SurgePays, Inc.
For the period ended Dec 31, 2024. Filed Mar 25, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 25, 2025
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-K
Period ended 2023-12-31; filed 2024-03-12.
0001493152-24-009661
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-25.
0001641172-25-000608
Item 7. 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 99 previous paragraphs and 107 current paragraphs.
59 unchanged; 20 reworded; 26 added; 20 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 13 previous and 19 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 (26)
Current report
We were incorporated in Nevada on August 18, 2006 as a pioneering financial technology and telecommunications company with one clear mission: to enhance connectivity and financial access in the places people live, shop, and work.
Current report
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 $75,127,676 or (63.4%). 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, and effective June 1, 2024, households no longer receive an ACP discount.
Current report
As a transition strategy, we decided to keep the existing base of subscribers from the former ACP enrolled in our network with a built-in subscriber base of 250,000. We chose to keep our subscribers active, absorbing 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 transitioned over 80,000 subscribers to the Lifeline program during 2024.
Current report
The Company signed a Master Services Agreement (MSA) with TerraCom, Inc. (“TerraCom”), a wireless service provider and licensed Lifeline provider, effective October 3, 2024, in order to execute the strategy of offering Lifeline to our existing ACP subscriber base. This agreement allows us to offer a government-subsidized program to our previous 250,000 ACP wireless subscribers. We transitioned over 80,000 subscribers to the Lifeline program during 2024. Equally important, this allows us to reignite our sales channels to acquire new Lifeline subscribers who lost their ACP service when their carrier chose to shut them off.
Current report
Comprehensive Platform Services revenues increased by $6,077,905 as a result of increasing our sales force and hiring of a new Director of Sales.
Current report
Effective December 31, 2024, the Company’s management elected to abandon its lead generation segment operations as part of a strategic reassessment of its business lines. This decision followed a review by the Chief Operating Decision Maker (“CODM”, which is our Chief Executive Officer), who had been regularly evaluating the segment’s financial performance and determined that its continued operation was no longer aligned with the Company’s long-term strategic objectives. The revenue was $0 and $7,184,283 respectively in years ended December 31, 2024 and 2023. Comparison numbers for the lead generation segment are shown in the respective Other Corporate Overhead lines.
Current report
The Company invested excess cash in various instruments during 2024, resulting in interest, dividends, and gains resulting in an aggregate increase of $355,549, compared to $0 in 2023.
Current report
As a result of shuttering the operations of LogicsIQ, the Company took an aggregate impairment loss of $1,183,376 relating to goodwill and software development assets.
Current report
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 report
As of December 31, 2024, The Company determined that it would no longer utilize the Business Process Outsourcing (BPO) services of CenterCom. The Company has commenced similar operations internally, eliminating the need for its investment in Centercom. Consequently, an assessment of the investment was performed to determine whether it should be written off in accordance with U.S. GAAP. As a result, the Company took an aggregate impairment loss of $498,273.
Current report
Stock Issued for Cash - Capital Raise
Current report
In January 2024, the Company issued 3,080,356 shares of common stock for gross proceeds of $17,249,994 ($5.60/share).
Current report
This offering was made pursuant to the Company’s registration statement on Form S-3 (File No. 333-273110) previously filed with the Securities and Exchange Commission (the “SEC”) on July 3, 2023, as amended, and declared effective by the SEC on November 3, 2023.
Current report
A preliminary and final prospectus supplement were filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933 (the “Securities Act”) on January 17, 2024 and January 19, 2024, respectively. The Offering closed on January 22, 2024.
Current report
During 2024, the Company issued 1,860,308 shares of common stock in connection with the exercise of 1,860,308 warrants for $8,799,257 ($4.73/share). See warrant table below.
Current report
The Company issued 47,386 shares of common stock for services rendered, having a fair value of $411,740 ($3.85 - $7.34/share), based upon the quoted closing trading price.
Current report
Effective July 2024, the Company implemented a share repurchase program. Under the terms of this program, the Company undertook the following:
Current report
The Company reacquired 362,620 shares of treasury stock for $631,967, at an average price of $1.74/share.
Current report
Effective October 2024, the Company ceased its share repurchase program.
