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 March 31, 2025 and 2024 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, 2025 and 2024 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

SurgePays, Inc. (“SurgePays”, “we”, the “Company”) is a financial technology and telecom company focused on providing these essential services to the underbanked community. We were previously known as North American Energy Resources, Inc. and KSIX Media Holdings, Inc. Prior to April 27, 2015, we operated solely as an independent oil and natural gas company engaged in the acquisition, exploration and development of oil and natural gas properties and the production of oil and natural gas through its wholly owned subsidiary, NAER. On April 27, 2015, NAER entered into a Share Exchange Agreement with KSIX Media whereby KSIX Media became a wholly owned subsidiary of NAER and which resulted in the shareholders of KSIX Media owning approximately 90% of the voting stock of the surviving entity. While we continued the oil and gas operations of NAER following this transaction, on August 4, 2015, we changed its name to KSIX Media Holdings, Inc. On December 21, 2017, we changed its name to Surge Holdings, Inc. to better reflect the diversity of its business operations. We changed our name to SurgePays, Inc. on October 29, 2020.

Current wording

SurgePays, Inc (“SurgePays,” “we” the “Company”) was incorporated in Nevada on August 18, 2006 is a financial technology and telecom company focused on providing these essential services to the underbanked community. We were previously known as North American Energy Resources, Inc. and KSIX Media Holdings, Inc. Prior to April 27, 2015, we operated solely as an independent oil and natural gas company engaged in the acquisition, exploration and development of oil and natural gas properties and the production of oil and natural gas through its wholly owned subsidiary, NAER. On April 27, 2015, NAER entered into a Share Exchange Agreement with KSIX Media whereby KSIX Media became a wholly owned subsidiary of NAER and which resulted in the shareholders of KSIX Media owning approximately 90% of the voting stock of the surviving entity. While we continued the oil and gas operations of NAER following this transaction, on August 4, 2015, we changed its name to KSIX Media Holdings, Inc. On December 21, 2017, we changed its name to Surge Holdings, Inc. to better reflect the diversity of its business operations. We changed our name to SurgePays, Inc. on October 29, 2020.

Previous wording

Revenue decreased overall by $20,851,706 (66.3%) from the three months ended March 31, 2024 to the three months ended March 31, 2025. The breakout was as follows:

Current wording

Revenue decreased overall by $3,567,533 (23.7%) from the three months ended June 30, 2024 to the three months ended June 30, 2025. 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 $26,606,767 (92.1%). 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 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 $10,229,801 (81.8%). 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.

Previous wording

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 wording

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 allowed 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.

Previous wording

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 $0 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 wording

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 $0 respectively in the year ended December 31, 2024 and in the six months ended June 30, 2025 Comparison numbers for the lead generation segment are shown in the respective Other Corporate Overhead lines.

Previous wording

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). For the three months ended March 31, 2024, cost of revenue for services primarily consists of data plan expenses ($8,979,344), devices ($3,900,413), marketing ($5,799,322), advertising ($2,937,608) and other expenses such as royalties and call-center expenses ($1,849,779).

Current wording

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 ($331,000) and other expenses such as royalties and call-center expenses ($1,271,049). 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).

Previous 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.

Current wording

The Company expects to continue the improvement of gross margin in the Point-of-Sale and Prepaid Services segment during 2025. Most of the cost to get Clearline ready for launch has occurred and we expect the gross margin to be positive by the end of 2025 for this revenue channel. As we continue to expand both subsidized (Lifeline) and non-subsidized products (LinkUp Mobile) 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

Selling, general and administrative costs (S, G & A) decreased by $1,753,358 (28.6%). The changes are discussed below:

Current wording

Selling, general and administrative costs (S, G & A) decreased by $3,217,484 (45.0%). The changes are discussed below:

Previous wording

Interest expense decreased to $119,434 in the three months ended March 31, 2025 from $132,583 in the three months ended March 31, 2024.

Current wording

Interest expense increased to $212,419 in the three months ended June 30, 2025 from $116,722 in the three months ended June 30, 2024.

