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 third quarter ended September 30, 2022.
Third Quarter 2022 Operational and
Financial Highlights
- Revenue of $36.2 million in the
third quarter, an increase of 149% compared to the third quarter of
2021
- Gross profit of $1.9 million in the
third quarter, an increase of 1% compared to the third quarter of
2021
- Net loss of $(1.5 million) in the
third quarter compared to a net loss of $(1.7 million) in the year
ago period
- Surpasses Year end Goal of 200,000
subscribers
- Appoints Jeremy Gies, President of
SurgePays Fintech to drive increases in the number of stores using
SurgePays software and revenue per store
- Integrate ACP into SurgePays
Fintech Platform to enable in store enrollments
CEO Commentary and Outlook
Chairman and CEO Brian Cox commented on third
quarter results, “The third quarter for SurgePays was about
disciplined growth while maintaining a velocity resulting in a 2.5X
revenue increase and surpassing our 2022 year-end goal of 200,000
mobile broadband (wireless) subscribers. We continued our growth
curve without dilutive capital raises through planning and
discipline. In a turbulent economy, our team is successfully
forging ahead focused on defined targets of subscribers, stores on
our network, and revenue.
“Once we hit 150,000 mobile broadband
subscribers, we analyzed our efficiency in purchasing wireless
equipment, margins, and retention. This evaluation has led to
margin expansion in both our equipment and service provision. We
have also implemented new protocols to enhance customer
retention.”
“By adding ACP enrollments to our SurgePays
platform for convenience stores, we can accelerate our growth goals
due to being the only company we are aware of offering ACP at the
community stores where the underbanked most frequently shop. These
stores accept SNAP(EBT), a qualifying program. At the register, the
clerk can quickly submit customer data needed for our compliance
specialists to activate the customer. By adding this offering to
our suite of prepaid products for the store owner, we should see
rapid growth in our total store count.
Mr. Cox concluded: “I have been very open about
not measuring our company by quarters, but the trajectory to hit
subscriber and revenue goals while improving the Cap Table. We are
executing with real-time results in the middle of a land grab. I
believe we have barely scratched the surface and will continue to
refine our sales and operating practices to maximize the rapid
scaling of our sales and revenue.”
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
1-877-270-2148 (United States) or 1-412-902-6510 (International). A
telephonic replay of the call will also be available shortly after
the completion of the call, until 11:59 pm ET on November 28, 2022,
by dialing 1-877-344-7529 (United States) or 1-412-317-0088
(International) and entering the replay pin number: 1557657.
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.
EBITDA is 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” 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 MonthsEnded September 30, |
|
|
For the Nine MonthsEnded September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
36,171,345 |
|
|
$ |
14,538,353 |
|
|
$ |
85,317,860 |
|
|
$ |
36,905,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
34,250,541 |
|
|
|
12,634,871 |
|
|
|
78,572,421 |
|
|
|
32,544,619 |
|
General and administrative
expenses |
|
|
2,885,744 |
|
|
|
2,909,954 |
|
|
|
9,656,518 |
|
|
|
10,262,479 |
|
Total costs and
expenses |
|
|
37,136,285 |
|
|
|
15,544,825 |
|
|
|
88,228,939 |
|
|
|
42,807,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(964,940 |
) |
|
|
(1,006,472 |
) |
|
|
(2,911,079 |
) |
|
|
(5,901,725 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(633,593 |
) |
|
|
(1,236,778 |
) |
|
|
(1,370,236 |
