SurgePays Announces First Quarter 2022 Financial Results
May 16 2022 - 8:00AM
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 first quarter ended March 31, 2022.
First Quarter 2022 Financial
Highlights
- Revenue of $21.1 million in the
first quarter, an increase of 92% compared to the first quarter of
2021
- Gross profit of $2.6 million in the
first quarter, an increase of 133% compared to the first quarter of
2021
- Net loss of $(1.2) million in the
first quarter compared to a net loss of $(4.8) million in the year
ago period
- Adjusted EBITDA loss of $(873)
thousand in the first quarter compared to a loss of ($4.0) million
in 2020.
Chairman and CEO Brian Cox commented on first
quarter results, “The first quarter demonstrated the progress we’re
making. Our actions were centered on maximizing the growth of our
mobile broadband subscriber base. Revenue growth is being reflected
in the quarterly results in a meaningful way. The cash flow we are
generating is being instantly re-invested in the business to help
accelerate growth in our mobile broadband subscribers which has now
eclipsed 125,000 subscribers.
“The Affordable Connectivity Program (ACP),
helps lower income Americans bridge the digital divide with greater
access to mobile broadband internet accessibility. The current
administration has made this program permanent and recognizes the
needs of the underbanked and underserved. The increased visibility
and recognition of our market potential should also increase the
relevance and understanding of our business model. As we have
enhanced our offerings to include wireless broadband along with a
comprehensive suite of value-driven financial service products for
the underbanked, our ability to attract mobile broadband
subscribers, increase store count and grow market share has
significantly increased. We are on track and on target.”
Business OutlookFor the full
year 2022, the Company expects to achieve the following financial
targets:
- Total revenues of at least $130
million.
- Adjusted EBITDA is expected to be
at least $15 million.
- Greater than 200,000 subscribers in
the mobile broadband business.
Conference Call and Webcast
InformationSurgePays will host a conference call today to
review its results and discuss its performance at 9:00 a.m. ET /
6:00 a.m. PT. Participants may join the conference call by dialing
1-877-407-9208 (United States) or 1-201-493-6784 (International). A
telephonic replay of the call will also be available shortly after
the completion of the call, until 11:59 pm ET on May 30, 2022, by
dialing 1-844-512-2921 (United States) or 1-412-317-6671
(International) and entering the replay pin number: 13730039.
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.
SurgePays, Inc. and
SubsidiariesConsolidated Statements of
Operations
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Revenues |
|
$ |
21,141,372 |
|
|
$ |
10,988,948 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses |
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
18,507,741 |
|
|
|
9,859,434 |
|
General and administrative
expenses |
|
|
3,683,782 |
|
|
|
3,237,684 |
|
Total costs and
expenses |
|
|
22,191,523 |
|
|
|
13,097,118 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(1,050,151 |
) |
|
|
(2,108,170 |
) |
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(169,645 |
) |
|
|
(599,636 |
) |
Derivative expense |
|
|
- |
|
|
|
(1,775,057 |
) |
Change in fair value of
derivative liabilities |
|
|
- |
|
|
|
303,850 |
|
Loss on investment in
CenterCom - former related party |
