# EDGAR Filing Document

**Accession Number:** 0001392694
**File Stem:** 0001493152-26-024591
**Filing Date:** 2026-5
**Character Count:** 212761
**Document Hash:** 70f7b4b9db9a2d1efd9d3898b48f6ed1
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-26-024591.hdr.sgml**: 20260520

**ACCESSION NUMBER**: 0001493152-26-024591

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 89

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260520

**DATE AS OF CHANGE**: 20260520

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SurgePays, Inc.
- **CENTRAL INDEX KEY:** 0001392694
- **STANDARD INDUSTRIAL CLASSIFICATION:** TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 980550352
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40992
- **FILM NUMBER:** 261003725

**BUSINESS ADDRESS:**
- **STREET 1:** 3124 BROTHER BLVD
- **STREET 2:** SUITE 104
- **CITY:** BARTLETT
- **STATE:** TN
- **ZIP:** 38133
- **BUSINESS PHONE:** 901-302-9587

**MAIL ADDRESS:**
- **STREET 1:** 3124 BROTHER BLVD
- **STREET 2:** SUITE 104
- **CITY:** BARTLETT
- **STATE:** TN
- **ZIP:** 38133

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Surge Holdings, Inc.
- **DATE OF NAME CHANGE:** 20180102

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** KSIX Media Holdings, Inc.
- **DATE OF NAME CHANGE:** 20150728

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** North American Energy Resources, Inc.
- **DATE OF NAME CHANGE:** 20150528

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended **March 31, 2026**

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number **<u>001-40992</u>**

**<u>SURGEPAYS, INC.</u>**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Nevada** | **98-0550352** |
| (State or other jurisdiction of<br> incorporation or organization) | (I. R. S. Employer<br> Identification No.) |

---

---

| | |
|:---|:---|
| **3124 Brother Blvd, Suite 104**<br>**Bartlett TN** | **38133** |
| (Address of principal executive offices) | (Zip Code) |

---

**<u>901-302-9587</u>**

(Registrant's telephone number, including area code)

**<u>Not applicable</u>**

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock | SURG | The Nasdaq Stock Market LLC<br> (Nasdaq Capital Market) |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant's common stock outstanding as of May 20, 2026 was 25,121,895 shares.

**SurgePays, Inc. and Subsidiaries**

---

| | |
|:---|:---|
|  | Page(s) |
| [Consolidated Balance Sheets (Unaudited)](#bs_001) | 3 |
| [Consolidated Statements of Operations (Unaudited)](#bs_002) | 4 |
| [Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)](#bs_003) | 5 - 6 |
| [Consolidated Statements of Cash Flows (Unaudited)](#bs_004) | 7 |
| [Notes to Consolidated Financial Statements (Unaudited)](#bs_005) | 8 - 68 |

---

**SurgePays, Inc. and Subsidiaries**

**Consolidated Balance Sheets**

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
|  | **(Unaudited)** | |
| **<u>Assets</u>** |  |  |
| **Current Assets** |  |  |
| Cash and cash equivalents | $1991166 | $1731400 |
| Restricted cash - line of credit reserve | 424995 | 281811 |
| Accounts receivable - net | 5041837 | 4045162 |
| Inventory | 339570 | 339570 |
| Prepaids and other | 410742 | 581823 |
| **Total Current Assets** | 8208310 | 6979766 |
| **Property and equipment - net** | 376678 | 403517 |
| **Other Assets** |  |  |
| Intangibles - net | 655776 | 819153 |
| Operating lease - right of use asset - net | 260694 | 313410 |
| **Total Other Assets** | 916470 | 1132563 |
| **Total Assets** | $9501458 | $8515846 |
| **<u>Liabilities and Stockholders' Deficit</u>** |  |  |
| **Current Liabilities** |  |  |
| Accounts payable and accrued expenses | $17514013 | $10219011 |
| Accounts payable and accrued expenses - related party | 159135 | 117546 |
| Operating lease liability | 226225 | 219997 |
| Notes payable | 2483335 | 1834008 |
| Note payable - related party | 1730796 | 2730796 |
| Convertible notes payable - net | 7744342 | 3068878 |
| Derivative liabilities | 184983 | - |
| **Total Current Liabilities** | 30042829 | 18190236 |
| **Long Term Liabilities** |  |  |
| Notes payable - SBA government | 455919 | 458334 |
| Operating lease liability | 40093 | 99235 |
| Convertible notes payable - net | 2830585 | 5170860 |
| **Total Long Term Liabilities** | 3326597 | 5728429 |
| **Total Liabilities** | 33369426 | 23918665 |
| **Stockholders' Deficit** |  |  |
| Common stock, $0.001 par value, 500,000,000 shares authorized 24,886,775 and 21,847,927 shares issued and 24,190,822 and 21,151,974 shares outstanding, at March 31, 2026 and December 31, 2025, respectively | 24890 | 21852 |
| Additional paid-in capital | 86829583 | 83246736 |
| Treasury stock - at cost (695,953 and 695,953 shares, respectively) | (1631966) | (1631966) |
| Accumulated deficit | (109035180) | (96984297) |
| Stockholders' equity (deficit) | (23812673) | (15347675) |
| &nbsp;&nbsp;&nbsp;Non-controlling interest | (55295) | (55144) |
| **Total Stockholders' Deficit** | (23867968) | (15402819) |
| **Total Liabilities and Stockholders' Deficit** | $9501458 | $8515846 |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements

**SurgePays, Inc. and Subsidiaries**

**Consolidated Statements of Operations**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Revenues, net** | $15983983 | $10577429 |
| **Costs and expenses** |  |  |
| Cost of revenues | 23681432 | 13519775 |
| General and administrative expenses | 3501918 | 4637556 |
| **Total costs and expenses** | 27183350 | 18157331 |
| **Loss from operations** | (11199367) | (7579902) |
| **Other income (expense):** |  |  |
| Interest expense (including amortization of debt discount) | (881908) | (119434) |
| Other income |  | 7140 |
| Interest income |  | 56903 |
| Change in fair value of derivative liabilities | 30241 | - |
| **Total other income (expense) - net** | (851667) | (55391) |
| **Net loss before provision for income taxes** | (12051034) | (7635293) |
| **Provision for income tax benefit (expense)** | - | - |
| **Net loss including non-controlling interest** | (12051034) | (7635293) |
| **Non-controlling interest** | (151) | (209) |
| **Net loss available to common stockholders** | $(12050883) | $(7635084) |
| **Loss per share - attributable to common stockholders** |  |  |
| &nbsp;&nbsp;&nbsp;**Basic** | $(0.51) | $(0.38) |
| &nbsp;&nbsp;&nbsp;**Diluted** | $(0.51) | $(0.38) |
| **Weighted average number of shares outstanding - attributable to common stockholders** |  |  |
| &nbsp;&nbsp;&nbsp;**Basic** | 23703775 | 20068929 |
| &nbsp;&nbsp;&nbsp;**Diluted** | 23703775 | 20068929 |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements

**SurgePays, Inc. and Subsidiaries** **Consolidated Statement of Changes in Stockholders' Deficit For the Three Months Ended March 31, 2026 (Unaudited)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | | | **Treasury Stock** | **Treasury Stock** | | |
|  | **Shares** | **Amount** | **Additional<br> Paid-in**<br>**Capital** | **Accumulated**<br>**Deficit** | **Shares** | **Amount** | **Non-Controlling**<br>**Interest** | **Total<br> Stockholders'**<br>**Deficit** |
| **December 31, 2025** | **21847927** | $**21852** | $**83246736** | $**(96984297)** | **695953** | $**(1631966)** | $**(55144)** | $**(15402819)** |
| Stock issued for cash | 2007323 | 2007 | 2512368 |  |  |  |  | 2514375 |
| Cash paid as direct offering costs |  |  | (375000) |  |  |  |  | (375000) |
| Stock issued for services | 200000 | 200 | 333800 |  |  |  |  | 334000 |
| Recognition of stock based compensation - employees |  |  | 7787 |  |  |  |  | 7787 |
| Recognition of stock based compensation - related parties |  |  | 49895 |  |  |  |  | 49895 |
| Debt discount - convertible notes payable - stock issued | 31525 | 31 | 54797 |  |  |  |  | 54828 |
| Conversion of debt to common stock - related party | 800000 | 800 | 706400 |  |  |  |  | 707200 |
| Debt forgiveness - related party |  |  | 292800 |  |  |  |  | 292800 |
| Non-controlling interest |  |  |  |  |  |  | (151) | (151) |
| Net loss | - | - | - | (12050883) | - | - | - | (12050883) |
| **March 31, 2026** | **24886775** | $**24890** | $**86829583** | $**(109035180)** | **695953** | $**(1631966)** | $**(55295)** | $**(23867968)** |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements

**SurgePays, Inc. and Subsidiaries**

**Consolidated Statement of Changes in Stockholders' Equity**

**For the Three Months Ended March 31, 2025**

**(Unaudited)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | | | **Treasury Stock** | **Treasury Stock** | | |
|  | **Shares** | **Amount** | **Additional<br> Paid-in**<br>**Capital** | **Accumulated**<br>**Deficit** | **Shares** | **Amount** | **Non-Controlling**<br>**Interest** | **Total<br> Stockholders'**<br>**Equity** |
| **December 31, 2024** | **20431549** | $**20435** | $**76842878** | $**(60915427)** | **362620** | $**(631967)** | $**(54306)** | $**15261613** |
| Recognition of stock based compensation - related parties |  |  | 155119 |  |  |  |  | 155119 |
| Non-controlling interest |  |  |  |  |  |  | (209) | (209) |
| Net loss | - | - | - | (7635084) | - | - | - | (7635084) |
| **March 31, 2025** | **20431549** | $**20435** | $**76997997** | $**(68550511)** | **362620** | $**(631967)** | $**(54515)** | $**7781439** |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements

**SurgePays, Inc and Subsidiaries**

**Consolidated Statements of Cash Flows**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Operating activities** |  |  |
| Net loss - including non-controlling interest | $(12051034) | $(7635293) |
| Adjustments to reconcile net loss to net cash used in operations |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 190216 | 249574 |
| &nbsp;&nbsp;&nbsp;Amortization of right-of-use assets | 52716 | 61279 |
| &nbsp;&nbsp;&nbsp;Amortization of debt discount/debt issue costs | 437778 |  |
| &nbsp;&nbsp;&nbsp;Stock issued for services | 334000 |  |
| &nbsp;&nbsp;&nbsp;Recognition of stock based compensation - related parties |  | 155119 |
| &nbsp;&nbsp;&nbsp;Recognition of share based compensation - options | 7787 |  |
| &nbsp;&nbsp;&nbsp;Recognition of share based compensation - options - related party | 49895 |  |
| &nbsp;&nbsp;&nbsp;Change in fair value of derivative liabilities | (30241) |  |
| Changes in operating assets and liabilities |  |  |
| &nbsp;&nbsp;&nbsp;(Increase) decrease in |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (996674) | 513320 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaids and other | 171081 | 113764 |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 7295002 | (168375) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses - related party | 41589 | (192845) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability | (52914) | (60027) |
| **Net cash used in operating activities** | (4550799) | (6963484) |
| **Investing activities** |  |  |
| Purchase of leasehold improvements | - | (18590) |
| **Net cash used in investing activities** | - | (18590) |
| **Financing activities** |  |  |
| Proceeds from common stock issued for cash | 2514375 |  |
| Cash paid as direct offering costs - common stock | (375000) |  |
| Proceeds from issuance of notes payable | 954272 |  |
| Repayments of notes payable | (347983) |  |
| Proceeds from issuance of convertible notes payable | 2225000 |  |
| Cash paid as direct offering costs - convertibles note payable | (14500) |  |
| Repayments of loans - related party |  | (407776) |
| Repayments on notes payable - SBA government | (2415) |  |
| Treasury shares repurchased (share buy-backs) | - | (2769) |
| **Net cash provided by financing activities** | 4953749 | (410545) |
| **Net decrease in cash, cash equivalents and restricted cash** | 402950 | (7392619) |
| **Cash, cash equivalents and restricted cash - beginning of period** | 2013211 | 12790389 |
| **Cash, cash equivalents and restricted cash - end of period** | $2416161 | $5397770 |
| **Supplemental disclosure of cash flow information** |  |  |
| Cash paid for interest | $38472 | $908760 |
| Cash paid for income tax | $- | $- |
| **Supplemental disclosure of non-cash investing and financing activities** |  |  |
| Conversion of debt to common stock - related party | $707200 | $- |
| Debt forgiveness - related party | $292800 | $- |
| Debt discount - convertible notes payable - original issue discount | $83333 | $- |
| Debt discount - convertible notes payable - issuance of common stock | $54828 | $- |
| Debt discount - convertible notes payable - stated interest | $66667 | $- |
| Debt discount - convertible note payable - issuance of warrants (derivative liabilities) | $215223 | $- |
| Stock issued in settlement of accounts payable | $- | $- |
| Reclassification of accrued interest - related party to note payable - related party | $- | $- |
| Exercise of warrants - cashless | $- | $- |
| Termination of ROU operating lease assets and liabilities | $- | $- |
| Right-of-use asset obtained in exchange for new operating lease liability | $- | $- |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Note 1 - Organization and Nature of Operations</u>**

**Organization and Nature of Operations**

SurgePays, Inc. ("SurgePays," "we," or the "Company") is a telecommunications and financial technology company focused on delivering wireless connectivity and point-of-sale solutions to underserved and value-conscious communities across the United States. The Company's mission is to enhance access to essential digital services where people live, shop, and work.

We operate through three primary business segments: (1) our MVNO wireless brands, (2) our MVNE enablement platform (HERO), and (3) our point-of-sale (POS) and fintech services. These businesses are supported through subsidiaries including SurgePhone Wireless, LLC, SurgePays Fintech, Inc., ECS Prepaid, LLC, and Torch Wireless, LLC, among others.

The Company and its subsidiaries are organized as follows:

Schedule of Subsidiaries

---

| | | | |
|:---|:---|:---|:---|
| **Company Name (Active)** | **Incorporation Date** | **State of Incorporation** | **Segment** |
| SurgePays, Inc. | August 18, 2006 | Nevada | Corporate Parent |
| Surge Blockchain, LLC | January 29, 2009 | Nevada | Other Corporate Overhead |
| ECS Prepaid, LLC | June 9, 2009 | Missouri | Point-of-Sale and Prepaid Services |
| Torch Wireless | January 29, 2019 | Wyoming | Mobile Virtual Network Operators |
| SurgePays Fintech, Inc. | August 22, 2019 | Nevada | Point-of-Sale and Prepaid Services |
| SurgePhone Wireless, LLC | August 29, 2019 | Nevada | Mobile Virtual Network Operators |

---

All of the following entities have nominal operations.

---

| | | | |
|:---|:---|:---|:---|
| **Company Name (Inactive)** | **Incorporation Date** | **State of Incorporation** |  |
| Electronic Check Services, Inc. | May 19, 1999 | Missouri |  |
| Central States Legal Services, Inc. | August 1, 2003 | Missouri |  |
| KSIX, LLC | September 14, 2011 | Nevada |  |
| DigitizeIQ, LLC | July 23, 2014 | Illinois |  |
| KSIX Media, Inc. | November 5, 2014 | Nevada |  |
| Surge Payments, LLC | December 17, 2018 | Nevada |  |
| LogicsIQ, Inc. | October 2, 2018 | Nevada | Other Corporate Overhead |
| Injury Survey, LLC | July 28, 2020 | Nevada | Other Corporate Overhead |

---

**Basis of Presentation**

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements ("U.S. GAAP") and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission ("SEC"). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2026 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the operating results for the full fiscal year or any future period.

These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on April 15, 2026.

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

**Nasdaq Continued Listing Compliance**

In March 2026, the Company received two notices from the Listing Qualifications Department of The Nasdaq Stock Market ("Nasdaq") indicating non-compliance with certain continued listing requirements.

On March 18, 2026, the Company was notified that it no longer meets the minimum market value of listed securities ("MVLS") requirement of $35,000,000. On March 23, 2026, the Company received a separate notice of non-compliance with the $1.00 minimum bid price requirement. These notices have no immediate effect on the listing or trading of the Company's common stock on Nasdaq.

Under Nasdaq listing rules, the Company has 180 calendar days to regain compliance with each requirement - until September 14, 2026 for the MVLS deficiency and September 21, 2026 for the minimum bid price deficiency. Compliance with the MVLS requirement will be regained if the market value of listed securities closes at or above $35,000,000 for at least ten consecutive business days during the compliance period. Compliance with the minimum bid price requirement will be regained if the closing bid price of the Company's common stock is at or above $1.00 per share for at least ten consecutive business days during the applicable period.

If the Company does not regain compliance with the minimum bid price requirement within the initial 180-day period, it may be eligible for an additional 180-day compliance period, subject to meeting certain other continued listing standards and notifying Nasdaq of its intention to cure the deficiency.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

If the Company's common stock were ultimately delisted from Nasdaq, it could have a material adverse effect on the liquidity and market price of its shares, its ability to raise equity financing, its access to the public capital markets, and its ability to provide equity incentives to employees. The Company is actively monitoring its compliance status and intends to pursue all available options to regain compliance within the applicable cure periods.

**Going Concern, Liquidity and Management's Plans**

As reflected in the accompanying consolidated financial statements, for the three months ended March 31, 2026, the Company had:

● Net loss available to common stockholders of $12,050,883 ; and

● Net cash used in operations of $4,550,799 .

Additionally, at March 31, 2026, the Company had:

● Accumulated deficit of $109,035,180 ;

● Stockholders' deficit of $23,867,968 ; and

● Working capital deficit of $21,834,519 .

The Company has unrestricted cash on hand of $1,991,166 at March 31, 2026. The Company has historically incurred significant losses and has not demonstrated an ability to generate sufficient revenues from the sales of its products and services to achieve profitable operations. In making this assessment, the Company performed a comprehensive analysis of its current circumstances, including its financial position, cash flows and cash usage forecasts for the twelve months ending March 31, 2027, and its current capital structure including equity-based instruments and outstanding debt obligations.

The Company believes it does not have sufficient cash resources on hand to meet its current obligations for a period of more than one year from the issuance date of these financial statements.

These conditions create substantial doubt about the Company's ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Management has evaluated the significance of these conditions and has developed plans intended to mitigate the substantial doubt. The Company's specific strategic and financing plans include the following:

● Enhancing market visibility and customer acquisition for its direct Mobile Virtual Network Operator ("MVNO") brand, LinkUp Mobile;

● Diversifying Lifeline revenue streams by expanding operations into California and additional states;

● Sustaining and growing its HERO Mobile Virtual Network Enabler ("MVNE") enablement platform to increase baseline recurring revenue; and

● Accessing new capital through the $20,000,000 convertible secured note financing authorized by the Board of Directors on January 6, 2026.