) |
|
|
(4,637,236 |
) |
Derivative expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,775,057 |
) |
Change in fair value of
derivative liabilities |
|
|
- |
|
|
|
(202,784 |
) |
|
|
- |
|
|
|
746,896 |
|
Gain (loss) on investment in
Centercom - former related party |
|
|
(52,435 |
) |
|
|
21,072 |
|
|
|
(42,099 |
) |
|
|
(3,556 |
) |
Gain on settlement of
liabilities |
|
|
- |
|
|
|
136,487 |
|
|
|
- |
|
|
|
979,469 |
|
Gain on deconsolidation of
True Wireless |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,895,871 |
|
Amortization of debt
discount |
|
|
(57,933 |
) |
|
|
630,580 |
|
|
|
(95,001 |
) |
|
|
2,008,036 |
|
Gain on forgiveness of PPP
loan - government |
|
|
- |
|
|
|
- |
|
|
|
524,143 |
|
|
|
- |
|
Total other income
(expense) - net |
|
|
(743,961 |
) |
|
|
(651,423 |
) |
|
|
(983,193 |
) |
|
|
(785,577 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss including
non-controlling interest |
|
|
(1,708,901 |
) |
|
|
(1,657,895 |
) |
|
|
(3,894,272 |
) |
|
|
(6,687,302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interest |
|
|
(216,163 |
) |
|
|
- |
|
|
|
(192,811 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to
common stockholders |
|
$ |
(1,492,738 |
) |
|
$ |
(1,657,895 |
) |
|
$ |
(3,701,461 |
) |
|
$ |
(6,687,302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic
and diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.30 |
) |
|
$ |
(2.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares - basic and diluted |
|
|
12,443,052 |
|
|
|
3,264,274 |
|
|
|
12,259,907 |
|
|
|
3,024,487 |
|
SurgePays, Inc. and Subsidiaries |
Consolidated Balance Sheets |
|
|
|
September 30,2022 |
|
|
December 31,2021 |
|
|
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
7,892,050 |
|
|
$ |
6,283,496 |
|
Accounts receivable - net |
|
|
9,467,422 |
|
|
|
3,249,889 |
|
Inventory |
|
|
9,492,385 |
|
|
|
4,359,296 |
|
Prepaids |
|
|
131,853 |
|
|
|
- |
|
Total Current
Assets |
|
|
26,983,710 |
|
|
|
13,892,681 |
|
|
|
|
|
|
|
|
|
|
Property and equipment
- net |
|
|
747,056 |
|
|
|
200,448 |
|
|
|
|
|
|
|
|
|
|
Other
Assets |
|
|
|
|
|
|
|
|
Note receivable |
|
|
176,851 |
|
|
|
176,851 |
|
Intangibles - net |
|
|
2,943,353 |
|
|
|
3,433,484 |
|
Goodwill |
|
|
1,666,782 |
|
|
|
866,782 |
|
Investment in Centercom -
former related party |
|
|
401,190 |
|
|
|
443,288 |
|
Operating lease - right of use
asset - net |
|
|
441,921 |
|
|
|
486,668 |
|
Total Other
Assets |
|
|
5,630,097 |
|
|
|
5,407,073 |
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
33,360,863 |
|
|
$ |
19,500,202 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
13,672,082 |
|
|
$ |
6,602,577 |
|
Accounts payable and accrued
expenses - related party |
|
|
3,558,258 |
|
|
|
1,389,798 |
|
Deferred revenue |
|
|
1,896,510 |
|
|
|
276,250 |
|
Operating lease liability |
|
|
38,606 |
|
|
|
49,352 |
|
Loans payable - related
parties |
|
|
1,086,413 |
|
|
|
1,553,799 |
|
Notes payable - SBA
government |
|
|
- |
|
|
|
126,418 |
|
Notes payable - net |
|
|
6,679,597 |
|
|
|
- |
|
Total Current
Liabilities |
|
|
26,931,466 |
|
|
|
9,998,194 |
|
|
|
|
|
|
|
|
|
|
Long Term
Liabilities |
|
|
|
|
|
|
|
|
Loans payable - related
parties |
|
|
4,974,403 |
|
|
|
4,507,017 |
|
Notes payable - SBA
government |
|
|
582,226 |
|
|
|
1,004,767 |
|
Operating lease liability |
|
|
409,672 |
|
|
|
438,903 |
|
Total Long-Term
Liabilities |
|
|
5,966,301 |
|
|
|
5,950,687 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities |
|
|
32,897,767 |
|
|
|
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 |
|
|
12,496 |
|
|
|
12,064 |
|
Additional paid-in
capital |
|
|
39,467,956 |
|
|
|
38,662,340 |
|
Accumulated deficit |
|
|
(38,801,452 |
) |
|
|
(35,123,343 |
) |
Stockholders’ equity |
|
|
679,260 |
|
|
|
3,551,321 |
|
Non-controlling interest |
|
|
(216,164 |
) |
|
|
- |
|
Total Stockholders’