Previous wording

The equity investment in Centercom changed by $0 in the three months ended March 31, 2025 compared to an increase of $16,153 in the three months ended March 31, 2024. As of December 31, 2024, The Company determined that it would no longer utilize the Business Process Outsourcing (BPO) services of CenterCom. As of December 31, 2024, the Company assessed its investment in CenterCom and determined there was an impairment. Factors leading to this decision included a change in ownership and large reduction in human capital. As a result, CenterCom was materially impacted and could no longer continue its operations.

Current wording

The equity investment in Centercom changed by $0 in the three months ended June 30, 2025 compared to an increase of $17,711 in the three months ended June 30, 2024. As of December 31, 2024, The Company determined that it would no longer utilize the Business Process Outsourcing (BPO) services of CenterCom. As of December 31, 2024, the Company assessed its investment in CenterCom and determined there was an impairment. Factors leading to this decision included a change in ownership and large reduction in human capital. As a result, CenterCom was materially impacted and could no longer continue its operations.

Previous 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 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.

Current wording

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 is further broken down into 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.

Previous wording

Comprehensive Platform Services revenues increased by $5,761,017 as a result of increasing our sales force and hiring of a new Director of Sales and renewed focus on this segment of the business. The Company expects this segment to continue to grow for the remainder of 2025.

Current wording

Point-of-Sale and Prepaid Services (Prepaid) revenues increased by $12,428,657 as a result of increasing our sales force and hiring of a new Director of Sales and renewed focus on this segment of the business. The Company expects this segment to continue to grow for the remainder of 2025.

Previous wording

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.

Current wording

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 $0 respectively in the year ended December 31, 2024 and in the six months ended June 30, 2025 Comparison numbers for the lead generation segment are shown in the respective Other Corporate Overhead lines.

Previous wording

Equity Transactions for the Three Months Ended March 31, 2025

Current wording

Equity Transactions for the Six Months Ended June 30, 2025

Previous wording

The MVNO revenue for the three months ended March 31, 2025 decreased by $26,606,767 as compared to the three months ended March 31, 2024. Cost of revenues for the three months ended March 31, 2025, decreased by $15,570,581 from the same period ended March 31, 2024, as a result of the 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 wording

The MVNO revenue for the three months ended June 30, 2025 decreased by $10,229,801 as compared to the three months ended June 30, 2024. Cost of revenues for the three months ended June 30, 2025, decreased by $11,630,159 from the same period ended June 30, 2024, as a result of the 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.

Previous wording

The revenue for the three months ended March 31, 2025 was $8,291,606 compared to $2,530,589 for the same period in 2024. The increase of 227.7% was the result of hiring new salespersons and a renewed focus on the market segment.

Current wording

The revenue for the three months ended June 30, 2025 was $9,244,460 compared to $2,576,820 for the same period in 2024. The increase of 58.8% was the result of hiring new salespersons and a renewed focus on the market segment.

Previous wording

The overall decrease in revenue of $20,851,706 from 2024 to 2025 for the three months ended March 31, can be attributed to the elimination of the ACP during the first half of 2024.

Current wording

The overall decrease in revenue of $24,419,238 from 2024 to 2025 for the six months ended June 30, can be attributed to the elimination of the ACP during the first half of 2024.

Previous wording

At March 31, 2025 and December 31, 2024, our current assets were $9,850,620 and $17,870,323, respectively, and our current liabilities were $5,740,255 and $6,059,476, respectively, which resulted in a working capital surplus of $4,110,365 and of $11,810,847, respectively.

Current wording

At June 30, 2025 and December 31, 2024, our current assets were $9,694,382 and $17,870,323, respectively, and our current liabilities were $8,702,069 and $6,059,476, respectively, which resulted in a working capital surplus of $992,313 and of $11,810,847, respectively.

Previous wording

Total assets at March 31, 2025 and December 31, 2024 amounted to $15,664,039 and $23,976,005, respectively. Total assets decreased by $8,311,966 from December 31, 2024 to March 31, 2025. At March 31, 2025, assets consisted of current assets of $9,850,620, net property and equipment of $523,556, net intangible assets of $1,309,510, goodwill of $3,300,000, note receivable of $176,851 and operating lease right of use asset of $503,502, compared to at December 31, 2024, 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.

