10-Q 1 form10-q.htm
0001392694 false --12-31 Q3 0001392694 2023-01-01 2023-09-30 0001392694 us-gaap:CommonStockMember 2023-01-01 2023-09-30 0001392694 SURG:CommonStockPurchaseWarrantsMember 2023-01-01 2023-09-30 0001392694 2023-11-10 0001392694 2023-09-30 0001392694 2022-12-31 0001392694 us-gaap:NonrelatedPartyMember 2023-09-30 0001392694 us-gaap:NonrelatedPartyMember 2022-12-31 0001392694 us-gaap:RelatedPartyMember 2023-09-30 0001392694 us-gaap:RelatedPartyMember 2022-12-31 0001392694 SURG:SBAGovernmentMember 2023-09-30 0001392694 SURG:SBAGovernmentMember 2022-12-31 0001392694 2023-07-01 2023-09-30 0001392694 2022-07-01 2022-09-30 0001392694 2022-01-01 2022-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-12-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-12-31 0001392694 us-gaap:CommonStockMember 2022-12-31 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001392694 us-gaap:RetainedEarningsMember 2022-12-31 0001392694 us-gaap:NoncontrollingInterestMember 2022-12-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2023-03-31 0001392694 us-gaap:CommonStockMember 2023-03-31 0001392694 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001392694 us-gaap:RetainedEarningsMember 2023-03-31 0001392694 us-gaap:NoncontrollingInterestMember 2023-03-31 0001392694 2023-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2023-06-30 0001392694 us-gaap:CommonStockMember 2023-06-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001392694 us-gaap:RetainedEarningsMember 2023-06-30 0001392694 us-gaap:NoncontrollingInterestMember 2023-06-30 0001392694 2023-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2021-12-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2021-12-31 0001392694 us-gaap:CommonStockMember 2021-12-31 0001392694 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001392694 us-gaap:RetainedEarningsMember 2021-12-31 0001392694 us-gaap:NoncontrollingInterestMember 2021-12-31 0001392694 2021-12-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-03-31 0001392694 us-gaap:CommonStockMember 2022-03-31 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001392694 us-gaap:RetainedEarningsMember 2022-03-31 0001392694 us-gaap:NoncontrollingInterestMember 2022-03-31 0001392694 2022-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-06-30 0001392694 us-gaap:CommonStockMember 2022-06-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001392694 us-gaap:RetainedEarningsMember 2022-06-30 0001392694 us-gaap:NoncontrollingInterestMember 2022-06-30 0001392694 2022-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-01-01 2023-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2023-01-01 2023-03-31 0001392694 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001392694 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001392694 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001392694 us-gaap:NoncontrollingInterestMember 2023-01-01 2023-03-31 0001392694 2023-01-01 2023-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-04-01 2023-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2023-04-01 2023-06-30 0001392694 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001392694 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001392694 us-gaap:NoncontrollingInterestMember 2023-04-01 2023-06-30 0001392694 2023-04-01 2023-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-07-01 2023-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2023-07-01 2023-09-30 0001392694 us-gaap:CommonStockMember 2023-07-01 2023-09-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2023-07-01 2023-09-30 0001392694 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-30 0001392694 us-gaap:NoncontrollingInterestMember 2023-07-01 2023-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-01-01 2022-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-01-01 2022-03-31 0001392694 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001392694 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001392694 us-gaap:NoncontrollingInterestMember 2022-01-01 2022-03-31 0001392694 2022-01-01 2022-03-31 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-04-01 2022-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-04-01 2022-06-30 0001392694 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001392694 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001392694 us-gaap:NoncontrollingInterestMember 2022-04-01 2022-06-30 0001392694 2022-04-01 2022-06-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-07-01 2022-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-07-01 2022-09-30 0001392694 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0001392694 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001392694 us-gaap:NoncontrollingInterestMember 2022-07-01 2022-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2023-09-30 0001392694 us-gaap:CommonStockMember 2023-09-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2023-09-30 0001392694 us-gaap:RetainedEarningsMember 2023-09-30 0001392694 us-gaap:NoncontrollingInterestMember 2023-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-09-30 0001392694 us-gaap:PreferredStockMember us-gaap:SeriesCPreferredStockMember 2022-09-30 0001392694 us-gaap:CommonStockMember 2022-09-30 0001392694 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0001392694 us-gaap:RetainedEarningsMember 2022-09-30 0001392694 us-gaap:NoncontrollingInterestMember 2022-09-30 0001392694 2022-09-30 0001392694 us-gaap:NonrelatedPartyMember 2023-01-01 2023-09-30 0001392694 us-gaap:NonrelatedPartyMember 2022-01-01 2022-09-30 0001392694 us-gaap:RelatedPartyMember 2023-01-01 2023-09-30 0001392694 us-gaap:RelatedPartyMember 2022-01-01 2022-09-30 0001392694 SURG:SurgePaysIncMember 2023-01-01 2023-09-30 0001392694 SURG:KsixMediaIncMember 2023-01-01 2023-09-30 0001392694 SURG:KsixLLCMember 2023-01-01 2023-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2023-01-01 2023-09-30 0001392694 SURG:InjurySurveyLLCMember 2023-01-01 2023-09-30 0001392694 SURG:DigitizeIQLLCMember 2023-01-01 2023-09-30 0001392694 SURG:LogicsIQIncMember 2023-01-01 2023-09-30 0001392694 SURG:SurgePaymentsLLCMember 2023-01-01 2023-09-30 0001392694 SURG:SurgephoneWirelessLLCMember 2023-01-01 2023-09-30 0001392694 SURG:SurgePaysFintechIncMember 2023-01-01 2023-09-30 0001392694 SURG:EcsPrepaidLlcMember 2023-01-01 2023-09-30 0001392694 SURG:CentralStatesLegalServicesIncMember 2023-01-01 2023-09-30 0001392694 SURG:ElectronicCheckServicesIncMember 2023-01-01 2023-09-30 0001392694 SURG:TorchWirelessMember 2023-01-01 2023-09-30 0001392694 SURG:TorchWirelessIncMember 2023-09-30 0001392694 SURG:TorchWirelessIncMember 2023-01-01 2023-09-30 0001392694 SURG:TorchWirelessIncMember 2023-09-30 0001392694 SURG:CustomerOneMember 2023-01-01 2023-09-30 0001392694 SURG:CustomerTwoMember 2023-01-01 2023-09-30 0001392694 SURG:TrueWirelessIncMember 2023-09-30 0001392694 SURG:TrueWirelessIncMember 2023-01-01 2023-09-30 0001392694 SURG:BlueSkiesConnectionsLLCMember 2023-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember SURG:SurgePhoneAndTorchWirelessMember us-gaap:RevenueFromContractWithCustomerMember 2023-01-01 2023-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember SURG:SurgePhoneAndTorchWirelessMember us-gaap:RevenueFromContractWithCustomerMember 2022-01-01 2022-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember SURG:FederalCommunicationsCommissionMember us-gaap:SalesRevenueNetMember 2023-01-01 2023-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember SURG:FederalCommunicationsCommissionMember us-gaap:AccountsReceivableMember 2023-01-01 2023-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember SURG:FederalCommunicationsCommissionMember us-gaap:AccountsReceivableMember 2022-01-01 2022-12-31 0001392694 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember