SurgePays Announces Second Quarter 2022 Financial Results

SurgePays, Inc.

BARTLETT, Tenn., Aug. 11, 2022 (GLOBE NEWSWIRE) -- SurgePays, Inc. (Nasdaq: SURG) (“SurgePays” or the “Company”), a technology and telecommunications company focused on the underbanked and underserved, today announced its financial results for the second quarter ended June 30, 2022.

Second Quarter 2022 Financial Highlights

• Revenue of $28.0 million in the second quarter, an increase of 146% compared to the second quarter of 2021

• Gross profit of $2.2 million in the second quarter, an increase of 65% compared to the second quarter of 2021

• Net loss of $(973) thousand in the second quarter compared to a net loss of $(214) thousand in the year ago period

• EBITDA loss of $(86) thousand in the second quarter of 2022

Chairman and CEO Brian Cox commented on second quarter results, “The second quarter built on the progress we’ve made as SurgePays continues to grow revenue and wireless subscribers. Our focus has been capitalizing on the Torch Wireless acquisition to further expand our mobile broadband network. The cash we are generating is being instantly re-invested in the business to help accelerate our mobile broadband subscribers which has now eclipsed 150,000 subscribers.

“Our efforts to expand our broadband footprint should be enhanced by our recent acquisition of a CRM tool that helps set up new subscribers, houses customer information and is integrated with wireless carriers. This CRM allows us to better serve our customer base while ultimately lowering costs.”

Mr. Cox concluded: “We continue to balance the immediate term opportunities to sign up new customers with the long-term opportunities of being a larger, more efficient and better organization.”

Business Outlook
For the full year 2022, the Company expects to achieve the following financial targets:

• Total revenues of at least $130 million.

• EBITDA is expected to be at least $15 million.

• Greater than 200,000 subscribers in the mobile broadband business.
  

Conference Call and Webcast Information
SurgePays will host a conference call today to review its results and discuss its performance at 5:00 p.m. ET / 2:00 p.m. PT. Participants may join the conference call by dialing 1-888-221-3881 (United States) or 1-323-794-2588 (International). A telephonic replay of the call will also be available shortly after the completion of the call, until 11:59 pm ET on August 25, 2022, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 7518553.

A live webcast will be available on SurgePays, Inc Investor Relations site under the Upcoming Event section at http://ir.surgepays.com and will be archived online upon completion of the conference call.

About SurgePays, Inc.

SurgePays, Inc. is a technology and telecommunications company focused on the underbanked and underserved communities. SurgePhone Wireless provide mobile broadband to low-income consumers nationwide. SurgePays blockchain fintech platform utilizes a suite of financial and prepaid products to convert corner stores and bodegas into tech-hubs for underbanked neighborhoods. Please visit SurgePays.com for more information.

About Non-GAAP Financial Measures

The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used to evaluate companies on the basis of operating performance and leverage. Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non-recurring transactions, if any, such as impairment losses and expenses associated with pending acquisitions, which vary significantly between periods and are not recurring in nature, as well as certain recurring non-cash charges such as changes in fair value of the Company’s derivative liabilities and stock-based compensation. The Company believes that Adjusted EBITDA provides investors with a measure of the Company’s operational and financial progress that corresponds with the measurements used by management as a basis for allocating resources and making other operating decisions.

EBITDA and Adjusted EBITDA are not intended to represent cash flows for the periods presented, nor have they been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In accordance with SEC Regulation G, the non-GAAP measurements in this press release have been reconciled to the nearest GAAP measurement, which can be viewed under the heading “Reconciliation of Net Income (loss) from Operations to EBITDA and Adjusted EBITDA” in the financial tables included in this press release.

Cautionary Note Regarding Forward-Looking Statements

This press release includes express or implied statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance and may contain projections of our future results of operations or of our financial information or state other forward-looking information. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Although we believe that the expectations reflected in these forward-looking statements such as regarding our market potential along with the statements under the heading Business Outlook are reasonable, these statements relate to future events or our future operational or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control, including, without limitation, statements about our future financial performance, including our revenue, cash flows, costs of revenue and operating expenses; our anticipated growth; our predictions about our industry; the impact of the COVID-19 pandemic on our business and our ability to attract, retain and cross-sell to clients. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The forward-looking statements in this press release speak only as of the date on which the statements are made. We undertake no obligation to update, and expressly disclaim the obligation to update, any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

Investor Relations
Brian M. Prenoveau, CFA
MZ Group – MZ North America
SURG@mzgroup.us
561 489 5315

