was estimated to be $207,640, which was recorded as a component of the total debt discount and is being amortized to interest expense over the term of the note.
Previous report
In connection with the issuance of convertible promissory notes (Notes #7 and #8), in March 2026, the Company issued 375,000 common stock purchase warrants. These warrants contain certain cash settlement features triggered upon events of default or change of control and therefore do not qualify for equity classification. Accordingly, the warrants are accounted for as derivative liabilities. For the three months ended March 31, 2026 and 2025, the Company recorded a loss (gain) on the change in fair value of derivative liabilities of $30,241 and $0, respectively.
Previous report
The offering was made pursuant to the Company’s effective registration statement on Form S-3 (File No. 333-273110).
Reworded paragraphs (35)
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 March 31, 2026 and 2025 and for the three 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 June 30, 2026 and 2025 and for the three and six months then ended includes the accounts of SurgePays, Inc. and its wholly owned subsidiaries during the period owned by SurgePays, Inc.
Previous wording
Please see the description in Item 1 of this Annual Report for a description of our Mobile Virtual Network Operators and Comprehensive Platform Services.
Current wording
Please see the description in Item 1 of this Quarterly Report for a description of our Mobile Virtual Network Operators and Comprehensive Platform Services.
Previous wording
Revenue increased overall by $5,406,554 (51.1%) from the three months ended March 31, 2025, to the three months ended March 31, 2026. Segment revenues were as follows:
Current wording
Revenue increased overall by $4,686,655 or 40.69% from the three months ended June 30, 2025, to the three months ended June 30, 2026. Segment revenues were 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 $482,311 or (21.1%). In fourth quarter of 2025, due to an audit delay, our Eligible Telecommunications Carrier paused the intake of new users, leading to a temporary dip in Lifeline revenues in early 2026.
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 $686,461 or (30.19%). In the fourth quarter of 2025, due to an audit delay, our Eligible Telecommunications Carrier paused the intake of new users, leading to a temporary dip in Lifeline revenues in early 2026.
Previous wording
Point-of-Sale and Prepaid Services revenues increased by $5,888,865 from March 31, 2025 to March 31, 2026, as a result of continued efforts to scale this segment by the VP of Sales, and the continued increasing of our sales force.
Current wording
Point-of-Sale and Prepaid Services revenues increased by $5,373,116 from June 30, 2025 to June 30, 2026, as a result of continued efforts to scale this segment by our VP of Sales, and the continued increasing use of our sales force.
Previous wording
For the three months ended March 31, 2026, cost of revenue for services primarily consisted of data plan expenses ($622,176), prepaid retail expenses ($22,629,899), marketing ($63,029), advertising ($27,779), and other expenses such as royalties and call-center expenses ($338,549). For the three months ended March 31, 2025, cost of revenue for services primarily consists of data plan expenses ($2,859,283), prepaid retail expenses ($8,330,157), devices ($391,539), marketing ($124,721), advertising ($516,778) and other expenses such as royalties and call-center expenses ($1,297,297).
Current wording
For the three months ended June 30, 2026, cost of revenue for services primarily consisted of Mobile Virtual Network Operator expenses of ($2,300,917), prepaid retail expenses ($14,229,075), and other expenses such as royalties and call-center expenses ($100,000). For the three months ended June 30, 2025, cost of revenue for services primarily consists of data plan expenses ($1,931,585), prepaid retail expenses ($9,788,814), devices ($481,737), marketing ($368,647), advertising ($331,00) and other expenses such as royalties and call-center expenses ($1,230,802).
Previous wording
The Company expects to focus on the improvement of gross margin in the Point-of-Sale and Prepaid Services segment during the remainder of 2026. In fourth quarter of 2025, the Company pivoted its focus for the Clearline platform, significantly reducing expenses within Clearline as the Company continues to focus on future revenue growth. As we continue to expand both subsidized (Lifeline) and non-subsidized products (LinkUp Mobile) in the MNVO segment in 2026, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results in late 2026.