SURG:CustomerMember 2023-01-01 2023-09-30 0001392694 SURG:LogicsIQMember 2023-07-01 2023-09-30 0001392694 SURG:LogicsIQMember 2023-01-01 2023-09-30 0001392694 SURG:CenterComGlobalMember 2019-01-17 0001392694 SURG:SurgePhoneAndTorchWirelessMember 2023-01-01 2023-09-30 0001392694 SURG:SurgePhoneAndTorchWirelessMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2023-01-01 2023-09-30 0001392694 SURG:SurgePhoneAndTorchWirelessMember 2022-01-01 2022-09-30 0001392694 SURG:SurgePhoneAndTorchWirelessMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2022-01-01 2022-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2023-01-01 2023-09-30 0001392694 SURG:SurgeBlockchainLLCMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2023-01-01 2023-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2022-01-01 2022-09-30 0001392694 SURG:SurgeBlockchainLLCMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2022-01-01 2022-09-30 0001392694 SURG:LogicsIQIncMember 2023-01-01 2023-09-30 0001392694 SURG:LogicsIQIncMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2023-01-01 2023-09-30 0001392694 SURG:LogicsIQIncMember 2022-01-01 2022-09-30 0001392694 SURG:LogicsIQIncMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2022-01-01 2022-09-30 0001392694 SURG:SurgeFintechAndECSMember 2023-01-01 2023-09-30 0001392694 SURG:SurgeFintechAndECSMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2023-01-01 2023-09-30 0001392694 SURG:SurgeFintechAndECSMember 2022-01-01 2022-09-30 0001392694 SURG:SurgeFintechAndECSMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2022-01-01 2022-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2023-01-01 2023-09-30 0001392694 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2022-01-01 2022-09-30 0001392694 SURG:CommonStockWarrantsMember 2023-01-01 2023-09-30 0001392694 SURG:CommonStockWarrantsMember 2022-01-01 2022-09-30 0001392694 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-09-30 0001392694 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-09-30 0001392694 us-gaap:SeriesAPreferredStockMember 2023-01-01 2023-09-30 0001392694 us-gaap:SeriesAPreferredStockMember 2022-01-01 2022-09-30 0001392694 us-gaap:ComputerEquipmentMember srt:MinimumMember 2023-09-30 0001392694 us-gaap:ComputerEquipmentMember srt:MaximumMember 2023-09-30 0001392694 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2023-09-30 0001392694 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2023-09-30 0001392694 2022-06-01 2022-06-30 0001392694 us-gaap:ComputerSoftwareIntangibleAssetMember 2023-09-30 0001392694 us-gaap:ComputerSoftwareIntangibleAssetMember 2022-12-31 0001392694 us-gaap:ComputerSoftwareIntangibleAssetMember 2023-01-01 2023-09-30 0001392694 us-gaap:TradeNamesMember 2023-09-30 0001392694 us-gaap:TradeNamesMember 2022-12-31 0001392694 us-gaap:TradeNamesMember 2023-01-01 2023-09-30 0001392694 SURG:ECSMembershipAgreementMember 2023-09-30 0001392694 SURG:ECSMembershipAgreementMember 2022-12-31 0001392694 SURG:ECSMembershipAgreementMember 2023-01-01 2023-09-30 0001392694 us-gaap:NoncompeteAgreementsMember 2023-09-30 0001392694 us-gaap:NoncompeteAgreementsMember 2022-12-31 0001392694 us-gaap:NoncompeteAgreementsMember 2023-01-01 2023-09-30 0001392694 us-gaap:CustomerRelationshipsMember 2023-09-30 0001392694 us-gaap:CustomerRelationshipsMember 2022-12-31 0001392694 us-gaap:CustomerRelationshipsMember 2023-01-01 2023-09-30 0001392694 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2023-09-30 0001392694 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2022-12-31 0001392694 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2023-09-30 0001392694 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2023-01-01 2023-09-30 0001392694 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2023-01-01 2023-09-30 0001392694 srt:MinimumMember 2023-01-01 2023-09-30 0001392694 srt:MaximumMember 2023-01-01 2023-09-30 0001392694 SURG:SecuredRevolvingDebtMember 2022-04-30 0001392694 SURG:SecuredRevolvingDebtMember 2022-06-01 2022-06-30 0001392694 SURG:SecuredRevolvingDebtMember 2022-04-01 2022-04-30 0001392694 SURG:SecuredRevolvingDebtMember 2022-01-01 2022-12-31 0001392694 SURG:SecuredRevolvingDebtMember 2022-12-31 0001392694 SURG:PaycheckProtectionProgramAndEconomicInjuryDisasterLoanMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableMember 2023-01-01 2023-09-30 0001392694 SURG:PaycheckProtectionProgramMember 2023-01-01 2023-09-30 0001392694 SURG:EconomicInjuryDisasterLoanMember 2023-01-01 2023-09-30 0001392694 SURG:EconomicInjuryDisasterLoanOneMember 2023-01-01 2023-09-30 0001392694 SURG:PaycheckProtectionProgramOneMember 2023-01-01 2023-09-30 0001392694 SURG:PaycheckProtectionProgramMember 2023-09-30 0001392694 SURG:EconomicInjuryDisasterLoanMember 2023-09-30 0001392694 SURG:EconomicInjuryDisasterLoanOneMember 2023-09-30 0001392694 SURG:PaycheckProtectionProgramOneMember 2023-09-30 0001392694 SURG:PaycheckProtectionProgramMember 2021-12-31 0001392694 SURG:EconomicInjuryDisasterLoanMember 2021-12-31 0001392694 SURG:EconomicInjuryDisasterLoanOneMember 2021-12-31 0001392694 SURG:PaycheckProtectionProgramOneMember 2021-12-31 0001392694 SURG:PaycheckProtectionProgramMember 2022-01-01 2022-12-31 0001392694 SURG:EconomicInjuryDisasterLoanMember 2022-01-01 2022-12-31 0001392694 SURG:EconomicInjuryDisasterLoanOneMember 2022-01-01 2022-12-31 0001392694 SURG:PaycheckProtectionProgramOneMember 2022-01-01 2022-12-31 0001392694 2022-01-01 2022-12-31 0001392694 SURG:PaycheckProtectionProgramMember 2022-12-31 0001392694 SURG:EconomicInjuryDisasterLoanMember 2022-12-31 0001392694 SURG:EconomicInjuryDisasterLoanOneMember 2022-12-31 0001392694 SURG:PaycheckProtectionProgramOneMember 2022-12-31 0001392694 srt:ChiefExecutiveOfficerMember us-gaap:RelatedPartyMember 2023-01-01 2023-09-30 0001392694 SURG:BoardMemberMember us-gaap:RelatedPartyMember 2023-01-01 2023-09-30 0001392694 srt:ChiefExecutiveOfficerMember us-gaap:RelatedPartyMember 2023-09-30 0001392694 SURG:BoardMemberMember us-gaap:RelatedPartyMember 2023-09-30 0001392694 srt:ChiefExecutiveOfficerMember us-gaap:RelatedPartyMember 2021-12-31 0001392694 SURG:BoardMemberMember us-gaap:RelatedPartyMember 2020-12-31 0001392694 us-gaap:RelatedPartyMember 2020-12-31 0001392694 srt:ChiefExecutiveOfficerMember us-gaap:RelatedPartyMember 2022-01-01 2022-12-31 0001392694 SURG:BoardMemberMember us-gaap:RelatedPartyMember 2022-01-01 2022-12-31 0001392694 us-gaap:RelatedPartyMember 2022-01-01 2022-12-31 0001392694 srt:ChiefExecutiveOfficerMember us-gaap:RelatedPartyMember 2022-12-31 0001392694 SURG:BoardMemberMember us-gaap:RelatedPartyMember 2022-12-31 0001392694 SURG:NotesPayableOneMember us-gaap:NonrelatedPartyMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableTwoMember us-gaap:NonrelatedPartyMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableThreeMember us-gaap:NonrelatedPartyMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableFourMember us-gaap:NonrelatedPartyMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableOneMember us-gaap:NonrelatedPartyMember 2023-09-30 0001392694 SURG:NotesPayableTwoMember us-gaap:NonrelatedPartyMember 2023-09-30 0001392694 SURG:NotesPayableThreeMember us-gaap:NonrelatedPartyMember 2023-09-30 0001392694 SURG:NotesPayableFourMember us-gaap:NonrelatedPartyMember 2023-09-30 0001392694 us-gaap:NonrelatedPartyMember SURG:NotesPayableMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableOneMember us-gaap:NonrelatedPartyMember 2021-12-31 0001392694 SURG:NotesPayableTwoMember us-gaap:NonrelatedPartyMember 2021-12-31 0001392694 SURG:NotesPayableThreeMember us-gaap:NonrelatedPartyMember 2021-12-31 0001392694 SURG:NotesPayableFourMember us-gaap:NonrelatedPartyMember 2021-12-31 0001392694 us-gaap:NonrelatedPartyMember 2021-12-31 0001392694 SURG:NotesPayableOneMember us-gaap:NonrelatedPartyMember 2022-01-01 