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Operations
		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2022				2021				2022				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues		$	28,005,144			$	11,377,928			$	49,146,515			$	22,366,876
Costs and expenses
Cost of revenue			25,814,153				10,051,119				44,321,894				19,908,428
General and administrative expenses			3,038,529				2,736,435				6,722,310				5,976,244
Total costs and expenses			28,852,682				12,787,554				51,044,204				25,884,672
Loss from operations			(847,538	)			(1,409,626	)			(1,897,689	)			(3,517,796	)
Other income (expense)
Interest expense			(566,999	)			(2,096,600	)			(736,644	)			(3,400,459	)
Derivative expense			-				-				-				(1,775,057	)
Change in fair value of derivative liabilities			-				645,830				-				949,680
Gain (loss) on investment in Centercom			35,519				49,145				10,336				(24,628	)
Gain on settlement of liabilities			-				701,404				-				842,982
Amortization of debt discount			(37,068	)			1,895,871				(37,068	)			1,895,871
Gain on forgiveness of PPP loan - government			524,143				-				524,143				-
Total other income (expense) - net			(44,405	)			1,195,650				(239,233	)			(1,511,611	)
Net loss including non-controlling interest			(891,943	)			(213,976	)			(2,136,922	)			(5,029,407	)
Non-controlling interest			81,094				-				48,449				-
Net loss available to common stockholders		$	(973,037	)		$	(213,976	)		$	(2,185,371	)		$	(5,029,407	)
Loss per share - basic and diluted		$	(0.07	)		$	(0.07	)		$	(0.18	)		$	(1.73	)
Weighted average number of shares - basic and diluted			12,268,669				3,087,881				12,166,817				2,902,607

  

SurgePays, Inc. and Subsidiaries
Consolidated Balance Sheets
		June 30, 2022				December 31, 2021
		(Unaudited)				(Audited)
Assets
Current Assets
Cash		$	8,704,526			$	6,283,496
Accounts receivable - net			8,322,807				3,249,889
Inventory			5,675,741				4,359,296
Prepaids			44,054				-
Total Current Assets			22,747,128				13,892,681
Property and equipment - net			887,374				200,448
Other Assets
Note receivable			176,851				176,851
Intangibles - net			3,106,730				3,433,484
Goodwill			1,666,782				866,782
Investment in Centercom - former related party			453,624				443,288
Operating lease - right of use asset - net			452,374				486,668
Total Other Assets			5,856,361				5,407,073
Total Assets		$	29,490,863			$	19,500,202
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued expenses		$	11,292,759			$	6,602,577
Accounts payable and accrued expenses - related party			2,184,896				1,389,798
Deferred revenue			107,500				276,250
Operating lease liability			37,733				49,352
Loans payable - related parties			1,086,413				1,553,799
Notes payable - SBA government			-				126,418
Notes payable - net			6,621,664				-
Total Current Liabilities			21,330,965				9,998,194
Long Term Liabilities
Loans payable - related parties			4,974,403				4,507,017
Notes payable - SBA government			593,522				1,004,767
Operating lease liability			419,574				438,903
Total Long-Term Liabilities			5,987,499				5,950,687
Total Liabilities			27,318,464				15,948,881
Commitments and Contingencies (Note 8)
Stockholders’ Equity
Series A, Convertible Preferred stock, $0.001 par value, 100,000,000 shares authorized, 13,000,000 and 13,000,000 shares issued and outstanding, respectively			260				260
Series C, Convertible Preferred stock, $0.001 par value, 1,000,000 shares authorized, 0 and 0 shares issued and outstanding, respectively			-				-
Common stock, $0.001 par value, 500,000,000 shares authorized 12,348,834 and 12,063,834 shares issued and outstanding, respectively			12,349				12,064
Additional paid-in capital			39,420,055				38,662,340
Accumulated deficit			(37,308,714	)			(35,123,343	)
Stockholders’ equity			2,123,950				3,551,321
Non-controlling interest			48,449				-
Total Stockholders’ Equity			2,172,399				3,551,321
Total Liabilities and Stockholders’ Equity		$	29,490,863			$	19,500,202

  