|
|
(25,183 |
) |
|
|
(73,773 |
) |
Gain on settlement of
liabilities |
|
|
- |
|
|
|
141,578 |
|
Amortization of debt
discount |
|
|
- |
|
|
|
(704,223 |
) |
Total other income
(expense) - net |
|
|
(194,828 |
) |
|
|
(2,707,261 |
) |
|
|
|
|
|
|
|
|
|
Net loss including
non-controlling interest |
|
$ |
(1,244,979 |
) |
|
$ |
(4,815,431 |
) |
|
|
|
|
|
|
|
|
|
Non-controlling
interest |
|
|
(32,645 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net loss available to
common stockholders |
|
$ |
(1,212,334 |
) |
|
$ |
(4,815,431 |
) |
|
|
|
|
|
|
|
|
|
Loss per share - basic
and diluted |
|
$ |
(0.10 |
) |
|
$ |
(1.85 |
) |
|
|
|
|
|
|
|
|
|
Weighted average
number of shares - basic and diluted |
|
|
12,063,834 |
|
|
|
2,604,456 |
|
SurgePays, Inc. and
SubsidiariesConsolidated Balance
Sheets
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,442,926 |
|
|
$ |
6,283,496 |
|
Accounts receivable - net |
|
|
5,644,120 |
|
|
|
3,249,889 |
|
Inventory |
|
|
3,075,529 |
|
|
|
4,359,296 |
|
Prepaids |
|
|
239,400 |
|
|
|
- |
|
Total Current
Assets |
|
|
12,401,975 |
|
|
|
13,892,681 |
|
|
|
|
|
|
|
|
|
|
Property and equipment
- net |
|
|
204,158 |
|
|
|
200,448 |
|
|
|
|
|
|
|
|
|
|
Other
Assets |
|
|
|
|
|
|
|
|
Note receivable |
|
|
176,851 |
|
|
|
176,851 |
|
Intangibles - net |
|
|
3,270,107 |
|
|
|
3,433,484 |
|
Goodwill |
|
|
866,782 |
|
|
|
866,782 |
|
Investment in CenterCom -
former related party |
|
|
418,105 |
|
|
|
443,288 |
|
Operating lease - right of use
asset - net |
|
|
462,716 |
|
|
|
486,668 |
|
Total Other
Assets |
|
|
5,194,561 |
|
|
|
5,407,073 |
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
17,800,694 |
|
|
$ |
19,500,202 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
5,645,134 |
|
|
$ |
6,602,577 |
|
Accounts payable and accrued
expenses - related party |
|
|
1,369,611 |
|
|
|
1,389,798 |
|
Deferred revenue |
|
|
317,700 |
|
|
|
276,250 |
|
Operating lease liability |
|
|
36,871 |
|
|
|
49,352 |
|
Loans payable - related
parties |
|
|
1,086,413 |
|
|
|
1,553,799 |
|
Notes payable - SBA
government |
|
|
- |
|
|
|
126,418 |
|
Notes payable - net |
|
|
461,047 |
|
|
|
- |
|
Total Current
Liabilities |
|
|
8,916,776 |
|
|
|
9,998,194 |
|
|
|
|
|
|
|
|
|
|
Long Term
Liabilities |
|
|
|
|
|
|
|
|
Loans payable - related
parties |
|
|
4,974,403 |
|
|
|
4,507,017 |
|
Notes payable - SBA
government |
|
|
1,125,572 |
|
|
|
1,004,767 |
|
Operating lease liability |
|
|
429,354 |
|
|
|
438,903 |
|
Total Long Term
Liabilities |
|
|
6,529,329 |
|
|
|
5,950,687 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities |
|
|
15,446,105 |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value, 500,000,000 shares authorized 12,063,834 and 12,063,834
shares issued and outstanding, respectively |
|
|
12,064 |
|
|
|
12,064 |
|
Additional paid-in
capital |
|
|
38,710,587 |
|
|
|
38,662,340 |
|
Accumulated deficit |
|
|
(36,335,677 |
) |
|
|
(35,123,343 |
) |
Stockholders’ equity before
non-controlling interest |
|
|
2,387,234 |
|
|
|
3,551,321 |
|
Non-controlling
interest |
|
|
(32,645 |
) |
|
|
- |
|
Total Stockholders’
Equity |
|
|
2,354,589 |
|
|
|
3,551,321 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
17,800,694 |
|
|
$ |
19,500,202 |
|
SurgePays, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows
|
|
|
|
|
|
|
|
|
For the Three Months ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Operating activities |
|
|
|
|
|
|
|
|
Net loss - including
non-controlling interest |
|
$ |
(1,244,979 |
) |
|
$ |
(4,815,431 |
) |
Adjustments to reconcile net