2022-12-31 0001392694 SURG:NotesPayableTwoMember us-gaap:NonrelatedPartyMember 2022-01-01 2022-12-31 0001392694 SURG:NotesPayableThreeMember us-gaap:NonrelatedPartyMember 2022-01-01 2022-12-31 0001392694 SURG:NotesPayableFourMember us-gaap:NonrelatedPartyMember 2022-01-01 2022-12-31 0001392694 us-gaap:NonrelatedPartyMember 2022-01-01 2022-12-31 0001392694 SURG:PaycheckProtectionProgramAndEconomicInjuryDisasterLoanMember us-gaap:NonrelatedPartyMember 2022-01-01 2022-12-31 0001392694 SURG:NotesPayableOneMember us-gaap:NonrelatedPartyMember 2022-12-31 0001392694 SURG:NotesPayableTwoMember us-gaap:NonrelatedPartyMember 2022-12-31 0001392694 SURG:NotesPayableThreeMember us-gaap:NonrelatedPartyMember 2022-12-31 0001392694 SURG:NotesPayableFourMember us-gaap:NonrelatedPartyMember 2022-12-31 0001392694 SURG:PrincipalAmountMember 2022-01-01 2022-12-31 0001392694 SURG:AccruedInterestMember 2022-01-01 2022-12-31 0001392694 2021-01-01 2021-12-31 0001392694 SURG:PrincipalAmountMember 2021-01-01 2021-12-31 0001392694 SURG:AccruedInterestMember 2021-01-01 2021-12-31 0001392694 SURG:ChiefExecutiveOfficerAndBoardDirectorMember SURG:KevinBrianCoxMember 2022-01-01 2022-12-31 0001392694 SURG:ChiefExecutiveOfficerAndBoardDirectorMember SURG:KevinBrianCoxMember 2022-12-31 0001392694 SURG:ChiefExecutiveOfficerAndBoardDirectorMember us-gaap:RelatedPartyMember 2022-12-31 0001392694 SURG:BoardMemberMember 2023-09-30 0001392694 SURG:BoardMemberMember 2023-01-01 2023-09-30 0001392694 SURG:NotesPayableOneMember 2023-09-30 0001392694 SURG:NotesPayableTwoMember 2023-09-30 0001392694 SURG:NotesPayableThreeMember 2023-09-30 0001392694 SURG:NotesPayableThreeMember 2022-09-30 0001392694 SURG:NotesPayableThreeMember 2022-01-01 2022-09-30 0001392694 SURG:NotesPayableThreeMember 2022-10-31 0001392694 SURG:NotesPayableFourMember 2022-10-31 0001392694 SURG:NotesPayableRelatedPartiesMember 2023-09-30 0001392694 SURG:YearOneMember srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember 2023-11-01 2023-11-30 0001392694 SURG:YearTwoMember srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember 2023-11-01 2023-11-30 0001392694 SURG:YearThreeMember srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember 2023-11-01 2023-11-30 0001392694 us-gaap:SubsequentEventMember srt:ChiefFinancialOfficerMember us-gaap:RestrictedStockMember 2023-11-10 0001392694 SURG:YearOneMember srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember us-gaap:RestrictedStockMember 2023-11-30 0001392694 SURG:YearTwoMember srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember us-gaap:RestrictedStockMember 2023-11-30 0001392694 SURG:YearThreeMember srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember us-gaap:RestrictedStockMember 2023-11-30 0001392694 srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember us-gaap:VehiclesMember 2023-11-01 2023-11-30 0001392694 srt:ScenarioForecastMember srt:ChiefFinancialOfficerMember us-gaap:HomeBuildingMember 2023-11-01 2023-11-30 0001392694 SURG:BlueSkiesConnectionsLLCMember 2021-06-14 2021-06-14 0001392694 SURG:BlueSkiesConnectionsLLCMember 2023-06-01 2023-06-01 0001392694 SURG:SeriesAConvertiblePreferredStocksMember 2023-09-30 0001392694 SURG:SeriesAConvertiblePreferredStocksMember 2023-01-01 2023-09-30 0001392694 us-gaap:SeriesAPreferredStockMember 2022-12-31 0001392694 us-gaap:SeriesAPreferredStockMember 2022-01-01 2022-12-31 0001392694 SURG:SeriesCConvertiblePreferredStocksMember 2023-09-30 0001392694 SURG:SeriesCConvertiblePreferredStocksMember 2023-01-01 2023-09-30 0001392694 us-gaap:CommonStockMember 2023-03-01 2023-03-31 0001392694 srt:MinimumMember 2023-09-30 0001392694 srt:MaximumMember 2023-09-30 0001392694 us-gaap:WarrantMember 2023-09-30 0001392694 us-gaap:ComputerSoftwareIntangibleAssetMember us-gaap:CommonStockMember 2022-01-01 2022-12-31 0001392694 us-gaap:ComputerSoftwareIntangibleAssetMember us-gaap:CommonStockMember 2022-12-31 0001392694 us-gaap:WarrantMember 2022-01-01 2022-12-31 0001392694 us-gaap:WarrantMember 2022-12-31 0001392694 srt:ChiefFinancialOfficerMember 2023-01-01 2023-09-30 0001392694 srt:ChiefFinancialOfficerMember 2022-01-01 2022-09-30 0001392694 us-gaap:InterestExpenseMember 2022-12-31 0001392694 us-gaap:InterestExpenseMember 2022-01-01 2022-12-31 0001392694 SURG:NotesPayableMember 2022-12-31 0001392694 SURG:NotesPayableMember 2022-01-01 2022-12-31 0001392694 SURG:WarrantOneMember 2023-01-01 2023-09-30 0001392694 SURG:WarrantTwoMember 2023-01-01 2023-09-30 0001392694 SURG:WarrantThreeMember 2023-01-01 2023-09-30 0001392694 SURG:WarrantOneMember us-gaap:MeasurementInputExpectedTermMember 2022-12-31 0001392694 SURG:WarrantOneMember us-gaap:MeasurementInputPriceVolatilityMember srt:MinimumMember 2022-12-31 0001392694 SURG:WarrantOneMember us-gaap:MeasurementInputPriceVolatilityMember srt:MaximumMember 2022-12-31 0001392694 SURG:WarrantOneMember us-gaap:MeasurementInputExpectedDividendRateMember 2022-12-31 0001392694 SURG:WarrantOneMember us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MinimumMember 2022-12-31 0001392694 SURG:WarrantOneMember us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MaximumMember 2022-12-31 0001392694 SURG:WarrantTwoMember us-gaap:MeasurementInputExpectedTermMember 2022-12-31 0001392694 SURG:WarrantTwoMember us-gaap:MeasurementInputPriceVolatilityMember 2022-12-31 0001392694 SURG:WarrantTwoMember us-gaap:MeasurementInputExpectedDividendRateMember 2022-12-31 0001392694 SURG:WarrantTwoMember us-gaap:MeasurementInputRiskFreeInterestRateMember 2022-12-31 0001392694 SURG:WarrantThreeMember us-gaap:MeasurementInputExpectedTermMember 2022-12-31 0001392694 SURG:WarrantThreeMember us-gaap:MeasurementInputPriceVolatilityMember srt:MinimumMember 2022-12-31 0001392694 SURG:WarrantThreeMember us-gaap:MeasurementInputPriceVolatilityMember srt:MaximumMember 2022-12-31 0001392694 SURG:WarrantThreeMember us-gaap:MeasurementInputExpectedDividendRateMember 2022-12-31 0001392694 SURG:WarrantThreeMember us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MinimumMember 2022-12-31 0001392694 SURG:WarrantThreeMember us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MaximumMember 2022-12-31 0001392694 SURG:SurgePhoneWirelessAndTorchWirelessMember 2023-07-01 2023-09-30 0001392694 SURG:SurgePhoneWirelessAndTorchWirelessMember 2022-07-01 2022-09-30 0001392694 SURG:SurgePhoneWirelessAndTorchWirelessMember 2023-01-01 2023-09-30 0001392694 SURG:SurgePhoneWirelessAndTorchWirelessMember 2022-01-01 2022-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2023-07-01 2023-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2022-07-01 2022-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2022-01-01 2022-09-30 0001392694 SURG:LogicsIQIncMember 2023-07-01 2023-09-30 0001392694 SURG:LogicsIQIncMember 2022-07-01 2022-09-30 0001392694 SURG:LogicsIQIncMember 2022-01-01 2022-09-30 0001392694 SURG:SurgeFintechECSMember 2023-07-01 2023-09-30 0001392694 SURG:SurgeFintechECSMember 2022-07-01 2022-09-30 0001392694 SURG:SurgeFintechECSMember 2023-01-01 2023-09-30 0001392694 SURG:SurgeFintechECSMember 2022-01-01 2022-09-30 0001392694 SURG:SurgePaysIncMember 2023-07-01 2023-09-30 0001392694 SURG:SurgePaysIncMember 2022-07-01 2022-09-30 0001392694 SURG:SurgePaysIncMember 2022-01-01 2022-09-30 0001392694 SURG:SurgePhoneWirelessAndTorchWirelessMember 2023-09-30 0001392694 SURG:SurgePhoneWirelessAndTorchWirelessMember 2022-12-31 0001392694 SURG:SurgeBlockchainLLCMember 2023-09-30 0001392694 SURG:SurgeBlockchainLLCMember 2022-12-31 0001392694 SURG:LogicsIQIncMember 2023-09-30 0001392694 SURG:LogicsIQIncMember 2022-12-31 0001392694 SURG:SurgeFintechECSMember 2023-09-30 0001392694 SURG:SurgeFintechECSMember 2022-12-31 0001392694 SURG:SurgePaysIncMember 2023-09-30 0001392694 SURG:SurgePaysIncMember 2022-12-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________