Current wording
The Company expects to focus on the improvement of gross margin in the Point-of-Sale and Prepaid Services segment during the remainder of 2026. In the fourth quarter of 2025, the Company pivoted its focus for the Clearline platform, significantly reducing expenses within Clearline as the Company continues to focus on future revenue growth. As we continue to expand both subsidized (Lifeline) and non-subsidized products (LinkUp Mobile) in the MNVO segment in 2026, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results in late 2026.
Previous wording
Selling, general and administrative costs (S, G & A) decreased by $1,239,807, or (27.2%). The changes are discussed below:
Current wording
Selling, general and administrative costs (S, G & A) increased by $517,547, or 13.2%. The changes are discussed below:
Previous wording
● Advertising and marketing costs increased to $29,922 in 2026 from $23,480 in 2025 primarily due to additional marketing of the Clearline platform.
Current wording
● Advertising and marketing costs increased to $128,880 in the three months ended June 30, 2026, from $14,143 in the comparable period in 2025, primarily due to additional marketing of the Clearline platform.
Previous wording
● Other costs decreased to $424,209 in 2026 from $1,244,321in 2025 primarily due to the resolution of various taxes associated with the ACP and other company-wide cost-cutting measures.
Current wording
● Other costs decreased to $443,117 in the three months ended June 30, 2026, from $756,627 in the comparable period in 2025, primarily due to the resolution of various taxes associated with the ACP and other company-wide cost-cutting measures.
Previous wording
The Company invested excess cash in various instruments during 2025, resulting in interest, dividends, and gains resulting in an aggregate increase of $56,903 compared to $0 in 2026.
Current wording
Other income was $20,290 for the three months ended June 30, 2026. The Company invested excess cash in various instruments during 2025, resulting in interest, dividends, and gains resulting in interest income of $7,008 in the three months ended June 30, 2025, compared to $0 in 2026.
Previous wording
The Company recognized $7,787 in compensation expense, related to the vesting of these awards.
Current wording
The Company recognized $7,787 in compensation expense during the three months ended June 30, 2026, related to the December 16, 2025, grant of 54,331 restricted shares of common stock to employees, which vest in full on the third anniversary of the grant date, with compensation cost recognized on a straight-line basis over the thirty-six (36) month requisite service period.
Previous wording
● Contractors and consultants expense decreased by $460,481 or 54.5% from $845,094 in 2025 to $384,613 in 2026. The Company decreased these expenses during the three months ended March 31, 2026, due to the reduction in advisory services specifically in the area of investment relations and the internalization of marketing efforts.
Current wording
● Contractors and consultants expense increased by $109,495 or 8.1% from $1,345,542 in the six months ended June 30, 2025, to $1,455,036 in the six months ended June 30, 2026. The Company decreased these expenses during the six months ended June 30, 2026, due to the reduction in advisory services specifically in the area of investment relations and the internalization of marketing efforts.
Previous wording
● Compensation increased slightly from $1,730,440 in 2025 to $1,801,049 in 2026.
Current wording
● Compensation increased slightly from $3,544,709 in the six months ended June 30, 2025, to $3,730,753 in the comparable period in 2026.
Previous wording
● Computer and internet costs decreased slightly to $253,053 in 2026 from $259,085 in 2025.
Current wording
● Computer and internet costs decreased to $448,414 in the six months ended June 30, 2026, from $506,857 in the comparable period in 2025.
Previous wording
● Insurance expense decreased to $258,616 in 2026 from $283,202 in 2025 primarily as a result of improved premium rates for the renewal of coverage.
Current wording
● Insurance expense increased to $753,565 in the six months ended June 30, 2026, from $566,580 in the comparable period in 2025 primarily as a result of improved premium rates for the renewal of coverage.
Previous wording
On January 20, 2026, the Company entered into an underwriting agreement with R.F. Lafferty & Co., Inc. for an underwritten public offering of 2,000,000 shares of common stock at a public offering price of $1.25 per share, for gross proceeds of approximately $2,500,000. The offering closed on January 22, 2026. The underwriter was granted a 45-day option to purchase up to an additional 300,000 shares at the public offering price to cover over-allotments. The Company intends to use the net proceeds for expansion of its Lifeline business and for working capital and general corporate purposes.