Current report
Exercise of Warrants
Current report
In 2024, the Company issued shares based on the following vesting schedule:
Current report
Net cash provided used in 2024, was primarily due to the net loss for the year ended December 31, 2024, compared to the net gain for the year ended December 31, 2023.
Current report
Net cash used in investing activities in 2024 was primarily due to the purchase and sale of investments, and the purchase of ClearLine assets in 2024
Current report
Net cash provided for financing activities is primarily due to the equity offering in January 2024 and the exercise of warrants during the year ended December 31, 2024.
Current report
Cash requirements and capital expenditures–Due to the end of the ACP program in 2024 and the reduction in total revenues and margins, we may not have sufficient resources to continue to fund operations for the next twelve months without additional funding. We are currently exploring various strategic opportunities; however, we have no commitments at this time and no known timing as to when any transaction may occur. We will only pursue options that we believe are in the best interest of, and on the best terms for, the Company.
Current report
Known trends and uncertainties– The Company continues to explore potential strategic opportunities to acquire other businesses with similar business operations, or businesses we believe could be potentially symbiotic. While we are currently exploring various strategic opportunities, we have no commitments at this time and no known timing as to when any opportunities may arise. We will only pursue opportunities that we believe are in the best interest of, and on the best terms for, the Company.
Removed paragraphs (20)
Previous report
We were incorporated in Nevada on August 18, 2006 and a technology and telecommunications company focused on the underbanked and underserved communities.
Previous report
Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) increased by $30,226,373 (34.2%) relating to the additional revenue stream generated by the increase in subscribers to over 260,000 at the end of 2023 from 200,000 at the end of 2022 since ACP started in August of 2021. According to the FCC website, on February 7, 2024, the ACP stopped accepting new applications and enrollments and the ACP will cease to be funded after April 2024.
Previous report
Lead Generation services consisting of LogicsIQ revenues decreased by $9,576,373 as a result of operational changes by management in 2023. The Company is still in the process of determining how best this service fits into the overall plans of SurgePays.
Previous report
Comprehensive Platform Services revenues decreased by $4,977,893 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 2024 and plans to hire a new head of sales for our Comprehensive Platform Service segment to tap into such growth opportunity.
Previous report
If the ACP is fully funded, we expect revenue to grow overall for the Company in 2024 and we will be focusing our business efforts on the continued growth of our Mobile Virtual Network Operators and rolling out a new sales approach for the Comprehensive Platform Service segments. Specifically, we plan to grow our Comprehensive Platform Service business by increasing our subscriber base and active store counts in 2024 by hiring a new head of sales. Our planned new head of sales has substantial experience and connections with convenience stores that we believe can be added to our platform services. However, if the ACP is not renewed, we expect revenue for the Company in 2024 to substantially decrease because ACP reimbursement we derive a substantial portion of our revenue from the ACP. Additionally, the Company plans to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in the second quarter of fiscal year ending 2024.
Previous report
The Company expects to continue the improvement of gross margin in the MVNO segment, assuming the ACP program if fully funded for 2024. The Company expects the overall cost to acquire a new ACP subscriber will decrease in 2024 as we introduce new social media approaches to capture new subscribers. We anticipate the cost of device acquisition will continue to be lower in 2024 as we transition from buying devices to using SIM cards to capture and switch subscribers to our services. As we roll out new approaches to acquire an ACP subscriber, our marketing-related expenses should decrease.
Previous report
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.
Previous report
We expect that our gross profit margin for product and service will increase over the long term as our sales and production volumes increase and our cost per unit decreases due to efficiencies of scale.
Previous report
During 2022, the Company received a forgiveness on a PPP loan totaling $524,143, of which $518,167 was for principal and $5,976 for accrued interest. The Company recorded this forgiveness as other income in the accompanying consolidated statements of operations.
Previous report
Stock Issued for Services
Previous report
The shares will vest at the earlier to occur:
Previous report
The Company issued 200,000 shares of common stock for services rendered in connection with the listing of our common stock on the Nasdaq Capital Market 2021. As a result, the Company recorded the par value of the common stock issued with a corresponding charge to additional paid-in capital, resulting in a net effect of $0 to stockholders’ equity.
Previous report
Stock Issued for Acquisition of Software
Previous report
The Company acquired software having a fair value of $711,400. Payment for the software consisted of $300,000 in cash and the Company issued 85,000 shares of common stock having a fair value of $411,400 ($4.84/share), based upon the quoted closing trading price.