 

Commission file number 001-40992

 

SURGEPAYS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   98-0550352

(State or other jurisdiction of

incorporation or organization)

  

(I. R. S. Employer

Identification No.)

 

3124 Brother Blvd, Suite 104    
Bartlett TN   38133
(Address of principal executive offices)   (Zip Code)

 

901-302-9587

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   SURG  

The Nasdaq Stock Market LLC

(Nasdaq Capital Market)

Common Stock Purchase Warrants   SURGW  

The Nasdaq Stock Market LLC

(Nasdaq Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares of the registrant’s common stock outstanding as of November 10, 2023 was 14,228,202 shares.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I 2
     
ITEM 1: FINANCIAL STATEMENTS 2
  Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 3
  Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2023, and 2022 4
  Consolidated Statement of Shareholders’ Equity (Unaudited) for the three and nine months ended September 30, 2023, and 2022 5-6
  Consolidated Statements of Cash flow (Unaudited) for the nine months ended September 30, 2023, and 2022 7
  Notes to Consolidated Financial Statements (Unaudited) 8
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 53
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 67
ITEM 4: CONTROLS AND PROCEDURES 67
     
PART II 68
   
ITEM 1: LEGAL PROCEEDINGS 68
ITEM 1A: RISK FACTORS 69
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 69
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 69
ITEM 4: MINE SAFETY DISCLOSURE 69
ITEM 5: OTHER INFORMATION 69
ITEM 6: EXHIBITS 70
SIGNATURES 71

 

1
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

SurgePays, Inc. and Subsidiaries

 

    Page(s)
     
Consolidated Balance Sheets   3
     
Consolidated Statements of Operations   4
     
Consolidated Statements of Changes in Stockholders’ Equity   5 - 6
     
Consolidated Statements of Cash Flows   7
     
Notes to Consolidated Financial Statements   8 - 52

 

2
 

 

Consolidated Balance Sheets

 

   September 30, 2023   December 31, 2022 
   (Unaudited)   (Audited) 
         
Assets          
           
Current Assets          
Cash  $12,731,449   $7,035,654 
Accounts receivable - net   9,774,428    9,230,365 
Inventory   14,549,407    11,186,242 
Prepaids   197,879    111,524 
Total Current Assets   37,253,163    27,563,785 
           
Property and equipment - net   432,224    643,373 
           
Other Assets          
Note receivable   176,851    176,851 
Intangibles - net   2,289,847    2,779,977 
Internal use software development costs - net   571,689    387,180 
Goodwill   1,666,782    1,666,782 
Investment in CenterCom   449,843    354,206 
Operating lease - right of use asset - net   398,926    431,352 
Total Other Assets   5,553,938    5,796,348 
           
Total Assets  $43,239,325   $34,003,506 
           
Liabilities and Stockholders’ Equity          
           
Current Liabilities          
Accounts payable and accrued expenses  $6,833,124   $5,784,374 
Accounts payable and accrued expenses - related party   1,002,558    1,728,721 
Installment sale liability   5,920,346    13,018,184 
Deferred revenue   118,000    243,110 
Operating lease liability   42,208    39,490 
Notes payable - related parties   558,150    1,108,150 
Notes payable   10,554    1,542,033 
Total Current Liabilities   14,484,940    23,464,062 
           
Long Term Liabilities          
Note payable   53,135    53,134 
Notes payable - related parties   4,026,413    4,493,798 
Notes payable - SBA government   463,870    474,846 
Operating lease liability   367,465    399,413 
Total Long Term Liabilities   4,910,883    5,421,191 
           
Total Liabilities   19,395,823    28,885,253 
           
Commitments and Contingencies (Note 8)   -    - 
           
Stockholders’ Equity          
Common stock, $0.001 par value, 500,000,000 shares authorized 14,343,261 and 14,116,832 shares issued and outstanding, respectively   14,344    14,117 
Additional paid-in capital   41,889,886    40,780,707 
Accumulated deficit   (18,207,472)   (35,804,106)
Stockholders’ equity   23,696,758    4,990,718 
Non-controlling interest   146,744    127,535 
Total Stockholders’ Equity   23,843,502    5,118,253 
           
Total Liabilities and Stockholders’ Equity  $43,239,325   $34,003,506 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

3
 

 

Consolidated Statements of Operations

 

   2023   2022   2023   2022 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2023   2022   2023   2022 
                 
Revenues  $34,160,834   $36,171,345   $104,823,710   $85,317,860 
                     
Costs and expenses                    
Cost of revenue   23,680,247    34,250,541    76,622,912    78,572,421 
General and administrative expenses   3,389,015    2,933,204    10,201,663    9,655,529 
Total costs and expenses   27,069,262    37,183,745    86,824,575    88,227,950 
                     
Income (loss) from operations   7,091,572    (1,012,400)   17,999,135    (2,910,090)
                     
Other income (expense)                    
Interest expense   (130,335)   (633,593)   (478,928)   (1,370,236)
Gain (loss) on investment in CenterCom   51,894    (52,435)   95,636    (42,099)
Amortization of debt discount   -    (57,933)   -    (95,001)
Gain on forgiveness of PPP loan - government   -    -    -    524,143 
Total other income (expense) - net   (78,441)   (743,961)   (383,292)   (983,193)
                     
Net income (loss) including non-controlling interest   7,013,131    (1,756,361)   17,615,843    (3,893,283)
                     
Non-controlling interest   (71,170)   (216,163)   19,209    (167,714)
                     
Net income (loss) available to common stockholders  $7,084,301   $(1,540,198)  $17,596,634   $(3,725,569)
                     
Earnings (loss) per share - attributable to common stockholders                    
Basic  $0.50   $(0.12)  $1.24   $(0.30)
Diluted  $0.49   $(0.12)  $1.19   $(0.30)
                     
Weighted average number of shares outstanding - attributable to common stockholders                    
Basic   14,291,263    12,443,052    14,205,127    12,259,907 
Diluted   14,507,984    12,443,052    14,740,201    12,259,907 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

4
 

 

Consolidated Statements of Changes in Stockholders’ Equity

 

     Shares   Amount   Capital   Deficit   Interest   Equity 
   Common Stock   Additional Paid-in   Accumulated   Non-Controlling   Total Stockholders’ 
   Shares   Amount   Capital   Deficit   Interest   Equity 
                         
December 31, 2022- -14,116,832   $14,117   $40,780,707   $(35,804,106)  $127,535   $5,118,253 
                               
Stock issued for services   60,082    60    307,398    -                         -    307,458 
                               
