SURGW SurgePays Inc

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	)