The Company is also actively pursuing additional equity and debt financing alternatives and strategic partnerships. These plans are subject to successful execution and prevailing market conditions, and there can be no assurance that they will generate sufficient liquidity to alleviate the substantial doubt.

**<u>Note 2 - Summary of Significant Accounting Policies</u>**

**Principles of Consolidation and Non-Controlling Interest**

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than the Company. The aggregate of the income or loss and corresponding equity that is not owned by us is included in Non-controlling Interests in the consolidated financial statements.

**Goodwill and Related Impairment - ClearLine Mobile, Inc. and Torch Wireless**

The Company tests goodwill for impairment at the reporting unit level annually, or more frequently when events or changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value, in accordance with ASC 350-20, Intangibles - Goodwill and Other.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

During the year ended December 31, 2025, the Company performed its annual goodwill impairment assessment and determined that the fair value of the ClearLine Mobile, Inc. ("CLMI") reporting unit was less than its carrying amount. The CLMI reporting unit was unable to generate revenues or cash flows sufficient to sustain operations. Accordingly, the Company recognized a full goodwill impairment charge of $2,500,000, representing the entire carrying amount of goodwill attributable to CLMI. This charge is included in other expense in the accompanying consolidated statements of operations for the year ended December 31, 2025.

The Company also determined that the fair value of the Torch Wireless reporting unit was less than its carrying amount and recognized a full goodwill impairment charge of $800,000 during the year ended December 31, 2025. This charge is included in other expense in the accompanying consolidated statements of operations for the year ended December 31, 2025.

Goodwill consisted of the following:

Schedule of Goodwill

---

| | |
|:---|:---|
| Balance - December 31, 2024 | $3300000 |
| Impairment charge - CLMI | (2500000) |
| Impairment charge - Torch | (800000) |
| Balance - December 31, 2025 | $- |

---

**Note Receivable (Sale of Former Subsidiary) and Related Impairment**

On May 7, 2021, the Company disposed of its former subsidiary True Wireless, Inc. In connection with the sale, the Company received an unsecured promissory note receivable from Blue Skies Connections, LLC in the original principal amount of $176,851, bearing interest at 0.6% per annum, with a default interest rate of 10%. The note was payable in twenty-five (25) monthly installments of principal and accrued interest of $7,461, commencing June 2023.

On July 12, 2023, the Company provided Notice of Default to Blue Skies Connections, LLC for failure to make required payments, and accelerated the full outstanding balance in accordance with the terms of the note. The note was placed on non-accrual status upon default in July 2023, and no interest income (including default interest at 10%) has been recognized since that date due to uncertainty of collection.

During the year ended December 31, 2025, the Company determined that the note was uncollectible and recognized an impairment loss of $176,851, representing the full carrying amount of the note receivable. This charge is included in other expense - net in the accompanying consolidated statements of operations for the year ended December 31, 2025.

See Note 8 for additional discussion of related legal proceedings.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Note Receivable was as follows:

Schedule of Note Receivables

---

| | |
|:---|:---|
| December 31, 2024 | 176851 |
| Less: impairment loss | (176851) |
| December 31, 2025 | $- |

---

**Business Segments and Concentrations**

The Company uses the "management approach" to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company's reportable segments. The Company manages its business as multiple reportable segments. See Note 10 regarding segment disclosure.

Revenues related to the Mobile Virtual Network Operator (SurgePhone and Torch Wireless) business segment are 100% derived from programs administered by the Federal Communications Commission (FCC), and all funds related to these programs are received directly from organizations under the direction of the FCC and subject to administrative rulings, statutory changes, and other funding restrictions that could impact the Company's operations in this segment.

Revenues related to the Point-of-Sale and Prepaid Services business segment are derived from suppling digital top-ups to a broad base of Independent Sales Organizations (ISOs), direct dealer stores, and convenience retailers, enabling us to sell domestic and international airtime and data replenishments for multiple carriers. Top ups are purchased at a wholesale rate and resold at a retail pricing, with the Company capturing margin on each transaction.

Accounts receivable related to these programs made up approximately 86% and 84% of accounts receivable at March 31, 2026 and December 31, 2025, respectively.

**Use of Estimates**

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Significant estimates at March 31, 2026 and December 31, 2025 include the following:

● Allowance for doubtful accounts and other receivables;

● Inventory reserves and classifications;

● Valuation of loss contingencies;

● Valuation of stock-based compensation;

● Estimated useful lives related to property and equipment and intangible assets;

● Implicit interest rate in right-of-use operating leases;

● Uncertain tax positions; and

● Valuation allowance on deferred tax assets.

**Risks and Uncertainties**

The Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company's operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

The Company has experienced, and in the future may experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, the following:

● The cyclical nature of the industry;

● General economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy; and

● The volatility of prices in connection with the Company's distribution of the product.

These factors, among others, make it difficult to project the Company's operating results on a consistent basis.

**Fair Value of Financial Instruments**

The Company accounts for financial instruments in accordance with Accounting Standards Codification (ASC) 820, Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy that prioritizes observable inputs over unobservable inputs:

● Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

● Level 3 - Unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use, developed using the best information available in the circumstances.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Company's financial instruments include cash, accounts receivable, accounts payable, and accrued expenses, including related-party amounts. As of March 31, 2026 and December 31, 2025, the carrying values of these instruments approximate their fair values due to their short-term nature.

See Note 6 for the Company's derivative liabilities, which are measured at fair value on a recurring basis using Level 3 inputs.

**Cash and Cash Equivalents, Restricted Cash and Concentration of Credit Risk**

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000.

At March 31, 2026 and December 31, 2025, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

Restricted Cash

The Company classifies as restricted cash any cash balances that are subject to legal or contractual restrictions limiting their availability for general corporate use. As of March 31, 2026 and December 31, 2025, restricted cash totaled $424,995 and $281,811, respectively, representing reserve amounts held in a Company-owned deposit account at the lender under the Company's accounts receivable financing facility. The reserve is subject to the lender's first-priority security interest and is available to cover charge-backs, customer adjustments, and service fees related to advances under the facility. See Note 5.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The following table reconciles cash and restricted cash reported on the consolidated balance sheets to the total cash and restricted cash presented on the consolidated statements of cash flows:

Schedule of Cash and Restricted Cash Reported on the Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Cash | $1991166 | $1731400 |
| Restricted cash | 424995 | 281811 |
| Total | $2416161 | $2013211 |

---

**Accounts Receivable**

Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

Management periodically assesses the Company's accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information, and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made. Bad debt expense is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

At March 31, 2026 and December 31, 2025, the allowance for doubtful accounts was $0, and no bad debt expense or recoveries were recorded during the years then ended.

**Inventory**

Inventory primarily consists of cell phones, store racking, and sim cards. Inventories are stated at the lower of cost or net realizable value using the average cost valuation method.

At March 31, 2026 and December 31, 2025, the Company had inventory of $339,570 and $339,570, respectively.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Impairment of Long-lived Assets**

Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with ASC 360-10-35-15, *Impairment or Disposal of Long-Lived Assets*. Factors considered in determining whether a potential impairment exists include, but are not limited to:

● Significant changes in performance relative to expected operating results;

● Significant changes in the use of the assets;

● Significant negative industry or economic trends; and

● Changes in the Company's business strategy.

In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds their fair value.

There were no impairment losses on long-lived assets for the three months ended March 31, 2026 and 2025, respectively.

**Property and Equipment**

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

There were no impairment losses for the three months ended March 31, 2026 and 2025, respectively.

**Derivative Liabilities**

The Company evaluates financial instruments that contain characteristics of both liabilities and equity in accordance with FASB ASC 480, *Distinguishing Liabilities from Equity*, and FASB ASC 815, *Derivatives and Hedging*.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Accounting for Derivative Liabilities

Derivative liabilities are remeasured at fair value at each reporting period, with changes in fair value recognized in the consolidated statements of operations as a gain or loss on derivative remeasurement. The Company uses the Black-Scholes option pricing model to estimate the fair value of these instruments.

Derivative Expense

When a bifurcated embedded derivative is recognized in connection with the issuance of a convertible debt instrument, the derivative is recorded at fair value on the commitment date and a corresponding debt discount is recorded against the host debt instrument, limited to the face amount of the debt. To the extent the initial fair value of the derivative liability, together with any other debt discounts (including original issue discount, equity-related discounts, and debt issuance costs), exceeds the face amount of the related debt, the excess is recognized immediately as day-one derivative expense in the consolidated statements of operations on the commitment date.

Conversion and Extinguishment of Derivative Liabilities

When a debt instrument with an embedded conversion option is converted into shares of common stock or repaid, the Company:

● Records the newly issued shares at fair value;

● Derecognizes the related debt, derivative liabilities, and any unamortized debt discounts; and

● Recognizes a gain or loss on debt extinguishment, if applicable.

For equity-classified derivative liabilities (such as certain warrants) that are extinguished, any remaining liability balance is reclassified to additional paid-in capital.

Reclassification of Equity Instruments to Liabilities

Equity instruments initially classified as equity are reclassified to liabilities if they no longer meet the criteria for equity classification. Upon reclassification, the instruments are remeasured at fair value on the date of reclassification, with any difference recognized in earnings.

Derivative Liability Balances

As of March 31, 2026 and December 31, 2025, the Company had derivative liabilities of $184,983 and $0, respectively.

See Notes 6 and 7 for additional information.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Debt Discounts**

The Company accounts for original issue discounts (OID), equity instruments issued with debt (common stock, warrants, etc.), and debt issuance costs as debt discounts in accordance with FASB ASC 835-30. These discounts are recorded as a reduction of the carrying amount of the related debt and amortized to interest expense over the term of the debt using the effective interest method (or straight-line method when not materially different). The aggregate debt discounts cannot exceed the face amount of the debt.

**Right-of-Use Assets and Lease Obligations**

The Company accounts for leases in accordance with ASC 842, *Leases*.

Recognition and Measurement

At lease commencement, the Company recognizes a right-of-use ("ROU") asset and a corresponding lease liability measured at the present value of the lease payments over the lease term. The Company evaluates ROU assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Lease Classification

All of the Company's leases are classified as operating leases and are presented as right-of-use assets and operating lease liabilities on the consolidated balance sheets. The Company has no finance leases. Operating lease expense is recognized on a straight-line basis over the lease term and is recorded in general and administrative expenses in the accompanying consolidated statements of operations.

Short-Term Leases

The Company has elected the short-term lease exemption under ASC 842 for leases with an initial term of twelve (12) months or less. These leases are not recorded on the balance sheet, and the related lease payments are expensed on a straight-line basis over the lease term.

Lease Term and Renewal Options

In determining the lease term, the Company evaluates whether renewal options are reasonably certain to be exercised. Factors considered include the useful life of leasehold improvements relative to the lease term, the economic performance of the business at the leased location, the comparative cost of renewal rates versus market rates, and any significant economic penalties for non-renewal. The Company's operating leases contain renewal options but no residual value guarantees. Management does not currently expect to exercise any renewal options, which are therefore excluded from the measurement of ROU assets and lease liabilities.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Discount Rate

As the implicit rate in the Company's leases is not readily determinable, the Company uses an incremental borrowing rate ("IBR") that represents the rate it would incur to borrow on a collateralized basis over a similar term in a similar economic environment.

See Note 8 for additional information regarding the Company's operating leases.

**Revenue Recognition**

The Company recognizes revenue in accordance with ASC 606, *Revenue from Contracts with Customers*. Revenue is recognized when control of promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company applies the following five-step model:

● Identify the contract with the customer;

● Identify the performance obligations in the contract;

● Determine the transaction price;

● Allocate the transaction price to performance obligations; and

● Recognize revenue when or as each performance obligation is satisfied.

All contract consideration is fixed and determinable at contract inception. The Company's contracts do not contain variable consideration, significant financing components, or multiple performance obligations. The Company does not offer returns, refunds, or warranties, and no arrangements are cancellable.

Mobile Virtual Network Operators

Torch Wireless is licensed to provide subsidized mobile broadband services through the Lifeline program to qualifying low-income customers. The Company's performance obligation is satisfied as mobile broadband services are provided to eligible subscribers.

Revenue is recognized in the month services are provided to Lifeline subscribers who remain active as of the last day of the month.

At month-end, the Company determines the number of eligible active subscribers based on internal usage data and subscriber eligibility status. The Company then submits a report to the Universal Service Administrative Company ("USAC"), which administers the Lifeline reimbursement program on behalf of the federal government. Upon submission of this report, the related accounts receivable is recorded. Payment is typically received by the 28th day of the following month.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Point-of-Sale and Prepaid Services

Revenues are generated through the sale of telecommunication products, including mobile phones, wireless top-up refills, and other mobile-related products through the Company's online web portal. The performance obligation is satisfied at the point of sale, at which time the web portal initiates an automated clearing house ("ACH") transaction and revenue is recognized. The Company has determined it is the principal in these arrangements, as it takes control of the products prior to transferring them to the customer, and accordingly records revenue on a gross basis with related costs recorded as cost of revenues.

Contract Liabilities - Deferred Revenue

Contract liabilities represent customer deposits received prior to the satisfaction of the related performance obligation. Upon completion of the performance obligation, the liability is relieved and revenue is recognized.

At March 31, 2026 and December 31, 2025, deferred revenue was $0.

The following represents the Company's disaggregation of revenues for the three months ended March 31, 2026 and 2025:

Schedule of Disaggregation of Revenue from Contracts with Customers

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
| | **2026** | **2026** | **2025** | **2025** |
| <br>**Revenue** | **Revenue** | **% of Revenues** | **Revenue** | **% of Revenues** |
| Mobile Virtual Network Operators | $1803512 | 11.28% | $2285823 | 21.61% |
| Point-of-Sale and Prepaid Services | 14180471 | 88.72% | 8291606 | 78.39% |
| Total Revenues | $15983983 | 100.00% | $10577429 | 100.00% |

---

The above disaggregation of revenues includes the following entities:

Mobile Virtual Network Operators (SPW and TW),

Point-of-Sale and Prepaid Services (Surge Fintech and ECS); and

Other Corporate Overhead (Surge Blockchain and formerly LogicsIQ and Injury Survey)

**Cost of Revenues**

Cost of revenues consists of tablet purchases, mobile phone purchases, purchased telecom services including data usage and access to wireless networks. Additionally, cost of revenues consists of call center costs, prepaid phone cards, commissions, and advertising costs.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Income Taxes**

Accounting Policy

The Company accounts for income taxes using the asset and liability method prescribed by ASC 740, *Income Taxes*. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company records a valuation allowance against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Uncertain Tax Positions

The Company follows the provisions of ASC 740 with respect to uncertainty in income taxes. Tax positions are recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the taxing authorities.

As of March 31, 2026 and December 31, 2025, the Company had no uncertain tax positions that qualify for recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No such interest or penalties were recorded for the three months ended March 31, 2026 and 2025, respectively.

Valuation Allowance and Net Operating Loss Carryforwards

The Company has net operating loss carryforwards that have been evaluated for applicability in offsetting current taxable income. Federal net operating loss carryforwards are limited to 80% of the current year's net taxable income.

During 2024, the Company entered a three-year cumulative loss position and remained in that position at March 31, 2026. As a result, a full valuation allowance has been recorded against all net operating loss carryforwards at March 31, 2026 and December 31, 2025, respectively.

**Advertising Costs**

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Company recognized marketing and advertising costs during the three months ended March 31, 2026 and 2025, respectively, as follows:

Schedule of Marketing and Advertising Costs

---

| | |
|:---|:---|
| **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
| 2026 | 2025 |
| $29922 | $23480 |

---

**Stock-Based Compensation**

The Company accounts for stock-based compensation in accordance with ASC 718, *Compensation—Stock Compensation*. Compensation cost is measured at the grant-date fair value of the award and is recognized over the requisite service period (generally the vesting period) on a straight-line basis.

This guidance applies to share-based payment awards granted to both employees and non-employees. Pursuant to ASU 2018-07, *Improvements to Nonemployee Share-Based Payment Accounting*, awards granted to non-employees are accounted for in substantially the same manner as awards granted to employees, with fair value determined on the grant date.

Fair Value Estimation

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The model incorporates the following key assumptions:

● Expected dividend yield - Based on the Company's anticipated dividend policy over the expected life of the option (generally assumed to be zero, as the Company does not currently pay dividends).

● Expected volatility - Based on the historical volatility of the Company.

● Risk-free interest rate - Based on the yield on U.S. Treasury securities with maturities approximating the expected term of the option.

● Expected term - Estimated based on historical exercise behavior, contractual terms, and the simplified method (average of contractual term and vesting period) where appropriate.

Forfeitures and Expense Classification

The Company has elected the practical expedient under ASU 2016-09 to account for forfeitures as they occur rather than estimating them in advance. This election is applied consistently to all stock-based awards. Stock-based compensation expense is classified in the consolidated statements of operations as a component of general and administrative expenses.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Tax Treatment

The Company applies the provisions of ASU 2016-09 related to the recognition of all excess tax benefits and tax deficiencies in income tax expense in the period in which they occur and the classification of cash paid for tax withholdings on behalf of employees as financing activities in the consolidated statement of cash flows.

**Stock Warrants**

The Company issues warrants to purchase shares of its common stock in connection with financing transactions, consulting arrangements, and strategic partnerships. The Company evaluates each warrant issuance under Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging - Contracts in Entity's Own Equity, to determine the appropriate balance sheet classification.

Warrants that are not puttable or mandatorily redeemable, do not require net cash settlement, and are indexed solely to the Company's own common stock are classified as equity instruments and recorded in additional paid-in capital. Warrants that do not meet the requirements for equity classification are recorded as liabilities at fair value, with changes in fair value recognized in earnings at each reporting date.

The fair value of warrants is measured using an appropriate fair value model, taking into consideration the specific terms and features of each instrument.

Warrants issued in connection with the sale of common stock are recorded at fair value as an allocation of the proceeds within additional paid-in capital.

Warrants issued in connection with the issuance of debt are recorded as a debt discount at fair value and amortized to interest expense over the term of the related debt using the effective interest method.

Warrants issued in exchange for services are recorded at fair value and recognized as expense over the requisite service period, or immediately upon issuance if no service period exists.