Recognition of stock based compensation - stock options   -    -    9,294    -    -    9,294 
                               
Non-controlling interest   -    -    -    -    (576)   (576)
                               
Net income- --    -    -    4,546,341    -    4,546,341 
                               
March 31, 2023- -14,176,914    14,177    41,097,399    (31,257,765)   126,959    9,980,770 
                               
Stock issued for services   64,927    65    311,121    -    -    311,186 
                               
Recognition of stock based compensation - stock options   -    -    9,294    -    -    9,294 
                               
Exercise of warrants for cash   43,814    44    207,196    -    -    207,240 
                               
Non-controlling interest   -    -    -    -    90,955    90,955 
                               
Net income- --    -    -    5,965,992    -    5,965,992 
                               
June 30, 2023- -14,285,655    14,286    41,625,010    (25,291,773)   217,914    16,565,437 
                               
Stock issued for services   57,606    58    255,582    -    -    255,640 
                               
Recognition of stock based compensation - stock options   -    -    9,294    -    -    9,294 
                               
Non-controlling interest   -    -    -    -    (71,170)   (71,170)
                               
Net income- --    -    -    7,084,301    -    7,084,301 
                               
September 30, 2023- -14,343,261   $14,344   $41,889,886   $(18,207,472)  $146,744   $23,843,502 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

5
 

 

   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Equity 
   Series A Preferred Stock   Series C Preferred Stock   Common Stock   Additional Paid-in   Accumulated   Non-Controlling  

Total Stockholders’

 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Equity 
                                         
December 31, 2021   260,000   $260    -   $-    12,063,834   $12,064   $38,662,340   $(35,123,343)  $-   $3,551,321 
                                                   
Recognition of stock based compensation   -    -    -    -    -    -    9,294    -    -    9,294 
                                                   
Warrants issued as debt issue costs   -               -                 -              -    -    -    38,953    -    -    38,953 
                                                   
Non-controlling interest   -    -    -    -    -    -    -    -    (32,645)   (32,645)
                                                   
Net loss   -    -    -    -    -    -    -    (1,212,334)                           -    (1,212,334)
                                                   
March 31, 2022   260,000    260    -    -    12,063,834    12,064    38,710,587    (36,335,677)   (32,645)   2,354,589 
                                                   
Recognition of stock based compensation   -    -    -    -    -    -    9,294    -    -    9,294 
                                                   
Stock issued as direct offering costs   -    -    -    -    200,000    200    (200)   -    -    - 
                                                   
Stock issued to purchase software   -    -    -    -    85,000    85    411,315    -    -    411,400 
                                                   
Warrants issued as debt issue costs   -    -    -    -    -    -    76,451    -    -    76,451 
                                                   
Warrants issued as interest expense   -    -    -    -    -    -    212,608    -    -    212,608 
                                                   
Non-controlling interest   -    -    -    -    -    -    -    -    81,094    81,094 
                                                   
Net loss   -    -    -    -    -    -    -    (973,037)   -    (973,037)
                                                   
June 30, 2022   260,000    260    -    -    12,348,834    12,349    39,420,055    (37,308,714)   48,449    2,172,399 
                                                   
Recognition of stock based compensation   -    -    -    -    -    -    9,294    -    -    9,294 
                                                   
Warrants issued as interest expense   -    -    -    -    -    -    38,754    -    -    38,754 
                                                   
Exercise of warrants (cashless)   -    -    -    -    147,153    147    (147)   -    -    - 
                                                   
Non-controlling interest   -    -    -    -    -    -    -    -    (216,163)   (216,163)
                                                   
Net loss   -    -    -    -    -    -    -    (1,540,198)   -    (1,540,198)
                                                   
September 30, 2022   260,000   $260    -   $-    12,495,987   $12,496   $39,467,956   $(38,848,912)  $(167,714)  $464,086 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

6
 

 

Consolidated Statements of Cash Flows

 

   2023   2022 
   For the Nine Months Ended September 30, 
   2023   2022 
         
Operating activities          
Net income (loss) - including non-controlling interest  $17,615,843   $(3,893,283)
Adjustments to reconcile net income (loss) to net cash used in operations          
Provision for inventory obsolescence   -    51,718 
Depreciation and amortization   701,279    664,534 
Amortization of right-of-use assets   32,426    44,747 
Amortization of debt discount/debt issue costs   -    95,001 
Amortization of internal use software development costs   96,795    27,882 
Stock issued for services   874,284    - 
Recognition of share based compensation - related party   27,882    - 
Warrants issued for interest expense   -    251,362 
(Gain) loss on equity method investment - CenterCom   (95,637)   42,098 
Gain on forgiveness of PPP loan   -    (524,143)
Changes in operating assets and liabilities        
(Increase) decrease in           
Accounts receivable   (544,063)    (6,217,533) 
Inventory   (3,363,165)   (5,184,807)
Prepaids   (86,355)   (131,853)
Increase (decrease) in          
Accounts payable and accrued expenses   1,048,750    7,074,491 
Accounts payable and accrued expenses - related party   (726,163)   2,168,460 
Installment sale liability - net   (7,097,838)   - 
Deferred revenue   (125,110)   1,620,260 
Operating lease liability   (29,230)   (39,977)
Net cash provided by (used in) operating activities   8,329,698    (3,951,043)
           
Investing activities          
Purchase of property and equipment   -    (9,611)
Capitalized internal use software development costs   (281,304)   - 
Purchase of software   -    (300,000)
Acquisition of Torch, Inc.   -    (800,000)
Net cash used in investing activities   (281,304)   (1,109,611)
           
Financing activities          
Proceeds from exercise of common stock warrants   207,240    - 
Repayments of loans - related party   (1,017,385)   - 
Proceeds from notes payable   -    6,700,000 
Repayments on notes payable   (1,531,478)   - 
Repayments on notes payable - SBA government   (10,976)   (30,792)
Net cash provided (used in) by financing activities   (2,352,599)   6,669,208 
           
Net increase in cash   5,695,795    1,608,554 
           
Cash - beginning of period   7,035,654    6,283,496 
           
Cash - end of period  $12,731,449   $7,892,050 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $209,840   $195,950 
Cash paid for income tax  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities          
           
Debt issue costs recorded in connection with notes payable  $-   $115,404 
Stock issued to acquire software  $-   $411,400 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

7
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Note 1 - Organization and Nature of Operations

 

Organization and Nature of Operations

 

SurgePays, Inc. (“SurgePays,” “SP,” “we,” “our” or “the Company”), and its operating subsidiaries, is a technology-driven company building a next generation supply chain software platform that can offer wholesale goods and services more cost efficiently than traditional and existing wholesale distribution models.

 

The parent (SurgePays, Inc.) and subsidiaries are organized as follows:

 

Company Name   Incorporation Date  State of Incorporation
SurgePays, Inc.   August 18, 2006  Nevada
KSIX Media, Inc.   November 5, 2014  Nevada
KSIX, LLC   September 14, 2011  Nevada
Surge Blockchain, LLC   January 29, 2009  Nevada
Injury Survey, LLC   July 28, 2020  Nevada
DigitizeIQ, LLC   July 23, 2014  Illinois
LogicsIQ, Inc.   October 2, 2018  Nevada
Surge Payments, LLC   December 17, 2018  Nevada
SurgePhone Wireless, LLC   August 29, 2019  Nevada
SurgePays Fintech, Inc.   August 22, 2019  Nevada
ECS Prepaid, LLC   June 9, 2009  Missouri
Central States Legal Services, Inc.   August 1, 2003  Missouri
Electronic Check Services, Inc.   May 19, 1999  Missouri
Torch Wireless * January 29, 2019  Wyoming

 

* Effective January 1, 2022, the Company acquired Torch Wireless

 

8
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2023 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 30, 2023.

 

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

 

Liquidity and Management’s Plans

 

As reflected in the accompanying consolidated financial statements, for the nine months September 30, 2023, the Company had:

 

● Net income available to common stockholders of $17,596,634; and
● Net cash provided by operations was $8,329,698

 

Additionally, at September 30, 2023, the Company had:

 

● Accumulated deficit of $18,207,472
● Stockholders’ equity of $23,843,502; and
● Working capital of $22,768,223

 

9
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand of $12,731,449 at September 30, 2023.

