United States securities and exchange commission logo
March 16, 2021
Kevin Brian Cox
Chief Executive Officer
Surge Holdings, Inc.
3124 Brother Boulevard, Suite 104
Bartlett, TN 38133
Re: Surge Holdings,
Inc.
Amendment No. 1 to
Registration Statement on Form S-1
Filed February 16,
2021
File No. 333-233726
Dear Mr. Cox:
We have reviewed your amended registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Unless we note
otherwise, our references to prior comments are to comments in our
October 8, 2019 letter.
Amendment No. 1 to Registration Statement on Form S-1
Prospectus Summary, page 1
1. Please revise to
include a description of each class of your authorized stock, including a
description of the
nature of the disparate voting rights and the number of votes per share
to which each class of
common stock is entitled.
Kevin Brian Cox
FirstName LastNameKevin Brian Cox
Surge Holdings, Inc.
Comapany
March NameSurge Holdings, Inc.
16, 2021
March2 16, 2021 Page 2
Page
FirstName LastName
Risk Factors, page 8
2. We reissue our prior comment 2. Please include additional risk factors
highlighting your
recent losses and increased reliance on debt financing focusing on the
effect of both on
your results of operation and financial condition. Address the factors
that your
management has considered in determining whether you could continue as
a going
concern, as discuss in your Management's Discussion and Analysis.
3. We note your disclosure on page 34 regarding your various legal
proceedings. To the
extent such legal proceedings present material risks, please include a
risk factor to discuss.
4. We note your risk factor on page 11 regarding your Chief Executive
Officer's ownership
and control of the company. Please revise to include the date of the
ownership
percentages provided or, alternatively, tie it out to the ownership
percentages presented in
the beneficial ownership table. Please also disclose the percentage of
outstanding shares
that high-vote shareholders must keep to continue to control the
outcome of matters
submitted to shareholders for approval and revise to acknowledge that
any future
issuances of high-vote stock may be dilutive to holders of low-vote
stock .
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
18
5. For all periods presented, please revise to separately discuss each
reportable segment s
results (Surge, TW and ECS) in MD&A, including sales, gross margin,
and operating
income (loss). Please discuss the factors that contributed to changes
in these amounts.
When more than one factor contributes to the change between periods,
please quantify the
impact of each factor separately. Refer to Item 303(A) of Regulation
S-K for further
guidance.
6. Please also provide additional analysis concerning the quality and
variability of your
earnings and cash flows of each segment (Surge, TW and ECS) so that
investors can
ascertain the likelihood or to the extent that past performance is
indicative of future
performance. In this regard, with a view to understanding the primary
drivers behind the
changes in revenue, please discuss which line of products, services or
licenses have
generated revenues, including any known trends and uncertainties
associated with those
products, services or licenses.
7. Please revise this section to provide updated disclosure about the
material effects on your
business as a result of the COVID-19 pandemic. In addition, consider
whether any
updates to your risk factor disclosure are warranted in light of any
events related to
COVID-19. Please refer to CF Disclosure Guidance Topics 9 and 9A.
Kevin Brian Cox
FirstName LastNameKevin Brian Cox
Surge Holdings, Inc.
Comapany
March NameSurge Holdings, Inc.
16, 2021
March3 16, 2021 Page 3
Page
FirstName LastName
Comparison of Nine Months Ended September 30, 2020 and 2019, page 21
8. Please disclose the facts and circumstances of the Gain/(loss) on
settlement of liabilities,
including the carrying value of the settled liabilities. Also disclose
these non-cash
transactions on the face of your statement of cash flows.
Comparison of Years Ended December 31, 2019 and 2018, page 24
9. With a view towards clarifying your MD&A disclosure, please explain to
us why the
increase in revenues attributed to Surge Logics LLC does not agree
with the change in
revenues in the Surge Logics LLC financial statements.
Liquidity, Capital Resources and Going Concern, page 26
10. Please expand your disclosure to include your estimated cash
requirements over the next
twelve months.