Previous report
The Company issued one hundred (100) shares of common stock in connection with an exercise of one hundred (100) warrants at an exercise price of $4.73 per share for proceeds of $473.
Previous report
The Company’s cash position on February 29, 2024 was approximately $40,500,000. This position was due to a capital raise we conducted in mid-January, resulting in net proceeds of approximately $13,700,000 (2,678,571 shares of common stock) and the allotment exercise in mid-February for an additional $2,000,000 (401,785 shares of common stock). Additionally, the Company has seen a steady flow of tradeable warrants being exercised as of the new year. In January 2024, 4,125 warrants were exercised at $4.73 for cash proceeds of $19,511 and in February 2024, 1,773,606 warrants were exercised at $4.73 for cash proceeds of $8,389,156. The outstanding warrant balance as of February 29, 2024 is 3,468,355. As long as the tradeable warrants are in the money, the Company expects to see continued exercise of warrants for the remainder of the year, as these tradeable warrants expire in early November 2024.
Previous report
Additionally, on March 12, 2024, the Company entered into an amended and restated promissory note (the “Amended Note”) with SMDMM Funding, LLC, a Company owned and controlled by our CEO, with which the Company currently has two outstanding notes, one in the original principal amount of $1,108,150.31 that was due on December 31, 2023 (the “One Year Note”), and another in the original principal amount of $4,026,413.00 due on December 31, 2024 (the “Two Year Note”). The Amended Note consolidated the One Year Note and Two Year Note into one note with outstanding principal of $4,758,088.74 and sets the principal and established interest to be paid over the course of thirty-three equal monthly payments beginning March 31, 2024, and ending December 31, 2026. Assuming we do not take on additional debt, this will effectively eliminate the debt from the balance sheet by the end of 2026. There will remain an SBA long-term note with favorable terms for approximately $460,000.
Previous report
We also expect the positive operating income results of 2023 to continue into 2024, assuming the ACP program is fully funded for the remainder of 2024. The Company has contingency plans in place if the funding is delayed or not approved. While this event would impact all aspects of the Company, we believe the current cash position would be sufficient to bridge the gap as we continued our efforts to grow other parts of the Company. The gross margins for each segment of the Company are also expected to improve over the course of 2024, assuming the ACP program is fully funded for the remainder of 2024. The Company believes there continues to be operating and logistic savings to be implemented during 2024, directly impact our cost to acquire subscribers and manage the relationship with the convenience store base.
Previous report
Cash requirements and capital expenditures–At the current level of operations, the Company does not anticipate borrowing funds to meet basic operating costs. Based on the current financial position of the Company, even if the ACP program is delayed or not funded in 2024, we have sufficient resources for the next twelve months.
Previous report
Known trends and uncertainties– The Company is planning to acquire other businesses with similar business operations. The uncertainty of the economy and program funding for the ACP program may delay the planned business expansion.
Reworded paragraphs (20)
Previous wording
Our Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless provide mobile broadband (internet connectivity) to low-income consumers nationwide. Our Comprehensive Platform Services consisting of SurgePays Fintech, ECS Prepaid, LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. provides ACH banking relationships and a fintech transactions platform that processes thousands of transactions a day independently owned convenience stores. We are aggressively pursuing the underbanked market directly to the consumer and in the stores they shop.
Current wording
Our Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless provide mobile broadband (internet connectivity) to consumers nationwide. Our Comprehensive Platform Services provides ACH banking relationships and a fintech transactions platform that processes thousands of transactions a day with independently owned convenience stores.
Previous wording
Please see the description in Item 1 of this Annual Report for a description of our Mobile Virtual Network Operators, Comprehensive Platform Services and Lead Generation business segments.
Current 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.
Previous wording
We report our financial performance based on the following segments: Mobile Virtual Network Operators (MVNO), Comprehensive Platform Service (Top-up) and Lead Generation. The MVNO segment is further broken down into subsidized and non-subsidized components. The subsidized component or ACP is the result of the mobile broadband (internet connectivity) services provided by SurgePhone Wireless and Torch Wireless to low-income consumers and accounts for the majority of our revenue. The Comprehensive Platform Service segment is comprised of Surge Fintech and ECS as previously shown. The Lead Generation is comprised of LogicsIQ as previously shown.