**Basic and Diluted Earnings (Loss) per Share**

Computation

The Company computes basic and diluted earnings (loss) per share in accordance with ASC 260-10-45, *Earnings Per Share*, as amended by ASU 2020-06, *Accounting for Convertible Instruments and Contracts in an Entity's Own Equity*.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period.

Diluted earnings (loss) per share includes the impact of potentially dilutive securities and is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding plus the weighted-average number of common stock equivalents and other potentially dilutive securities during the period.

Treasury Stock

Treasury shares are excluded from the denominator in computing both basic and diluted earnings (loss) per share because they are not considered outstanding.

During the year ended December 31, 2025, the Company reacquired 333,333 shares of treasury stock for $999,999 ($3 per share) in connection with a third-party convertible debt lender arrangement (see Note 5).

Potentially Dilutive Securities

Potentially dilutive common shares include contingently issuable shares, common stock issuable upon the exercise of stock options and warrants (calculated using the treasury stock method in accordance with ASC 260-10-55), and convertible debt instruments, if applicable.

These securities may be dilutive in future periods. However, in periods in which the Company reports a net loss, diluted loss per share is equal to basic loss per share because the inclusion of potential common stock equivalents would be anti-dilutive.

The following potentially dilutive equity securities were outstanding as of March 31, 2206 and 2025:

Schedule of Diluted Net Income (Loss) Per Share

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2025** |
| Convertible notes payable and related accrued interest | 2922105 |  |
| Warrants | 1165000 | 93000 |
| Stock options | 1968194 | 1166081 |
| Total common stock equivalents | 6055299 | 1259081 |

---

Warrants and stock options included as common stock equivalents represent those that are fully vested and exercisable. See Note 9.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Sufficiency of Authorized Shares

As of March 31, 2026 and December 31, 2025, the Company has 500,000,000 authorized shares of common stock, respectively, which is sufficient to accommodate any potential exercises of common stock equivalents.

**Treasury Stock**

Accounting Policy

The Company accounts for treasury stock using the cost method in accordance with ASC 505-30, *Equity—Treasury Stock*. Under this method, treasury stock is recorded at cost on the date of repurchase and presented as a reduction in stockholders' equity. Purchases, sales, issuances, or retirements of treasury stock do not affect the consolidated statements of operations.

Reissuance of Treasury Stock

When treasury shares are reissued, they are removed from treasury stock at their original cost. Any excess of the reissuance price over cost is credited to additional paid-in capital. Any deficiency is charged first to additional paid-in capital to the extent of previously recorded credits from treasury stock transactions, with any remaining deficiency charged to retained earnings.

Retirement of Treasury Stock

The Company periodically assesses whether to retain treasury shares or retire them. Upon retirement, the shares are removed from issued stock and a corresponding adjustment is made to retained earnings.

**Related Parties**

The Company identifies and discloses related party relationships and transactions in accordance with ASC 850, "Related Party Disclosures", and follows guidance set forth by the SEC under Regulation S-X, Rule 4-08(k) regarding related party disclosures.

A party is considered related to the Company if it meets any of the following criteria:

● Directly or indirectly controls, is controlled by, or is under common control with the Company.

● Principal owners, including any entity or individual that holds a significant ownership interest in the Company.

● Management and key personnel, including officers, directors, and executives.

● Immediate family members of principal owners and key management personnel.

● Entities with significant influence, where one party can exert control or influence over the management or operating policies of another party to the extent that one of the transacting parties may not be fully pursuing its own separate economic interests.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Company follows the SEC's Regulation S-K, Item 404(a), which requires the disclosure of related party transactions exceeding a materiality threshold and details on the nature of the relationship, transaction terms, and amounts involved.

During the three months ended March 31, 2026 and 2025, respectively, the Company incurred expenses with a related party (annual rental agreement) in the normal course of business as follows:

Schedule of Related Party Expenses

---

| | | |
|:---|:---|:---|
| **Related Party** | **March 31, 2026** | **March 31, 2025** |
| Carddawg Investments, Inc. | $41589 | $41589 |

---

1 - represents an affiliate of our Chief Executive Officer (Kevin Brian Cox)

From time to time, the Company may use credit cards to pay corporate expenses, these credit cards are in the names of certain of the Company's officers and directors. These amounts are insignificant.

See Note 5 for debt transactions with our Chief Executive Officer.

**Recent Accounting Standards**

**<u>Recently Adopted Accounting Standards</u>**

**FASB ASU 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures**

In November 2023, the FASB issued ASU 2023-07, which enhances reportable segment disclosure requirements by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM"), the title and position of the CODM, and extending certain annual disclosures to interim periods. It also clarifies that single-reportable-segment entities must apply ASC 280 in its entirety. This ASU was effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with retrospective application required.

The Company adopted ASU 2023-07 effective January 1, 2025. The adoption resulted in enhanced segment disclosures but did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**FASB ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures**

In December 2023, the FASB issued ASU 2023-09, which enhances income tax disclosure requirements by standardizing and disaggregating rate reconciliation categories and requiring disclosure of income taxes paid by jurisdiction. This ASU was effective for annual periods beginning after December 15, 2024, and may be applied on a prospective or retrospective basis. The Company adopted ASU 2023-09 effective January 1, 2025.

The adoption resulted in enhanced income tax disclosures but did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

**FASB ASU 2025-05 – Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets**

In July 2025, the FASB issued ASU 2025-05, which provides a practical expedient that permits entities to assume that current economic conditions as of the balance sheet date will remain unchanged over the remaining life of current (short-term) accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The Company early adopted ASU 2025-05 effective January 1, 2025, and elected the practical expedient. The amendments were applied prospectively. The adoption did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

**FASB ASU 2024-04 - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments**

In November 2024, the FASB issued ASU 2024-04, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The ASU was effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual periods.

The Company adopted ASU 2024-04 effective January 1, 2026 on a prospective basis. The adoption did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

**Recently Issued Accounting Standards Not Yet Adopted**

**FASB ASU 2024-03 / ASU 2025-01 – Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures**

In November 2024, the FASB issued ASU 2024-03, which requires public business entities to disclose, in both annual and interim reporting periods, disaggregated information about certain income statement expense line items in a tabular format, along with a qualitative reconciliation to the captions on the face of the financial statements. In January 2025, the FASB issued ASU 2025-01 to clarify the effective date for non-calendar year-end entities. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and may be applied on either a prospective or retrospective basis.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Company is currently assessing the potential impact of ASU 2024-03 / 2025-01 on its consolidated financial statement disclosures.

Other Accounting Standards Updates

The Company has evaluated all other recently issued accounting standards not yet effective and has determined that the adoption of such standards is not expected to have a material impact on the Company's financial statements or disclosures.

**Reclassifications**

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the consolidated results of operations, stockholders' equity, or cash flows.

**<u>Note 3 – Property and Equipment</u>**

Property and equipment consisted of the following:

---

| | | | |
|:---|:---|:---|:---|
| <br>**Type** |<br>**March 31, 2026** |<br>**December 31, 2025** | **Estimated Useful**<br>**Lives (Years)** |
| Computer equipment and software | $1135178 | $1135178 | 3 - 5 |
| Leasehold improvements | 324901 | 324901 | 5 |
| Furniture and fixtures | 165738 | 165738 | 5 - 7 |
|  | 1625817 | 1625817 |  |
| Less: accumulated depreciation/amortization | (1249139) | (1222300) |  |
| Property and equipment - net | $376678 | $403517 |  |

---

Depreciation and amortization expense for the three months ended March 31, 2026 and 2025 was as follows:

---

| | |
|:---|:---|
| **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
| **2026** | **2025** |
| $26839 | $86122 |

---

These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Note 4 – Intangibles</u>**

Intangibles consisted of the following:

---

| | | | |
|:---|:---|:---|:---|
| <br>**Type** |<br>**March 31, 2026** |<br>**December 31, 2025** | **Estimated Useful**<br>**Lives (Years)** |
| Proprietary Software | $4286402 | $4286402 | 7 |
| Tradenames/trademarks | 617474 | 617474 | 15 |
| ECS membership agreement | 465000 | 465000 | 1 |
| Noncompetition agreement | 201389 | 201389 | 2 |
| Customer Relationships | 183255 | 183255 | 5 |
|  | 5753520 | 5753520 |  |
| Less: accumulated amortization | (5097744) | (4934367) |  |
| Intangibles - net | $655776 | $819153 |  |

---

Amortization expense for the three months ended March 31, 2026 and 2025 was as follows:

---

| | |
|:---|:---|
| **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
| **2026** | **2025** |
| $163377 | $163452 |

---

Estimated amortization expense for each of the succeeding years is as follows:

---

| | |
|:---|:---|
| For the Years Ended December 31: |  |
| 2026 (9 months) | 490131 |
| 2027 | 165645 |
| Total | $655776 |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Note 5 – Debt</u>**

The following represents a summary of the Company's notes payable – SBA government, notes payable – related parties, convertible notes payable and notes payable, key terms, and outstanding balances at March 31, 2026 and December 31, 2025, respectively:

**<u>Notes Payable – SBA government</u>**

**Economic Injury Disaster Loan ("EIDL")**

During 2020, the Company received Economic Injury Disaster Loan ("EIDL") proceeds under a U.S. Small Business Administration program made available in response to the COVID-19 pandemic, which were used for working capital purposes. Monthly installment payments of principal and interest range from $74 to $731 and are payable over thirty (30) years from the date of the promissory note, with no prepayment penalty.

---

| | |
|:---|:---|
| **Terms** | **EIDL SBA** |
| Issuance dates of SBA loans | May 2020 - July 2020 |
| Term | 30 Years |
| Maturity date | May 2050 - July 2050 |
| Interest rate | 3.75% |
| Collateral | Unsecured |
| Balance - December 31, 2024 | $469396 |
| Repayments | (11062) |
| Balance - December 31, 2025 | 458334 |
| Repayments | (2415) |
| Balance - March 31, 2026 | $455919 |

---

**<u>Note Payable – Related Party</u>**

The following summarizes activity in the Company's note payable to a related party (the Chief Executive Officer):

---

| | |
|:---|:---|
| Balance - December 31, 2024 | $3555655 |
| Repayments | (824859) |
| Balance - December 31, 2025 | 2730796 |
| Conversion of debt to common stock | (707200) |
| Forgiveness of debt | (292800) |
| Balance - March 31, 2026 | $1730796 |

---

On March 12, 2024, the Company consolidated outstanding principal of $4,584,563 and accrued interest of $498,991 into a single unsecured note with a face amount of $5,083,554. The note bears interest at 10% per annum (15% upon default) and is repayable in monthly installments of $164,039 over 36 months, maturing in December 2026.

Beginning in July 2025, monthly payments were temporarily suspended due to cash flow constraints. The note holder confirmed that the suspension does not constitute an event of default. Interest continues to accrue at the contractual 10% rate, and the note terms were not modified. Management is evaluating options to resume or restructure payments.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Conversion of Related Party Note Payable to Common Stock**

On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer in partial conversion of a related party note payable (see Note 9). The shares were valued at their fair market value of $707,200 ($0.884 per share), determined using the quoted closing market price on the issuance date. In connection with the transaction, the Chief Executive Officer forgave an additional $292,800 of principal on the note.

The forgiveness of debt by the Chief Executive Officer, in his capacity as both a principal shareholder and creditor, was accounted for as a capital contribution and credited to additional paid-in capital. No gain on debt extinguishment was recognized. The aggregate value of the transaction ($1,000,000) was applied as a reduction to the outstanding balance of the related party note payable.

The following is a detail of the Company's Notes Payable - Related Party:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Note Payable - Related Party** | **Note Payable - Related Party** | **Note Payable - Related Party** | **Note Payable - Related Party** | **Note Payable - Related Party** | **Note Payable - Related Party** | **Note Payable - Related Party** | **Note Payable - Related Party** |
| **Note Holder** | **Issue Date** | **Maturity Date** | **Interest Rate** | **Default Interest Rate** | **Collateral** | **March 31, 2026** | **December 31, 2025** |
| Note #1 | December 31, 2023 | December 31, 2026 | 10.00% | 15.00% | Unsecured | $1730796 | $2730796 |
|  |  |  |  |  | Short Term | 1730796 | 2730796 |
|  |  |  |  |  | Long Term | $- | $- |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Convertible Notes Payable and Relate Debt Discounts</u>**

The Company has issued multiple convertible promissory notes to institutional and individual investors that are convertible into shares of the Company's common stock. The following table summarizes the principal terms and the gross and net carrying value of the Company's convertible notes payable as of March 31, 2026 and December 31, 2025:

The following is a summary of the Company's Convertible Notes Payable and related Debt Discounts:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** |
| <br>**Note #** | **December 31,**<br> **2024** | **Face amount**<br>**of note** | **Stated guaranteed<br> earned**<br> **interest** | **Common stock**<br>**repurchase** | **Debt**<br>**discounts** | **Amortization of**<br>**debt discount** | **December 31,**<br>**2025** | **Unamortized<br> Debt**<br> **Discounts** |
| Note #1 | $- | $6000000 | $- | $999999 | $(1679927) | $559976 | $5880048 | $1119951 |
| Note #2 |  | 770000 | 61600 |  | (224900) | 74967 | 681667 | 149933 |
| Note #3 |  | 660000 | 52800 |  | (182720) | 45680 | 575760 | 137040 |
| Note #4 |  | 385000 | 30800 |  | (106780) | 26695 | 335715 | 80085 |
| Note #5 |  | 385000 | 30800 |  | (104580) | 26145 | 337365 | 78435 |
| Note #6 | - | 495000 | 39600 | - | (126500) | 21083 | 429183 | 105417 |
| **Total** | $**-** | $**8695000** | $**215600** | $**999999** | $**(2425407)** | $**754546** | $**8239738** | $**1670861** |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** | **Convertible Notes Payable** |
| <br>**Note #** | **December 31,**<br>**2025** | **Face amount**<br>**of note** | **Stated guaranteed earned**<br> **interest** | **Common stock**<br>**repurchase** | **Debt**<br>**discounts** | **Amortization of debt**<br> **discounts** | **March 31,**<br> **2026** | **Unamortized Debt**<br> **Discounts** |
| Note #1 | $5880048 | $500000 | $- | $- | $- | $169993 | $6550041 | $949958 |
| Note #2 | 681667 |  |  |  |  | 56225 | 737892 | 93708 |
| Note #3 | 575760 |  |  |  |  | 45680 | 621440 | 91360 |
| Note #4 | 335715 |  |  |  |  | 26695 | 362410 | 53390 |
| Note #5 | 337365 |  |  |  |  | 26145 | 363510 | 52290 |
| Note #6 | 429183 |  |  |  |  | 31625 | 460808 | 73792 |
| Note #7 |  | 333333 | 26667 |  | (142797) | 11900 | 229103 | 130897 |
| Note #8 |  | 500000 | 40000 |  | (236926) | 19744 | 322818 | 217182 |
| Note #9 |  | 100000 |  |  | (8823) | 1103 | 92280 | 7720 |
| Note #10 |  | 50000 |  |  | (2905) | 242 | 47337 | 2663 |
| Note #11 |  | 100000 |  |  | (7808) | 976 | 93168 | 6832 |
| Note #12 |  | 400000 |  |  | (35292) | 4412 | 369120 | 30880 |
| Note #13 |  | 50000 |  |  |  |  | 50000 |  |
| Note #14 |  | 200000 |  |  |  |  | 200000 |  |
| Note #15 | - | 75000 | - | - | - | - | 75000 | - |
| **Total** | $**8239738** | $**2308333** | $**66667** | $**-** | $**(434551)** | $**394740** | $**10574927** | $**1710672** |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** |
| <br>**Note #** |<br>**Warrants** | **Legal**<br>**fees** | **Broker**<br>**fee** | **Original Issue**<br>**Discount** | **Stated Guaranteed**<br>**Interest** | **Commitment Shares (common**<br> **stock)** | **December 31,**<br>**2025** |
| Note #1 | $1084927 | $175000 | $420000 | $- | $- | $- | $1679927 |
| Note #2 |  | 7500 |  | 70000 | 61600 | 85800 | 224900 |
| Note #3 |  | 2000 |  | 60000 | 52800 | 67920 | 182720 |
| Note #4 |  | 1500 |  | 35000 | 30800 | 39480 | 106780 |
| Note #5 |  |  |  | 35000 | 30800 | 38780 | 104580 |
| Note #6 | - | 2000 | - | 45000 | 39600 | 39900 | 126500 |
| **Total** | $**1084927** | $**188000** | $**420000** | $**245000** | $**215600** | $**271880** | $**2425407** |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** | **Debt Discounts** |
| <br>**Note #** |<br>**Warrants** | **Legal**<br>**fees** | **Broker**<br>**fee** | **Original Issue**<br>**Discount** | **Stated Guaranteed**<br>**Interest** | **Commitment Shares (common**<br> **stock)** | **March 31,**<br>**2026** |
| Note #7 | $73297 | $9500 | $- | $33333 | $26667 | $- | $142797 |
| Note #8 | 141926 | 5000 |  | 50000 | 40000 |  | 236926 |
| Note #9 |  |  |  |  |  | 8823 | 8823 |
| Note #10 |  |  |  |  |  | 2905 | 2905 |
| Note #11 |  |  |  |  |  | 7808 | 7808 |
| Note #12 |  |  |  |  |  | 35292 | 35292 |
| Note #13 |  |  |  |  |  |  |  |
| Note #14 |  |  |  |  |  |  |  |
| Note #15 | - | - | - | - | - | - | - |
| **Total** | $**215223** | $**14500** | $**-** | $**83333** | $**66667** | $**54828** | $**434551** |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The following is a detail of the Company's Convertible Notes Payable:

****

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** | **Convertible Notes Payable - Net** |
| **Note Holder** | **Issue Date** | **Maturity Date** | **Interest Rate** | **Default Interest Rate** | **Collateral** | **March 31, 2026** | **December 31, 2025** |
| Note #1 | May 12, 2025 | November 12, 2027 | 15.00% | 15.00% | All assets | $7499999 | $6999999 |
| Note #2 | September 29, 2025 | September 29, 2026 | 0.00% | 22.00% | Unsecured | 831600 | 831600 |
| Note #3 | October 8, 2025 | October 8, 2026 | 0.00% | 22.00% | Unsecured | 712800 | 712800 |
| Note #4 | October 7, 2025 | October 7, 2026 | 0.00% | 22.00% | Unsecured | 415800 | 415800 |
| Note #5 | October 15, 2025 | October 15, 2026 | 0.00% | 22.00% | Unsecured | 415800 | 415800 |
| Note #6 | November 17, 2025 | November 17, 2026 | 0.00% | 22.00% | Unsecured | 534600 | 534600 |
| Note #7 | March 27, 2026 | March 27, 2027 | 8.00% | 22.00% | Unsecured | 360000 |  |
| Note #8 | March 12, 2026 | March 12, 2027 | 8.00% | 22.00% | Unsecured | 540000 |  |
| Note #9 | January 12, 2026 | January 12, 2028 | 14.50% | 18.00% | All assets | 100000 |  |
| Note #10 | February 18, 2026 | February 18, 2028 | 14.50% | 18.00% | All assets | 50000 |  |
| Note #11 | January 23, 2026 | January 23, 2028 | 14.50% | 18.00% | All assets | 100000 |  |
| Note #12 | January 12, 2026 | January 12, 2028 | 14.50% | 18.00% | All assets | 400000 |  |
| Note #13 | March 11, 2026 | March 11, 2028 | 14.50% | 18.00% | All assets | 50000 |  |
| Note #14 | March 6, 2026 | March 6, 2028 | 14.50% | 18.00% | All assets | 200000 |  |
| Note #15 | March 20, 2026 | March 20, 2028 | 14.50% | 18.00% | All assets | 75000 | - |
|  |  |  |  |  | Gross Carrying Value | 12285599 | 9910599 |
|  |  |  |  |  | Less: unamortized debt discount | (1710672) | (1670861) |
|  |  |  |  |  | Convertible notes payable - net | 10574927 | 8239738 |
|  |  |  |  |  | Short Term | 7744342 | 3068878 |
|  |  |  |  |  | Long Term | $2830585 | $5170860 |

---

**<u>Convertible Notes Payable - Notes #1 through #6</u>**

**Overview**

**Year Ended December 31, 2025**

The Company entered into six (6) Note Purchase Agreements with institutional investors and issued Convertible Notes (collectively, the "Notes") with an aggregate obligation (including guaranteed interest) of $9,694,999. Note #1 is a senior secured obligation collateralized by a first-priority lien on substantially all of the Company's and its subsidiaries' assets. Notes #2 through #6 are unsecured obligations.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Notes are summarized in detail below.

