Note 2 - Summary of Significant Accounting Policies

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

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

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 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:

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.

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:

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

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:

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:

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:

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

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

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:

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

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:

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

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

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.

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.