What changed in SurgePays, Inc.'s 10-K — 2023 vs 2024

Our Business Segments Mobile Virtual Network Operators We provide mobile broadband (internet connectivity), voice and SMS text messaging to both subsidized and direct retail prepaid customers through SurgePhone Wireless, LLC and Torch Wireless, LLC, wholly owned subsidiaries of SurgePays. We consider this the Mobile Virtual Network Operators (MVNO) segment of our business.

Further, we provide two types of MVNO’s, subsidized and non-subsidized. Our subsidized MVNO’s are licensed by the Federal Communications Commission (the “FCC”) to provide subsidized access to the internet through mobile broadband services to consumers qualifying under the federal guidelines of the Affordable Connectivity Program (the “ACP”).

We provide these services by supplying consumers eligible for the ACP with tablet devices with mobile broadband capabilities for use in their homes.

For providing mobile broadband on tablets to these eligible customers, the ACP (the successor program, as of March 1, 2022 to the Emergency Broadband Benefit program) reimburses us up to a $100 for the cost of each tablet device we distribute and a $30 per customer, per month subsidy for mobile broadband (internet connectivity) services.

SurgePhone and Torch combined are licensed to offer subsidized mobile broadband to all fifty states. Revenue from this portion of our business currently accounts for 86% of our total revenue. However, according to the FCC website, on February 7, 2024, the ACP stopped accepting new applications and enrollments and the ACP will cease to be funded after April 2024.

The Company hopes that the program will be funded by Congress, however, at this time, we cannot predict any outcome.

Through our subsidiary LinkUp Mobile, we plan to roll-out in the second quarter of 2024 a non-subsidized portion of our MVNO business to leverage the volume of buying power we have with our subsidized subscriber base to build low-cost plans using SIM kits in convenience stores transacting on the SurgePays network.

Our market will be to penetrate rural America where there is less competition and higher consumer pricing and offer incentivized family plans to the rapidly growing base of subsidized customer households. The revenue will be generated by subscribers paying a monthly fee for talk, text and data carrier services on a prepaid basis.

If the ACP is not funded, we plan to competitively market our non-subsidized MVNO business to our current ACP customers and hope to be able to retain them as customers in this segment.

Comprehensive Platform Services We provide f inancial technology and a wireless top-up platform to independently owned convenience stores throughout the country via our subsidiaries SurgePays Fintech, ECS Prepaid, LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. We consider these services the “Comprehensive Platform Services” segment of our business.

Specifically, our Comprehensive Platform Services provides ACH banking relationships and a fintech transactions platform that processes thousands of transactions a day at independently owned convenience stores . The Comprehensive Platform Service also provides wireless top-up transactions and wireless product aggregation for our nationwide network of convenience stores.

By linking together the customer, the carrier plan and the convenience store to allow all parties to have one location to get what they need. Our revenue is derived from the transaction that takes place when an individual using a prepaid cellular carrier plan needs to add more minutes to their cellular phone .

These services are vital to convenience store operations and we believe we can utilize our relationships with convenience stores from our ACP services to expand the network for our Comprehensive Platform Services.

The Company expects this segment to be the biggest percent of year-over-year revenue growth opportunity for 2024 and plans to hire a new head of sales for our Comprehensive Platform Service segment to tap into such growth opportunity. Lead Generation We refer to LogicsIQ, Inc. as the Lead Generation segment of our business.

LogicsIQ is a lead generation and case management solutions company primarily serving law firms in the mass tort industry. Revenues from this segment of our business 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.

In 2023, we decided to focus less on this segment of our business and the Company is in the process of determining how best this service fits into the overall plans of SurgePays.

The Company still derived revenue from this segment of our business in 2023, however, we plan to make a final decision on whether to maintain or discontinue the Lead Generation segment of its business in the second quarter of fiscal year ended 2024. 1 Growth Strategies We have different strategies for each of our current business segments: Mobile Virtual Network Operators Assuming the ACP is extended, we plan to do the following for the federally subsidized portion of our MVNO business: ● Prioritize sales channels with lower cost per subscriber acquisition. ● Continue to integrate Shockwave CRM and Clearline Mobile into our Comprehensive Platform Service software to enable ACP enrollments initiated from convenience stores. ● Integrate Shockwave CRM into existing ATM machines and Point of Sale registers to initiate ACP enrollments. ● Partner with existing regional distribution companies already provide consumable goods to convenient stores. ● Analyze attrition/retention data to continually monitor and improve customer experience with the goal of industry best retention. ● Increase the national sales team nationally.

We also plan to do the following for the non-subsidized MVNO portion of our MVNO business: ● Leverage the volume of buying power for wholesale carrier minutes/texts/data to build market low plans to offer customers using SIM kits in convenience stores transacting on the SurgePays network. ● Penetrate rural America where there is less competition and higher consumer pricing. ● Offer incentivized family plans to the rapidly growing base of subsidized customer households.

Comprehensive Platform Services We plan to do the following for our Comprehensive Platform Services business: ● Build a national sales team of in-house salespeople, Independent Sales Organizations, Chain Retail Stores, and Distributors, all incentivized to add store locations and drive increased sales per store. ● Strategically acquire other companies that offer prepaid products and other complimentary fintech products.

