SurgePays Reports Third Quarter 2021 Financial Results and Provides Corporate Update

BARTLETT, Tenn., Nov. 16, 2021 (GLOBE NEWSWIRE) -- SurgePays, Inc. (Nasdaq: SURG) (“SurgePays” or the “Company”), a fintech company providing essential financial services and products to the underbanked population and software applications to a number of industry verticals, today announces financial results for the third quarter ended September 30, 2021 and provides a corporate update.

Recent Corporate Highlights:

  • Uplisted to the Nasdaq Capital Market and completed a $19.8 million public offering.
  • Received approval from the Emergency Broadband Benefit (EBB) Program to provide discounted broadband services through the Company’s SurgePhone mobile virtual network operator (MVNO) subsidiary to qualified users in 14 states.
  • Acquired Commander Communication, a provider of prepaid wireless payment products to approximately 500 convenience stores with intent to cross-sell other products and services into Commander’s customer base.
  • Launched new custom private label gift card program for retail stores on the SurgePays fintech platform to provide additional convenience and loyalty opportunities for these locations’ customers
  • Continued to progress towards an IPO of the Company’s enterprise software subsidiary LogicsIQ, Inc. (formerly Surge Logics, Inc.)
  • Appointed Anthony P. Nuzzo, Jr. as CEO of LogicsIQ subsidiary

“The third quarter showed increasing revenue, margin expansion and a narrowing in the net loss. What I’m really excited about, though, is we are now trading on NASDAQ with a significant infusion of capital which should allow us to take advantage of multiple growth initiatives and better execute on things in our pipeline,” commented SurgePays CEO Brian Cox.

“Our core mission has not changed: We are focused on utilizing our blockchain fintech software platform to bring essential financial services and products to the underbanked communities by targeting the stores most frequented by these customers. To this end, and with our newly available capital, we plan to shift from independent sales reps to building out a nationwide in-house sales team to more aggressively engage convenience stores, bodegas and community stores in order to expand beyond the 8,000 stores on our network. We have already identified an additional 30,000 stores for targeting, and over time the addressable market is literally hundreds of thousands of additional stores that could be transacting on the SurgePays network,” Mr. Cox continued. “The combination of increasing the number of stores within our network and increasing average sales per store is really the ‘deep and wide’ approach at the heart of our growth strategy.”

“The capital generated from our recent NASDAQ listing allows us to greatly accelerate the rollout of the Emergency Broadband Benefit, or EBB, Program through our SurgePhone Wireless subsidiary. The successful limited launch in a handful of states suggests that a wider and more aggressive rollout can be the catalyst to our march towards profitability. We have ordered an additional 21,000 tablets to cover the remainder of 2021 and are aggressively putting more sales teams in place while exploring opportunities to expand our footprint beyond 14 states. We have already surpassed our short term goal of 15,000 EBB subscribers, ahead of schedule, which is a baseline of $750,000 per month in relatively higher-margin reoccurring revenue.

“Our LogicsIQ subsidiary had its strongest quarter ever in the third quarter and generated nearly $7.5 million in revenue. This is on the heels of its second-best quarter ever in the second quarter of 2021 when it delivered approximately $4.5 million in revenue. The leaner COVID periods allowed the LogicsIQ team to essentially strengthen the underlying engine of its software platform and allow for the successful development of applications to target new verticals outside the core legal industry.

“In summary, the uplist and capital raising process took a significant amount of our team’s bandwidth for almost a year. Now that this is finally behind us, our focus is on efficient deployment of our capital to achieve maximum revenue growth and reach profitability in the near term. We believe being a profitable blockchain fintech will significantly increase overall shareholder value. Our team is encouraged with the opportunities immediately ahead of us across all business segments. I would like to thank the shareholders for their loyalty, patience and for believing in the management team. I have enjoyed preparing this update, and based on my view of the near future, I will enjoy the next corporate update even more as we execute on our growth strategy,” Mr. Cox concluded.

Financial Results for Third Quarter 2021

Revenue in the third quarter of 2021 was $14.54 million vs. $12.80 million in the year-ago period.   General and administrative expenses declined from $3.21 million in the third quarter of 2020 to $2.28 million in the third quarter of 2021. Net loss in the third quarter of 2021 improved to ($1.66 million) from ($2.50 million) in the year-ago period.

Cash and cash equivalents as of September 30, 2021 was $635,527, as compared to $673,995 as of December 31, 2020. Subsequent to the end of the third quarter, the company raised $19.8 million in gross proceeds from a public offering.