Current wording
On January 20, 2026, the Company entered into an underwriting agreement with the representative of the underwriters for an underwritten public offering of 2,000,000 shares of common stock at a public offering price of $1.25/share, for gross proceeds of $2,500,000. In connection with this offering, the Company paid direct offering costs of $375,000, resulting in net proceeds of $2,125,000. The offering closed on January 22, 2026. The underwriter was granted a 45-day option to purchase up to an additional 300,000 shares at the public offering price to cover over-allotments; the option expired unexercised on March 8, 2026. The Company intends to use the net proceeds for expansion of its Lifeline business and for working capital and general corporate purposes.
Previous wording
In connection with the offering, the Company issued warrants to the underwriter to purchase a number of shares equal to 3.0% of the total shares sold (60,000 warrants – see table below), at an exercise price equal to 110% of the public offering price ($1.38/share). The warrants are exercisable commencing six months after the closing date and expire five years after the commencement of sales, and were issued without registration under the Securities Act of 1933 in reliance on the exemption provided by Section 4(a)(2).
Current wording
In connection with the offering, the Company issued warrants to the underwriter to purchase 60,000 shares of common stock, equal to 3.0% of the total shares sold, at an exercise price of $1.38/share, equal to 110% of the public offering price. The warrants are exercisable commencing six months after the closing date and expire five years after the commencement of sales, and were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemption provided by Section 4(a)(2) of the Securities Act.
Previous wording
The Company issued 7,323 shares of common stock for net proceeds of $14,375 ($1.98 - $2.03/share).
Current wording
The Company issued 7,323 shares of common stock under its at the market offering program at prices ranging from $1.98/share to $2.03/share, for gross proceeds of $14,820, less commissions of $445, resulting in net proceeds of $14,375. The shares were sold under the At the Market Offering Agreement described below.
Previous wording
The Company issued 200,000 shares of common stock for services rendered, having a fair value of $334,000 ($1.67/share), based upon the quoted closing trading price.
Current wording
The Company issued 385,000 shares of common stock for services rendered, having a fair value of $509,935 ($0.551 - $2.04/share), based upon the quoted closing trading price on the grant date.
Previous wording
During the year ended December 31, 2025, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828 to lenders as additional consideration in connection with the issuance of convertible notes payable. The fair value of the shares was recorded as a debt discount and is being amortized to interest expense over the term of the related notes using the effective interest method. See Note 5.
Current wording
During the six months ended June 30, 2026, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828, based upon the quoted closing price, to four lenders (convertible notes #9, #10, #11 and #12) as additional consideration in connection with the issuance of convertible notes payable, at prices ranging from $0.83/share to $2.04/share. The fair value of the shares was recorded as a debt discount and is being amortized to interest expense over the term of the related notes. See Note 5.
Previous wording
On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer at a fair value of $707,200 ($0.884 per share) in partial settlement of a related party note payable. The Chief Executive Officer also forgave $292,800 of principal, which was accounted for as a capital contribution from a principal shareholder and credited to additional paid-in capital. The aggregate $1,000,000 was applied as a reduction of the related party note payable, and no gain on extinguishment was recognized. See Note 5.
Current wording
On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer at a fair value of $707,200 ($0.884/share) in partial settlement of a related party note payable. The Chief Executive Officer also forgave $292,800 of principal, which was accounted for as a capital contribution from a principal shareholder and credited to additional paid-in capital. The aggregate $1,000,000 was applied as a reduction of the related party note payable, and no gain on extinguishment was recognized. See Note 5.
Previous wording
At March 31, 2026, and December 31, 2025, our current assets were $8,208,310 and $6,979,766, respectively, and our current liabilities were $30,042,829 and $18,190,236, respectively, which resulted in a working capital deficit of $(21,834,519) and $(11,210,470), respectively. The increase in current assets is primarily a result of increased accounts receivable, and the increase in current liabilities is primarily a result of increased accounts payable and notes payable.