Integrating these acquisitions to an existing base of convenience stores allows us to deploy our comprehensive fintech suite to maximize the value of the existing relationships. ● Continue to add value driven products such as payment processing and consumer retail hard goods via our marketplace to differentiate our competitive advantage over single product companies and diversify our revenue streams. ● Create and offer our own MVNO products to all new and existing distribution channels adding further branding and revenue streams for SurgePays.

If the ACP is not funded, we will take the resources dedicated to the subsidized MVNMO business and move into the non-subsidized MVNO quicker than currently planned. We believe there is an opportunity to accomplish both goals, expand subscribers and add stores simultaneously. We also believe there is an opportunity to convert the subsidized subscribers into a non-subsidized plan.

Those individuals currently utilizing the ACP may be looking for an alternative.

Lead Generation We currently have no set plans on how to grow our Lead Generation business as we are making a final decision on whether to maintain or discontinue the Lead Generation segment of its business in the second quarter of fiscal year ended 2024. 2 Market Opportunity Mobile Virtual Network Operators Subsidized As currently implemented, individuals are eligible for ACP if they are eligible for the following other government subsidized programs: (i) the Supplemental Nutrition Assistance Program (SNAP) in the United States, (ii) Medicaid, (iii) Supplemental Security Income (SSI), (iv) Federal Public Housing Assistance, (v) Women, Infants and Children Assistance and (vi) the Lifeline program.

Accordingly, as of February 2024, the government estimated that 51.7 million households were eligible for the ACP. As of this same time, the government estimates that only 23.3 million households have enrolled in ACP to date.

If ACP is funded, we believe that we can tap into the estimated 28.4 million households eligible for ACP that are not currently enrolled in the program.

Non-subsidized If the ACP is not funded, we expect the subsidized market opportunity listed above could become the market opportunity for our non-subsidized prepaid phone and internet services we believe these households will look to continue with an MVNO.

In addition to those individuals, as of December 12, 2023, there were approximately 330.8 million cell phone users in the United States. As of the end of 2021, approximately 36% of these cell phone users were using prepaid cell phones.

Once we launch our non-subsidized MVNO’s, we hope to be able to entice some of these prepaid cell phone users to our products. Comprehensive Platform Services Our market opportunity for our Comprehensive Platform Services continues to be smaller convenience stores, bodegas, mercados and tiendas. As of December 31, 2023, there were 152,396 convenience stores operating across the United States.

This represents a 1.5% increase from the store count in the previous year, reversing a four-year decline. We continue to expand our product portfolio to capitalize on market trends, changes in technology and new product releases.

Based on available data for our served markets, we estimate that our market share of the convenience store sales business at this time is substantially less than 1% and we plan to utilize a new sales force to expand our customers in this market. Marketing and Sales We utilize different marketing methods for each segment of business that we operate.

For the federally subsidized portion of our MVNO business, we utilize third parties to help identify potential customers for ACP and additional convenience stores where we can sell our ACP products.

Additionally, we have a campaign where we utilize social media platforms to help identify potential customers for ACP and provide knowledge to individuals who are not aware that they are eligible for ACP so they can utilize our ACP services.

We currently do not market for the non-subsidized portion of our MVNO business but we plan to move forward by marketing our business to families of those who are ACP eligible. Also, in the event that the ACP is not extended, we plan to utilize a marketing effort to get our current ACP clients to utilize our non-subsidized MVNO’s.

For our Comprehensive Platform Services, we plan to hire a new head of sales to market our platform to their existing convenience store connections and create a national strategy to market our platform in rural areas that may not currently have the capabilities our platform can provide.

In the past, we have utilized social media platforms to market to specific segment of the population to identify potential plaintiffs for our Lead Generation segment. However, we have stopped these campaigns as we decide the future of our Lead Generation business. Competition There are many competitors in the prepaid wireless and mobile broadband industry.

We feel what makes SurgePhone different is we are a grassroots company with our products placed in convenience stores where the underbanked shop. We can offer prepaid wireless and financial services, through these stores, at a lower price to customers since we own the transaction software processing the activations and top-ups.

The FCC has also indicated that the last fully funded month of the ACP is April 2024 due to lack of additional funding from Congress.

If the ACP is allowed to expire, as indicated that it will on the FCC website, the governmental agencies will reduce or cease reimbursement payments, which will have a substantial adverse effect on our business, financial condition, and operating results.

Furthermore, the percentage of revenue from our ACP business has been growing year over year while revenue from other business segments has been decreasing.

Additionally, some of our growth plans for the non-ACP business segments of the Company are dependent on the growth of the ACP customers. Therefore, if the ACP business is not funded, we may lose the opportunity to expand our other business segments, which will have a substantial adverse effect on our business, financial condition, and operating results.

We are frequently required to maintain licenses for our operations and conduct our operations in accordance with prescribed standards. We are often involved in regulatory and other governmental proceedings or inquiries related to the application of these requirements.

We also may be unable to find suitable acquisition candidates and may not be able to complete acquisitions on favorable terms, if at all, or obtain adequate financing for such acquisitions.

Because we currently have very limited marketing resources and sales capabilities, commercialization of our products, some of which require regulatory clearance prior to market entrance, we must either expand our own marketing and sales capabilities or consider collaborating with additional third parties to perform these functions.

We will acquire additional office space as needed. 11