SurgePays Announces Second Quarter 2024 Financial Results

$5 Million Share Repurchase Authorized

BARTLETT, Tenn., Aug. 13, 2024 /PRNewswire/ -- SurgePays, Inc. (NASDAQ: SURG) ("SurgePays" or the "Company"), a technology and telecom company focused on the underbanked and underserved, today announced its financial results for the second quarter ended June 30, 2024.

SurgePays, Inc. (NASDAQ: SURG) (PRNewsfoto/SurgePays)

Management Commentary

Chairman and CEO Brian Cox commented on the quarter's results, "The second quarter of 2024 begins a transition phase for SurgePays. ACP funding has run out and there is no guarantee it will return. Fortunately, in the first quarter we shored up our balance sheet and began implementing growth initiatives outside of the ACP program to continue to pursue our strategic goal of being one of the country's largest providers of prepaid wireless and underbanked financial technology services.

"Second quarter sales of $15.1 million were about as expected, but were well below the first quarter 2024 revenues of $31.4 million and the year ago second quarter 2023 revenues of $35.9 million due to the ending of the government's ACP funding in mid-May, which we knew was coming. Both the first quarter of 2024 and the second quarter of 2023 had full ACP funding.

"Gross profits in the 2024 second quarter were a loss of ($3.4) million compared to a profit of $10.0 million in the year ago quarter as the original ACP funding ran out mid-quarter. Additionally, we made the strategic decision to have our balance sheet take on the funding to maintain continuity within our subscriber base for three main reasons:

Congress could renew the ACP program at any time, and if we terminated service, we would have to go out and re-acquire customers from a standing start, which would cost tens of millions of dollars.
If Congress delayed or didn't fund the program, we had plan B to acquire a company with licenses to provide a similar wireless subsidy and offer our subscribers the option to remain on a free monthly plan subsidized by a sister program. This is in conjunction with incentivizing customers to switch to LinkUp Mobile, our non-subsidized prepaid wireless brand.
We know how critical broadband service is in everybody's life, and we believe it was simply the right thing to do.

"We are in a transition phase and are looking to get back to generating positive free cash flow by the end of this year through the following initiatives:

Continue to grow our ACP revenue stream should Congress begin funding it again.
Offer our ACP subscriber base a free monthly service plan utilizing the Lifeline program while enticing customers with a cost-saving LinkUp Mobile prepaid wireless plan.
Scaling up our third-party wholesale transactions for other prepaid wireless company payments at convenience stores. We believe this initiative is necessary because it is a relationship gateway product for LinkUp Mobile activations and subscriber growth.
Expand our offerings outside of wireless. For instance, we recently launched our ClearLine customer engagement platform for convenience stores at last month's RetailNOW Conference in Las Vegas.
Expand product and service offerings to the same nationwide network of convenience stores we are building by exploring and executing prospective partnering or product distribution opportunities.
Identify unique market opportunities that represent potential positive short-term cash flow.

"As we said last quarter, we knew that the ACP funding could run out, and we are not waiting around for Congress to provide additional funding. Many initiatives are underway to expand SurgePays's footprint among the underbanked and underserved, who remain our key customers. We recognize that the expiration of ACP funding has adversely impacted our business and stock price. Therefore, we feel it's an opportune time to announce a corporate stock buyback so our long-term investors know our interests are aligned. Until December 31, 2024, we will implement a buyback of up to $5 million (the "Maximum Amount") of SurgePays common stock in the open market. Repurchases may be made from time to time at management's discretion. The program will end upon the earlier of 6 months after the commencement of the program or the date upon which the Maximum Amount has been purchased and can be discontinued at any time. No shares have been repurchased under the program to date. There can be no assurance as to the timing or number of shares of any repurchases."

Second Quarter 2024 Results Conference Call

SurgePays management will host a webcast at 5 p.m. ET / 2 p.m. PT to discuss these results. The live webcast of the call can be accessed on the company's investor relations website at ir.surgepays.com, or by registering at the following link: Second Quarter Financial Results Call.

Telephone access to the call will be available at 877-545-0320 (in the U.S.) or by dialing 973-528-0002 (outside the U.S.). Participant access code is 650138.

A telephone replay will be available approximately one hour following completion of the call until August 27, 2024. To access the replay, please dial 877-481-4010 (in the U.S.) or 919-882-2331 (outside the U.S.). Replay passcode is 51057.

Share Repurchase Authorization

As indicated above, SurgePays's board of directors has authorized the company to repurchase up to $5 million of common stock through the open market until December 31, 2024.

About SurgePays, Inc.

SurgePays, Inc. is a technology and telecom company focused on the underbanked and underserved communities. SurgePays' technology-layered platform empowers clerks at over 8,000 convenience stores to provide a suite of prepaid wireless and financial products to underbanked customers. SurgePays prepaid wireless companies provide services to over 250,000 low-income subscribers nationwide. The company ranks as the 345th fastest-growing tech company in North America according to the 2023 Deloitte Technology Fast 500. Please visit SurgePays.com for more information.

