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Liquidity

6 Months Ended

Jun. 30, 2019

3	LIQUIDITY

The Company had a loss from operations of approximately $4.1 million for the six months ended June 30, 2019. As of June 30, 2019, we had cash and working capital deficit of approximately $1.4 million and $2.6 million, respectively.

Management made a decision to expedite product rollouts in order to ramp up revenue in 2019 and beyond. As part of this strategy, the Company rolled out the SurgePays software platform to the AATAC network of 40,000 retail locations. This includes placement orders of 250,000 Androids and 500,000 Sim Starter kits over the course of the multi-phase rollout. The Company is in the first phase of the rollout, during which it expects to initially fulfil $2,800,000 in purchase orders of Androids and Sim Starter kits during Quarter 3.

In addition, management made the decision to expedite programming, software development and integration to enable to launch of the SurgePays Prepaid Visa card in Quarter 3.

To support the significant growth inflection, we have reorganized our human resources department, including building the administrative, legal and finance office in Bartlett, and the operations center in El Salvador (which will be able to host 300 employees). We believe the Company now has the ability to support this exponential growth, which was a major goal for fiscal year 2019. Lastly, we have significantly restructured our balance sheet to be an effective platform for growth as we continue to work towards listing on the Nasdaq Capital Market.

These factors, among others, were addressed by management in determining whether the Company could continue as a going concern. The Company projects that it should be cash flow positive by the end of fiscal year 2019 from ongoing operations by the combination of increased cash flow from its current subsidiaries, as well as restructuring our current debt burden. The Company has executed an agreement with a FINRA licensed broker, as well as several institutional investors, to bring in equity investments to pay down existing debt obligations, cover short term shortfalls, meet the shareholders equity requirements for Nasdaq, and complete proposed acquisitions. While the Company believes in the viability of management’s strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. While management believes it is more likely than not the Company has the ability to continue as a going concern, this is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses.

Additionally, if necessary, based on the Company’s history of being able to raise capital from both internal and external sources coupled with current favorable market conditions, management believes that debt and/or equity financing can be obtained from both related parties (management and members of the Board of Directors of the Company) and external sources. Therefore, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.