**<u>Note #1 - Senior Secured Convertible Note</u>**

On May 12, 2025, the Company issued a Senior Secured Convertible Note (the "Note") in the original principal amount of $6,999,999, resulting in net cash proceeds of $5,405,000 after $175,000 of legal fees and $420,000 of broker fees. The Note is fully guaranteed by certain of the Company's subsidiaries. Concurrent with issuance, the Company repurchased 333,333 shares of its common stock from the investor at $3.00 per share; these shares were cancelled and retired and are recorded as treasury stock (see Note 9).

The Note accrues interest at 1.25% per month (15.00% per annum), payable monthly in cash or as payment-in-kind at the Company's election. Following the Second Amendment (January 31, 2026) and Third Amendment (March 26, 2026), each evaluated and accounted for as a debt modification under ASC 470-50 (no gain or loss recognized; carrying value not adjusted), the Note currently amortizes in equal monthly installments of $500,000 commencing June 30, 2026, with the remaining balance due on the November 12, 2027 maturity date. Pursuant to the Third Amendment, the investor advanced an additional $500,000 of principal under the Note (increasing the aggregate principal to $7,499,999), and the Company agreed to obtain shareholder approval by July 17, 2026 to permit issuance of conversion shares in excess of 19.99% of the Company's outstanding common stock (the "Exchange Cap"); until such approval is obtained, conversions are limited to the Exchange Cap pursuant to Nasdaq Rule 5635(d).

The Note is convertible at the investor's option into shares of the Company's common stock at $4.00 per share. The conversion option is indexed solely to the Company's own common stock and satisfies the fixed-for-fixed criteria under ASC 815-10-15-74(a), qualifying for the scope exception from derivative accounting. Accordingly, the Note is accounted for in its entirety as a debt instrument.

**Warrant Issuance**

In connection with the issuance of the original note ($6,999,999), the Company issued warrants to purchase 700,000 shares of its common stock at an exercise price of $6.00 per share. The warrants are immediately exercisable and expire on May 12, 2030.

The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants at issuance was estimated at $1,084,927, which was recorded as a debt discount with a corresponding credit to additional paid-in capital.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The assumptions used in the Black-Scholes model were as follows:

---

| | |
|:---|:---|
| Expected term (years) | 5.0 |
| Expected volatility | 105.0% |
| Expected dividends | 0.0% |
| Risk free interest rate | 4.09% |

---

**Debt Discount**

In connection with the issuance of the Note, the Company recorded total debt discounts of $1,679,927, consisting of the following:

---

| | |
|:---|:---|
| Fair value - warrants issued | $1084927 |
| Legal fees | 175000 |
| Broker fees | 420000 |
| Total debt discount | $1679927 |

---

Debt discounts are being amortized to interest expense over the revised contractual term of the Note through the Maturity Date (as amended) of November 12, 2027 using the effective interest method in accordance with ASC 835-30.

**<u>Notes #2 through #6</u>**

The Company issued five (5) separate one-year unsecured Convertible Notes summarized in the tables below (collectively, the "Notes").

In accordance with ASC 835-30, original issue discounts, guaranteed interest capitalized at issuance, the fair value of common shares issued to the investors (determined based on the quoted closing price of the Company's common stock on each respective grant date), and professional fees were recorded as a reduction of the carrying value of the respective Notes and are amortized to interest expense using the effective interest method over each Note's one-year contractual term.

Each of these notes is convertible at the investor's option into common stock at fixed conversion prices in three tranches: 25% of the total obligation at $4.00 per share, 25% at $6.00 per share, and 50% at $6.00 per share. Upon an event of default or the Company's failure to pay any amortization payment when due, all tranches may alternatively be converted at 85% of the lowest daily volume-weighted average price ("VWAP") of the Company's common stock during the five (5) trading days immediately preceding the conversion date.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The fixed conversion prices are subject to customary anti-dilution adjustments. Subject to specified price and volume conditions and the investor's prior written consent, the Company may also effect a mandatory conversion of all or a portion of any 2025 Note.

The Company evaluated the embedded conversion features under ASC 815-10-15-74(a) and ASC 815-40. The fixed-price conversion options ($4.00 and $6.00 per share) satisfy the fixed-for-fixed criteria under ASC 815-40-15 and qualify for the scope exception from derivative accounting. The contingent VWAP-based conversion feature is exercisable only upon an event of default; management has assessed the likelihood of default as remote, and the feature is therefore considered clearly and closely related to the debt host under ASC 815-10-15-74(a) and qualifies for the equity scope exception. Each 2025 Note is accounted for in its entirety as a debt instrument. The Company reassesses the probability of default at each reporting date; should default no longer be considered remote, the contingent feature would be bifurcated and recognized as a derivative liability at fair value. As of March 31, 2026, the Company was in compliance with all terms of the 2025 Notes.

**<u>Convertible Notes Payable - Other (Notes #7 and #8) (Derivative Liabilities)</u>**

In March 2026, the Company issued two unsecured convertible promissory notes to institutional investors along with accompanying common stock purchase warrants.

The notes were issued at a discount due to original issue discount, capitalized guaranteed interest, debt issuance costs, and the fair value of the warrants. These discounts are recorded as a reduction of the notes' carrying value and amortized to interest expense using the effective interest method over the contractual term.

The notes mature twelve months (12) from issuance and bear a one-time guaranteed interest charge of 8% on the original principal, fully earned at issuance. They are repayable in four monthly installments followed by a final payment of all remaining amounts, with a 22% default interest rate.

● Note #7: Original principal $333,333 (total obligation $360,000). Four monthly payments of $72,000 begin November 27, 2026, with final payment due March 27, 2027 .

● Note #8: Original principal $500,000 (total obligation $540,000). Four monthly payments of approximately $102,920 begin November 12, 2026, with final payment due March 12, 2027 .

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Each note includes embedded conversion features in three tranches:

● First tranche (≈ 25 %): convertible at $4.00 per share;

● Second tranche (≈ 25 %): convertible at $6.00 per share;

● Third tranche (≈ 50 %): convertible only upon event of default or missed amortization payment, at 85% of the lowest daily VWAP during the five preceding trading days.

The fixed-price conversion options in the first two tranches qualify for the ASC 815-40-15 scope exception and are not bifurcated. The third tranche is considered remote and is also not bifurcated. The notes are accounted for entirely as debt, with default probability reassessed each reporting period.

The Company also issued five-year warrants to purchase 375,000 shares of common stock at $1.25 per share (150,000 related to Note #7 and 225,000 related to Note #8). Due to certain cash settlement features, the warrants are accounted for as derivative liabilities. Their aggregate fair value at issuance ($215,223) was recorded as a derivative liability and debt discount. The warrants are remeasured at fair value each reporting period, with changes recognized in earnings.

See Note 6 for additional information on derivative liabilities.

**<u>Convertible Secured Notes Payable Financing – Notes #9 - #15</u>**

On January 6, 2026, the Board authorized a private placement of up to $20,000,000 of convertible secured promissory notes (the "Notes"). The Notes bear interest at 14.5% per annum, payable quarterly in arrears, and mature 24 months from the respective issuance date. Torch Wireless, a subsidiary, unconditionally guarantees the Notes, which are secured by a junior perfected security interest in substantially all of the Company's assets, subordinated to existing senior indebtedness under an intercreditor agreement.

The Notes are convertible at the holder's option at any time into common stock using tiered conversion prices (20% tranches) based on the portion of principal and accrued interest converted. Conversion pricing differs by closing:

● Notes #9 - #12 - closings of $325,000 closing at higher-tier pricing: $4.00, $6.00, $8.00, $10.00, and $12.00 per share.

● Notes #13 - #15 - closings totaling $650,000 at lower-tier pricing: $2.00, $4.00, $6.00, $8.00, and $10.00 per share.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

All conversion prices are subject to customary anti-dilution adjustments for stock splits, stock dividends, and similar pro rata equity events. The Notes contain no down-round, full-ratchet, or variable conversion price provisions. Conversions are subject to a 4.99% beneficial ownership limitation (increaseable to 9.99% upon 61 days' prior written notice) and are settled solely in shares of common stock.

Six months after issuance, the Company may force conversion at the applicable tiered prices, subject to no Event of Default, minimum volume-weighted-average price (VWAP) and trading volume thresholds, and freely tradeable shares.

Upon an uncured Event of Default, the outstanding principal, accrued and unpaid interest, and default interest at 18% per annum become immediately due and payable, and the holder may convert the Default Amount into common stock at the applicable tiered conversion price.

As of March 31, 2026, the Company had issued $975,000 in aggregate principal amount of Notes (Notes #9 through #15). Subsequent to March 31, 2026, the Company issued an additional $175,000 in principal amount under the lower-tier pricing.

In connection with the issuances, the Company issued an aggregate of 31,525 commitment shares of common stock to the holders as additional consideration for the financing. The commitment shares were recorded at fair value on the respective issuance dates, based on the closing market prices of the Company's common stock, which ranged from $0.83 to $2.04 per share, for an aggregate fair value of $54,828. The fair value of the commitment shares was recorded as a debt discount against the carrying amount of the related Notes and is being amortized to interest expense over the contractual term of the Notes using the effective interest method.

The Company evaluated the embedded conversion features under ASC 815-15-25-1 and ASC 815-40. The tiered fixed conversion prices are indexed solely to the Company's common stock and are subject only to standard anti-dilution adjustments, satisfying the fixed-for-fixed criterion and qualifying for the scope exception in ASC 815-10-15-74(a). The Notes are accounted for as a single liability under ASC 470-20, as amended by ASU 2020-06, with no separation of the conversion feature into an equity component.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The following tables summarize each convertible note and their related debt discount components:

****

**<u>Convertible Notes Payable - Net</u>**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** |
| <br>**Note Holder** | **Issue**<br>**Date** | **Maturity**<br>**Date** | **Original**<br>**Principal** | **Capitalized Guaranteed**<br>**Interest** | **Total**<br>**Obligation** | **Net Cash**<br>**Proceeds** | **Total Debt**<br>**Discount** |
| Note #1 | May 12, 2025 | November 12, 2027 | $7499999 | $- | $7499999 | $5405000 | $1679927 |
| Note #2 | September 29, 2025 | September 29, 2026 | 770000 | 61600 | 831600 | 692500 | 224900 |
| Note #3 | October 8, 2025 | October 8, 2026 | 660000 | 52800 | 712800 | 598000 | 182720 |
| Note #4 | October 7, 2025 | October 7, 2026 | 385000 | 30800 | 415800 | 348500 | 106780 |
| Note #5 | October 15, 2025 | October 15, 2026 | 385000 | 30800 | 415800 | 350000 | 104580 |
| Note #6 | November 17, 2025 | November 17, 2026 | 495000 | 39600 | 534600 | 448000 | 126500 |
| Total |  |  | $10194999 | $215600 | $10410599 | $7842000 | $2425407 |
| **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
|  | **Issue** | **Maturity** | **Original** | **Capitalized Guaranteed** | **Total** | **Net Cash** | **Total Debt** |
| **Note Holder** | **Date** | **Date** | **Principal** | **Interest** | **Obligation** | **Proceeds** | **Discount** |
| Note #7 | March 27, 2026 | March 27, 2027 | $333333 | $26667 | $360000 | $290500 | $142797 |
| Note #8 | March 12, 2026 | March 12, 2027 | 500000 | 40000 | 540000 | 445000 | 236926 |
| Note #9 | January 12, 2026 | January 12, 2028 | 100000 |  | 100000 | 100000 | 8823 |
| Note #10 | February 18, 2026 | February 18, 2028 | 50000 |  | 50000 | 50000 | 2905 |
| Note #11 | January 23, 2026 | January 23, 2028 | 100000 |  | 100000 | 100000 | 7808 |
| Note #12 | January 12, 2026 | January 12, 2028 | 400000 |  | 400000 | 400000 | 35292 |
| Note #13 | March 11, 2026 | March 11, 2028 | 50000 |  | 50000 | 50000 |  |
| Note #14 | March 6, 2026 | March 6, 2028 | 200000 |  | 200000 | 200000 |  |
| Note #15 | March 20, 2026 | March 20, 2028 | 75000 | - | 75000 | 75000 | - |
| Total |  |  | $1808333 | $66667 | $1875000 | $1710500 | $434551 |

---

Note #1 ($7,499,999) is a combination of principal from 2025 ($6,999,999) and 2026 ($500,000). Net cash proceeds in 2026 are reflected in the table above plus an additional $500,000, totaling $2,225,000, the Company also paid direct debt offering costs of $14,500.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Debt Discount Components</u>**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** |
| <br>**Note Holder** | **Original Issue**<br>**Discount** | **Capitalized Guaranteed**<br>**Interest** | **Warrants**<br>**Issued** | **Common Stock**<br>**Issued** | **Grant Date**<br>**Price** | **Fair Value of Shares**<br> **Issued** | **Professional**<br>**Fees** | **Total Debt**<br>**Discount** |
| Note #1 | $- | $- | $1084927 |  | $- | $- | $595000 | $1679927 |
| Note #2 | 70000 | 61600 |  | 30000 | $2.86 | 85800 | 7500 | 224900 |
| Note #3 | 60000 | 52800 |  | 24000 | $2.83 | 67920 | 2000 | 182720 |
| Note #4 | 35000 | 30800 |  | 14000 | $2.82 | 39480 | 1500 | 106780 |
| Note #5 | 35000 | 30800 |  | 14000 | $2.77 | 38780 |  | 104580 |
| Note #6 | 45000 | 39600 | - | 21000 | $1.90 | 39900 | 2000 | 126500 |
|  | $245000 | $215600 | $1084927 | $103000 |  | $271880 | $608000 | $2425407 |
| **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
|  | **Original Issue** | **Capitalized Guaranteed** | **Warrants** | **Common Stock** | **Grant Date** | **Fair Value of Shares** | **Professional** | **Total Debt** |
|  | **Discount** | **Interest** | **Issued** | **Issued** | **Price** | **Issued** | **Fees** | **Discount** |
| Note #7 | $33333 | $26667 | $73297 **A** |  | $- | $- | $9500 | $142797 |
| Note #8 | 50000 | 40000 | 141926 **A** |  | $- |  | 5000 | 236926 |
| Note #9 |  |  |  | 4325 | $2.04 | 8823 |  | 8823 |
| Note #10 |  |  |  | 3500 | $0.83 | 2905 |  | 2905 |
| Note #11 |  |  |  | 6400 | $1.22 | 7808 |  | 7808 |
| Note #12 |  |  |  | 17300 | $2.04 | 35292 |  | 35292 |
| Note #13 |  |  |  |  | $- |  |  |  |
| Note #14 |  |  |  |  | $- |  |  |  |
| Note #15 | - | - | - | - | $- | - | - | - |
| Total | $83333 | $66667 | $215223 | $31525 |  | $54828 | $14500 | $434551 |

---

A - The Warrants Issued for Notes #7 and #8 are classified as derivative liabilities under ASC 815-40-25; see Note 6, Derivative Liabilities, for further information.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

These convertible notes are repayable in either monthly or quarterly installments inclusive of the capitalized guaranteed interest, with any unpaid amounts due and payable as part of the final installment, as follows:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br>**Note Holder** | **Monthly**<br>**Installment** | **Quarterly**<br>**Installment** | <br>**Payment 1** | <br>**Payment 2** | <br>**Payment 3** | <br>**Payment 4** | <br>**Payment 5** |
| Note #1 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Note #2 | $166320 |  | May 25, 2026 | June 25, 2026 | July 25, 2026 | August 25, 2026 | September 25, 2026 |
| Note #3 | $142560 |  | May 31, 2026 | June 30, 2026 | July 31, 2026 | August 31, 2026 | October 8, 2026 |
| Note #4 | $83160 |  | June 7, 2026 | July 7, 2026 | August 7, 2026 | September 7, 2026 | October 7, 2026 |
| Note #5 | $83160 |  | June 15, 2026 | July 15, 2026 | August 15, 2026 | September 15, 2026 | October 15, 2026 |
| Note #6 | $106920 |  | July 17, 2026 | August 17, 2026 | September 17, 2026 | October 17, 2026 | November 17, 2026 |
| Note #7 | $72000 |  | November 27, 2026 | December 28, 2026 | January 27, 2027 | February 26, 2027 | March 27, 2027 |
| Note #8 | $106920 |  | November 12, 2026 | December 12, 2026 | January 12, 2027 | February 12, 2027 | March 12, 2027 |
| Note #9 |  | $25000 | January 12, 2027 | April 12, 2027 | July 12, 2027 | October 12, 2027 | N/A |
| Note #10 |  | $12500 | February 18, 2027 | May 18, 2027 | August 18, 2027 | November 18, 2027 | N/A |
| Note #11 |  | $25000 | January 23, 2027 | April 23, 2027 | July 23, 2027 | October 23, 2027 | N/A |
| Note #12 |  | $100000 | January 12, 2027 | April 12, 2027 | July 12, 2027 | October 12, 2027 | N/A |
| Note #13 |  | $12500 | March 11, 2027 | June 11, 2027 | September 11, 2027 | December 11, 2027 | N/A |
| Note #14 |  | $50000 | March 6, 2027 | June 6, 2027 | September 6, 2027 | December 6, 2027 | N/A |
| Note #15 |  | $18750 | March 20, 2027 | June 20, 2027 | September 20, 2027 | December 20, 2027 | N/A |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Notes Payable</u>**