Current wording
We report our financial performance based on the following segments: Mobile Virtual Network Operators (MVNO) and Comprehensive Platform Service (Top-up). The MVNO segment is further broken down into subsidized and non-subsidized components. The subsidized component is the result of the mobile broadband (internet connectivity) services provided by SurgePhone Wireless and Torch Wireless to low-income consumers and accounts for the majority of our revenue. The Comprehensive Platform Service segment is comprised of Surge Fintech and ECS as previously shown.
Previous wording
Revenue increased overall by $15,597,642 (12.8%) from year ended December 31, 2022 to year ended December 31, 2023. The breakout was as follows:
Current wording
Revenue decreased overall by $76,260,659 (55.6%) from year ended December 31, 2023 to year ended December 31, 2024. The breakout was as follows:
Previous wording
For the year of 2023, cost of revenue for services primarily consists of data plan expenses ($28,612,000), devices ($28,476,000), marketing and advertising ($23,227,000), and other expenses such as royalties and call-center expenses ($3,604,000). For the year of 2022, cost of revenue for services primarily consists of data plan expenses ($21,056,000), devices ($35,313,000), marketing and advertising ($17,449,000), and other expenses such as royalties and call-center expenses ($2,312,000).
Current wording
For the year 2024, cost of revenue for services primarily consists of data plan expenses ($21,684,451), prepaid retail expenses ($16,779,312), devices ($5,685,656), marketing ($15,632,078), advertising ($4,808,305), and other expenses such as royalties and call-center expenses ($4,233,099). With the stoppage of ACP, we reviewed the inventory associated with the program and decided to write off the entirety of the tablets ($6,382,471). Efforts to find buyers of this inventory have been challenging, thus, the Company has decided to write-off any inventory related to ACP. For the year 2023, cost of revenue for services primarily consists of data plan expenses ($28,612,000), devices ($28,476,000), marketing and advertising ($23,227,000), and other expenses such as royalties and call-center expenses ($3,604,000).
Previous wording
The Company expects to continue the improvement of gross margin in all segments, assuming the ACP program is fully funded for 2024.
Current wording
The Company expects to continue the improvement of gross margin in the Comprehensive Platform Service segment during 2025. As we continue to expand both subsidized and non-subsidized products of the MNVO segment in 2025, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results.
Previous wording
The increase in depreciation and amortization costs for 2023 is the result of capitalizing costs associated with software enhancements to our various software platforms in 2023.
Current wording
The increase in depreciation and amortization costs for 2024 is the result of capitalizing costs associated with software enhancements to our various software platforms.
Previous wording
Selling, general and administrative costs (S, G & A) increased by $3,808,978 (32.0%). The changes are discussed below:
Current wording
Selling, general and administrative costs (S, G & A) increased by $10,579,865 (67.3%). The changes are discussed below:
Previous wording
Interest expense decreased to $595,975 in 2023 from $1,843,396 in 2022 primarily due to the payoff of various debt instruments in 2023.
Current wording
Interest expense decreased to $554,200 in 2024 from $595,975 in 2023 primarily due to the payoff of various debt instruments in 2024.
Previous wording
The equity investment in Centercom, an unconsolidated subsidiary of the Company in which we are a minority owner, increased by $110,203 in 2023 compared to a decrease of $89,082 in 2022.
Current wording
The equity investment in Centercom, an unconsolidated subsidiary of the Company in which we are a minority owner, increased by $33,864 in 2024 compared to an increase of $110,203 in 2023.
Previous wording
Equity Transactions for the Year Ended December 31, 2022
Current wording
Equity Transactions for the Years Ended December 31, 2024
Previous wording
Stock Issued as Direct Offering Costs
Current wording
In connection with the capital raise, the Company paid cash as direct offering costs totaling $1,395,000, resulting in net proceeds of $15,854,994.
Previous wording
The Company issued 147,153 shares of common stock in connection with the cashless exercise of 498,750 warrants. These transactions had a net effect of $0 on stockholders’ equity.
Current wording
During 2024, the Company issued 40,238 shares of common stock in connection with the cashless exercise of warrants ($0.001/share). The transaction had a net effect of $0 on stockholders’ equity.
