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SurgePays Announces Second Quarter 2022 Financial Results

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) 
      
       
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 
         
        
         
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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