The following is a summary of the Company's Notes Payable:

---

| | | | |
|:---|:---|:---|:---|
|  | **Note #1** | **Note #2** | **Total** |
| Balance - December 31, 2024 | $- | $- | $- |
| Proceeds from issuance of note | 1000000 | 5628811 | 6628811 |
| Repayments |  | (4751765) | (4751765) |
| Debt discount | (48418) |  | (48418) |
| Amortization of debt discount | 5380 | - | 5380 |
| Balance - December 31, 2025 | $956962 | $877046 | $1834008 |
| Unamortized debt discount | $43038 | $- | $43038 |
| Balance - December 31, 2025 | $956962 | $877046 | $1834008 |
| Proceeds |  | 954272 | 954272 |
| Repayments |  | (347983) | (347983) |
| Amortization of debt discount | 43038 | - | 43038 |
| Balance - March 31, 2026 | $1000000 | $1483335 | $2483335 |

---

The following is a detail of the Company's Notes Payable:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** | **Notes Payable - Net** |
| **Note Holder** | **Issue Date** | **Maturity Date** | **In-Default** | **Interest Rate** | **Default Interest Rate** | **Collateral** | **March 31,<br> 2026** | **December 31,<br> 2025** |
| Note #1 | September 9, 2025 | March 9, 2026 | Yes | 19.00% | 6.00% | Unsecured | $1000000 | $1000000 |
| Note #2 | September 9, 2025 | September 9, 2026 | No | 0.00% | 0.00% | Accounts receivable | 1483335 | 877046 |
|  |  |  |  |  |  | Less: unamortized debt discount | - | (43038) |
|  |  |  |  |  |  | Notes payable - net | 2483335 | 1834008 |
|  |  |  |  |  |  | Short Term | 2483335 | 1834008 |
|  |  |  |  |  |  | Long Term | $- | $- |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Note #1 - Note Issuance and Warrants

On September 9, 2025, the Company entered into a six-month (6) Senior Secured Note with an individual (the "Investor"), in the original principal amount of $1,000,000 (the "Note").

As of March 31, 2026, this note ($1,000,000) was in default.

Warrant Issuance and Classification

In connection with the issuance of the Note, the Company also issued warrants to purchase 30,000 shares of its common stock at an exercise price of $2.50/share. The warrants are immediately exercisable and remain outstanding through September 9, 2028.

Debt Discount

In connection with the issuance of the $1,000,000 note, the Company issued warrants to purchase 30,000 shares of common stock. The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants was estimated to be $48,418, which was recorded as a debt discount and is being amortized to interest expense over the term of the note. The Company also recorded a corresponding increase to additional paid-in capital of $48,418. See Note 9.

The fair value of the warrants was determined using the Black-Scholes model with the following assumptions:

---

| | |
|:---|:---|
| Expected term (years) | 3.0 |
| Expected volatility | 90.0% |
| Expected dividends | 0.0% |
| Risk free interest rate | 3.48% |

---

The debt discount will be fully amortized over the contractual term of the note (1 year).

Note #2 – Accounts Receivable Financing Facility

On September 9, 2025, the Company entered into a one-year Business Loan and Security Agreement (the "Agreement") with Paragon Bank ("Paragon") establishing a $1,500,000 accounts receivable financing facility (the "Facility"). The Facility matures on September 9, 2026 and is secured by a first-priority lien on substantially all of the Company's accounts receivable and related collateral. The Facility is a full-recourse arrangement under which the Company remains liable to Paragon for all advances, including amounts related to uncollected or disputed customer receivables.

Because the Company retains substantially all of the risks and rewards of ownership of the receivables transferred to Paragon under the full-recourse terms of the Agreement, the transactions do not qualify as sales under Accounting Standards Codification (ASC) 860-10-40. Accordingly, the underlying receivables remain on the Company's consolidated balance sheets as accounts receivable, and the related cash advances received from Paragon are reported as a secured borrowing within current liabilities on the consolidated balance sheets. Service charges and related finance fees are recognized as interest expense in the consolidated statements of operations as incurred.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Borrowings under the Facility are available based on eligible accounts receivable, with maximum advances of up to 85% of the eligible borrowing base, subject to customary reserves, concentration limits, and reporting requirements. The Facility does not bear stated interest; the Company's cost of funds under the Facility consists of service charges and related finance fees assessed by Paragon on factored invoice volume, together with a one-time loan origination fee of $5,000 paid at inception. Proceeds from the Facility are used to provide working capital financing and liquidity support for the Company's operations.

Paragon retains a reserve account equal to 15% of receivables financed under the Facility to cover charge-backs, customer adjustments, and service fees. Amounts held in the reserve are released to the Company upon collection of the related underlying receivables, net of any applicable charge-backs and fees. The reserve is maintained in a Company-owned deposit account at Paragon Bank, subject to Paragon's first-priority security interest and restrictions on withdrawal, and is presented as restricted cash on the Company's consolidated balance sheets. At March 31, 2026 and December 31, 2025, the reserve balance was $424,995 and $281,811, respectively.

Service charges and related finance fees were $38,472 and $0 for the three months ended March 31, 2026 and 2025, respectively, and are recognized as interest expense in the consolidated statements of operations.

The Agreement contains customary affirmative and negative covenants, including:

● borrowing-base reporting and certification requirements;

● maintenance of the first-priority lien on the pledged receivables and related collateral;

● restrictions on additional indebtedness, liens, and recourse sales of accounts receivable to parties other than Paragon;

● restrictions on dividends, mergers, dispositions of collateral outside the ordinary course of business, and material changes in the Company's business operations; and

● maintenance of the Company's corporate existence, required insurance coverage, and periodic financial and tax reporting.

The Agreement also provides that a change in ownership of 25% or more of the Company's common stock constitutes an event of default. As of March 31, 2026 and December 31, 2025, the Company was in compliance with all covenants and other terms of the Agreement.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Debt Maturities</u>**

The following represents the maturities of the Company's various debt arrangements for each of the five (5) succeeding years and thereafter as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **For the Year Ended December 31,** | **Note Payable - Related Party** | **Convertible Notes Payable** | **Notes Payable** | **Notes Payable - SBA Government** | **Total** |
| 2026 | $1730796 | $6840440 | $2483335 | $11727 | $11066298 |
| 2027 |  | 5445159 |  | 11902 | 5457061 |
| 2028 |  |  |  | 12308 | 12308 |
| 2029 |  |  |  | 12820 | 12820 |
| 2030 |  |  |  | 13313 | 13313 |
| Thereafter | - | - | - | 393849 | 393849 |
| Total | 1730796 | 12285599 | 2483335 | 455919 | 16955649 |
| Less: unamortized debt discount | - | 1710672 | - | - | 1710672 |
| Debt - net | $1730796 | $10574927 | $2483335 | $455919 | $15244977 |

---

**<u>Note 6 – Derivative Liabilities</u>**

In connection with the issuance of convertible promissory notes (Notes #7 and #8), in March 2026, the Company issued 375,000 common stock purchase warrants. These warrants contain certain cash settlement features triggered upon events of default or change of control and therefore do not qualify for equity classification. Accordingly, the warrants are accounted for as derivative liabilities.

The derivative liabilities are measured at fair value on a recurring basis and are classified as Level 3 in the fair value hierarchy because their valuation relies on significant unobservable inputs. The Company determines the fair value of these warrant liabilities using the Black-Scholes option pricing model.

**Valuation Assumptions**

The Company used the following key assumptions to estimate the fair value of the derivative liabilities:

Schedule of Estimate Fair Value of Derivative Liabilities

---

| | | |
|:---|:---|:---|
|  | **Commitment Date** | **Remeasurement** |
| Stock Price | $0.74 - $0.89 | $0.75 |
| Exercise Price | $1.25 | $1.25 |
| Expected term (years) | 5.00 | 4.95 - 4.99 |
| Expected volatility | 94% - 98 | 94% |
| Expected dividends | 0.00% | 0.00% |
| Risk free interest rate | 3.88% - 4.06 | 3.92% |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Derivative Liability Activity**

Changes in the fair value of these derivative liabilities are recognized in the consolidated statements of operations as "Change in fair value of derivative liabilities" within other income (expense).

For the three months ended March 31, 2026 and 2025, the Company recorded a loss (gain) on the change in fair value of derivative liabilities of $30,241 and $0, respectively.

The following table presents a reconciliation of the beginning and ending balances for the Level 3 derivative liabilities for the three months ended March 31, 2026:

Schedule of Beginning and Ending Balances for Level 3 Derivative Liabilities

---

| | |
|:---|:---|
| Derivative liabilities – December 31, 2025 | $- |
| Fair value at commitment date | 215224 |
| Fair value - mark to market adjustment | (30241) |
| Derivative liabilities – March 31, 2026 | $184983 |

---

**<u>Note 7 – Fair Value of Financial Instruments</u>**

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis and classifies them within the fair value hierarchy under ASC 820. The Company's fair value measurement policies, including the three-level hierarchy framework, are described in Note 2.

Recurring Fair Value Measurements

As of March 31, 2026, the Company had derivative liabilities classified as Level 3 in the fair value hierarchy. There were no derivative liabilities as of December 31, 2025.

These derivative liabilities (warrants issued with notes #7 and #8) are measured at fair value with significant unobservable inputs.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The Company had no other financial assets or liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025, respectively.

Schedule of Other Financial Assets or Liabilities Measured at Fair Value on a Recurring Basis

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Liabilities |  |  |  |  |
| Derivative liabilities | $&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $184983 | $184983 |
| Total | $- | $- | $184983 | $184983 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Liabilities |  |  |  |  |
| Derivative liabilities | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - |
| Total | $- | $- | $- | $- |

---

**<u>Note 8 – Commitments and Contingencies</u>**

**Operating Leases**

We have entered into various operating lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: *Leases,* which requires a lessee to utilize the right-of-use model and to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

We have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

Our leases, where we are the lessee, do not include an option to extend the lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.

Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.

**Operating Lease**

On October 1, 2024, the Company entered into a 32-month operating lease for 2,293 square feet of office space in San Salvador. The lease expires in May 2027. The initial monthly payment is $18,958, which includes base rent, estimated operating expenses, and sales tax. The lease is subject to annual increases of 3%.

In accordance with ASC 842, *Leases*, the Company recognized a right-of-use ("ROU") asset and a corresponding lease liability of $565,650 upon lease commencement. The recognition of the ROU asset was a non-cash transaction.

The Company had no financing leases as of March 31, 2026 and December 31, 2025.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The tables below present information regarding the Company's operating lease assets and liabilities at March 31, 2026 and December 31, 2025, respectively:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| Assets |  |  |
| Operating lease - right-of-use asset - non-current | $260694 | $313410 |
| Liabilities |  |  |
| Operating lease liability | $266318 | $319232 |
| Weighted-average remaining lease term (years) | 1.17 | 1.41 |
| Weighted-average discount rate | 8% | 8% |

---

The components of lease expense were as follows:

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
|  | **2026** | **2025** |
| Operating lease costs |  |  |
| Amortization of right-of-use operating lease asset | $52716 | $61279 |
| Lease liability expense in connection with obligation repayment | 5667 | 10035 |
| Total operating lease costs | $58383 | $71314 |
| Supplemental cash flow information related to operating leases was as follows: |  |  |
| Operating cash outflows from operating lease (obligation payment) | $58581 | $70062 |
| Right-of-use asset obtained in exchange for new operating lease liability | $- | $- |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Future minimum lease payments for the years ended December 31:

---

| | |
|:---|:---|
| <u>Year Ended December 31,</u> |  |
| 2026 (9 months) | $177501 |
| 2027 | 100565 |
| Total undiscounted cash flows | 278066 |
| Less: amount representing interest | 11748 |
| Present value of operating lease liabilities | 266318 |
| Less: current portion of operating lease liabilities | 226225 |
| Long-term operating lease liabilities | $40093 |

---

**Employment Agreements (Chief Executive Officer and Chief Financial Officer)**

Chief Executive Officer

In December 2023, the Company entered into an employment agreement with its Chief Executive Officer through December 31, 2028, as subsequently amended. The agreement provides for an annual base salary of $750,000 for the year ended December 31, 2023, with 3% annual increases thereafter, and an annual cash bonus of $870,000.

The agreement includes a long-term equity incentive program under the SurgePays, Inc. 2022 Omnibus Securities and Incentive Plan, pursuant to which the Company is required to grant the Chief Executive Officer 500,000 shares of restricted common stock annually for a minimum of five years. Because each annual grant requires separate Board approval, each grant constitutes a separate award under ASC 718. Compensation cost is measured at the grant-date fair value and recognized over the requisite service period, which in this case is expected to be the grant date itself (as the awards are fully vested upon grant), consistent with ASC 718-10-55-87 through 55-88.

The initial award of 500,000 shares was granted in monthly installments during the second half of 2024 and had a total grant-date fair value of $3,800,000 ($7.60 per share). These shares were fully vested and the related compensation expense was fully recognized in 2024. The second award of 500,000 shares was approved by the Board on June 26, 2025, with an original planned grant and vesting date of June 1, 2025. On December 31, 2025, the Company and the Chief Executive Officer entered into Amendment No. 3 to the Employment Agreement, which deferred the grant and vesting of this award to April 1, 2026 and also deferred payment of the 2025 annual cash bonus of $870,000 to April 1, 2026. Because no grant date had been established for this award as of December 31, 2025, no stock-based compensation expense has been recognized with respect to this award for the year ended December 31, 2025. The fair value of this award was $360,000 ($0.72/share), based upon the quoted closing market price on the grant date of April 1, 2026 (See Note 11).

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Future awards of 500,000 shares are scheduled to be granted on or around June 1 of 2026, 2027, and 2028, and on each June 1 of any renewal term, with fair values to be determined at their respective grant dates.

The agreement also provides for additional performance-based restricted stock awards upon achievement of specified Revenue, EBITDA, and Market Capitalization thresholds, with potential award values ranging from $2,500,000 to $200,000,000. No such performance thresholds were met during the year ended December 31, 2025.

All awards vest immediately upon the Chief Executive Officer's death, total disability, termination without cause, or a change in control, provided the executive remains employed by the Company at such time.

Chief Financial Officer

In November 2023, the Company finalized the terms of its employment agreement with its former Chief Financial Officer (CFO), providing for a base salary of $489,250 for the year ended December 31, 2024 and $503,928 for the year ended December 31, 2025, and an annual cash bonus of at least $510,000 for the year ended December 31, 2024, with the 2025 bonus subject to Board approval.

In November 2023, the Company granted 600,000 shares of restricted common stock to its former CFO, having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price on the grant date. The award was structured in two tranches:

● 400,000 shares vesting ratably over the period July 2024 through December 2024, representing approximately 66,667 shares per month; and

● 200,000 shares vesting on December 31, 2025.

All 600,000 shares vested in accordance with their original vesting schedules in their respective periods, and all compensation cost associated with this award has been fully recognized in the periods where services were provided.

In October 2025, the Company provided notice to the former CFO that his employment agreement would not be renewed upon its expiration on December 31, 2025. Subsequent to December 31, 2025, the Company and the former CFO entered into a separation agreement pursuant to which the former CFO will provide consulting services through June 30, 2026. In connection therewith, the Company will pay consulting fees of $250,000, payable in twelve equal monthly installments of approximately $20,833, as well as reimburse health insurance premiums under COBRA through December 31, 2026.

See Note 9 regarding the vesting provisions of these shares.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

MVNx Reseller Agreement

In August 2024, the Company entered into an MVNx Reseller Agreement (the "AT&T Agreement") with AT&T Mobility LLC ("AT&T"), pursuant to which the Company purchases wholesale wireless network services from AT&T for resale to the Company's end users under the Company's own brand. After an extensive systems integration with AT&T, commercial services under the AT&T Agreement did not commence until April 2025. The AT&T Agreement has an initial three-year term commencing on the Launch Date, defined as the date that is 90 days following the completion of such API integration. Following the initial term, the AT&T Agreement automatically renews for successive one-year periods unless either party provides written notice of non-renewal at least 120 days prior to the end of the then-current term.

Under the AT&T Agreement, the Company is subject to minimum annual spend commitments over the initial three-year term, as follows:

● Year 1: $10,000,000

● Year 2: $15,000,000

● Year 3: $25,000,000

The aggregate minimum spend commitment over the initial term is $50,000,000. During each month of Year 1, the Company is invoiced for the greater of (i) actual usage charges incurred during that month or (ii) a specified monthly minimum floor that escalates beginning in Month 7 of the term (October 2025), reaching $3,500,000 in Month 12. During Years 2 and 3, the monthly obligation equals the greater of actual usage or one-twelfth of the applicable annual minimum commitment. To the extent cumulative invoiced payments in any contract year exceed the applicable annual minimum commitment, the excess is applied toward the minimum commitment for the following year. Any portion of an annual minimum commitment that remains unsatisfied at the end of the applicable contract year constitutes an unconditional payment obligation of the Company.

In accordance with Accounting Standards Codification (ASC) 440-10-50, the Company has evaluated its remaining obligations under the AT&T Agreement and determined that a material contractual commitment exists. As of December 31, 2025, the Company had a remaining unsatisfied minimum spend commitment of $1,981,142 under Year 1 of the AT&T Agreement, representing the portion of the $10,000,000 Year 1 minimum commitment not yet satisfied through invoiced amounts as of the balance sheet date. Amounts invoiced and due under the AT&T Agreement are reflected in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The remaining Year 1 unsatisfied commitment of $1,981,142 must be satisfied by March 2026, which represents the end of the Year 1 contract period, through ongoing usage charges and, to the extent actual usage is insufficient, minimum commitment payments. Thereafter, beginning in April 2026, the Company will be subject to the Year 2 minimum spend commitment of $15,000,000, payable monthly at the greater of actual usage or $1,250,000 per month.

