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 OutlookFor 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 InformationSurgePays 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 RelationsBrian M. Prenoveau, CFAMZ Group – MZ North AmericaSURG@mzgroup.us561 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 )
         
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