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Re: StockItOut post# 17978

Saturday, 10/09/2021 6:39:56 AM

Saturday, October 09, 2021 6:39:56 AM

Post# of 19860
FROM THE FRAUDSTERS MOUTH HIMSELF!

PAGE 10

Our business has generated net loses, and we intend to continue to invest substantially in our business. Thus, we may not be able to achieve or maintain profitability. We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs.



For the six months ended June 30, 2021, our note payable borrowings totaled $5,191,167 and our note payable repayments totaled $1,573,792. 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 June 30, 2021, we had an stockholders’ deficit of $9,331,099. 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, loading transit and toll cards, offering check cashing software, utility bill payments, activating gift cards, and funding mobile apps such as gaming apps, 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.


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