Business Combinations and Asset Acquisitions

The Company accounts for acquisitions that qualify as business combinations by applying the acquisition method according to Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”).

Transaction costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred.

The identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity, net of the fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.

Purchase price allocations may be preliminary, and, during the measurement period not to exceed one year from the date of acquisition, changes in assumptions and estimates that result in adjustments to the fair value of assets acquired and liabilities assumed are recorded in the period the adjustments are determined.

Significant judgments are used in determining fair values of assets acquired and liabilities assumed, as well as intangibles. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows, and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and liabilities made after the end of the measurement period are recorded within the Company’s earnings.

The Company evaluates acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether the Company has acquired inputs and processes that can create outputs that would meet the definition of a business. When applying the screen test, significant judgment is required to determine whether an acquisition is a business combination or an acquisition of assets.

Accounting for asset acquisitions falls under the guidance of Topic 805, Business Combinations, specifically Subtopic 805-50. A cost accumulation model is used to determine an asset acquisition’s cost. Assets acquired are based on their cost, generally allocated to them on a relative fair value basis. Direct acquisition-related costs are included in the cost of the acquired assets.

The distinction between business combinations and asset acquisitions involves judgment, particularly when applying the screen test to determine the nature of the transaction. Incorrect judgments or changes in decisions in these areas could materially affect the determination of goodwill, the recognition and measurement of acquired assets and assumed liabilities, and, consequently, our financial position and results of operations.

Acquisition of ClearLine Mobile, Inc and Related Impairment

On January 5, 2024, the Company closed a purchase agreement and acquired ClearLine Mobile, Inc’s. (“CLMI”) related software development in exchange for $2,500,000.

CLMI produces a touchscreen display, positioned by the cash register, that is integrated into the SurgePays software platform and markets SurgePays products 24/7 from a central server. SurgePays can advertise its entire suite of products and services while utilizing the POS device for transactions.

Following the guidance of ASC 805, we performed the screen test to evaluate whether the acquired set is a business or a group of assets. The acquired group of assets included inputs and a substantive process that together significantly contributed to the ability to create outputs. At the time of purchase, CLMI had insignificant operations, however, the transaction was accounted for as a business combination in accordance with ASC 805-50.

Payments were paid as follows:

In connection with this business combination, the Company assumed a right-of-use operating lease and corresponding lease liability of $98,638 with a period of two (2) years remaining (the lease expired on December 31, 2025). The acquired technology and software had a net carrying amount of $0 at the acquisition date.

At the time of acquisition, CLMI had nominal revenues and historical losses from operations. As a result, and given the immaterial nature of this acquisition, the Company elected not to present pro-forma financial information.

This transaction did not involve the purchase of a “significant amount of assets” as defined in the Instructions to Item 2.01 of Form 8-K, and the acquisition of CLMI was not deemed significant to the Company at any level under SEC Regulation S-X Rule 3-05 and did not require the presentation of additional historical audited financial statements.

The table below summarizes the estimated fair values of the assets acquired and liabilities assumed as of the effective acquisition date.

 Schedule of Estimated Fair Value of Assets Acquired and Liabilities Assumed

Goodwill Impairment - ClearLine Mobile, Inc. & 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.

At December 31, 2025, the Company performed its annual goodwill impairment assessment. Based on this analysis, the Company determined that the fair value of the 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. 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, representing the entire carrying amount of goodwill attributable to Torch Wireless.

*During the year ended December 31, 2024, the Company recognized a goodwill impairment loss of $866,782 related to the LogicsIQ reporting unit, prior to its classification as a discontinued operation (see Note 1).

At December 31, 2025 and December 31, 2024 goodwill was as follows:

 Schedule of Goodwill

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 3 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 84% and 97% of accounts receivable at December 31, 2025 and 2024, respectively.

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:

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

Effective February 7, 2024, the Affordable Connectivity Program (“ACP”) stopped accepting new applications and enrollments. The program ceased funding on June 1, 2024. See discussion below regarding revenue recognition.

At December 31, 2024, the Company discontinued its lead generation services segment.

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 December 31, 2025 and 2024, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

Restricted Cash

At December 31, 2025, the Company had $281,811 in cash restricted under the terms of its line of credit with a third-party lender. While these funds remain under the Company’s control, they may be used to cover shortfalls related to advances under its receivables-based financing facility.

At December 31, 2024, the Company had $1,000,000 held in escrow, restricted in connection with a potential acquisition. The restriction lapsed in January 2025, and the funds were subsequently released and returned to the Company’s operating cash account.