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
		For the Six Months Ended June 30,
		2022				2021
		(Unaudited)				(Unaudited)
Operating activities
Net loss - including non-controlling interest		$	(2,136,922	)		$	(5,029,407	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization			362,629				398,240
Amortization of right-of-use assets			34,294				92,531
Amortization of debt discount/debt issue costs			37,068				1,351,351
Recognition of share-based compensation			18,588				45,099
Warrants issued for interest expense			212,608				-
Change in fair value of derivative liabilities			-				(949,680	)
Derivative expense			-				1,775,057
Gain on settlement of liabilities			-				(840,932	)
(Gain) loss on equity method investment - Centercom - former related party			(10,336	)			24,628
Gain on forgiveness of PPP loan			(524,143	)			-
Gain on deconsolidation of subsidiary (True Wireless)			-				(1,895,871	)
Changes in operating assets and liabilities
(Increase) decrease in
Accounts receivable			(5,072,918	)			(411,943	)
Lifeline revenue - due from USAC			-				105,532
Inventory			(1,316,445	)			(71,700	)
Prepaids			(44,054	)			(462	)
Increase (decrease) in
Accounts payable and accrued expenses			4,696,158				1,824,604
Accounts payable and accrued expenses - related party			795,098				(1,305,278	)
Deferred revenue			(168,750	)			122,600
Operating lease liability			(30,948	)			(89,616	)
Net cash used in operating activities			(3,148,073	)			(4,855,247	)
Investing activities
Purchase of property and equipment			(11,401	)			(45,983	)
Purchase of software			(300,000	)			-
Acquisition of Torch, Inc.			(800,000	)			-
Cash disposed in deconsolidation of subsidiary (True Wireless)			-				(325,316	)
Net cash used in investing activities			(1,111,401	)			(371,299	)
Financing activities
Proceeds from stock and warrants issued for cash			-				1,510,000
Proceeds from loans - related party			-				2,123,000
Repayments of loans - related party			-				(63,000	)
Proceeds from notes payable			6,700,000				-
Repayments on notes payable			-				(250,000	)
Proceeds from SBA notes			-				518,167
Repayments on SBA notes			(19,496	)			-
Proceeds from convertible notes			-				2,550,000
Repayments on convertible notes - net of overpayment			-				(1,260,792	)
Net cash provided by financing activities			6,680,504				5,127,375
Net increase (decrease) in cash			2,421,030				(99,171	)
Cash - beginning of period			6,283,496				673,995
Cash - end of period		$	8,704,526			$	574,824
Supplemental disclosure of cash flow information
Cash paid for interest		$	195,950			$	-
Cash paid for income tax		$	-			$	-
Supplemental disclosure of non-cash investing and financing activities
Debt issue costs recorded in connection with notes payable		$	115,404			$	-
Stock issued to acquire software		$	411,400
Debt discount/issue costs recorded in connection with debt/derivative liabilities		$	-			$	2,140,829
Stock issued in settlement of liabilities		$	-			$	1,755,150
Conversion of debt into equity		$	-			$	858,158
Right-of-use asset obtained in exchange for new operating lease liability		$	-			$	515,848
Termination of ECS ROU lease		$	-			$	228,752
Stock issued in connection with debt modification		$	-			$	108,931
Stock issued under make-whole arrangement		$	-			$	90,401
Stock issued for acquisition of membership interest in ECS		$	-			$	17,900
Deconsolidation of subsidiary (True Wireless)		$	-			$	2,434,552

Reconciliation of Net Income (loss) from Operations to EBITDA
		6 Months Ended				6 Months Ended
		June 30, 2022				June 30, 2021
Net loss - including non-controlling interest		$	(2,136,922	)		$	(5,029,407	)
Depreciation and amortization			362,629				398,240
Amortization of right-of-use assets			34,294				92,531
Amortization of debt discount/debt issue costs			37,068				1,351,351
Interest expense			736,644				3,400,459
EBITDA		$	(966,287	)		$	213,174
		3 Months Ended				3 Months Ended
		June 30, 2022				June 30, 2021
Net loss - including non-controlling interest		$	(891,943	)		$	(213,976	)
Depreciation and amortization			191,561				180,282
Amortization of right-of-use assets			10,342				27,677
Amortization of debt discount/debt issue costs			37,068				647,128
Interest expense			566,999				2,800,823
EBITDA		$	(85,973	)		$	3,441,934
		3 Months Ended				3 Months Ended
		March 31, 2022				March 31, 2021
Net loss - including non-controlling interest		$	(1,244,979	)		$	(4,815,431	)
Depreciation and amortization			171,068				217,958
Amortization of right-of-use assets			23,952				64,854
Amortization of debt discount/debt issue costs			-				704,223
Interest expense			169,645				599,636
EBITDA		$	(880,314	)		$	(3,228,760	)