Current wording
At June 30, 2026, and December 31, 2025, our current assets were $4,858,095 and $6,979,766, respectively, and our current liabilities were $26,161,011 and $18,190,236, respectively, which resulted in a working capital deficit of $(21,302,916) and $(11,210,470), respectively. The increase in current assets is primarily a result of increased accounts receivable, and the increase in current liabilities is primarily a result of increased accounts payable and notes payable.
Previous wording
Total assets at March 31, 2026 and December 31, 2025, amounted to $9,501,458 and $8,515,846, respectively, an increase of $985,612 from 2025 to 2026. The increase in total assets is a result of a slight increase in available cash and an increase in accounts receivable. At March 31, 2026, assets consisted of current assets of $8,208,310, net intangible assets of $655,776, and operating lease right of use asset of $260,694, and at December 31, 2025, assets consisted of current assets of $6,979,766, net intangible assets of $819,153, and operating lease right of use asset of $313,410.
Current wording
Total assets at June 30, 2026 and December 31, 2025, amounted to $9,238,440 and $8,515,846, respectively, an increase of $722,594 from December 31, 2025, to June 30, 2026. The increase in total assets is a result of a slight increase in available cash and an increase in accounts receivable. At June 30, 2026, assets consisted of current assets of $4,858,905, net intangible assets of $492,399, and operating lease right of use asset of $206,891, and at December 31, 2025, assets consisted of current assets of $6,979,766, net intangible assets of $819,153, and operating lease right of use asset of $313,410.
Previous wording
At March 31, 2026, our total liabilities were $33,369,426 compared to total liabilities of $23,918,665 at December 31, 2025. This $9,450,761 increase was related to an increase in accounts payable and notes payable.
Current wording
At June 30, 2026, our total liabilities were $29,987,865, compared to total liabilities of $23,918,665 at December 31, 2025. This $6,069,200 increase was related to an increase in accounts payable and notes payable.
Previous wording
At March 31, 2026, our total stockholders’ deficit was $(23,867,968) as compared to $(15,402,819) at December 31, 2025. The $(9,450,761) decrease was primarily due to the net loss for the year, as well as the above discussed increase in liabilities.
Current wording
At June 30, 2026, our total stockholders’ deficit was $(20,749,425) as compared to $(15,402,819) at December 31, 2025. The $(5,346,606) decrease was primarily due to the net loss for the year, as well as the above discussed increase in liabilities.
Previous wording
The following table sets forth the major sources and uses of cash for three months ended March 31, 2026 and 2025.
Current wording
The following table sets forth the major sources and uses of cash for six months ended June 30, 2026 and 2025.
Previous wording
Net cash used in operating activities for the three months ended March 31, 20256 and 2025, was primarily due to the net loss for the period.
Current wording
Net cash used in operating activities for the six months ended June 30, 2026 and 2025, was primarily due to the net loss for the period.
Previous wording
There was no net cash used in investing activities in the three months ended March 31, 2026, and the net cash used in investing activities for the three months ending March 31, 2025 was primarily due to payment for leases.
Current wording
There was no net cash used in investing activities in the six months ended June 30, 2026, and the net cash used in investing activities for the three months ending June 30, 2025, was primarily due to payment for leases.
Previous wording
Net cash received for financing activities for the three months ended March 31, 2026 is primarily due to proceeds from the issuance of notes payable and convertible notes, as well as proceeds from stock issued for cash, offset by the repayment of debt. Net cash used for financing activities for the three months ended March 31, 2025 is primarily due to the repayment of debt.
Current wording
Net cash received for financing activities for the six months ended June 30, 2026, is primarily due to proceeds from the issuance of notes payable and convertible notes, as well as proceeds from stock issued for cash, offset by the repayment of debt. Net cash used for financing activities for the six months ended June 30, 2025, is primarily due to the repayment of debt.
