SurgePays(SURG) - 2024 Q4 - Annual Report

Revenue Performance - Revenue decreased by $76,260,659 (55.6%) from $137,141,832 in 2023 to $60,881,173 in 2024, primarily due to a decline in the Mobile Virtual Network Operator segment, which fell by $75,127,676 (63.4%)[133] - The Comprehensive Platform Services segment saw an increase in revenue of $6,077,905, attributed to an expanded sales force and the hiring of a new Director of Sales[136] - Total cost of revenue decreased from $101,499,341 in 2023 to $75,205,372 in 2024, reflecting a reduction in expenses associated with the Mobile Virtual Network Operator segment[140] - Other income increased by $636,868 in 2024, primarily due to a one-time reduction in accounts payable to CenterCom[147] Subscriber and Program Changes - The company transitioned over 80,000 subscribers to the Lifeline program in 2024, maintaining a subscriber base of 250,000 after the cessation of ACP funding[134][135] Expenses and Losses - General and administrative expenses rose by $10,681,045 (63.7%) from $16,777,107 in 2023 to $27,458,152 in 2024, driven by increased compensation and contractor costs[143][144] - The company incurred an aggregate impairment loss of $1,183,376 related to goodwill and software development assets due to the shuttering of LogicsIQ operations[147] - The Company recognized a net loss for the year ended December 31, 2024, leading to a decrease in total stockholders' surplus from $28,403,464 in 2023 to $15,261,613 in 2024, a decline of $12,643,578[171] - Net cash used in operating activities for 2024 was $(21,310,603), compared to a net cash provided of $10,287,345 in 2023[173] Shareholder Activities - The Company issued 3,080,356 shares of common stock for gross proceeds of $17,249,994 in January 2024, resulting in net proceeds of $15,854,994 after direct offering costs[149] - The Company issued 40,238 shares of common stock in connection with the cashless exercise of warrants, resulting in a net effect of $0 on stockholders' equity[153] - The Company issued 242,615 shares of common stock for services rendered in 2023, with a fair value of $1,290,024, averaging between $4.19 and $9.40 per share[158] - The Company implemented a share repurchase program in July 2024, reacquiring 362,620 shares for $631,967 at an average price of $1.74 per share[156] - The Company ceased its share repurchase program effective October 2024[157] Asset Management - Total assets decreased from $41,925,307 in 2023 to $23,976,005 in 2024, a reduction of $17,949,302, primarily due to the suspension of the Affordable Connectivity Program[170] - Current assets decreased from $33,366,661 in 2023 to $17,870,323 in 2024, resulting in a working capital surplus of $11,810,847[167] Future Outlook - The company expects to improve gross margins in the Comprehensive Platform Service segment during 2025 and aims to return to positive results in the MVNO segment[141] - The Company is exploring strategic opportunities for acquisitions but has no current commitments or known timing for such transactions[178] Accounting and Valuation - The Company recognized stock compensation expense of $529,534 related to vesting for the year ended December 31, 2023[166] - The Company uses the fair value method for equity instruments granted to non-employees and measures the fair value of options using the Black-Scholes model[193] - Outstanding warrants are classified as equity awards and are measured at fair value using the Black-Scholes option pricing model or a binomial pricing model for derivative liabilities[194] - Warrants issued in conjunction with common stock issuance are recorded at fair value as a reduction in additional paid-in capital[195] - 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 no service period[195] - The Company evaluates new accounting pronouncements to determine their potential impact on Consolidated Financial Statements[196] - There are no applicable quantitative and qualitative disclosures about market risk[197] Profitability Metrics - The gross profit margin for the Mobile Virtual Network Operator segment was -34.4% in 2024, down from 29.2% in 2023, while the Comprehensive Platform Services segment improved to 3.7% from 0.5%[142]