SURGEPAYS This statement contains forward-looking statements within the meaning of the
Securities Act. Discussions containing such forward-looking statements may be
found throughout this statement. Actual events or results may differ materially
from those discussed in the forward-looking statements as a result of various
factors, including the matters set forth in this statement. The accompanying
condensed consolidated financial statements as of
On
The Company's name on the OTCQB will remain
The Company's current focus is the provision of financial and telecommunications
services to the financially underserved (i.e. persons
Commencing in 2018, the Company has significantly expanded its suite of services to include the pursuit of the following business models:
True Wireless
LocoRabbit Wireless
LocoRabbit is an MVNO with wireless services (voice, text and data) being provided via the Sprint and T-Mobile nationwide LTE networks. The value driven service is sold primarily through the SurgePays software, enabling retailers to do activations on site, but can also be purchased directly from www.locorabbit.com. LocoRabbit Wireless SIM Kits (bring your own device) and smartphones are being featured on the Prepaid Center racks being installed in convenience stores. The payments for the service can be made in cash, monthly at retailers on the SurgePays network.
34SurgePays, Inc.
The SurgePays system is a fintech software platform that processes third-party prepaid wireless activations and top-ups, gift card activation and loads, and wireless SIM activation. It enables retailers to instantly add credit to any prepaid wireless customer's account for any carrier, providing the merchant commissioned transactions, increased foot traffic, and customer loyalty. Additionally, SurgePays offers an innovative supply-chain marketplace for convenience store, bodega and tienda owners. Retailers can order many top selling products for their store, at a deeper wholesale discount than traditional distribution due to utilizing the Direct Store Delivery (DSD) model. (www.SurgePays.com)
Surge Software
SurgePays Portal is a multi-purpose software interface for convenience stores, bodegas and other corner merchants providing goods and services to the underbanked community. The merchant or clerk is able to use the portal interface - similar to a website - with image driven navigation to add wireless minutes to any prepaid wireless carrier's phone and access to other services such as bill payment and loading debit cards. We believe what makes SurgePays unique is that it also offers the merchant the ability to order wholesale goods through the portal with one touch ease. SurgePays is essentially a wholesale e-commerce storefront that allows manufactures and distribution companies to have access to merchants while cutting out the middleman. The goal of the SurgePays Portal is to provide as many commonly sold consumable products as possible to convenience stores, corner markets, bodegas, and supermarkets. These products include energy drinks, dry foods, frozen foods, bagged snacks, processed meats, automotive parts and many more goods, all in one convenient e-commerce storefront.
Surge Logics
Is a performance-driven marketing agency focused on the Mass Tort industry for attorneys. We utilize our in-house media buying team as well as our marketing partners. Our dedication to performance-driven marketing reflects in our strategy and media spend. Our proven strategy means our clients' media budget delivers one of the most cost-effective lead acquisitions and retained cases systems available. Surge Logics commitment and tracking mean our clients' campaigns are optimized by data-informed decisions. Our responsive, in-house creative team rapidly executes new ads when data shows the need.
Surge Logics efficiency, follow-up, and feedback allows for a smooth interface with attorney's office and case management systems. Key features:
? Straightforward Onboarding Process
?
? Case Management and CRM Integration
? Appointment scheduling ? Lead Callbacks on: - Webforms - Live Chats - Lead Lists ? After-Hours Call Transfers 35 Intake Logics
Intake Logics is our proprietary, powerhouse CRM and intake management software built based on our years of experience. Built with marketing and tracking in mind, it allows Surge Logics and the attorneys to break down media spend per marketing channel and break it down to case cost.
Since we built this from the ground up with strong API functionality, we can integrate into any attorneys Case Management System. Some of the benefits of Intake Logics are auto email / SMS, integrated dialer, real-time reporting, and SMS bot follow up. Our unique SMS bot and email system communicate with leads to make sure we communicate with potential clients from multiple channels. With our real-time reporting and strict control of marketing and intake services mean that our clients have a 360° view of the client acquisition process. Intake Logics tracks inbound calls and multiple internet ad campaigns to optimize for the best cost per case conversion. In addition, our around the clock statistics keep our clients well-versed in results, outcomes, and conversions.