loss to net cash used in operations |
|
|
|
|
|
|
|
|
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 |
|
Recognition of share based compensation |
|
|
9,294 |
|
|
|
61,571 |
|
Change in fair value of derivative liabilities |
|
|
- |
|
|
|
(303,850 |
) |
Derivative expense |
|
|
- |
|
|
|
1,775,057 |
|
Gain on settlement of liabilities |
|
|
- |
|
|
|
(201,778 |
) |
Gain on equity method investment - Centercom - former related
party |
|
|
25,183 |
|
|
|
73,773 |
|
Changes in operating assets
and liabilities |
|
|
|
|
|
|
|
|
(Increase) decrease in |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,394,231 |
) |
|
|
(308,938 |
) |
Lifeline revenue - due from USAC |
|
|
- |
|
|
|
(9,169 |
) |
Inventory |
|
|
1,283,767 |
|
|
|
(55,500 |
) |
Prepaids |
|
|
(239,400 |
) |
|
|
(816 |
) |
Increase (decrease) in |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
(957,443 |
) |
|
|
(851,492 |
) |
Accounts payable and accrued expenses - related party |
|
|
(20,187 |
) |
|
|
- |
|
Deferred revenue |
|
|
41,450 |
|
|
|
281,900 |
|
Operating lease liability |
|
|
(22,030 |
) |
|
|
(67,716 |
) |
Net cash used in
operating activities |
|
|
(3,323,556 |
) |
|
|
(3,435,354 |
) |
|
|
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
|
|
Purchase of property and
equipment |
|
|
(11,401 |
) |
|
|
(2,615 |
) |
Net cash used in
investing activities |
|
|
(11,401 |
) |
|
|
(2,615 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
Proceeds from stock and
warrants issued for cash |
|
|
- |
|
|
|
1,510,000 |
|
Proceeds from loans - related
party |
|
|
- |
|
|
|
1,255,000 |
|
Proceeds from notes
payable |
|
|
500,000 |
|
|
|
768,167 |
|
Repayments on notes
payable |
|
|
- |
|
|
|
(1,466,719 |
) |
Repayments on SBA notes |
|
|
(5,613 |
) |
|
|
- |
|
Proceeds from convertible
notes |
|
|
- |
|
|
|
2,300,000 |
|
Net cash provided by
financing activities |
|
|
494,387 |
|
|
|
4,366,448 |
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash |
|
|
(2,840,570 |
) |
|
|
928,479 |
|
|
|
|
|
|
|
|
|
|
Cash - beginning of
period |
|
|
6,283,496 |
|
|
|
673,995 |
|
|
|
|
|
|
|
|
|
|
Cash - end of
period |
|
$ |
3,442,926 |
|
|
$ |
1,602,474 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
8,552 |
|
|
$ |
- |
|
Cash paid for income tax |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issue costs recorded in
connection with notes payable |
|
$ |
38,953 |
|
|
$ |
- |
|
Debt discount/issue costs
recorded in connection with debt/derivative liabilities |
|
$ |
- |
|
|
$ |
2,038,635 |
|
Right-of-use asset obtained in
exchange for new operating lease liability |
|
$ |
- |
|
|
$ |
515,848 |
|
Stock issued in connection
with debt modification |
|
$ |
- |
|
|
$ |
108,931 |
|
Stock issued under make-whole
arrangement |
|
$ |
- |
|
|
$ |
90,401 |
|
Reconciliation of Net Income (loss) from
Operations to EBITDA and Adjusted EBITDA
|
|
March 31,
2022 |
|
March 31,
2021 |
(unaudited) |
|
(unaudited) |
|
Revenue |
|
$ |
21,141,372 |
|
|
$ |
10,988,948 |
|
Cost of
revenue (exclusive of depreciation and amortization) |
|
|
18,507,741 |
|
|
|
9,859,434 |
|
General and
administrative expenses |
|
|
3,683,782 |
|
|
|
3,237,684 |
|
Loss from
operations |
|
$ |
(1,050,151 |
) |
|
$ |
(2,108,170 |
) |
Net loss to
common stockholders |
|
|
(1,212,334 |
) |
|
|
(4,815,431 |
) |
Interest
expense |
|
|
169,645 |
|
|
|
599,635 |
|
Depreciation
and Amortization |
|
|
169,278 |
|
|
|
217,958 |
|
EBITDA |
|
$ |
(873,411 |
) |
|
|
(3,997,838 |
) |
|
|
|
|
|
|
|
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