**<u>Contingencies – Legal Matters</u>**

In the normal course of business, the Company may be subject to litigation, claims, and legal proceedings. The Company evaluates legal contingencies in accordance with FASB ASC 450-20-50, "Contingencies", which requires recognition of a liability if an unfavorable outcome is both probable and can be reasonably estimated.

When a legal matter arises, the Company:

● Assesses the merits of the case, including available defenses.

● Evaluates its potential exposure and possible legal or settlement strategies.

● Determines the likelihood of an unfavorable outcome based on available information.

● Establishes an accrual if a loss is both probable and reasonably estimable.

As of March 31, 2026, based on management's review and consultation with legal counsel, the Company is not aware of any contingent liabilities that require accrual or disclosure in the consolidated financial statements.

Blue Skies Connections, LLC, and True Wireless, Inc. v. SurgePays, Inc., et. al.

District Court of Oklahoma County, OK, CJ-2021-5327, filed on December 13, 2021. Plaintiffs' petition alleges breach of a Stock Purchase Agreement by SurgePays, SurgePhone Wireless, LLC, and Kevin Brian Cox ("Defendants"), and makes other allegations related to SurgePays' consulting work with Jonathan Coffman, formerly a True Wireless employee. The petition requests injunctive relief, general damages, punitive damages, attorney fees and costs for alleged breach of contract, tortious interference with a business relationship, and fraud. Blue Skies alleged the Defendants are in violation of their non-competition and non-solicitation agreements related to the sale of True Wireless from SurgePays to Blue Skies. Defendants filed various dispositive motions with the Court demonstrating Oklahoma state law does not recognize non-compete agreements and non-solicitation agreements in the manner alleged by Plaintiffs, and the Court granted these motions, finding the non-solicitation and non-competition clauses in the Stock Purchase Agreement void as a matter of Oklahoma law. Defendants then filed additional dispositive motions on Plaintiffs' claims in tort and equity, which the Court granted in part based on its prior rulings. Plaintiffs took the position the Court granting Defendants' dispositive motions on these material issues only leaves partial contract claims that are inextricably intertwined with the remaining claims and defenses. Plaintiffs sought a certified interlocutory appeal of the Court's orders. On March 10, 2025, the Oklahoma Supreme Court entered an order denying Plaintiffs' Petition for Certiorari to review the certified interlocutory appeal. In December 2025, Judge Dishman recused himself from the case following a request from the Blue Skies and True Wireless parties and objection by SurgePays' counsel. Judge Andrews has been assigned to the matter and has set remaining matters for status and briefing schedules on outstanding motions in the trial court. The case will now proceed in the district court on the parties' remaining claims. Presently, there is no trial date.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

In the Circuit Court of Tennessee for the 30th Judicial District at Memphis, Docket # CT-3219-23. On August 8, 2023, a complaint was filed by SurgePays for breach of a promissory note by Blue Skies Connections, LLC. The note at issue is dated June 14, 2021, and requires Blue Skies Connections to repay the principal sum of $176,850.56, by monthly payments of $7,461.37 commencing on June 1, 2023. Blue Skies Connections has failed to make any payments due under the terms of the note, and this breach entitles SurgePays to demand payment of the entire amount of the note together with all accrued interest. Blue Skies Connections responded by filing a Motion to Dismiss or, in the alternative, a Motion to Stay, taking the position that, under the prior suit pending doctrine, the subject promissory note is subject to the prior litigation instituted by Blue Skies Connections against SurgePays, styled Skies Connections, LLC and True Wireless, Inc. v. SurgePays, Inc., et al., Case No. CJ-2021-5327, District Court of Oklahoma County, Oklahoma. SurgePays elected to dismiss its complaint without prejudice and is in the process of evaluating re-filing the matter in the District Court of Oklahoma County, Oklahoma.

SurgePays, Inc. et al. v. Fina et al., Case No. CJ-2022-2782, District Court of Oklahoma County, Oklahoma

Plaintiffs SurgePays, Inc. and Kevin Brian Cox initiated this case against its former officer Mike Fina, his companies Blue Skies Connections, LLC, True Wireless, Inc., Government Consulting Solutions, Inc., Mussell Communications LLC, and others. This case also arises from the June 2021 transaction by which SurgePays sold True Wireless to Blue Skies. During the litigation of CJ-2021-5327 described above, SurgePays learned information that showed Mike Fina breached his duties owed to True Wireless during his employment and consulting work for True Wireless prior to SurgePays' sale of True Wireless to Blue Skies. SurgePays alleges that Mike Fina conspired with the other defendants to damage True Wireless thereby harming the value of the company and causing its eventual sale at a greatly reduced price. SurgePays asserts claims for (i) breach of contract; (ii) breach of fiduciary duty; (iii) fraud; (iv) tortious interference; and (v) unjust enrichment. At this stage, no defendant has asserted a counterclaim against SurgePays. SurgePays filed a Second Amended Petition on January 27, 2023. Defendants Fina, Blue Skies, True Wireless, and Government Consulting Solutions filed a Motion to Dismiss on March 10, 2023. On June 29, 2023, the Court granted the Motion to Dismiss, ruling the claims asserted are "derivative" and could only be asserted by the True Wireless entity now owed by Blue Skies. The Court rejected SurgePays' request to certify this ruling for immediate appeal. Defendant Misty Garrett filed a Motion for Summary Judgment seeking the same relief as the Motion to Dismiss, which was granted by the Court. It is SurgePays' intent to evaluate an additional options in the Court's dismissal of Fina, Blue Skies, True Wireless, Government Consulting Solutions, and Misty Garrett. At this stage, no attempts at settlement have been made.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

All claims against all parties have been adjudicated by the Court. SurgePays filed a Motion for New Trial, which was denied by the Court on February 20, 2025. SurgePays' has filed an appeal of the Court's dismissal of Fina, Blue Skies, True Wireless, Government Consulting Solutions, and summary judgment for Misty Garrett.

With regard to the appeal against Misty Garrett and Misty Garrett's claims against SurgePays, Misty Garrett and SurgePays have entered into a Settlement Agreement and Release dated as of October 16, 2025 in which the parties have agreed to dismiss all matters in the courts and release each other from liability, with an agreement to file such dismissal documents at the in the respective courts.

SSB Communications, Inc., Plaintiff v SurgePays, Inc., and American Broadband & Telecommunications Company, Defendants, Case No. DC-26-07054

District Court 116<sup>th</sup> Judicial District, Dallas County, Texas filed April 20, 2026. Plaintiff filed this collection suit seeking an amount over $250,000 but less than $1,000,000 for breach of contract for the provision of goods, plus interest, fees and costs. SurgePays, Inc.'s initial pleading is not due until May 25, 2026. At this time, SurgePays, Inc. is in settlement discussions with Co-Defendant, American Broadband & Telecommunications Company and the Plaintiff.

Ellenoff Grossman & Schole, LLP and SurgePays

Ellenoff Grossman & Schole LLP v. SurgePays, Inc., Index No. 651282/2026, Supreme Court of the State of New York, County of New York, filed March 2, 2026. The action sought recovery of $234,151 in unpaid legal fees, plus costs and attorneys' fees.

Effective April 7, 2026, the Company entered into a settlement agreement resolving all claims, pursuant to which the Company agreed to pay the total settlement amount of $234,151 in eight equal monthly installments of $29,269, commencing April 2026 and ending November 2026. All required installments have been paid to date. The settlement agreement provides for a default interest rate of 9% per annum on any overdue amounts and is secured by an Affidavit of Confession of Judgment held in escrow by the plaintiff, which may be filed upon an uncured payment default.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Note 9 – Stockholders' Deficit</u>**

At March 31, 2026 and December 31, 2025, the Company had three (3) classes of stock:

**Common Stock**

● Authorized: 500,000,000 shares

● Par Value: $0.001 per share

● Voting Rights: One vote per share

● Dividends: None declared

● Liquidation Preference: Subordinate to all classes of preferred stock

**Series A, Convertible Preferred Stock**

● Authorized: 13,000,000 shares

● Issued and Outstanding: None

● Par Value: $0.001 per share

● Voting Rights: Ten votes per share

● Ranking: Senior to all other classes of preferred stock

● Dividends: None

● Liquidation Preference: None

● Redemption: Not redeemable

● Conversion: Each share convertible into one-tenth (1/10) of a share of common stock at the option of the holder

**Series C, Convertible Preferred Stock**

● Authorized: 1,000,000 shares

● Issued and Outstanding: None

● Par Value: $0.001 per share

● Voting Rights: 250 votes per share

● Ranking: Junior to all other classes of preferred stock

● Dividends: Participating with common stock on an as-converted basis, when and if declared by the Board of Directors

● Liquidation Preference: Original issue price plus any declared but unpaid dividends

● Redemption: Not redeemable

● Conversion: Each share convertible into 250 shares of common stock at the option of the holder

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Securities and Incentive Plan**

In March 2023, the Company's shareholders approved the 2022 Plan (the "Plan") initially approved, authorized and adopted by the Board of Directors in August 2022.

The Plan initially provided for the following:

&nbsp;&nbsp;&nbsp;&nbsp;1. 3,500,000 shares of common stock

&nbsp;&nbsp;&nbsp;&nbsp;2. An
 annual increase on the first day of each calendar year beginning January 1, 2023 and ending
 on January 1, 2031 equal to the lesser of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. 10 %
 of the common stock outstanding on the final day of the immediately preceding calendar year,
 or

b. Such
 smaller amount of common stock as determined by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;3. The
 shares may be issued as follows to directors, officers, employees, and consultants:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Distribution
 equivalent rights

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Incentive
 share options

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Non-qualified
 share options

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Performance
 unit awards

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Restricted
 share awards

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Restricted
 share unit awards

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Share
 appreciation rights

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. Tandem
 share appreciation rights

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Unrestricted
 share awards

See the proxy statement filed with the SEC on January 19, 2023 for a complete detail of the Plan.

Effective January 1, 2025, in accordance with the Plan, we increased the available amount of shares by 10% of the common stock outstanding on December 31, 2024, approximating an additional 2,007,000 shares of common stock. After this increase, total shares authorized and available to be issued under the Plan approximated 6,907,000 shares.

Effective January 1, 2026, in accordance with the Plan, we increased the available amount of shares by 10% of the common stock outstanding on December 31, 2025, approximating an additional 2,185,000 shares of common stock. After this increase, total shares authorized and available to be issued under the Plan approximated 9,092,000 shares.

Of the total shares authorized and available, the Company has reserved shares for its officers, directors and employees for non-vested shares that are expected to vest in accordance with the terms of the related employment agreements and stock options that may be converted into common stock. At March 31, 2026 and December 31, 2025, the Company had sufficient authorized shares to settle any possible awards that vested or stock options eligible for conversion.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Equity Transactions for the Three Months Ended March 31, 2026</u>**

**Stock Issued for Cash**

Underwritten Public Offering

On January 20, 2026, the Company entered into an underwriting agreement with R.F. Lafferty & Co., Inc. for an underwritten public offering of 2,000,000 shares of common stock at a public offering price of $1.25 per share, for gross proceeds of approximately $2,500,000. The offering closed on January 22, 2026. The underwriter was granted a 45-day option to purchase up to an additional 300,000 shares at the public offering price to cover over-allotments. The Company paid fees of $375,000 for net proceeds of $2,125,000. The Company intends to use the net proceeds for expansion of its Lifeline business and for working capital and general corporate purposes.

In connection with the offering, the Company issued warrants to the underwriter to purchase a number of shares equal to 3.0% of the total shares sold (60,000 warrants – see table below), at an exercise price equal to 110% of the public offering price ($1.38/share). The warrants are exercisable commencing six months after the closing date and expire five years after the commencement of sales, and were issued without registration under the Securities Act of 1933 in reliance on the exemption provided by Section 4(a)(2).

**Stock Issued for Cash – At the Market Offering ("ATM")**

The Company issued 7,323 shares of common stock for net proceeds of $14,375 ($1.98 - $2.03/share).

**Stock Issued for Services**

The Company issued 200,000 shares of common stock for services rendered, having a fair value of $334,000 ($1.67/share), based upon the quoted closing trading price.

**Recognition of Stock Based Compensation - Restricted Stock Awards – Employees**

The Company recognized $7,787 in compensation expense, related to the vesting of these awards.

**Debt Discount – Convertible Notes Payable – Common Stock**

During the year ended December 31, 2025, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828 to lenders as additional consideration in connection with the issuance of convertible notes payable. The fair value of the shares was recorded as a debt discount and is being amortized to interest expense over the term of the related notes using the effective interest method. See Note 5.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Conversion of Debt to Common Stock – Related Party**

On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer at a fair value of $707,200 ($0.884 per share) in partial settlement of a related party note payable. The Chief Executive Officer also forgave $292,800 of principal, which was accounted for as a capital contribution from a principal shareholder and credited to additional paid-in capital. The aggregate $1,000,000 was applied as a reduction of the related party note payable, and no gain on extinguishment was recognized. See Note 5.

**<u>Equity Transactions for the Year Ended December 31, 2025</u>**

**Stock Issued for Cash – At the Market Offering ("ATM")**

In August 2025, the Company entered into an At the Market Offering Agreement (the "ATM Agreement") with Titan Partners Group LLC, a division of American Capital Partners, LLC ("Titan"), pursuant to which the Company may, from time to time, offer and sell shares of its common stock, $0.001 par value per share, to or through Titan, acting as sales agent and/or principal, in transactions deemed to be "at-the-market offerings" under Rule 415(a)(4) of the Securities Act of 1933, as amended. Under the Prospectus Supplement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $15,000,000, which is within the Company's current "baby shelf" limitations under General Instruction I.B.6. of Form S-3. The Company will pay Titan a commission of 3.0% of the gross proceeds from each sale. The Company intends to utilize the ATM Agreement, when appropriate, to fund working capital needs on an ongoing basis.

The Company issued 697,691 shares of common stock for gross proceeds of $1,774,636 ($2.12 - $2.98/share). In connection with the capital raise, the Company paid cash as direct offering costs (including professional fees) totaling $123,197, resulting in net proceeds of $1,651,439.

**Stock Issued for Services**

The Company issued 324,000 shares of common stock for services rendered, having a fair value of $641,430 ($1.70 - $2.87/share), based upon the quoted closing trading price.

**Stock Issued to Settle Accounts Payable**

The Company issued 22,807 shares of common stock to settle outstanding vendor payables, having a fair value of $65,456 ($2.87/share), based upon the quoted closing trading price.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Debt Discount – Common Stock**

In connection with the issuance of various convertible notes payable, the Company issued 103,000 shares of common stock, having a fair value of $271,880 ($1.90 - $2.86/share), based upon the quoted closing trading price on each respective grant date. This amount has been recorded as a debt discount. See Note 5 for discussion of the various common stock issuances related to convertible note offerings.

**Debt Discount – Warrants**

In connection with the issuance of various convertible notes payable and a note payable, the Company issued warrants to purchase shares of common stock, having an aggregate fair value of $1,133,345, comprised of $1,084,927 related to convertible notes payable and $48,418 related to the note payable. The fair value of each warrant was determined using the Black-Scholes pricing model on each respective grant date. These amounts have been recorded as a debt discount. See Note 5 for discussion of the assumptions and inputs used in these fair value calculations.

**Treasury Stock**

The Company repurchased 333,333 shares of its common stock from a convertible note payable holder for $999,999 ($3/share). In connection with the transaction, the principal balance of the related convertible note was increased by $999,999. See Note 5.

**Restricted Stock Awards – Employees**

On December 16, 2025, the Company granted 54,331 restricted stock awards ("RSAs") of its common stock to various employees pursuant to the Company's 2022 Omnibus Securities and Incentive Plan.

The RSAs vest in full on the third anniversary of the grant date and have a total grant-date fair value of $93,449 ($1.72 per share), based upon the quoted closing stock price on the grant date. Compensation expense of $93,449 will be recognized on a straight-line basis over the 36-month requisite service period.

**Non-Vested Shares – Related Parties (Officer and Directors) – and related Vesting**

Chief Financial Officer

In November 2023, the Company granted 600,000 shares of restricted common stock to its former Chief Financial Officer (CFO), having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price on the grant date. The award was structured in two tranches, with 400,000 shares vesting ratably over the period July 2024 through December 2024 and 200,000 shares vesting on December 31, 2025. All shares vested in accordance with their original vesting schedules. See Note 8 for additional information regarding the CFO employment agreement.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Board of Directors

2025 Grant

In May 2025, the Company granted an aggregate of 150,000 shares of common stock to various members of its Board of Directors, having a fair value of $474,000 ($3.16/share), based upon the quoted closing trading price on the grant date. The shares vest upon the earliest of the following:

● The board member no longer serves in that capacity for any reason, except for cause;

● Occurrence of a change in control; and

● August 2028.

Effective December 31, 2025, a board member resigned their position. In accordance with the terms of their agreement, all unvested shares vested immediately upon resignation. As a result, 88,880 shares of common stock vested on December 31, 2025.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense recognized for all officer and director arrangements for the three months ended March 31, 2026 and 2025:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2025** |
| Chief Financial Officer | $- | $119770 |
| Board of Directors | 49895 | 35349 |
| Total | $49895 | $155119 |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

The following is a summary of the Company's non-vested shares at March 31, 2026 and December 31, 2025.

---

| | | |
|:---|:---|:---|
| <br>**Non-Vested Shares** |<br>**Number of Shares** | **Weighted Average**<br>**Grant Date Fair Value** |
| Balance - December 31, 2024 | 139640 | $5.03 |
| Granted | 150000 | 3.16 |
| Vested | (88880) | 4.77 |
| Cancelled/Forfeited | - |  |
| Balance - December 31, 2025 | 200760 | 4.00 |
| Granted |  |  |
| Vested |  |  |
| Cancelled/Forfeited | - |  |
| Balance - March 31, 2026 | 200760 | $4.00 |
| Unrecognized Compensation | $457367 |  |
| Weighted average period (years) | 2.33 |  |

---

**Stock Options**

Stock option transactions for the three months ended March 31, 2026 and the year ended December 31, 2025 are summarized as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <br>**Stock Options** |<br><br>**Number of**<br>**Options** |<br>**Weighted**<br> **Average**<br> **Exercise**<br> **Price** | **Weighted**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Term (Years)** |<br>**Aggregate**<br>**Intrinsic**<br>**Value** | **Weighted**<br>**Average**<br>**Grant**<br>**Date**<br>**Fair Value** |
| Outstanding - December 31, 2024 | 1166081 | $2.37 | 6.85 | $- |  |
| Vested and Exercisable - December 31, 2024 | 1166081 | $2.37 | 6.85 | $- |  |
| Granted | 1144116 | $1.75 |  |  | $1.49 |
| Exercised |  | $- |  |  |  |
| Cancelled/Forfeited | (17253) | $1.78 |  |  |  |
| Outstanding - December 31, 2025 | 2292944 | $2.06 | 6.43 | $- |  |
| Vested and Exercisable - December 31, 2025 | 2292944 | $2.06 | 6.43 | $- |  |
| Granted |  | $- |  |  | $- |
| Exercised |  | $- |  |  |  |
| Cancelled/Forfeited | (324750) | $2.51 |  |  |  |
| Outstanding - March 31, 2026 | 1968194 | $1.99 | 6.22 | $- |  |
| Vested and Exercisable - March 31, 2026 | 1968194 | $1.99 | 6.22 | $- |  |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Three Months Ended March 31, 2026</u>**

**Stock Options – Employee Terminations**

324,750 options expired due to forfeiture, including 318,318 options held by our former Chief Financial Officer.