About SurgePays, Inc.

SurgePays, Inc. is a B2B fintech with other verticals in the underbanked and software development space. SurgePays utilizes its blockchain software platform to offer a comprehensive suite of essential financial services for the underbanked, and top selling consumable products to convenience stores, mini-marts, tiendas, and bodegas more cost efficiently than existing wholesale distribution models. Please visit www.SurgePays.com for more information.

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 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, 2020. 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.

Company Contact:
Tony Evers CPA, CIA
Chief Financial Officer
Phone: (847) 648-7542 ext. 104
tevers@surgeholdings.com

Media Relations:
Henry Feintuch / Doug Wright
Feintuch Communications
914-548-6924 / 201-952-6033
surgepays@feintuchpr.com

Investor Relations:
CORE IR
516-222-2560
invest@surgeholdings.com


SURGEPAYS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

    September 30,
2021
    December 31,
2020
 
    (Unaudited)     (Audited)  
             
Assets                
                 
Current Assets                
Cash   $ 635,527     $ 673,995  
Accounts receivable - net     1,667,630       180,499  
Lifeline revenue - due from USAC     -       212,621  
Inventory     502,109       178,309  
Prepaids     35,001       5,605  
Total Current Assets     2,840,267       1,251,029  
                 
Property and equipment - net     217,070       236,810  
                 
Other Assets                
Note receivable     176,851       -  
Intangibles - net     3,596,861       4,125,742  
Goodwill     866,782       866,782  
Investment in Centercom - related party     411,056       414,612  
Operating lease - right of use asset - net     522,072       368,638  
Other     -       61,458  
Total Other Assets     5,573,622       5,837,232  
                 
Total Assets   $ 8,630,959     $ 7,325,071  
                 
Liabilities and Stockholders’ Deficit                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 4,159,473     $ 6,827,487  
Accounts payable and accrued expenses - related party     2,293,926       1,753,837  
Deferred revenue     235,500       443,300  
Operating lease liability     68,303       210,556  
Line of credit     -       912,870  
Loans payable - related parties     1,027,500       2,389,000  
Notes payable - net     593,205       250,000  
Convertible notes payable - net     1,298,083       1,516,170  
Derivative liabilities     1,567,508       1,357,528  
Total Current Liabilities     11,243,498       15,660,748  
                 
Long Term Liabilities                
Loans payable - related parties     5,986,940       1,100,440  
Notes payable - SBA government     1,499,424       1,134,682  
Operating lease liability     447,002       155,167  
Total Long Term Liabilities     7,933,366       2,390,289  
                 
Total Liabilities     19,176,864       18,051,037  
                 
Commitments and Contingencies (Note 8)                
                 
Stockholders’ Deficit                
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
    13,000       13,000  
Series C, Convertible Preferred stock, $0.001 par value, 1,000,000
shares authorized, 721,598 and 721,598 shares issued and
outstanding, respectively
    722       722  
Common stock, $0.001 par value, 500,000,000 shares authorized
3,288,429 and 2,542,624 shares issued and outstanding, respectively
    3,289       2,543  
Additional paid-in capital     17,804,181       10,849,968  
Accumulated deficit     (28,367,097 )     (21,592,199 )
Total Stockholders’ Deficit     (10,545,905 )     (10,725,966 )
                 
Total Liabilities and Stockholders’ Deficit   $ 8,630,959     $ 7,325,071  



SURGEPAYS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)

    For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2021     2020     2021     2020  
                         
Revenues   $ 14,538,353     $ 12,802,172     $ 36,905,373     $ 43,104,767  
                                 
Costs and expenses                                
Cost of revenue     12,634,871       11,216,186       32,544,619       39,422,776  
General and administrative expenses     2,279,374       3,210,910       8,254,443       12,014,616  
Total costs and expenses     14,914,245       14,427,096       40,799,062       51,437,392  
                                 
Loss from operations     (375,892 )     (1,624,924 )     (3,893,689 )     (8,332,625 )
                                 
Other income (expense)                                
Interest expense     (1,236,778 )     (1,164,409 )     (4,637,236 )     (2,348,175 )
Derivative expense     -       (33,239 )     (1,775,057 )     (529,294 )
Change in fair value of derivative liabilities     (202,784 )     212,851       746,896       405,413  
Gain (loss) on investment in Centercom - related
party
    21,072       107,649       (3,556 )     252,985  
Gain on settlement of liabilities     136,487       -       979,469       2,556,979  
Gain on deconsolidation of True Wireless     -       -       1,895,871       -  
Other income     -       -       -       10,000  
Total other income (expense) - net     (1,282,003 )     (877,148 )     (2,793,613 )     347,908  
                                 