Previous wording
The Company kicked off several initiatives in April of 2025 that are continuing to scale through 2026. We have begun the launch of LinkUp Mobile SIM (subscriber identity module) cards into the national retail market. LinkUp Mobile has also launched its phone in a box program. Thousands of phones have already been purchased by convenience stores, which we believe is a positive sign for our future capabilities. Torch Wireless, supported by the Lifeline program, is now actively expanding its subscriber base in the state of California. This development is noteworthy for the growth of the Torch offering, as California provides an additional revenue incentive for its subscribers and has a large potential subscriber base. The wholesale MVNE (Mobile Virtual Network Enabler) leveraging technology and industry expertise has allowed us to expand services as a Mobile Network Enabler. Leveraging our direct carrier relationship, we offer billing, provisioning, SIM cards, and services to wireless companies lacking direct carrier access. Two such companies have already embraced this offering, and we anticipate more to join in the near future. We believe the MVNE solution will continue to uniquely position us for additional rapid growth into the subscriber activation channel by enabling other wireless companies who lack a direct carrier relationship. Clear-line has launched a comprehensive code management campaign, providing services to over 1,600 convenience stores. In addition to this new business venture, Shortcode, the ability to dynamic content and features into posts, pages and widgets, has been provisioned with all carriers in preparation for a national campaign scheduled to launch in July.
Current wording
The Company kicked off several initiatives in April of 2025 that are continuing to scale through 2026. We have begun the launch of LinkUp Mobile SIM (subscriber identity module) cards into the national retail market. LinkUp Mobile has also launched its phone in a box program. Thousands of phones have already been purchased by convenience stores, which we believe is a positive sign for our future capabilities. Torch Wireless, supported by the Lifeline program, is now actively expanding its subscriber base in the state of California. This development is noteworthy for the growth of the Torch offering, as California provides an additional revenue incentive for its subscribers and has a large potential subscriber base. The wholesale MVNE (Mobile Virtual Network Enabler) leveraging technology and industry expertise has allowed us to expand services as a Mobile Network Enabler. Leveraging our direct carrier relationship, we offer billing, provisioning, SIM cards, and services to wireless companies lacking direct carrier access. Two such companies have already embraced this offering, and we anticipate more to join in the near future. We believe the MVNE solution will continue to uniquely position us for additional rapid growth into the subscriber activation channel by enabling other wireless companies who lack a direct carrier relationship. Clear-line has launched a comprehensive code management campaign, providing services to over 1,600 convenience stores. In addition to this new business venture, Shortcode, the ability to dynamic content and features into posts, pages and widgets, has been provisioned with all carriers in preparation for a national campaign scheduled to launch in Q3 of 2026
Previous wording
While our significant accounting policies are more fully described inNote 2—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included inItem 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and which require our most difficult, subjective and complex judgments.
Current wording
While our significant accounting policies are more fully described inNote 2—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included inItem 8, Financial Statements and Supplementary Data of this Quarterly Report on Form 10-Q, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and which require our most difficult, subjective and complex judgments.
Previous wording
Significant estimates during the three months ended March 31, 2026 and 2025, respectively, include, allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of loss contingencies, valuation of stock-based compensation, estimated useful lives related to intangible assets, capitalized internal-use software development costs, and property and equipment, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.
Current wording
Significant estimates during the six months ended June 30, 2026 and 2025, respectively, include, allowance for doubtful accounts and other receivables, the expected collection period and discount rate used to measure long-term accounts receivable at present value, inventory reserves and classifications, valuation of loss contingencies, the classification and fair value of derivative liabilities, including the expected volatility and expected term used to measure them, valuation of stock-based compensation, estimated useful lives related to intangible assets, capitalized internal-use software development costs, and property and equipment, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.
Previous wording
We account for revenue earned from contracts with customers under ASC 606,Revenue from Contracts with Customers (“ASC 606”), and ASC 842,Leases(“ASC 842”). The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
Current wording
We account for revenue earned from contracts with customers under ASC 606,Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
Previous wording
In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a binomial pricing model.
Current wording
In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of the Black-Scholes option pricing model.
Rearranged current paragraphs (18)
Current report — wording carried from elsewhere
We measure our performance on a consolidated basis as well as the performance of each segment.