Centercom is a dynamic operations center currently providing all SurgePays
subsidiaries with a cost effective solution for sales support, customer service,
IT infrastructure design, graphic media, database programming, software
development, revenue assurance, lead generation, and other critical operational
support services.
Due to the fact that a director, officer, and minority owner of the Company has
a controlling interest in CenterCom Global, the Company recorded its investment
in Centercom of
ECS Business
On
COMPARISON OF THREE MONTHS ENDED
Revenues during the three months endedSeptember 30, 2020 and 2019 consisted of the following: 2020 2019 Revenue$ 12,802,172 $ 4,901,864 Cost of revenue 11,216,186 3,023,292 Gross profit$ 1,585,986 $ 1,878,572
Revenue increased
36
Costs and expenses during the three months ended
2020 2019
Depreciation and amortization $ 306,341 $ 17,926
Selling, general and administration 2,904,569 2,998,359
Total $ 3,210,910 $ 3,016,285 Depreciation and amortization increased
Selling, general and administrative expenses during the three months ended
2020 2019
Telecom operations center $ 757,502 $ 599,474
Professional services and consultants 201,185 977,831
Compensation 1,143,380 508,254
Webhosting/internet 172,155 152,066
Advertising and marketing 56,742 189,528
Other 573,604 571,204
Total $ 2,904,568 $ 2,998,357 Selling, general and administrative costs (S, G & A) decreased by
* Telecom operations center expenses increased from
in 2020 primarily as a result of the contracting vendor providing additional
services for
* Professional services and consultants decreased to
on the SurgePays portal and outside management services.
* Compensation increased from
a result of the increase in staff support positions to support the expected
increase in revenue in the coming months and to replace the outside management
services. The 2020 period includes
are not included in the 2019 expenses.
* Webhosting/internet costs increased to
* Advertising and marketing costs decreased to
2019 primarily due to the Company reducing advertising and marketing costs
while evaluating future advertising and marketing campaigns.
Other (expense) income during the three months endedSeptember 30, 2020 and 2019 consisted of the following: 2020 2019 Interest, net$ (1,164,409 ) $ (20,767 ) Change in fair value of derivative liability 212,851 - Derivative expense (33,239 ) - Gain on equity investment in Centercom 107,649 6,134$ (877,148 ) $ (14,633 )
Interest expense increased to
37
During the three months ended
The gain on equity investment in Centercom of
COMPARISON OF NINE MONTHS ENDED
Revenues during the nine months endedSeptember 30, 2020 and 2019 consisted of the following: 2020 2019 Revenue$ 43,104,767 $ 12,295,058 Cost of revenue 39,422,776 7,814,614 Gross profit$ 3,681,991 $ 4,480,444
Revenue increased
Costs and expenses during the nine months endedSeptember 30, 2020 and 2019 consisted of the following: 2020 2019 Depreciation and amortization$ 876,152 $ 39,050 Selling, general and administration 11,138,464 9,222,923 Total$ 12,014,616 $ 9,261,973
Depreciation and amortization increased
Selling, general and administrative expenses during the nine months ended
2020 2019
Telecom operations center $ 2,121,225 $ 1,625,774
Professional services and consultants 2,435,970 2,880,825
Compensation 2,657,875 1,326,821
Webhosting/internet 533,569 457,996
Advertising and marketing 209,699 1,079,715
DRIP fees - 547,000
Bad debt expense 1,633,575 7,841
Other 1,546,551 1,296,951
Total $ 11,138,464 $ 9,222,923 Selling, general and administrative costs (S, G & A) increased by
* Telecom operations center expenses increased from
additional services for
38
* Professional services and consultants decreased to
and a decrease in the use of outside management services. The 2020 period
includes
2019 expenses.