Current wording

Total assets at June 30, 2025 and December 31, 2024 amounted to $15,215,409 and $23,976,005, respectively. Total assets decreased by $8,760,596 from December 31, 2024 to June 30, 2025. At June 30, 2025, assets consisted of current assets of $9,694,382, net property and equipment of $457,195, net intangible assets of $1,145,756, goodwill of $3,300,000, note receivable of $176,851 and operating lease right of use asset of $441,225, compared to at December 31, 2024, 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.

Previous wording

At March 31, 2025, our total liabilities were $7,882,600 compared to total liabilities of $8,714,392 at December 31, 2024. This $831,792 decrease was related to the repayment during the three months ended March 31, 2025 of the various notes payable.

Current wording

At June 30, 2025, our total liabilities were $15,154,017 compared to total liabilities of $8,714,392 at December 31, 2024. This $6,439,625 increase was related to on May 12, 2025, the Company entered into a Senior Secured Note Purchase Agreement with Funicular Funds, LP (the “Investor”), pursuant to which the Company issued a Senior Secured Convertible Note in the original principal amount of $6,999,999 (the “Note”). The transaction resulted in net cash proceeds of $6,000,000 to the Company and included the repurchase of 333,333 shares of the Company’s common stock from the Investor at $3/share. These repurchased shares will be cancelled and retired, and the corresponding shares will not be returned to the pool of authorized but unissued shares, and remain as treasury stock. We have also entered into an At The Market Offering Agreement (the “ATM Agreement”) with Titan Partners Group LLC, a division of American Capital Partners, LLC (“Titan”), pursuant to which the Company may offer and sell shares of its common stock (subject to certain limitations set forth in the ATM Agreement), from time to time, to or through Titan, acting as sales agent and/or principal. In accordance with the terms of the ATM Agreement, under the Prospectus Supplement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $15,000,000, from time to time, to or through Titan, which is within the Company’s current “baby shelf” limitations under General Instruction I.B.6. of Form S-3. We plan to utilize the ATM Agreement when appropriate to fund our working capital needs on an ongoing basis.

Previous wording

At March 31, 2025, our total stockholders’ equity was $7,781,439 as compared to $15,261,613 at December 31, 2024.

Current wording

At June 30, 2025, our total stockholders’ equity was $61,392 as compared to $15,261,613 at December 31, 2024.

Previous wording

The following table sets forth the major sources and uses of cash for the three months ended March 31, 2025 and 2024.

Current wording

The following table sets forth the major sources and uses of cash for the six months ended June 30, 2025 and 2024.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025, was primarily due to the net loss for the period of $7,635,084.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025, was primarily due to the net loss for the period of $14,718,100.

Previous wording

Net cash used in investing activities for the three months ending March 31, 2025 was primarily due to payment for leases.

Current wording

Net cash used in investing activities for the six months ending June 30, 2025 was primarily due to payment for leases.

Previous wording

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 used for financing activities for the six months ended June 30, 2025 is primarily due to proceeds from a convertible note.

Previous wording

As a result of net negative cash provided by operating activities and investing activities in 2025, our overall cash decreased in 2025 by $7,392,619, compared to an increase of cash in 2024 primarily driven by net cash provided for by a capital raise and exercise of warrants $28,323,018.

Current wording

As a result of net negative cash provided by operating activities and investing activities in 2025, our overall cash decreased in 2025 by $8,385,940, compared to an increase of cash in 2024 primarily driven by net cash provided for by a capital raise and exercise of warrants $23,812,520.

Previous wording

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 wording

Cash requirements and capital expenditures– As we transition from 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.

Previous wording

The Company kicked of several initiatives in April of 2025. 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. 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.

Previous wording

Significant estimates during the three months ended March 31, 2025 and 2024, respectively, include, allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of loss contingencies, valuation of derivative liabilities, 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, 2025 and 2024, respectively, include, allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of loss contingencies, valuation of derivative liabilities, 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.