Current report — wording carried from elsewhere
We report our financial performance based on the following segments: Mobile Virtual Network Operators (MVNO), and Point-of-Sale and Prepaid Services (Top-up). The MVNO segment includes subsidized (Lifeline) and non-subsidized components (LinkUp Mobile). The subsidized component or Lifeline is the result of the mobile broadband (phone and internet) services provided by Torch Wireless to eligible consumers. The Point-of-Sale and Prepaid Services segment is comprised of Surge Fintech and ECS as previously shown.
Current report — wording carried from elsewhere
The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. Additional information on our reportable segments is contained in Note 10 – Segment Information of the Notes to Financial Statements.
Current report — wording carried from elsewhere
Revenue increased overall by $10,093,208 (45.7%) from the six months ended June 30, 2025, to the six months ended June 30, 2026. Segment revenues were as follows:
Current report — wording carried from elsewhere
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 $1,168,773 or (25.6%). In the fourth quarter of 2025, due to an audit delay, our Eligible Telecommunications Carrier paused the intake of new users, leading to a temporary dip in Lifeline revenues in early 2026.
Current report — wording carried from elsewhere
Point-of-Sale and Prepaid Services revenues increased by $11,261,980 from June 30, 2025 to June 30, 2026, as a result of continued efforts to scale this segment by our VP of Sales, and the continued increasing use of our sales force.
Current report — wording carried from elsewhere
Cost of Revenue, Gross Profit and Gross Margin
Current report — wording carried from elsewhere
For the six months ended June 30, 2026, cost of revenue for services primarily consisted of mobile virtual network operator expenses ($3,318,445), prepaid retail expenses ($36,859,083), and other expenses such as royalties and call-center expenses ($134,005). For the six months ended June 30, 2025, cost of revenue for services primarily consists of data plan expenses ($4,790,868), prepaid retail expenses ($18,118,971), devices ($873,276), marketing ($493,368), advertising ($847,778) and other expenses such as royalties and call-center expenses ($2,568,346).
Current report — wording carried from elsewhere
We expect that our cost of revenue will increase or decrease to the extent that our revenue increases and decreases.
Current report — wording carried from elsewhere
Gross profit margin is calculated as revenue less cost of revenue. Gross profit margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including market conditions that may impact our pricing, sales mix among devices, sales mix changes among consumables, excess and obsolete inventories, and the cost of our products from manufacturers. Our gross profit (loss) in future periods will vary based upon our revenue stream mix and may increase or decrease based upon our distribution channels.
Current report — wording carried from elsewhere
The Company expects to focus on the improvement of gross margin in the Point-of-Sale and Prepaid Services segment during the remainder of 2026. In the fourth quarter of 2025, the Company pivoted its focus for the Clearline platform, significantly reducing expenses within Clearline as the Company continues to focus on future revenue growth. As we continue to expand both subsidized (Lifeline) and non-subsidized products (LinkUp Mobile) in the MNVO segment in 2026, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results in late 2026.
Current report — wording carried from elsewhere
General and administrative during the six months ended June 30, 2026 and 2025, consisted of the following:
Current report — wording carried from elsewhere
Selling, general and administrative expenses during the six months ended June 30, 2026 and 2025, consisted of the following:
Current report — wording carried from elsewhere
Selling, general and administrative costs (S, G & A) decreased by $557,716, or (6.7%) across comparative periods. The changes are discussed below:
Current report — wording carried from elsewhere
● Other costs decreased to $865,918 in the six months ended June 30, 2026, from $1,837,495 in the comparable period in 2025 primarily due to the resolution of various taxes associated with the ACP and other company-wide cost-cutting measures.
Current report — wording carried from elsewhere
Other (expense) income during the six months ended June 30, 2026 and 2025, consisted of the following:
Current report — wording carried from elsewhere
Equity Transactions for the Six Months Ended June 30, 2026
Current report — wording carried from elsewhere
Recognition of Stock Based Compensation - Restricted Stock Awards – Employees