SurgePays Announces First Quarter 2022 Financial Results

BARTLETT, Tenn., May 16, 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 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 Outlook
For 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 Information
SurgePays 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 Subsidiaries
Consolidated 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 Subsidiaries
Consolidated 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 Subsidiaries
Consolidated 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 )
             

 


Primary Logo

Source: SurgePays, Inc.