Equity |
|
|
463,096 |
|
|
|
3,551,321 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
33,360,863 |
|
|
$ |
19,500,202 |
|
SurgePays, Inc. and Subsidiaries |
Consolidated Statements of Cash Flows |
|
|
|
For the Nine Months Ended September 30, |
|
|
2022 |
|
|
2021 |
|
|
(Unaudited) |
|
|
(Unaudited) |
Operating activities |
|
|
|
|
|
|
|
Net loss - including
non-controlling interest |
|
$ |
(3,894,272 |
) |
|
$ |
(6,687,302 |
Adjustments to reconcile net
loss to net cash used in operations |
|
|
|
|
|
|
|
Provision for inventory obsolescence |
|
|
51,718 |
|
|
|
- |
Depreciation and amortization |
|
|
664,534 |
|
|
|
398,240 |
Amortization of right-of-use assets |
|
|
44,747 |
|
|
|
92,531 |
Amortization of debt discount/debt issue costs |
|
|
95,001 |
|
|
|
1,351,351 |
Recognition of share-based compensation |
|
|
27,882 |
|
|
|
45,099 |
Warrants issued for interest expense |
|
|
251,362 |
|
|
|
- |
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 |
|
|
42,098 |
|
|
|
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 |
|
|
(6,217,533 |
) |
|
|
(411,943 |
Lifeline revenue - due from USAC |
|
|
- |
|
|
|
105,532 |
Inventory |
|
|
(5,184,807 |
) |
|
|
(71,700 |
Prepaids |
|
|
(131,853 |
) |
|
|
(462 |
Increase (decrease) in |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
7,075,480 |
|
|
|
1,824,604 |
Accounts payable and accrued expenses - related party |
|
|
2,168,460 |
|
|
|
(1,305,278 |
Deferred revenue |
|
|
1,620,260 |
|
|
|
122,600 |
Operating lease liability |
|
|
(39,977 |
) |
|
|
(89,616 |
Net cash used in
operating activities |
|
|
(3,951,043 |
) |
|
|
(6,513,142 |
|
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
|
Purchase of property and
equipment |
|
|
(9,611 |
) |
|
|
(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 |
|
|
(1,109,611 |
) |
|
|
(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 |
|
|
(30,792 |
) |
|
|
- |
Proceeds from convertible
notes |
|
|
- |
|
|
|
2,550,000 |
Repayments on convertible
notes - net of overpayment |
|
|
- |
|
|
|
(1,260,792 |
Net cash provided by
financing activities |
|
|
6,669,208 |
|
|
|
5,127,375 |
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash |
|
|
1,608,554 |
|
|
|
(1,757,066 |
|
|
|
|
|
|
|
|
Cash - beginning of
period |
|
|
6,283,496 |
|
|
|
673,995 |
|
|
|
|
|
|
|
|
Cash - end of
period |
|
$ |
7,892,050 |
|
|
$ |
(1,083,071 |
|
|
|
|
|
|
|
|
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 |
|
|
|
Three months
ended |
|
Three months
ended |
|
|
September
30, 2022 |
|
September
30, 2021 |
(unaudited) |
(unaudited) |
Revenue |
|
$ |
36,171,345 |
|
|
$ |
14,538,353 |
|
Cost of
revenue (exclusive of depreciation and amortization) |
|
|
34,250,541 |
|
|
|
12,634,871 |
|
General and
administrative expenses |
|
|
2,933,204 |
|
|
|
2,909,954 |
|
Loss from
operations |
|
$ |
(1,012,400 |
) |
|
$ |
(1,006,472 |
) |
Net loss to
common stockholders |
|
|
(1,540,198 |
) |
|
|
(1,657,895 |
) |
Interest
expense |
|
|
633,593 |
|
|
|
1,236,778 |
|
Depreciation
and Amortization |
|
|
140,318 |
|
|
|
17,756 |
|
EBITDA |
|
$ |
(766,287 |
) |
|
|
(403,361 |
) |
|
|
|
|
|
|
|
|
|
Nine months
ended |
|
Nine months
ended |
|
|
September
30, 2022 |
|
September
30, 2021 |
(unaudited) |
(unaudited) |
Revenue |
|
$ |
85,317,860 |
|
|
$ |
36,905,373 |
|
Cost of
revenue (exclusive of depreciation and amortization) |
|
|
78,572,421 |
|
|
|
32,544,619 |
|
General and
administrative expenses |
|
|
9,655,529 |
|
|
|
10,262,479 |
|
Loss from
operations |
|
$ |
(2,910,090 |
) |
|
$ |
(5,901,725 |
) |
Net loss to
common stockholders |
|
|
(3,725,569 |
) |
|
|
(6,687,302 |
) |
Interest
expense |
|
|
1,370,236 |
|
|
|
4,637,236 |
|
Depreciation
and Amortization |
|
|
501,157 |
|
|
|
415,996 |
|
EBITDA |
|
$ |
(1,854,176 |
) |
|
|
(1,634,070 |
) |
|
|
|
|
|
|
|
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