**<u>Year Ended December 31, 2025</u>**

**Stock Options – Chief Executive Officer, Chief Financial Officer and Employees**

The Company granted an aggregate of 1,144,116 fully vested, seven-year stock options for services rendered, allocated as follows: 227,336 to its Chief Executive Officer (CEO), 143,979 to its Chief Financial Officer (CFO), and 772,801 to various employees. The aggregate grant-date fair value was $1,701,735, of which $552,286 related to the officers and $1,149,449 related to employees. All options have an exercise price of $1.75 per share.

The fair value of these stock options was determined using the Black-Scholes option pricing model with the following inputs:

---

| | |
|:---|:---|
| Expected term | 7 years |
| Expected volatility | 103% |
| Expected dividends | 0% |
| Risk free interest rate | 3.88% |

---

**Stock Options – Employee Terminations**

17,253 stock options were cancelled in connection with employee terminations.

Stock-based compensation expense related to stock options for the three months ended March 31, 2026 and 2025, was as follows:

---

| | |
|:---|:---|
| **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| **2026** | **2025** |
| $- | $- |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**Warrants**

Warrant activity for the three months ended March 31, 2026 and the year ended December 31, 2025 are summarized as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| <br>**Warrants** |<br><br>**Number of**<br>**Warrants** |<br>**Weighted**<br>**Average**<br>**Exercise Price** | **Weighted**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Term (Years)** |<br>**Aggregate**<br>**Intrinsic**<br>**Value** |
| Outstanding - December 31, 2024 | 96000 | $4.73 | 0.37 | $- |
| Vested and Exercisable - December 31, 2024 | 96000 | $4.73 | 0.37 | $- |
| Granted | 730000 | $5.86 |  |  |
| Exercised |  | $- |  |  |
| Cancelled/Forfeited | (96000) | $4.73 |  |  |
| Outstanding - December 31, 2025 | 730000 | $5.86 | 4.30 | $- |
| Vested and Exercisable - December 31, 2025 | 730000 | $5.86 | 4.30 | $- |
| Granted | 435000 | $1.27 |  |  |
| Exercised |  | $- |  |  |
| Cancelled/Forfeited | - | $- |  |  |
| Outstanding - March 31, 2026 | 1165000 | $4.14 | 4.38 | $- |
| Vested and Exercisable - March 31, 2026 | 1165000 | $4.14 | 4.38 | $- |

---

**<u>Three Months Ended March 31, 2026</u>**

**Warrants Issued with Convertible Debt**

The Company issued 375,000 warrants in connection with convertible notes #7 and #8. See Notes 5 and 6.

**Warrants Issued – Equity Offering**

The Company issued 60,000 warrants in connection with a capital raise of $2,500,000. See above.

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

**<u>Note 10 – Segment Information</u>**

Operating segments are defined as components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its Chief Executive Officer.

The Company evaluated the performance of its operating segments based on revenue and operating loss. All data below is prior to intercompany eliminations.

Segment information for the Company's operations for the three months ended March 31, 2026 and 2025, are as follows:

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Revenues** |  |  |
| Mobile Virtual Network Operators | $1803512 | $2285823 |
| Point-of-Sale and Prepaid Services | 14180471 | 8291606 |
| Other Corporate Overhead | - | - |
| **Total** | $15983983 | $10577429 |
| **Cost of revenues** |  |  |
| Mobile Virtual Network Operators | $1017528 | $5189618 |
| Point-of-Sale and Prepaid Services | 22629899 | 8330157 |
| Other Corporate Overhead | 34005 | - |
| **Total** | $23681432 | $13519775 |
| **Operating expenses** |  |  |
| Mobile Virtual Network Operators | $71620 | $596226 |
| Point-of-Sale and Prepaid Services | 699552 | 906996 |
| Other Corporate Overhead | 2730746 | 3134334 |
| **Total** | $3501918 | $4637556 |
| **Income (loss) from operations** |  |  |
| Mobile Virtual Network Operators | $714364 | $(3500021) |
| Point-of-Sale and Prepaid Services | (9148980) | (945547) |
| Other Corporate Overhead | (2764751) | (3134334) |
| **Total** | $(11199367) | $(7579902) |

---

**SURGEPAYS, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2026 AND 2025**

Segment information for the Company's assets and liabilities at March 31, 2026 and December 31, 2025, are as follows:

---

| | | |
|:---|:---|:---|
|  | **March 31, 2026** | **December 31, 2025** |
| **Total Assets** |  |  |
| Mobile Virtual Network Operators | $5088425 | $4524425 |
| Point-of-Sale and Prepaid Services | 2470659 | 2231645 |
| Other Corporate Overhead | 1942374 | 1759776 |
| Total | $9501458 | $8515846 |
| **Total Liabilities** |  |  |
| Mobile Virtual Network Operators | $1760758 | $2632025 |
| Point-of-Sale and Prepaid Services | 10683586 | 2768490 |
| Other Corporate Overhead | 20925082 | 18518150 |
| Total | $33369426 | $23918665 |

---

All intercompany accounts are separately presented above as both a component of the assets and liabilities. These amounts net to $0 in the Company's consolidated balance sheets.

**<u>Note 11 – Subsequent Event</u>**

Subsequent to March 31, 2026, the Company had the following transactions:

**Stock Issued for Services – Related Party**

On April 1, 2026, the Company issued Mr. Cox 500,000 shares of common stock for services rendered, having a fair value of $360,000. See Note 8.

**ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

This statement contains forward-looking statements within the meaning of the Securities Act of 1933, as amended (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 consolidated financial statements as of March 31, 2026 and 2025 and for the three months then ended includes the accounts of SurgePays, Inc. and its wholly owned subsidiaries during the period owned by SurgePays, Inc.

**Business Overview**

We were incorporated in Nevada on August 18, 2006, as a pioneering financial technology and telecommunications company with one clear mission: to enhance connectivity and financial access in the places people live, shop, and work.

Our Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless provide mobile broadband (internet connectivity) to consumers nationwide. Our Comprehensive Platform Services provides ACH banking relationships and a fintech transactions platform that processes thousands of transactions a day with independently owned convenience stores.

Please see the description in Item 1 of this Annual Report for a description of our Mobile Virtual Network Operators and Comprehensive Platform Services.

**COMPARISON OF THREE MONTHS ENDED MARCH 31, 2026 AND 2025**

**We measure our performance on a consolidated basis as well as the performance of each segment.**

We report our financial performance based on the following segments: Mobile Virtual Network Operators (MVNO), and Point-of-Sale and Prepaid Services (Top-up). The MVNO segment includes subsidized (Lifeline) and non-subsidized components (LinkUp Mobile). The subsidized component or Lifeline is the result of the mobile broadband (phone and internet) services provided by Torch Wireless to eligible consumers. The Point-of-Sale and Prepaid Services segment is comprised of Surge Fintech and ECS as previously shown.

The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. Additional information on our reportable segments is contained in Note 10 – Segment Information of the Notes to Financial Statements.

Revenues and expenses during the three months ended March 31, 2026 and 2025, consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **2026** | **2025** |
| Revenue | $15983983 | $10577429 |
| Cost of revenue (exclusive of depreciation and amortization) | (23681432) | (13519775) |
| General and administrative | (3501918) | (4637556) |
| &nbsp;&nbsp;&nbsp;Income (Loss) from operations | $(11199367) | $(7579902) |

---

Revenue increased overall by $5,406,554 (51.1%) from the three months ended March 31, 2025, to the three months ended March 31, 2026. Segment revenues were as follows:

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Revenues:** |  |  |
| Mobile Virtual Network Operator | $1803512 | $2285823 |
| Point-of-Sale and Prepaid Services | 14180471 | 8291606 |
| Other Corporate Overhead | - | - |
| **Total** | $15983983 | $10577429 |

---

Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) decreased by $482,311 or (21.1%). In fourth quarter of 2025, due to an audit delay, our Eligible Telecommunications Carrier paused the intake of new users, leading to a temporary dip in Lifeline revenues in early 2026.

Point-of-Sale and Prepaid Services revenues increased by $5,888,865 from March 31, 2025 to March 31, 2026, as a result of continued efforts to scale this segment by the VP of Sales, and the continued increasing of our sales force.

**Cost of Revenue, Gross Profit and Gross Margin**

For the three months ended March 31, 2026, cost of revenue for services primarily consisted of data plan expenses ($622,176), prepaid retail expenses ($22,629,899), marketing ($63,029), advertising ($27,779), and other expenses such as royalties and call-center expenses ($338,549). For the three months ended March 31, 2025, cost of revenue for services primarily consists of data plan expenses ($2,859,283), prepaid retail expenses ($8,330,157), devices ($391,539), marketing ($124,721), advertising ($516,778) and other expenses such as royalties and call-center expenses ($1,297,297).

We expect that our cost of revenue will increase or decrease to the extent that our revenue increases and decreases.

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Cost of Revenue (exclusive of depreciation and amortization):** |  |  |
| Mobile Virtual Network Operator | $1017528 | $5189618 |
| Point-of-Sale and Prepaid Services | 22629899 | 8330157 |
| Other Corporate Overhead | 34005 | - |
| **Total** | $23681432 | $13519775 |

---

Gross profit margin is calculated as revenue less cost of revenue. Gross profit margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including market conditions that may impact our pricing, sales mix among devices, sales mix changes among consumables, excess and obsolete inventories, and the cost of our products from manufacturers. Our gross profit (loss) in future periods will vary based upon our revenue stream mix and may increase or decrease based upon our distribution channels.

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Gross Profit (Loss) (exclusive of depreciation and amortization):** |  |  |
| Mobile Virtual Network Operator | $785984 | $(2903795) |
| Point-of-Sale and Prepaid Services | (8449428) | (38551) |
| Other Corporate Overhead | (34005) | - |
| **Total** | $(7697449) | $(2942346) |

---

The Company expects to focus on the improvement of gross margin in the Point-of-Sale and Prepaid Services segment during the remainder of 2026. In fourth quarter of 2025, the Company pivoted its focus for the Clearline platform, significantly reducing expenses within Clearline as the Company continues to focus on future revenue growth. As we continue to expand both subsidized (Lifeline) and non-subsidized products (LinkUp Mobile) in the MNVO segment in 2026, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results in late 2026.

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2025** |
| **Gross Margin:** |  |  |
| Mobile Virtual Network Operator | 43.6% | (127.0)% |
| Point-of-Sale and Prepaid Services | (59.6) | (0.5) |
| Other Corporate Overhead | N/A | N/A |
| **Total** | (48.2)% | (27.8)% |

---

**General and administrative during the three months ended March 31, 2026 and 2025, consisted of the following:**

---

| | | |
|:---|:---|:---|
|  | **2026** | **2025** |
| Depreciation and amortization | $190291 | $86122 |
| Selling, general and administration | 3311627 | 4551434 |
| &nbsp;&nbsp;&nbsp;Total | $3501918 | $4637556 |

---

**Selling, general and administrative expenses during the three months ended March 31, 2026 and 2025, consisted of the following:**

---

| | | |
|:---|:---|:---|
|  | **2026** | **2025** |
| Contractors and consultants | $384613 | $845094 |
| Professional services | 160164 | 165813 |
| Compensation | 1801049 | 1730440 |
| Computer and internet | 253053 | 259085 |
| Advertising and marketing | 29922 | 23480 |
| Insurance | 258616 | 283202 |
| Other | 424209 | 1244321 |
| &nbsp;&nbsp;&nbsp;Total | $3311626 | $4551434 |

---

Selling, general and administrative costs (S, G & A) decreased by $1,239,807, or (27.2%). The changes are discussed below:

● Contractors and consultants expense decreased by $460,481 or 54.5% from $845,094 in 2025 to $384,613 in 2026. The Company decreased these expenses during the three months ended March 31, 2026, due to the reduction in advisory services specifically in the area of investment relations and the internalization of marketing efforts.

● Professional services remained fairly steady, decreasing by 5,649 or 3.4% in 2026.

● Compensation increased slightly from $1,730,440 in 2025 to $1,801,049 in 2026.

● Computer and internet costs decreased slightly to $253,053 in 2026 from $259,085 in 2025.

● Advertising and marketing costs increased to $29,922 in 2026 from $23,480 in 2025 primarily due to additional marketing of the Clearline platform.

● Insurance expense decreased to $258,616 in 2026 from $283,202 in 2025 primarily as a result of improved premium rates for the renewal of coverage.

● Other costs decreased to $424,209 in 2026 from $1,244,321in 2025 primarily due to the resolution of various taxes associated with the ACP and other company-wide cost-cutting measures.

**Other (expense) income during the three months ended March 31, 2026 and 2025, consisted of the following:**

---

| | | |
|:---|:---|:---|
|  | **2026** | **2025** |
| Interest, net | $(881908) | $(119434) |
| Change in fair value of derivative liability | 30241 |  |
| Interest income |  | 56903 |
| Other income | - | 7140 |
| Total other (expense) income | $(851667) | $(55391) |

---

Interest expense increased to $881,908 in 2026 from $119,434 in 2025 primarily due to additional notes entered into during the latter three quarters of 2025 and first quarter of 2026.

In connection with the issuance of a $6,999,999 convertible promissory note, the Company issued warrants to purchase 700,000 shares of common stock. The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants was estimated to be $207,640, which was recorded as a component of the total debt discount and is being amortized to interest expense over the term of the note.

In connection with the issuance of convertible promissory notes (Notes #7 and #8), in March 2026, the Company issued 375,000 common stock purchase warrants. These warrants contain certain cash settlement features triggered upon events of default or change of control and therefore do not qualify for equity classification. Accordingly, the warrants are accounted for as derivative liabilities. For the three months ended March 31, 2026 and 2025, the Company recorded a loss (gain) on the change in fair value of derivative liabilities of $30,241 and $0, respectively.

The Company invested excess cash in various instruments during 2025, resulting in interest, dividends, and gains resulting in an aggregate increase of $56,903 compared to $0 in 2026.

**<u>Equity Transactions for the Three Months Ended March 31, 2026</u>**

**Stock Issued for Cash**

Underwritten Public Offering

On January 20, 2026, the Company entered into an underwriting agreement with R.F. Lafferty & Co., Inc. for an underwritten public offering of 2,000,000 shares of common stock at a public offering price of $1.25 per share, for gross proceeds of approximately $2,500,000. The offering closed on January 22, 2026. The underwriter was granted a 45-day option to purchase up to an additional 300,000 shares at the public offering price to cover over-allotments. The Company intends to use the net proceeds for expansion of its Lifeline business and for working capital and general corporate purposes.

In connection with the offering, the Company issued warrants to the underwriter to purchase a number of shares equal to 3.0% of the total shares sold (60,000 warrants – see table below), at an exercise price equal to 110% of the public offering price ($1.38/share). The warrants are exercisable commencing six months after the closing date and expire five years after the commencement of sales, and were issued without registration under the Securities Act of 1933 in reliance on the exemption provided by Section 4(a)(2).

The offering was made pursuant to the Company's effective registration statement on Form S-3 (File No. 333-273110).

**Stock Issued for Cash – At the Market Offering ("ATM")**

The Company issued 7,323 shares of common stock for net proceeds of $14,375 ($1.98 - $2.03/share).

**Stock Issued for Services**

The Company issued 200,000 shares of common stock for services rendered, having a fair value of $334,000 ($1.67/share), based upon the quoted closing trading price.

**Recognition of Stock Based Compensation - Restricted Stock Awards – Employees**

The Company recognized $7,787 in compensation expense, related to the vesting of these awards.

**Debt Discount – Convertible Notes Payable – Common Stock**

During the year ended December 31, 2025, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828 to lenders as additional consideration in connection with the issuance of convertible notes payable. The fair value of the shares was recorded as a debt discount and is being amortized to interest expense over the term of the related notes using the effective interest method. See Note 5.

**Conversion of Debt to Common Stock – Related Party**

On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer at a fair value of $707,200 ($0.884 per share) in partial settlement of a related party note payable. The Chief Executive Officer also forgave $292,800 of principal, which was accounted for as a capital contribution from a principal shareholder and credited to additional paid-in capital. The aggregate $1,000,000 was applied as a reduction of the related party note payable, and no gain on extinguishment was recognized. See Note 5.

**LIQUIDITY AND CAPITAL RESOURCES**

At March 31, 2026, and December 31, 2025, our current assets were $8,208,310 and $6,979,766, respectively, and our current liabilities were $30,042,829 and $18,190,236, respectively, which resulted in a working capital deficit of $(21,834,519) and $(11,210,470), respectively. The increase in current assets is primarily a result of increased accounts receivable, and the increase in current liabilities is primarily a result of increased accounts payable and notes payable.

Total assets at March 31, 2026 and December 31, 2025, amounted to $9,501,458 and $8,515,846, respectively, an increase of $985,612 from 2025 to 2026. The increase in total assets is a result of a slight increase in available cash and an increase in accounts receivable. At March 31, 2026, assets consisted of current assets of $8,208,310, net intangible assets of $655,776, and operating lease right of use asset of $260,694, and at December 31, 2025, assets consisted of current assets of $6,979,766, net intangible assets of $819,153, and operating lease right of use asset of $313,410.

At March 31, 2026, our total liabilities were $33,369,426 compared to total liabilities of $23,918,665 at December 31, 2025. This $9,450,761 increase was related to an increase in accounts payable and notes payable.

At March 31, 2026, our total stockholders' deficit was $(23,867,968) as compared to $(15,402,819) at December 31, 2025. The $(9,450,761) decrease was primarily due to the net loss for the year, as well as the above discussed increase in liabilities.

