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Friday, June 18, 2021 6:25:00 AM
For the quarter ended March 31, 2021, our note payable borrowings totaled $3,555,000 and our note payable repayments totaled $1,466,719. The net cash provided by financing was requiring a substantial portion of our cash flow from operations to be dedicated to the payment of obligations with respect to our debt, thereby reducing our ability to use our cash flow to fund our operations, lease payments, capital expenditures, selling and marketing efforts, product development, future business opportunities and other purposes. We have experienced net losses in each period since inception. As of March 31, 2021, we had an accumulated deficit of $10.4 million. We have funded our operations since inception primarily through equity financings, bank credit facilities, and capital lease arrangements. We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to respond to business opportunities, refinancing needs, challenges, acquisitions, or unforeseen circumstances and may decide to engage in equity or debt financings or enter into credit facilities for other reasons, and we may not be able to secure any such additional debt or equity financing or refinancing on favorable terms, in a timely manner, or at all. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
We will need to generate and sustain increased revenue levels in future periods in order to become consistently profitable, and, even if we do, we may not be able to maintain or increase our level of profitability. We intend to continue to expend significant funds to expand our marketing and sales operations, develop and enhance our software platform, upgrade our data center infrastructure and services capabilities and expand into new markets. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the market price of our common stock may significantly decrease.
Our sales model is based on earning the relationship with the store. There is no cost for the store to onboard and have access to the SurgePays platform fintech services. In other words, we establish relationships with retail stores by enabling them to offer their underbanked customers life enhancing services such as prepaid wireless payments, loading debit cards, activating gift cards, funding mobile apps such as Amazon and iTunes. There is no out of pocket cost for the store owner who earns a commission per transaction. Since these sales are more transactional based, SurgePays usually realizes gross margins of 3%-4%. These services are offered through a platform integrated into our wholesale marketplace which enables us to utilize the relationship, built based on these initial no-cost services, to upsell merchants by enticing them with lower prices on the most popular product categories sold in convenience stores. These products include bagged snacks, personal care items, herbal stimulants, energy shots, dry foods, CBD products, cell phone accessories, novelties, PPP products, processed meats, automotive parts among others, are sold at higher margins ranging from 12%-37%.
ECS primarily offers prepaid wireless payments to over 8,000 independently owned convenience stores. The value of the acquisition was more focused on the relationships with these stores and the ability to integrate the Surge Blockchain wholesale marketplace into the ECS software platform to create a significant increase in both revenue and gross margins per store. The integration of the software platforms was completed in mid-2020, however due to the COVID-19 pandemic and the various restrictions imposed nationwide, salespeople were unable to visit stores as planned and the rollout of the wholesale marketplace was pushed to 2021. While this did cause an unexpected delay in our expected jump in revenue and gross margins per store, it allowed our software developers to further enhance our offerings by integrating with more manufacturers and fintech providers to strengthen our sales and revenue skew once restrictions were lifted.
10
There is substantial doubt about our ability to continue as a going concern.
The report of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2020 and 2019 included an explanatory paragraph expressing management’s assessment and conclusion that there is substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date, citing our recurring losses and cash used from operations among other factors.
For the quarter ended March 31, 2021, our note payable borrowings totaled $3,555,000 and our note payable repayments totaled $1,466,719. The net cash provided by financing was requiring a substantial portion of our cashflow from operations to be dedicated to the payment of obligations with respect to our debt, thereby reducing our ability to use our cash flow to fund our operations, lease payments, capital expenditures, selling and marketing efforts, product development, future business opportunities and other purposes.
Our ability to continue as a going concern will be determined by our ability to generate sufficient cash flow to sustain our operations and/or raise additional capital in the form of debt or equity financing. We believe that the inclusion of a going concern explanatory paragraph in the report of our registered public accounting firm will make it more difficult for us to secure additional financing or enter into strategic relationships with distributors on terms acceptable to us, if at all, and likely will materially and adversely affect the terms of any financing that we might obtain.
Recent SURG News
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/03/2024 08:42:40 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/03/2024 08:33:01 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/03/2024 07:50:44 PM
- SurgePays Announces Commencement of Share Repurchase Program • PR Newswire (US) • 08/22/2024 12:30:00 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 08/13/2024 08:15:48 PM
- SurgePays Announces Second Quarter 2024 Financial Results • PR Newswire (US) • 08/13/2024 08:15:00 PM
- U.S. Futures Climb Before Inflation Data; Oil Slips on OPEC Demand Cut • IH Market News • 08/13/2024 09:45:01 AM
- SurgePays Announces Second Quarter 2024 Earnings Release and Conference Call • PR Newswire (US) • 08/08/2024 12:30:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/05/2024 12:48:03 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/05/2024 12:47:18 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 08/02/2024 08:22:49 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 08/01/2024 08:26:01 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 08/01/2024 08:16:35 PM
- ClearLine to Unveil its Innovative SaaS Retail Point-of-Sale Marketing Solutions at RSPA RetailNOW Conference • PR Newswire (US) • 07/24/2024 12:30:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/16/2024 07:53:47 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 07/15/2024 07:30:14 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/12/2024 06:13:42 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 07/11/2024 06:11:03 PM
- SurgePays Appoints Joseph Gomez as Vice President of MVNO Operations • PR Newswire (US) • 07/09/2024 01:00:00 PM
- SurgePays, Inc. Announces Launch of Prepaid Wireless Brand LinkUp Mobile • GlobeNewswire Inc. • 06/06/2024 12:30:00 PM
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- SurgePays Announces First Quarter 2024 Earnings Release and Conference Call • GlobeNewswire Inc. • 05/06/2024 08:01:00 PM
- SurgePays to Participate in Water Tower Fireside Chat Series • GlobeNewswire Inc. • 04/18/2024 08:55:37 PM
- SurgePays Announces Fourth Quarter and Full Year 2023 Financial Results • GlobeNewswire Inc. • 03/12/2024 08:01:00 PM
- SurgePays Announces Fourth Quarter and Full Year 2023 Earnings Release and Conference Call • GlobeNewswire Inc. • 03/05/2024 09:01:00 PM
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