* Compensation increased from
as a result of the increase in staff support positions to support the expected
increase in revenue in the coming months and to replace the outside management
services. The 2020 period includes
that are not included in the 2019 expenses.
* Webhosting/internet costs increased to
* DRIP fees decreased from
to
entering into a Distributive Resolution & Integration Program ("DRIP") with the
up to 40,000 locations in 2019. The DRIP fees were a one-time location
activation fee.
* Advertising and marketing costs decreased to
in 2019 primarily due to the Company reducing advertising and marketing costs
while evaluating future advertising and marketing campaigns.
* Bad debt expense increased to
due to the Company's evaluation of the receivables generated during the initial
rollout of the SurgePays portal and providing an appropriate allowance for bad
debts.
* Other costs increased to
due to an increase in fidelity, cyber security and professional liability
insurance required for the issuance of the SurgePays Visa debit card,
shareholder communications and travel. The 2020 period includes
expenses of the ECS companies that are not included in 2019 expenses.
Other (expense) income during the nine months endedSeptember 30, 2020 and 2019 consisted of the following: 2020 2019 Interest, net$ (2,348,175 ) $ (93,157 ) Change in fair value of derivative liability 405,413 - Derivative expense (529,294 ) - Gain on equity investment in Centercom 252,985 70,909 Gain (loss) on settlement of liabilities 2,556,979 (466,187 ) Other income 10,000 -$ 347,908 $ (488,435 )
Interest expense increased to
During the nine months ended
The gain on equity investment in Centercom of
During the nine months ended
39
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
At
Total assets at
At
At
The following table sets forth the major sources and uses of cash for the nine
months ended
2020 2019
Net cash used in operating activities
10,812 (222,000 )
Net cash provided by financing activities 3,442,082 4,908,370
Net change in cash and cash equivalents
At
Notes payable - related party - See Note 7 to the Condensed Consolidated Financial Statements.
Notes payable and long-term debt - See Note 8 to the Condensed Consolidated Financial Statements.
Convertible promissory notes - See Note 9 to the Condensed Consolidated Financial Statements.
Advances from related party - See Note 14 to the Condensed Consolidated Financial Statements.
Cash requirements and capital expenditures - At the current level of operations, the Company has to borrow funds to meet basic operating costs.
Known trends and uncertainties - The Company is planning to acquire other businesses that are similar to its operations. The uncertainty of the economy may increase the difficulty of raising funds to support the planned business expansion.
Liquidity - The Company had a net loss of approximately
Management's ability to pivot in 2020 due to the Coronavirus allowed the Company to finalize enhancements to both the SurgePays and Logics Intake platforms, resulting in improved end user control on product logistics. The Company also overhauled its entire customer service platform and standard operating procedures to ensure rapid growth success. Management continued efforts to source products for our client base, including an exclusivity to provide gift card distribution at all locations.
40
During the year ended
The development of the Surge Logistics Intake software and the infrastructure at CenterCom BPO have enabled rapid scaling growth and evidenced in Surge Logics revenue trajectory.
To support the significant growth inflection, the Company has reorganized its
human resources department, including building the administrative, legal and
finance office in
In
These factors, among others, were addressed by management in determining whether the Company could continue as a going concern. The Company projects that it should be cash flow positive by the end of Quarter 1 2021 through increased cash flow from ongoing operations the collection of outstanding receivables and the restructuring of the current debt burden. While management believes it is more likely than not the Company has the ability to continue as a going concern, this is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses.
Additionally, if necessary, based on the Company's history of being able to raise capital from both internal and external sources coupled with current favorable market conditions, management believes that debt and/or equity financing can be obtained from both related parties (management and members of the Board of Directors of the Company) and external sources to pay down existing debt obligations, cover short term shortfalls, meet the shareholders equity requirements for Nasdaq, and complete proposed acquisitions. Although the Company believes in the viability of management's strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. Therefore, the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
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