 

The Company has historically incurred significant losses and has not, prior to 2023, demonstrated an ability to generate sufficient revenues from the sales of its products and services to achieve profitable operations. There can be no assurance that profitable operations will continue to be, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended September 30, 2024, and our current capital structure including equity-based instruments and our obligations and debts.

 

The Company believes it has sufficient cash resources on hand along with access to additional debt and/or equity-based capital from third parties and related parties as needed to meet its current obligations for a period that is one year from the issuance date of these financial statements.

 

Management’s strategic plans include the following:

 

● Continue the hyper growth of the Affordable Connectivity Program revenue stream,
● Expand product and services offerings to a larger surrounding geographic area,
● Continuing to explore and execute prospective partnering or distribution opportunities; and
● Identifying unique market opportunities that represent potential positive short-term cash flow.

 

Note 2 - Summary of Significant Accounting Policies

 

Principles of Consolidation and Non-Controlling Interest

 

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than the Company. The aggregate of the income or loss and corresponding equity that is not owned by us is included in Non-controlling Interests in the consolidated financial statements.

 

10
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Business Combinations

 

The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date.

 

The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.

 

Significant judgments are used in determining fair values of assets acquired and liabilities assumed, as well as intangibles. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows, and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.

 

Effective January 1, 2022, the Company executed a management agreement with Torch Wireless (“Torch”). Generally, the Company was engaged to handle the following services:

 

  ● Oversee management of the business being conducted by Torch,
  ● Involved in the performance of Torch’s obligations under contracts regarding its business operations and maintenance of Torch’s customer relationships,
  ● Assist Torch with regulatory compliance,
  ● Manage all billing and collection functions, including the right to collect revenues related to Torch’s business operations, as part of the agreement, Torch may not participate in this function; and
  ● Manage all payment functions related to the business, including the right to disburse funds, as part of the agreement, Torch may not participate in this function

 

Torch is a provider of subsidized mobile broadband services to consumers qualifying under the federal guidelines of the U.S. Federal Communication Commission’s Affordable Connectivity Program (“ACP”). The ACP provides the Company with up to a $100 reimbursement for the cost of each tablet device distributed and a $30 per customer, per month subsidy for mobile broadband (internet connectivity) services.

 

11
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

With the purchase of Torch, the Company offers subsidized mobile broadband in all fifty (50) states.

 

It was determined that the Company had acquired 100% of Torch, effective January 1, 2022, resulting in Torch becoming a wholly-owned subsidiary, in a transaction accounted for as a business combination. Pursuant to ASC 805-10-25-7, the Company determined that the acquisition date preceded the closing date as it was managing Torch and in full control of all operational decision making. At this time, the Company had obtained control of Torch through its management contract.

 

At the time of acquisition, Torch had no significant assets or liabilities. The Company paid $800,000. As a result of the acquisition, the Company recorded goodwill of $800,000.

 

At the time of acquisition, Torch had nominal revenues and losses. As a result, and given the immaterial nature of this acquisition, the Company elected not to present any pro-forma financial information during the year ended December 31, 2022.

 

In addition, the Company was required to pay the Sellers monthly residual payments for customers enrolled by the Company through December 31, 2022 of either $2 or $3 per customer (depending on the category of customer).

 

For the nine months ended September 30, 2023 and 2022, the Company incurred expenses of $0 and $584,038, respectively, related to the residual payments. All expenses are included as a component of cost of goods sold.

 

This transaction did not involve the purchase of a “significant amount of assets” as defined in the Instructions to Item 2.01 of Form 8-K. Additionally, the acquisition of Torch was not deemed to be significant at any level under SEC Regulation S-X 3.05 and did not require the presentation of any additional historical audited financial statements.

 

For financial reporting purposes, Torch has been consolidated into the Company’s consolidated statements of financial position, results of operations, and cash flows.

 

At September 30, 2023 and December 31, 2022 goodwill was $1,666,782.

 

There were no impairment losses for the nine months ended September 30, 2023 and 2022, respectively.

 

12
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Note Receivable (Sale of Former Subsidiary)

 

On May 7, 2021, the Company disposed of its subsidiary True Wireless, Inc.

 

In connection with the sale, the Company received an unsecured note receivable for $176,851, bearing interest at 0.6%, with a default interest rate of 10%. The Company will receive twenty-five (25) monthly payments of principal and accrued interest totaling $7,461 commencing in June 2023.

 

Payments are scheduled as follows:

 

For the Year Ended December 31,    
     
2023 (3 months)  $52,227 
2024   89,532 
2025   44,766 
    186,525 
Less: amount representing interest   (9,674)
Total  $176,851 

 

On July 12, 2023, Notice of Default was provided by SurgePays, Inc. to Blue Skies Connections, LLC for failure to pay amounts due under that certain Promissory Note dated June 14, 2021 by Blue Skies Connections, LLC in favor of SurgePays, Inc. in the original principal amount of $176,851 (the “Note”). Pursuant to the terms of the Note, SurgePays, Inc. accelerated the amount due. See Note 8 for Contingencies – Legal Matters for additional discussion.

 

As of September 30, 2023, the Company believes the note is collectible.

 

Business Segments and Concentrations

 

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as multiple reportable segments. See Note 10 regarding segment disclosure.

 

The SurgePhone and Torch Wireless business segment made up approximately 85% and 72% of total consolidated revenues for the nine months ended September 30, 2023 and 2022, respectively.

 

13
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Revenues related to this business segment are 100% derived from programs administered by the Federal Communications Commission (FCC), and all funds related to these programs are received directly from organizations under the direction of the FCC and subject to administrative rulings, statutory changes, and other funding restrictions that could impact the Company’s operations in this segment.

 

Accounts receivable related to these programs made up 98% and 96% of accounts receivable at September 30, 2023 and December 31, 2022, respectively.

 

Customers in the United States accounted for 100% of our revenues. We do not have any property or equipment outside of the United States.

 

Use of Estimates

 

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Significant estimates during the nine months ended September 30, 2023 and 2022, 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.

 

Risks and Uncertainties

 

The Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future may experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

 

14
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Fair Value of Financial Instruments

 

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

  ● Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
  ● Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
  ● Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate. Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

 

15
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

The Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, and accounts payable and accrued expenses – related party, are carried at historical cost. At September 30, 2023 and December 31, 2022, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

 

Cash and Cash Equivalents and Concentration of Credit Risk

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

 

At September 30, 2023 and December 31, 2022, respectively, the Company did not have any cash equivalents.

 

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000.

 

At September 30, 2023 and December 31, 2022, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

 

Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

 

Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made.

 

16
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Allowance for doubtful accounts was $17,525 at September 30, 2023 and December 31, 2022, respectively.

 

There was no bad debt expense for the three and nine months ended September 30, 2023 and 2022, respectively.

 

Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

Inventory

 

Inventory primarily consists of tablets, cell phones and sim cards. Inventories are stated at the lower of cost or net realizable value using the average cost valuation method.

 

There was a provision for inventory obsolescence of $0 and $51,718 for the nine months ended September 30, 2023 and 2022, respectively.

 

At September 30, 2023 and December 31, 2022, the Company had inventory of $14,549,407 and $11,186,242, respectively.

 

Impairment of Long-lived Assets including Internal Use Capitalized Software Costs

 

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

 

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

There were no impairment losses for the nine months ended September 30, 2023 and 2022, respectively.

 

17
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Property and Equipment

 

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

There were no impairment losses for the three and nine months ended September 30, 2023 and 2022, respectively.

 

Internal Use Software Development Costs

 

We capitalize certain internal use software development costs associated with creating and enhancing internally developed software related to our technology infrastructure. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining the software. Software development costs that do not meet the qualification for capitalization, as further discussed below, are expensed as incurred and recorded in general and administrative expenses in the consolidated results of operations.

 

Software development activities generally consist of three stages:

 

(i) planning stage,
(ii) application and infrastructure development stage, and
(iii) post implementation stage.

 

Costs incurred in the planning and post implementation stages of software development, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred.

 

18
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

We capitalize costs associated with software developed for internal use when the planning stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development stages, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete, and the software and technologies are ready for their intended purpose. There is judgment involved in estimating the stage of development as well as estimating time allocated to a particular project. A significant change in the time spent on each project could have a material impact on the amount capitalized and related amortization expense in subsequent periods.