Net loss   $ (1,657,895 )   $ (2,502,072 )   $ (6,687,302 )   $ (7,984,717 )
                                 
Loss per share - basic and diluted   $ (0.51 )   $ (1.09 )   $ (2.21 )   $ (3.69 )
                                 
Weighted average number of shares -
basic and diluted
    3,264,274       2,293,669       3,024,487       2,164,930  



SURGEPAYS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)

    For the Nine Months Ended September 30,  
    2021     2020  
Operating activities                
Net loss   $ (6,687,302 )   $ (7,984,717 )
Adjustments to reconcile net loss to net cash used in operations                
Depreciation and amortization     579,372       876,512  
Amortization of right-of-use assets     122,681       146,647  
Amortization of debt discount     2,008,036       1,417,524  
Recognition of share based compensation     8,441       127,992  
Change in fair value of derivative liabilities     (746,896 )     (405,413 )
Derivative expense     1,775,057       529,294  
Gain on settlement of liabilities     (935,375 )     (2,556,979 )
(Gain) loss on equity method investment - Centercom - related
party
    3,556       (252,985 )
Gain on deconsolidation of subsidiary (True Wireless)     (1,895,871 )     -  
Changes in operating assets and liabilities                
(Increase) decrease in                
Accounts receivable     (1,487,131 )     2,719,196  
Lifeline revenue - due from USAC     105,532       (162,043 )
Inventory     (398,450 )     (177,184 )
Prepaids     (29,396 )     58,111  
Other     61,458       4,999  
Increase (decrease) in                
Accounts payable and accrued expenses     166,163       2,469,612  
Accounts payable and accrued expenses - related party     540,089       -  
Deferred revenue     (207,800 )     -  
Gain contingency     -       (38,040 )
Operating lease liability     (126,533 )     (150,145 )
Net cash used in operating activities     (7,144,369 )     (3,377,619 )
                 
Investing activities                
Purchase of property and equipment     (51,396 )     (4,147 )
Cash disposed in deconsolidation of subsidiary (True Wireless)     (325,316 )     -  
Repayment of notes receivable     -       14,959  
Net cash provided by (used in) investing activities     (376,712 )     10,812  
                 
Financing activities                
Proceeds from stock and warrants issued for cash     1,510,000       705,000  
Repurchase of common stock     -       (500,000 )
Proceeds from loans - related party     3,688,000       723,196  
Repayments of loans - related party     (163,000 )     (240,196 )
Proceeds from notes payable     853,386       1,134,582  
Repayments on notes payable     (250,000 )     (27,500 )
Proceeds from SBA notes     518,167       -  
Repayments on SBA notes     (3,425 )     -  
Proceeds from convertible notes     2,550,000       2,182,000  
Repayments on convertible notes - net of overpayment     (1,220,515 )     (373,000 )
Cash paid for debt issuance costs     -       (162,000 )
Net cash provided by financing activities     7,482,613       3,442,082  
                 
Net decrease in cash     (38,468 )     75,275  
                 
Cash - beginning of period     673,995       346,040  
                 
Cash - end of period   $ 635,527     $ 421,315  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest   $ 117,836     $ 98,113  
Cash paid for income tax   $ -     $ -  
                 
Supplemental disclosure of non-cash investing and financing activities                
                 
Deconsolidation of subsidiary (True Wireless)   $ 2,434,552     $ -  
Debt discount/issue costs recorded in connection with derivative
liabilities
  $ 2,140,829     $ 1,366,636  
Debt discount recorded in connection with notes payable   $ 265,268          
Stock issued in settlement of liabilities   $ 1,879,785     $ -  
Conversion of debt into equity   $ 948,002     $ -  
Right-of-use asset obtained in exchange for new operating lease
liability
  $ 515,848     $ 355,203  
Termination of ECS ROU lease   $ 228,752     $ -  
Stock issued in connection with debt modification   $ 108,931     $ 49,890  
Stock issued under make-whole arrangement   $ 90,401     $ 196,341  
Stock issued for acquisition of membership interest in ECS   $ 17,900     $ -  
True up adjustment related to initial acquisition of True Wireless   $ 87,596          
Stock issued for acquisition   $ -     $ 210,794  
Stock and warrants issued with debt recorded as a debt discount   $ -     $ 906,098  

 


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