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," "attempting," 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 Management Commentary 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 including but not limited to, our plans to expand our prepaid wireless company and the stock buyback program, our ability to retain our subscribers on a free monthly plan subsidized by a sister program, our ability to obtain a company that has the license to subsidize our subscribers through a sister program and our expanded service and offerings. 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, whether the ACP is funded again, our ability to obtain a company that has the license to subsidize our subscribers through a sister program, statements about our future financial performance, including our revenue, cash flows, costs of revenue and operating expenses; our anticipated growth; and our predictions about our industry. 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, 2023. 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 Balance Sheets

	30-Jun-24		31-Dec-23
	(Unaudited)

Assets

Current Assets
Cash	$	38,434,580	$	14,622,060
Accounts receivable - net		1,412,177		9,536,074
Inventory		8,363,434		9,046,594
Prepaids and other		507,927		161,933
Total Current Assets		48,718,118		33,366,661

Property and equipment - net		221,075		361,841

Other Assets
Note receivable		176,851		176,851
Intangibles - net		1,799,716		2,126,470
Internal use software development costs - net		428,010		539,424
Goodwill		4,166,782		1,666,782
Investment in CenterCom		498,273		464,409
Operating lease - right of use asset - net		396,475		387,869
Deferred income taxes - net		-		2,835,000
Total Other Assets		7,466,107		8,196,805

Total Assets	$	56,405,300	$	41,925,307

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable and accrued expenses	$	4,297,557	$	6,439,120
Accounts payable and accrued expenses - related party		499,853		1,048,224
Accrued income taxes payable		100,000		570,000
Deferred revenue		-		20,000
Operating lease liability		96,332		43,137
Note payable - related party		1,606,654		4,584,563
Total Current Liabilities		6,600,396		12,705,044

Long Term Liabilities
Note payable - related party		2,730,796		-
Notes payable - SBA government		474,758		460,523
Operating lease liability		317,470		356,276
Total Long Term Liabilities		3,523,024		816,799

Total Liabilities		10,123,420		13,521,843

Stockholders' Equity
Common stock, $0.001 par value, 500,000,000 shares authorized 19,431,549 and 14,403,261 shares issued and outstanding, respectively		19,435		14,404
Additional paid-in capital		72,967,169		43,421,019
Accumulated deficit		(26,827,373		(15,186,203
Stockholders' equity		46,159,231		28,249,220
Non-controlling interest		122,649		154,244
Total Stockholders' Equity		46,281,880		28,403,464

Total Liabilities and Stockholders' Equity	$	56,405,300	$	41,925,307

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023

Revenues	$	15,085,699	$	35,886,433	$	46,514,834	$	70,662,876

Costs and expenses
Cost of revenues		18,528,774		25,860,705		41,775,243		52,942,665
General and administrative expenses		7,432,978		3,823,227		13,863,783		6,812,648
Total costs and expenses		25,961,752		29,683,932		55,639,026		59,755,313

Income (loss) from operations		(10,876,053)		6,202,501		(9,124,192)		10,907,563

Other income (expense)
Interest expense		(116,722)		(156,267)		(249,305)		(348,593
Other income		636,868		-		636,868		-
Gain on investment in CenterCom		17,711		10,713		33,864		43,742
Total other income (expense) - net		537,857		(145,554)		421,427		(304,851

Net income (loss) before provision for income taxes		(10,338,196)		6,056,947		(8,702,765)		10,602,712

Provision for income tax benefit (expense)		(2,547,000)		-		(2,970,000)		-

Net income (loss) including non-controlling interest		(12,885,196)		6,056,947		(11,672,765)		10,602,712

Non-controlling interest		(19,431)		90,955		(31,595)		90,379

Net income (loss) available to common stockholders	$	(12,865,765)	$	5,965,992	$	(11,641,170)	$	10,512,333

Earnings per share - attributable to common stockholders
Basic	$	(0.66)	$	0.42	$	(0.63)	$	0.74
Diluted	$	(0.66)	$	0.4	$	(0.63)	$	0.71

Weighted average number of shares outstanding - attributable to common stockholders
Basic		19,431,549		14,191,083		18,562,416		14,154,163
Diluted		19,431,549		15,076,466		18,562,416		14,811,785


The accompanying notes are an integral part of these unaudited consolidated financial statements

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the Three and Six Months Ended June 30, 2024
(Unaudited)

	Common Stock				Additional		Accumulated		Non-Controlling		Total
	Common Stock				Paid-in		Accumulated		Non-Controlling		Stockholders'
	Shares		Amount		Capital		Deficit		Interest		Equity

December 31, 2023		14,403,261	$	14,404	$	43,421,019	$	(15,186,203)	$	154,244	$	28,403,464