Business, page 28
11. We note your disclosure on page 32, under the heading "Disrupting the
Supply Chain"
regarding your (i) established models used to market and sell products
and services and
(ii) capability and capacity to "scale significantly quick to being
approved products into
stores nationwide." Please enhance your disclosure in this section to
provide additional
detail on your abilities in this space and provide support for your
statements.
12. Please revise to include the human capital resources information
required by Item
101(c)(2)(ii) of Regulation S-K.
Directors and Executive Officers, page 35
13. We reissue our prior comment 9. Please revise to clarify how long Mr.
Nuzzo led Glass
Mountain Capital LLC.
Description of Capital Stock , page 47
14. With respect to your Series "A" Preferred Stock and your Series "C"
Convertible
Preferred Stock, please revise to describe, if applicable:
circumstances or events in which the conversion of high-vote
and/or no-vote shares is
mandatory or optional, and any resulting impact on low-vote
shareholders, including
dilution;
any exceptions to provisions requiring mandatory conversion of
shares upon their
transfer; and
any sunset provisions that limit the lifespan of high-vote shares,
and whether the
death of a high-vote shareholder or founder, or intra-family
transfers of shares would
require conversion of high-vote shares.
Kevin Brian Cox
FirstName LastNameKevin Brian Cox
Surge Holdings, Inc.
Comapany
March NameSurge Holdings, Inc.
16, 2021
March4 16, 2021 Page 4
Page
FirstName LastName
Financial Statements
Consolidated Statements of Operations , page F-3
15. Since cost of revenue excludes charges for depreciation and
amortization, please revise
the caption of the line item to read Cost of revenue (exclusive of
depreciation and
amortization shown separately below) and delete the line item for
Gross Profit. Refer to
the guidance in SAB Topic 11:B.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F-11
16. For each revenue category, please revise to clarify and explain in
greater detail your
performance obligations under your agreements, including judgments
made concerning
the timing of satisfaction and in the allocation of the transaction
price, if any. For
example, in regard to your ECS revenues, please revise your
disclosures to identify the
performance obligations promised within the contract. Indicate the
goods or services
promised that are distinct and those that are combined to form a
bundled performance
obligation. Refer to ASC 606-10-25-14 through 22 and provide the
disclosures required
by ASC 606-10-50-12 and 50-13.
Note 5. Asset Purchase Agreement, page F-17
17. We note that on September 30, 2019 you acquired substantially all of
the assets and
specified liabilities related to the ECS Business from GBT
Technologies Inc. Based on
your description it appears this constitutes a business for reporting
purposes. Please tell us
your consideration of the guidance in Articles 8-04 and 8-05 of
Regulation S-X in
assessing whether audited financial statements of this acquired
business and the related
pro forma financial information giving effect to this acquisition
should be provided.
Please provide us your analysis addressing the guidance in Rule
11-01(d) of Regulation S-
X. Alternatively, please amend the Form 8-K filed on October 2, 2019
to provide
financial statements required pursuant to Rule 8-04 of Regulation S- X
and Article 11 pro
forma financial information required by Item 9.01(a) of Form 8-K.
Note 16. Segment Information, page F-63
18. In light of the Surge Logics, Inc registration statement, please
explain to us why Surge
Logics is not identified as a separate operating segment.
Item 16. Exhibits and Financial Statement Schedules
Exhibit 23.1, page II-6
19. We reissue our prior comment 13. Please include a currently dated
consent from your
independent registered public accounting firm in an amendment to your
Form S-1 prior to
requesting effectiveness.
Kevin Brian Cox
FirstName LastNameKevin Brian Cox
Surge Holdings, Inc.
Comapany
March NameSurge Holdings, Inc.
16, 2021
March5 16, 2021 Page 5
Page
FirstName LastName
You may contact Joseph Cascarano at (202) 551-3376 or Robert Littlepage
at (202) 551-
3361 if you have questions regarding comments on the financial statements and
related
matters. Please contact Cara Wirth at (202) 551-7127 or Mara Ransom at (202)
551-3264 with
any other questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Steven Lipstein