Previous wording
The Company issued 242,615 shares of common stock for services rendered, having a fair value of $1,290,024 ($4.19 - $9.40/share), based upon the quoted closing trading price. All of these shares are for consultants based upon agreements.
Current wording
The Company issued 242,615 shares of common stock for services rendered, having a fair value of $1,290,024 ($4.19 - $9.40/share), based upon the quoted closing trading price. All of these shares are for arrangements with consultants as called for per their respective agreements.
Previous wording
In 2023, the Company granted common stock to its Chief Financial Officer having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price. The vesting schedule is as follows:
Current wording
In 2023, the Company granted common stock to its Chief Financial Officer having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price.
Previous wording
At December 31, 2023 and 2022, our current assets were $33,366,661 and $27,563,785, respectively, and our current liabilities were $12,705,044 and $23,464,062, respectively, which resulted in a working capital surplus of $20,661,617 and of $4,099,723, respectively. The increase in current assets is a result of expansion of the Affordable Connectivity Program, whereby cash increased by $7,586,406.
Current wording
At December 31, 2024 and 2023, our current assets were $17,870,323 and $33,366,661, respectively, and our current liabilities were 6,059,476 and $12,705,044, respectively, which resulted in a working capital surplus of $11,810,847 and $20,661,617, respectively. The decrease in current assets is a result of the suspension of the Affordable Connectivity Program, whereby accounts receivable decreased by $6,535,865 and the write-down of the inventory of $6,382,471.
Previous wording
Total assets at December 31, 2023 and 2022 amounted to $41,925,307 and $34,003,506, respectively. The increase in total assets is a result of the expansion of the Affordable Connectivity Program, whereby cash increased by $ 7,586,406 and inventory decreased by $2,139,648. Total assets increased by $7,921,801 from December 31, 2022 to December 31, 2023. At December 31, 2023, assets consisted of 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 compared to current assets of $27,563,785, net property and equipment of $643,373, net intangible assets of $2,779,977, goodwill of $1,666,782, equity investment in Centercom of $354,206, note receivable of $176,851, internal use software of $387,180, and operating lease right of use asset of $431,352.
Current wording
Total assets at December 31, 2024 and 2023 amounted to $23,976,005 and $41,925,307, respectively, a decrease of $17,949,302 from 2023 to 2024. The decrease in total assets is a result of the suspension of the Affordable Connectivity Program and shuttering of the LogicsIQ business segment, whereby accounts receivable decreased by $6,535,865, the write-down of the inventory of $6,382,471, and the impairment loss of $1,681,649. At December 31, 2024, assets consisted of current assets of $17,870,323, net property and equipment of $591,088, net intangible assets of $1,472,962, goodwill of $3,300,000, note receivable of $176,851, and operating lease right of use asset of $564,781 and at December 31, 2023, assets consisted of 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 December 31, 2023, our total liabilities were $13,521,843 compared to total liabilities of $28,885,253 at December 31, 2022. This $15,363,410 decrease was related to the repayment during 2023 of the installment sales liability of $13,018,184 at December 31, 2022.
Current wording
At December 31, 2024, our total liabilities were $8,714,392 compared to total liabilities of $13,521,843 at December 31, 2023. This $4,807,451 decrease was related to the accounts payable and debt repayment during 2024.
Previous wording
At December 31, 2023, our total stockholders’ surplus was $28,403,464 as compared to $5,118,253 at December 31, 2022.
Current wording
At December 31, 2024, our total stockholders’ surplus was $15,261,613 as compared to $28,403,464 at December 31, 2023. The $12,643,578 decrease was primarily due to the net loss for the year.
Previous wording
As a result of net positive cash provided by operating activities in 2023, the cash increased in 2023 by $7,586,406, compared to an increase of cash increase provided in operations of $793,272 in 2022.
Current wording
As a result of net negative cash provided by operating activities and investing activities in 2024, our overall cash decreased in 2024 by $1,831,671, compared to an increase of cash in 2023 primarily driven by net cash provided for by operations of $10,287,345.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
For the year ended December 31, 2024, the Company recognized stock compensation expense of $486,242 related to vesting.
Current report — wording carried from elsewhere
In 2024, the Company granted an aggregate 44,640 shares of common stock to various members of the Board of Directors, having a fair value of $149,990 ($3.36/share), based upon the quoted closing trading price.