Stock issued for cash		3,080,356		3,081		17,246,913		-		-		17,249,994

Cash paid as direct offering costs		-		-		(1,395,000)		-		-		(1,395,000

Exercise of warrants - cash		1,860,308		1,861		8,797,396		-		-		8,799,257

Exercise of warrants - cashless		40,238		41		(41)		-		-		-

Stock issued for services		47,386		48		411,692		-		-		411,740

Recognition of stock based compensation - unvested shares - related parties		-		-		1,497,417		-		-		1,497,417

Recognition of stock-based compensation - related party		-		-		6,196		-		-		6,196

Non-controlling interest		-		-		-		-		(12,164)		(12,164

Net income		-		-		-		1,224,595		-		1,224,595

March 31, 2024		19,431,549		19,435		69,985,592		(13,961,608)		142,080		56,185,499

Recognition of stock based compensation - unvested shares - related parties		-		-		2,981,577		-		-		2,981,577

Non-controlling interest		-		-		-		-		(19,431)		(19,431

Net loss		-		-		-		(12,865,765)		-		(12,865,765

June 30, 2024		19,431,549	$	19,435	$	72,967,169	$	(26,827,373)	$	122,649	$	46,281,880


SurgePays, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the Three and Six Months Ended June 30, 2023
(Unaudited)

	Common Stock				Additional		Accumulated		Non-Controlling		Total
	Common Stock				Paid-in		Accumulated		Non-Controlling		Stockholders'
	Shares		Amount		Capital		Deficit		Interest		Equity

December 31, 2022		14,116,832	$	14,117	$	40,780,707	$	(35,804,106)	$	127,535	$	5,118,253

Stock issued for services		60,082		60		307,398		-		-		307,458

Recognition of stock based compensation - stock options		-		-		9,294		-		-		9,294

Non-controlling interest		-		-		-		-		(576)		(576

Net income		-		-		-		4,546,341		-		4,546,341

March 31, 2023		14,176,914		14,177		41,097,399		(31,257,765)		126,959		9,980,770

Stock issued for services		64,927		65		311,121		-		-		311,186

Recognition of stock based compensation - stock options		-		-		9,294		-		-		9,294

Exercise of warrants for cash		43,814		44		207,196		-		-		207,240

Non-controlling interest		-		-		-		-		90,955		90,955

Net income		-		-		-		5,965,992		-		5,965,992

June 30, 2023		14,285,655	$	14,286	$	41,625,010	$	(25,291,773)	$	217,914	$	16,565,437

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

	For the Six Months Ended June 30,
	2024		2023

Operating activities
Net income (loss) - including non-controlling interest	$	(11,672,765)	$	10,602,712
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations
Depreciation and amortization		467,520		467,519
Amortization of right-of-use assets		46,995		21,494
Amortization of internal use software development costs		111,414		64,530
Stock issued for services		411,740		618,644
Recognition of stock based compensation - unvested shares - related parties		4,478,994		-
Recognition of share based compensation - options - related party		6,196		18,588
Interest expense adjustment - SBA loans		19,750		-
Right-of-use asset lease payment adjustment true up		(97,346)		-
Gain on equity method investment - CenterCom		(33,864)		(43,742
Changes in operating assets and liabilities
(Increase) decrease in
Accounts receivable		8,123,897		(1,059,014
Inventory		683,160		(6,900,674
Prepaids and other		(345,994)		(56,131
Deferred income taxes - net		2,835,000		-
Increase (decrease) in
Accounts payable and accrued expenses		(4,641,563)		(1,351,218
Accounts payable and accrued expenses - related party		(49,380)		(270,665
Accrued income taxes payable		(470,000)		-
Installment sale liability - net		-		(1,668,744
Deferred revenue		(20,000)		(199,910
Operating lease liability		56,134		(19,329
Net cash provided by (used in) operating activities		(90,112)		224,060

Investing activities
Capitalized internal use software development costs		-		(281,304
Net cash used in investing activities		-		(281,304

Financing activities
Proceeds from stock issued for cash		17,249,994		-
Proceeds from exercise of common stock warrants		8,799,257		207,240
Cash paid as direct offering costs		(1,395,000)		-
Repayments of loans - related party		(746,104)		(467,385
Repayments on notes payable		-		(1,520,954
Repayments on notes payable - SBA government		(5,515)		(9,213
Net cash provided (used in) by financing activities		23,902,632		(1,790,312

Net increase (decrease) in cash		23,812,520		(1,847,556

Cash - beginning of period		14,622,060		7,035,654

Cash - end of period	$	38,434,580	$	5,188,098

Supplemental disclosure of cash flow information
Cash paid for interest	$	259,765	$	209,840
Cash paid for income tax	$	-	$	-

Supplemental disclosure of non-cash investing and financing activities

Reclassification of accrued interest - related party to note payable - related party	$	498,991	$	-
Exercise of warrants - cashless	$	41	$	-
Right-of-use asset obtained in exchange for new operating lease liability	$	98,638	$	-
Goodwill (ClearLine Mobile, Inc.)	$	2,500,000	$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements

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