SurgePays Announces Second Quarter 2022 Financial Results

·13 min read
SurgePays, Inc.
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

)