 

We amortize internal use software development costs using a straight-line method over a three-year estimated useful life, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived. We determined the life of internal use software based on historical software upgrades and replacement.

 

On an ongoing basis, we assess if the estimated remaining useful lives of capitalized projects continue to be reasonable based on the remaining expected benefit and usage. If the remaining useful life of a capitalized project is revised, it is accounted for as a change in estimate and the remaining unamortized cost of the underlying asset is amortized prospectively over the updated remaining useful life.

 

We also evaluate internal use software for abandonment and use that as a significant indicator for impairment on a quarterly basis.

 

Right of Use Assets and Lease Obligations

 

The Right of Use Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

 

19
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the performance of the business remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company. The Company’s operating leases contained renewal options that expire at various dates with no residual value guarantees. Future obligations relating to the exercise of renewal options is included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities.

 

As the rate implicit in leases are not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment.

 

See Note 8 regarding operating leases.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606 to align revenue recognition more closely with the delivery of the Company’s services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:

 

Identify the contract with a customer

 

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

20
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Identify the performance obligations in the contract

 

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

 

Determine the transaction price

 

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component.

 

Allocate the transaction price to performance obligations in the contract

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

 

21
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Recognize revenue when or as the Company satisfies a performance obligation

 

The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

 

The following reflects additional discussion regarding our revenue recognition policies for each of our material revenue streams. For each revenue stream we do not offer any returns, refunds or warranties, and no arrangements are cancellable. Additionally, all contract consideration is fixed and determinable at the initiation of the contract. Performance obligations for Torch and LogicsIQ are satisfied when services are performed. Performance obligations for ECS and SB are satisfied at point of sale.

 

For each of our revenue streams we only have a single performance obligation.

 

Surge Phone Wireless (SPW) and Torch Wireless

 

SPW and Torch Wireless are licensed to provide subsidized mobile broadband services through the ACP to qualifying low-income customers to all fifty (50) states. Revenues are recognized when an ACP application is completed and accepted. Each month we reconcile subscriber usage to ensure the service was utilized. A monthly file is submitted to the Universal Service Administrative Company for review and approval, at which time we have completed our performance obligation and recognize accounts receivable and revenue. Revenues are recorded in the month when services were rendered, with payment typically received on the 28th of the following month.

 

Surge Blockchain

 

Revenues are generated through the sale of various products such as energy drinks, CBD products, and other top selling products in convenience store and bodega nationwide. At the time in which our products are sold at the store our performance obligation is considered complete. At point of sale, our web portal platform initiates an automated clearing house transaction (ACH) resulting in the recording revenue.

 

22
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

LogicsIQ

 

LogicsIQ, Inc. is a lead generation and case management solutions company primarily serving law firms in the mass tort industry. Revenues are earned from our lead generation retained services offerings and call center activities through CenterCom.

 

Lead generation consist of sourcing leads, which requires us to drive traffic to our landing pages for a specific marketing campaign. We also achieve this in certain marketing campaigns by using third-party preferred vendors to meet the needs of our clients. Revenues are recognized at the time the lead is delivered to the client. If payment is received in advance of the delivery of services, it is included in deferred revenue, and subsequently recognized once the performance obligation has been completed.

 

Retained service offerings consist of turning leads into a retained legal case. To provide this service to our customers, we qualify leads through verification of information collected during the lead generation process. Additionally, we further qualify these leads using a client questionnaire which assists in determining the services to be provided. The qualification process is completed using our call center operations.

 

Effective February 1, 2023, LogicsIQ started offering call center services to existing clients. These services are similar in nature to the services CenterCom offers LogicsIQ. The total revenue from these services for the three and nine months ended September 30, 2023 was $340,989 and $1,212,019, respectively.

 

If payment is received in advance of the delivery of services, it is included in deferred revenue, and subsequently recognized once the performance obligation has been completed. At the time of delivery of leads and the creation of retained cases (customers are qualified at this point), our performance obligation has been completed and revenues are recognized. Arrangements with customers do not provide the customer with the right to take possession of our software or platform at any time. Once the advertising is delivered, it is non-refundable.

 

Surge Fintech and ECS

 

Revenues are generated through the sale of telecommunication products such as mobile phones, wireless top-up refills, and other mobile related products. At the time in which our products are sold through our online web portal (point of sale), our performance obligation is considered complete. At point of sale, our web portal platform initiates an automated clearing house transaction (ACH) resulting in the recording revenue.

 

23
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Contract Liabilities (Deferred Revenue)

 

Contract liabilities represent deposits made by customers before the satisfaction of performance obligation and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer based on the terms of the contract, the liability for the customer deposit is relieved and revenue is recognized.

 

At September 30, 2023 and December 31, 2022, the Company had deferred revenue of $118,000 and $243,110, respectively.

 

The following represents the Company’s disaggregation of revenues for the nine months ended September 30, 2023 and 2022:

 

   For the Nine Months Ended September 30, 
   2023   2022 
                 
Revenue  Revenue   % of Revenues   Revenue   % of Revenues 
                 
Surge Phone and Torch Wireless  $89,536,546    85.42%  $61,462,327    72.04%
Surge Blockchain, LLC   30,533    0.03%   102,378    0.12%
LogicsIQ, Inc.   6,647,061    6.34%   10,689,006    12.53%
Surge Fintech & ECS   8,609,570    8.21%   13,064,149    15.31%
Total Revenues  $104,823,710    100%  $85,317,860    100%

 

Cost of Revenues

 

Cost of revenues consists of purchased telecom services including data usage and access to wireless networks. Additionally, prepaid phone cards, commissions, and advertising costs.

 

Income Taxes

 

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

24
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of September 30, 2023 and December 31, 2022, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

 

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the nine months ended September 30, 2023 and 2022, respectively.

 

For the three and nine months ended September 30, 2023, the Company generated net income. The Company currently has an unapplied net operating loss carryforward (deferred tax asset), which is currently being evaluated for applicability in offsetting the current taxable net income. The Company believes the current net operating loss carryforward is in excess of any amounts of income tax that may be due. At September 30, 2023, the Company has an estimated income tax liability of $0.

 

Investment – Former Related Party

 

On January 17, 2019, we announced the completion of an agreement to acquire a 40% equity ownership of CenterCom Global, S.A. de C.V. (“CenterCom”). CenterCom is a dynamic operations center currently providing sales support, customer service, IT infrastructure design, graphic media, database programming, software development, revenue assurance, lead generation, and other various operational support services. Our CenterCom team is based in El Salvador. CenterCom also provides call center support for various third-party clients.

 

Anthony N. Nuzzo, a former director and officer and the holder of approximately 10% of our voting equity, had a controlling interest in CenterCom Global. During 2022, Mr. Nuzzo passed away. See Form 8-K filed on March 24, 2022.

 

The strategic partnership with CenterCom as a bilingual operations hub has powered our growth and revenue. CenterCom has been built to support the infrastructure required to rapidly scale in synergy and efficiency to support our sales growth, customer service and development.

 

We account for this investment under the equity method. Investments accounted for under the equity method are recorded based upon the amount of our investment and adjusted each period for our share of the investee’s income or loss. All investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment may not be recoverable. The financial information used to account for the investment is unaudited.

 

25
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

At September 30, 2023 and December 31, 2022, our investment in CenterCom was $449,843 and $354,206, respectively.

 

During the three months ended September 30, 2023 and 2022, we recognized a gain of $51,894 and a loss of $52,435, respectively.

 

During the nine months ended September 30, 2023 and 2022, we recognized a gain of $95,636 and a loss of $42,099, respectively.

 

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

 

The Company recognized $89,069 and $34,708 in marketing and advertising costs during the three months ended September 30, 2023 and 2022, respectively.

 

The Company recognized $137,933 and $170,714 in marketing and advertising costs during the nine months ended September 30, 2023 and 2022, respectively.

 

Stock-Based Compensation

 

The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes model for measuring the fair value of options.

 

The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

26
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

When determining fair value of stock-based compensation, the Company considers the following assumptions in the Black-Scholes model:

 

● Exercise price,
● Expected dividends,
● Expected volatility,
● Risk-free interest rate; and
● Expected life of option

 

Stock Warrants

 

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.