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 December 31, 2025 and 2024, the allowance for doubtful accounts was $0, and no bad debt expense or recoveries were recorded during the years then ended.

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:

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.

During the year ended December 31, 2024, the Company recorded an impairment loss on long-lived assets (see below). There were no impairment losses on long-lived assets for the year ended December 31, 2025.

Internal Use Software Development Costs

The Company capitalizes certain costs associated with internally developed software related to its technology infrastructure, including personnel and related employee benefit expenses for employees directly involved in software development projects and external direct costs of materials and services. Costs that do not meet the criteria for capitalization are expensed as incurred and recorded in general and administrative expenses.

Software development activities consist of three stages:

Costs incurred in the planning and post-implementation stages, including training and maintenance, are expensed as incurred. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized once the planning stage is complete, management has authorized further funding, and it is probable the project will be completed and perform as intended. Capitalization ends when the software is substantially complete and ready for its intended purpose.

Capitalized internal-use software costs are amortized on a straight-line basis over an estimated useful life of three (3) years, commencing when the software is ready for its intended use. The Company periodically evaluates the remaining useful lives of capitalized projects and assesses whether facts and circumstances warrant a revision. The Company also evaluates capitalized projects for abandonment on a quarterly basis, which serves as a significant indicator of impairment.

At December 31, 2024, the Company determined that its capitalized internal-use software development costs had no future use based upon its current and expected future operations and recorded an impairment loss of $316,594. There were no capitalized internal-use software development costs or impairment charges during the year ended December 31, 2025. The net carrying value of capitalized internal-use software was $0 at both December 31, 2025 and 2024.

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:

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.

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.

Lead Generation Services

LogicsIQ, Inc. was a lead generation and case management solutions company primarily serving law firms in the mass tort industry. Effective January 1, 2024, the Company ceased providing these services. Effective December 31, 2024, management elected to abandon the lead generation segment as part of a strategic reassessment of its business (see Note 1). Segment disclosure for this former operation has been combined with other corporate overhead.

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 December 31, 2025 and 2024, deferred revenue was $0.

The following represents the Company’s disaggregation of revenues for the years ended December 31, 2025 and 2024:

 Schedule of Disaggregation of Revenue from Contracts with Customers

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)

Effective December 31, 2024, the Company’s management elected to abandon its lead generation segment operations as part of a strategic reassessment of its business lines. See Note 1. As a result, segment reporting/disaggregation of revenues for lead generation was no longer required and have now been included as a component of “other corporate overhead”.

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 December 31, 2025 and 2024, 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 years ended December 31, 2025 and 2024.

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 December 31, 2025. As a result, a full valuation allowance has been recorded against all net operating loss carryforwards at December 31, 2025 and 2024.

Income Tax Expense and Liability

The recognition of the full valuation allowance resulted in income tax expense of $2,870,000 for the year ended December 31, 2024. No income tax expense or benefit was recorded for the year ended December 31, 2025.

At December 31, 2025 and 2024, the Company had no accrued income tax liability (see Note 11).

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.

The Company recognized marketing and advertising costs during the years ended December 31, 2025 and 2024, respectively, as follows:

 Schedule of Marketing and Advertising Costs

Stock Warrants

In connection with certain financing transactions (debt or equity), consulting arrangements, or strategic partnerships, the Company may issue warrants to purchase shares of its common stock. Warrants that do not meet liability classification under ASC 480, Distinguishing Liabilities from Equity, are evaluated under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. The Company’s outstanding warrants are not puttable or mandatorily redeemable, do not require net cash settlement, and are indexed to the Company’s own common stock. Accordingly, they are classified as equity instruments in additional paid-in capital.

The fair value of warrants issued for compensation purposes is measured using the Black-Scholes option pricing model.

Warrants issued in conjunction with common stock issuances are initially recorded at fair value as a reduction in additional paid-in capital. Warrants issued for services are recorded at fair value and expensed over the requisite service period or immediately upon issuance if no service period exists. Warrants classified as liabilities due to settlement features or pricing adjustments are remeasured at fair value each reporting period, with changes recognized in earnings.

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.

Recent Accounting Standards

Recently Adopted Accounting Standards

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.

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.

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

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.

ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. Adoption may be applied on a prospective or retrospective basis. The Company is currently evaluating the impact that ASU 2024-04 may have on its consolidated financial statement presentation and 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.