The following table sets forth the major sources and uses of cash for three months ended March 31, 2026 and 2025.

---

| | | |
|:---|:---|:---|
|  | **2026** | **2025** |
| Net cash provided by or (used in) operating activities | $(4550799) | $(6963484) |
| Net cash used in investing activities |  | (18590) |
| Net cash provided by financing activities | 4953749 | (410545) |
| Net change in cash and cash equivalents | $402950 | $(7392619) |

---

Net cash used in operating activities for the three months ended March 31, 20256 and 2025, was primarily due to the net loss for the period.

There was no net cash used in investing activities in the three months ended March 31, 2026, and the net cash used in investing activities for the three months ending March 31, 2025 was primarily due to payment for leases.

Net cash received for financing activities for the three months ended March 31, 2026 is primarily due to proceeds from the issuance of notes payable and convertible notes, as well as proceeds from stock issued for cash, offset by the repayment of debt. Net cash used for financing activities for the three months ended March 31, 2025 is primarily due to the repayment of debt.

At March 31, 2026, the Company had the following material commitments and contingencies.

**Cash requirements and capital expenditures** – Due to reduction in total revenues and margins and increase in operating expenses as we scale, we may not have sufficient resources to continue to fund operations for the next twelve months without additional funding. We are currently exploring various strategic opportunities; however, we have no commitments at this time and no known timing as to when any transaction may occur. We will only pursue options that we believe are in the best interest of, and on the best terms for, the Company.

The Company kicked off several initiatives in April of 2025 that are continuing to scale through 2026. We have begun the launch of LinkUp Mobile SIM (subscriber identity module) cards into the national retail market. LinkUp Mobile has also launched its phone in a box program. Thousands of phones have already been purchased by convenience stores, which we believe is a positive sign for our future capabilities. Torch Wireless, supported by the Lifeline program, is now actively expanding its subscriber base in the state of California. This development is noteworthy for the growth of the Torch offering, as California provides an additional revenue incentive for its subscribers and has a large potential subscriber base. The wholesale MVNE (Mobile Virtual Network Enabler) leveraging technology and industry expertise has allowed us to expand services as a Mobile Network Enabler. Leveraging our direct carrier relationship, we offer billing, provisioning, SIM cards, and services to wireless companies lacking direct carrier access. Two such companies have already embraced this offering, and we anticipate more to join in the near future. We believe the MVNE solution will continue to uniquely position us for additional rapid growth into the subscriber activation channel by enabling other wireless companies who lack a direct carrier relationship. Clear-line has launched a comprehensive code management campaign, providing services to over 1,600 convenience stores. In addition to this new business venture, Shortcode, the ability to dynamic content and features into posts, pages and widgets, has been provisioned with all carriers in preparation for a national campaign scheduled to launch in July.

**Known trends and uncertainties** – The Company may pursue strategic opportunities, including acquisitions or partnerships, that align with its core business and support long-term growth. There are no definitive agreements in place at this time.

**Critical Accounting Policies and Estimates**

Management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which were prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, and expenses. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and any such differences may be material.

While our significant accounting policies are more fully described in *Note 2*—*Summary of Significant Accounting Policies* of the Notes to Consolidated Financial Statements included in *Item 8, Financial Statements and Supplementary Data* of this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and which require our most difficult, subjective and complex judgments.

**Use of Estimates**

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

Significant estimates during the three months ended March 31, 2026 and 2025, respectively, include, allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of loss contingencies, valuation of stock-based compensation, estimated useful lives related to intangible assets, capitalized internal-use software development costs, and property and equipment, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.

**Fair Value of Financial Instruments**

The Company accounts for financial instruments under Financial Accounting Standards Board ("FASB") ASC 820, *Fair Value Measurements*. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company's principal or, in absence of a principal, most advantageous market for the specific asset or liability.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

● Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

● Level 2 - Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

● Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

The determination of fair value and the assessment of a measurement's placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management's assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

**Impairment of Long-lived Assets including Internal Use Capitalized Software Costs**

Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 *"Impairment or Disposal of Long-Lived Assets."* Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company's business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

**Revenue from Contracts with Customers**

We account for revenue earned from contracts with customers under ASC 606, *Revenue from Contracts with Customers* ("ASC 606"), and ASC 842, *Leases* ("ASC 842"). The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 1: Identify the contract with the customer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 2: Identify the performance obligations in the contract.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 3: Determine the transaction price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 4: Allocate the transaction price to the performance obligations in the contract.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 5: Recognize revenue when, or as, the company satisfies a performance obligation.

**Stock-Based Compensation**

The Company accounts for our stock-based compensation under ASC 718 *"Compensation – Stock Compensation"* using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options.

The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

**Stock Warrants**

In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a binomial pricing model.

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. 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 not a service period.

**Recent Accounting Pronouncements**

In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. Refer to Note 2 - *Summary of Significant Accounting Policies* of the Notes to Consolidated Financial Statements.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Not applicable.

**ITEM 4. CONTROLS AND PROCEDURES**

**Evaluation of disclosure controls and procedures**

Under the PCAOB standards, a control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit the attention by those responsible for oversight of the company's financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2026.

**Changes in Internal Control over Financial Reporting**

During the period ended March 31, 2026, there were no changes in our internal controls over financial reporting, which were identified in connection with our management's evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that materially affected, or is reasonably likely to have a material effect, on our internal control over financial reporting.

**PART II - OTHER INFORMATION**

**ITEM 1: LEGAL PROCEEDINGS**

From time to time, we may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. Except as described below, we are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or results of operations.

The following is a summary of threatened, pending, asserted or unasserted claims against us or any of our wholly owned subsidiaries for which there have been material developments:

Blue Skies Connections, LLC, and True Wireless, Inc. v. SurgePays, Inc., et. al.

District Court of Oklahoma County, OK, CJ-2021-5327, filed on December 13, 2021. Plaintiffs' petition alleges breach of a Stock Purchase Agreement by SurgePays, SurgePhone Wireless, LLC, and Kevin Brian Cox ("Defendants"), and makes other allegations related to SurgePays' consulting work with Jonathan Coffman, formerly a True Wireless employee. The petition requests injunctive relief, general damages, punitive damages, attorney fees and costs for alleged breach of contract, tortious interference with a business relationship, and fraud. Blue Skies alleged the Defendants are in violation of their non-competition and non-solicitation agreements related to the sale of True Wireless from SurgePays to Blue Skies. Defendants filed various dispositive motions with the Court demonstrating Oklahoma state law does not recognize non-compete agreements and non-solicitation agreements in the manner alleged by Plaintiffs, and the Court granted these motions, finding the non-solicitation and non-competition clauses in the Stock Purchase Agreement void as a matter of Oklahoma law. Defendants then filed additional dispositive motions on Plaintiffs' claims in tort and equity, which the Court granted in part based on its prior rulings. Plaintiffs took the position the Court granting Defendants' dispositive motions on these material issues only leaves partial contract claims that are inextricably intertwined with the remaining claims and defenses. Plaintiffs sought a certified interlocutory appeal of the Court's orders. On March 10, 2025, the Oklahoma Supreme Court entered an order denying Plaintiffs' Petition for Certiorari to review the certified interlocutory appeal. In December 2025, Judge Dishman recused himself from the case following a request from the Blue Skies and True Wireless parties and objection by SurgePays' counsel. Judge Andrews has been assigned to the matter and has set remaining matters for status and briefing schedules on outstanding motions in the trial court. The case will now proceed in the district court on the parties' remaining claims. Presently, there is no trial date.

In the Circuit Court of Tennessee for the 30th Judicial District at Memphis, Docket # CT-3219-23. On August 8, 2023, a complaint was filed by SurgePays for breach of a promissory note by Blue Skies Connections, LLC. The note at issue is dated June 14, 2021, and requires Blue Skies Connections to repay the principal sum of $176,850.56, by monthly payments of $7,461.37 commencing on June 1, 2023. Blue Skies Connections has failed to make any payments due under the terms of the note, and this breach entitles SurgePays to demand payment of the entire amount of the note together with all accrued interest. Blue Skies Connections responded by filing a Motion to Dismiss or, in the alternative, a Motion to Stay, taking the position that, under the prior suit pending doctrine, the subject promissory note is subject to the prior litigation instituted by Blue Skies Connections against SurgePays, styled Skies Connections, LLC and True Wireless, Inc. v. SurgePays, Inc., et al., Case No. CJ-2021-5327, District Court of Oklahoma County, Oklahoma. SurgePays elected to dismiss its complaint without prejudice and is in the process of evaluating re-filing the matter in the District Court of Oklahoma County, Oklahoma.

SurgePays, Inc. et al. v. Fina et al., Case No. CJ-2022-2782, District Court of Oklahoma County, Oklahoma

Plaintiffs SurgePays, Inc. and Kevin Brian Cox initiated this case against its former officer Mike Fina, his companies Blue Skies Connections, LLC, True Wireless, Inc., Government Consulting Solutions, Inc., Mussell Communications LLC, and others. This case also arises from the June 2021 transaction by which SurgePays sold True Wireless to Blue Skies. During the litigation of CJ-2021-5327 described above, SurgePays learned information that showed Mike Fina breached his duties owed to True Wireless during his employment and consulting work for True Wireless prior to SurgePays' sale of True Wireless to Blue Skies. SurgePays alleges that Mike Fina conspired with the other defendants to damage True Wireless thereby harming the value of the company and causing its eventual sale at a greatly reduced price. SurgePays asserts claims for (i) breach of contract; (ii) breach of fiduciary duty; (iii) fraud; (iv) tortious interference; and (v) unjust enrichment. At this stage, no defendant has asserted a counterclaim against SurgePays. SurgePays filed a Second Amended Petition on January 27, 2023. Defendants Fina, Blue Skies, True Wireless, and Government Consulting Solutions filed a Motion to Dismiss on March 10, 2023. On June 29, 2023, the Court granted the Motion to Dismiss, ruling the claims asserted are "derivative" and could only be asserted by the True Wireless entity now owed by Blue Skies. The Court rejected SurgePays' request to certify this ruling for immediate appeal. Defendant Misty Garrett filed a Motion for Summary Judgment seeking the same relief as the Motion to Dismiss, which was granted by the Court. It is SurgePays' intent to evaluate an additional options in the Court's dismissal of Fina, Blue Skies, True Wireless, Government Consulting Solutions, and Misty Garrett. At this stage, no attempts at settlement have been made.

All claims against all parties have been adjudicated by the Court. SurgePays filed a Motion for New Trial, which was denied by the Court on February 20, 2025. SurgePays' has filed an appeal of the Court's dismissal of Fina, Blue Skies, True Wireless, Government Consulting Solutions, and summary judgment for Misty Garrett.

With regard to the appeal against Misty Garrett and Misty Garrett's claims against SurgePays, Misty Garrett and SurgePays have entered into a Settlement Agreement and Release dated as of October 16, 2025 in which the parties have agreed to dismiss all matters in the courts and release each other from liability, with an agreement to file such dismissal documents at the in the respective courts.

SSB Communications, Inc., Plaintiff v SurgePays, Inc., and American Broadband & Telecommunications Company, Defendants, Case No. DC-26-07054

District Court 116<sup>th</sup> Judicial District, Dallas County, Texas filed April 20, 2026. Plaintiff filed this collection suit seeking an amount over $250,000 but less than $1,000,000 for breach of contract for the provision of goods, plus interest, fees and costs. SurgePays, Inc.'s initial pleading is not due until May 25, 2026. At this time, SurgePays, Inc. is in settlement discussions with Co-Defendant, American Broadband & Telecommunications Company and the Plaintiff.

Ellenoff Grossman & Schole, LLP and SurgePays

Ellenoff Grossman & Schole LLP v. SurgePays, Inc., Index No. 651282/2026, Supreme Court of the State of New York, County of New York, filed March 2, 2026. The action sought recovery of $234,151 in unpaid legal fees, plus costs and attorneys' fees.

Effective April 7, 2026, the Company entered into a settlement agreement resolving all claims, pursuant to which the Company agreed to pay the total settlement amount of $234,151 in eight equal monthly installments of $29,269, commencing April 2026 and ending November 2026. All required installments have been paid to date. The settlement agreement provides for a default interest rate of 9% per annum on any overdue amounts and is secured by an Affidavit of Confession of Judgment held in escrow by the plaintiff, which may be filed upon an uncured payment default.

**ITEM 1A. RISK FACTORS**

Not applicable.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

During the year ended December 31, 2025, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828 to lenders as additional consideration in connection with the issuance of convertible notes payable.

On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer at a fair value of $707,200 ($0.884 per share) in partial settlement of a related party note payable. The Chief Executive Officer also forgave $292,800 of principal.

Shares were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder, as the shareholders were accredited and had adequate access, through business or other relationships, to information about the Company, and the issuances did not involve a public offering of securities or any general solicitation.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES.**

On September 9, 2025, the Company issued a Senior Secured Note in the original principal amount of $1,000,000, which matured on March 9, 2026. The Company failed to pay the principal at maturity and is in default. As of the date of this Quarterly Report, the arrearage consists of $1,000,000 in unpaid principal and $99,195 in accrued and unpaid interest.

**ITEM 4. MINE SAFETY DISCLOSURES.**

Not applicable

**ITEM 5. OTHER INFORMATION.**

Not applicable.

**ITEM 6. EXHIBITS**

---

| | |
|:---|:---|
| Exhibit |  |
| Number | Exhibit Description |
| 31.1\* | [Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer](ex31-1.htm) |
| 31.2\* | [Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer](ex31-2.htm) |
| 32.1\*\* | [Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer](ex32-1.htm) |
| 32.2\*\* | [Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer](ex32-2.htm) |
| 101.INS\* | Inline XBRL Instance Document |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL\* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF\* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE\* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104\* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

\*Filed herewith.

\*\* Furnished herewith

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | SURGEPAYS, INC. | SURGEPAYS, INC. |
| Date: May 20, 2026 |  |  |
|  | By: | */s/ Kevin Brian Cox* |
|  |  | Kevin Brian Cox |
|  |  | Chief Executive Officer<br> (Principal Executive Officer) |

---

---

| | |
|:---|:---|
| Date: May 20, 2026 | */s/ Chelsea Pullano* |
|  | Chelsea Pullano |
|  | Chief Financial Officer |
|  | (Principal Financial and Accounting Officer) |

---

## Exhibit 31.1

**Exhibit 31.1**

SURGEPAYS, INC. FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2026

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin Brian Cox, Chief Executive Officer, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed
 this report on Form 10-Q of SurgePays, Inc. (the registrant);

2. Based on my knowledge,
 this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
 made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
 report;

3. Based on my knowledge,
 the financial statements, and other financial information included in this quarterly report, fairly present in all material respects
 the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing
 and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
 over financial reporting (as defined in Exchange Act Rules 13a-a15(f) and 15d-15(f) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. designed such
 disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure
 that material information relating to the registrant, is made known to me by others, particularly during the period in which this
 report is being prepared;

b. designed such internal
 control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
 external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness
 of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness
 of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report
 any change in the registrant's internal controls over financial reporting that occurred during the registrant's current
 fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
 reasonably likely to materially affect, the registrant's internal control over financial reporting; and;

&nbsp;&nbsp;&nbsp;&nbsp;5. I have disclosed,
 based on my most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of
 directors (or persons performing the equivalent functions);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant
 deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect
 the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not
 material, that involves management or other employees who have a significant role in the registrant's internal controls.

---

| | |
|:---|:---|
| May 20, 2026 | */s/ Kevin Brian Cox* |
|  | Kevin Brian Cox |
|  | Chief Executive Officer |
|  | (Principal Executive Officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

SURGEPAYS, INC. FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2026

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Chelsea Pullano, Chief Financial Officer, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed
 this report on Form 10-Q of SurgePays, Inc. (the registrant);

2. Based on my knowledge,
 this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
 made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
 report;

3. Based on my knowledge,
 the financial statements, and other financial information included in this quarterly report, fairly present in all material respects
 the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing
 and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
 over financial reporting (as defined in Exchange Act Rules 13a-a15(f) and 15d-15(f) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. designed such
 disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure
 that material information relating to the registrant, is made known to me by others, particularly during the period in which this
 report is being prepared;

b. designed such internal
 control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
 external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness
 of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness
 of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report
 any change in the registrant's internal controls over financial reporting that occurred during the registrant's current
 fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
 reasonably likely to materially affect, the registrant's internal control over financial reporting; and;

&nbsp;&nbsp;&nbsp;&nbsp;5. I have disclosed,
 based on my most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of
 directors (or persons performing the equivalent functions);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant
 deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect
 the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not
 material, that involves management or other employees who have a significant role in the registrant's internal controls.

---

| | |
|:---|:---|
| May 20, 2026 | */s/ Chelsea Pullano* |
|  | Chelsea Pullano |
|  | Chief Financial Officer |
|  | (Principal Financial and Accounting Officer) |

---

## Exhibit 32.1

**Exhibit 32.1**

SURGEPAYS, INC. FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2026

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin Brian Cox, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I am the Chief
 Executive Officer of SurgePays, Inc.

2. Attached to this certification
 is Form 10-Q for the quarter ended March 31, 2026 , a periodic report (the "periodic report") filed by the issuer
 with the Securities Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the "Exchange
 Act"), which contains financial statements.

3. I hereby certify, pursuant
 to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

● The periodic report containing the financial statements fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, and

● The information in the periodic report fairly presents, in all material respects, the consolidated financial condition and results of operations of the issuer for the periods presented.

---

| | |
|:---|:---|
| May 20, 2026 | */s/ Kevin Brian Cox* |
|  | Kevin Brian Cox |
|  | Chief Executive Officer |
|  | (Principal Executive Officer) |

---

## Exhibit 32.2

**Exhibit 32.2**

SURGEPAYS, INC. FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2026

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Chelsea Pullano, certify that

&nbsp;&nbsp;&nbsp;&nbsp;1. I am the Chief
 Financial Officer of SurgePays, Inc.

2. Attached to this certification
 is Form 10-Q for the quarter ended March 31, 2026, a periodic report (the "periodic report") filed by the issuer
 with the Securities Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the "Exchange
 Act"), which contains financial statements.

3. I hereby certify, pursuant
 to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

● The periodic report containing the financial statements fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, and

● The information in the periodic report fairly presents, in all material respects, the consolidated financial condition and results of operations of the issuer for the periods presented.

---

| | |
|:---|:---|
| May 20, 2026 | */s/ Chelsea Pullano* |
|  | Chelsea Pullano |
|  | Chief Financial Officer |
|  | (Principal Financial and Accounting Officer) |

---