 

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period or at the date of issuance if there is not a service period.

 

Basic and Diluted Earnings (Loss) per Share

 

Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.

 

Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

 

Potentially dilutive common shares may consist of contingently issuable shares, common stock issuable upon the conversion of stock options and warrants (using the treasury stock method), and convertible notes. These common stock equivalents may be dilutive in the future.

 

27
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.

 

The following potentially dilutive equity securities outstanding as of September 30, 2023 and 2022 were as follows:

 

   September 30, 2023   September 30, 2022 
Warrants   5,616,892    5,648,563 
Stock options   11,902    6,801 
Series A, convertible preferred stock   -    26,000 
Total common stock equivalents   5,628,794    5,681,364 

 

Warrants and stock options included as commons stock equivalents represent those that are fully vested and exercisable. See Note 9.

 

Based on the potential common stock equivalents noted above at September 30, 2023, the Company has sufficient authorized shares of common stock (500,000,000) to settle any potential exercises of common stock equivalents.

 

The following table shows the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2023. The Company had a net loss in 2022, as a result, basic and diluted earnings per share for the three and nine months ended September 30, 2022 were the same.

 

   3 Months Ended   9 Months Ended 
   September 30, 2023   September 30, 2023 
         
Numerator          
Net income  $7,084,301   $17,596,634 
           
Denominator          
Weighted average shares outstanding - basic   14,291,263    14,205,127 
Effect of dilutive securities (warrants)   216,721    535,074 
Weighted average shares outstanding - diluted   14,507,984    14,740,201 
           
Earnings per share - basic  $0.50   $1.24 
Earnings per share - diluted  $0.49   $1.19 

 

28
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Related Parties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

During the nine months ended September 30, 2023 and 2022, the Company incurred expenses with related parties in the normal course of business totaling $124,767 and $124,767, respectively, with Carddawg Investments, Inc. an affiliate of our Chief Executive Officer (Kevin Brian Cox).

 

From time to time, the Company may use credit cards to pay corporate expenses, these credit cards are in the names of certain of the Company’s officers and directors. These amounts are insignificant.

 

Recent Accounting Standards

 

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

 

29
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

In March 2022, the Financial Accounting Standards Board (the “FASB”) issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 was effective for the Company January 1, 2023. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

 

This guidance was adopted on January 1, 2023. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

 

Reclassifications

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the consolidated results of operations, stockholders’ equity, or cash flows.

 

Note 3 – Property and Equipment

 

Property and equipment consisted of the following:

 

           Estimated Useful
Type  September 30, 2023   December 31, 2022   Lives (Years)
            
Computer equipment and software  $1,006,286   $1,006,286   3 - 5
Furniture and fixtures   82,752    82,752   5 - 7
    1,089,038    1,089,038    
Less: accumulated depreciation/amortization   656,814    445,665    
Property and equipment - net  $432,224   $643,373    

 

In June 2022, the Company acquired software having a fair value of $711,400. Payment for the software consisted of $300,000 as well as the issuance of 85,000 shares of common stock having a fair value of $411,400 ($4.84/share), based upon the quoted closing trading price.

 

30
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Depreciation and amortization expense for the three months ended September 30, 2023 and 2022 was $211,149 and $140,318, respectively.

 

Depreciation and amortization expense for the nine months ended September 30, 2023 and 2022 was $701,279 and $664,534, respectively.

 

These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

Note 4 – Intangibles

 

Intangibles consisted of the following:

 

           Estimated Useful
Type  September 30, 2023   December 31, 2022   Lives (Years)
            
Proprietary Software  $4,286,402   $4,286,402   7
Tradenames/trademarks   617,474    617,474   15
ECS membership agreement   465,000    465,000   1
Noncompetition agreement   201,389    201,389   2
Customer Relationships   183,255    183,255   5
    5,753,520    5,753,520    
Less: accumulated amortization   (3,463,673)   (2,973,543)   
Intangibles - net  $2,289,847   $2,779,977    

 

Amortization expense for the three months ended September 30, 2023 and 2022 was $163,377 and $163,377, respectively.

 

Amortization expense for the nine months ended September 30, 2023 and 2022 was $490,130 and $490,130, respectively.

 

31
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

Estimated amortization expense for each of the five (5) succeeding years is as follows:

 

For the Year Ended December 31:    
     
2023 (3 Months)   163,376 
2024   653,507 
2025   653,507 
2026   653,507 
2027   165,950 
Total  $2,289,847 

 

Note 5 – Internal Use Software Development Costs

 

Internal Use Software Development Costs consisted of the following:

 

           Estimated Useful
Type  September 30, 2023   December 31, 2022   Life (Years)
            
Internal Use Software Development Costs  $668,484   $387,180   3
Less: accumulated amortization   96,795    -    
Internal Use Software Development Costs - net  $571,689   $387,180    

 

Costs incurred for Internal Use Software Development Costs

 

Additional costs of $281,304 were incurred in 2023, which will be amortized over their estimated useful life of three (3) years once the application and infrastructure development stage is completed.

 

Amortization of Software Development Costs

 

Management determined that all costs incurred in 2022 related to internal use software development costs related to the application and infrastructure development stage which were completed at December 31, 2022. Amortization of these costs began in 2023.

 

Management has determined that all costs incurred in 2023 related to internal use software development costs related to the application and infrastructure development stage will be completed as of December 31, 2023. Amortization of these costs will begin in 2024.

 

32
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

For the three months ended September 30, 2023 and 2022, amortization of internal use software development costs was $32,265 and $0, respectively.

 

For the nine months ended September 30, 2023 and 2022, amortization of internal use software development costs was $96,795 and $0, respectively.

 

Estimated amortization expense is as follows for the years ended December 31:

 

      
2023 (3 Months)   32,265 
2024   222,828 
2025   222,828 
2026   93,768 
Total  $571,689 

 

Note 6 – Debt

 

The following represents a summary of the Company’s notes payable – SBA government, notes payable – related parties, and notes payable, key terms, and outstanding balances at September 30, 2023 and December 31, 2022, respectively:

 

Notes Payable – SBA government

 

(1) Paycheck Protection Program - PPP Loan

 

Pertaining to the Company’s eighteen (18) month loan and in accordance with the Paycheck Protection Program (“PPP”) and Conditional Loan Forgiveness, the promissory note evidencing the loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company.

 

Under the terms of the PPP loan program, all or a portion of this Loan may be forgiven upon request from Borrower to Lender, provided the Loan proceeds are used in accordance with the terms of the Coronavirus Aid, Relief and Economic Security Act (the “Act” or “CARES”), Borrower is not in default under the Loan or any of the Loan Documents, and Borrower has provided documentation to Lender supporting such request for forgiveness that includes verifiable information on Borrower’s use of the Loan proceeds, to Lender’s satisfaction, in its sole and absolute discretion.

 

33
 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

(2) Economic Injury Disaster Loan (“EIDL”)

 

This program was made available to eligible borrowers in light of the impact of the COVID-19 pandemic and the negative economic impact on the Company’s business. Proceeds from the EIDL are to be used for working capital purposes.

 

Installment payments, including principal and interest, are due monthly (beginning twelve (12) months from the date of the promissory note) in amounts ranging from $109 - $751/month. The balance of principal and interest is payable over the next thirty (30) years from the date of the promissory note. There are no penalties for prepayment. The EIDL Loan is not required to be refinanced by the PPP loan.

 

Schedule of Notes Payable 

   PPP   EIDL   EIDL   PPP     
Terms  SBA   SBA   SBA   SBA   Total 
                     
Issuance dates of SBA loans   April 2020    May 2020    July 2020    March 2021      
Term   18 months    30 Years    30 Years    5 Years      
Maturity date   October 2021    May 2050    July 2050    March 2026      
Interest rate   1%   3.75%   3.75%   1%     
Collateral   Unsecured    Unsecured    Unsecured    Unsecured      
Conversion price   N/A    N/A    N/A    N/A      
                          
Balance - December 31, 2021  $126,418   $150,000   $336,600   $518,167   $1,131,185 
Forgiveness of loan   -<