SurgePays Announces Third Quarter 2020 Financial Results and Provides Corporate Update

Revenue for the nine months ending September 30, 2020 increased $30.8 million or 251%

SurgePays, Inc. is currently trading as Surge Holdings, Inc. (SURG). Its name change to "SurgePays, Inc." is expected to take effect soon.

BARTLETT, Tenn., Nov. 17, 2020 (GLOBE NEWSWIRE) -- SurgePays (OTCQB: SURG) (“Surge” or the “Company”), a fintech company meeting the needs of the underserved and underbanked, announces financial results from the third quarter ending September 30, 2020 and provides a financial update.

Corporate highlights and recent developments include:

  • Announced rebranding to SurgePays to better reflect the Company’s orientation around its fintech platform
  • Launched proprietary 4SIM™ wireless activation technology
  • Retained CORE IR to assist the Company with investor relations, public relations, advisory and shareholder communications

“The third quarter of 2020 continued to exceed expectations with regard to revenue, product diversification, and penetration, as the Company continued its strong growth. Concurrently, we are sharpening our focus to ensure that the Company operates efficiently and ensure that both our customers and our stockholders have a clear understanding of our business and of our path forward. We are very excited for the future of SurgePays and believe that the next few quarters will continue to demonstrate dynamic growth and progress,” stated Brian Cox, SurgePays’ Chief Executive Officer.

“We believe SurgePays as a brand is better representative of our focus on our fintech software platform that processes third-party prepaid wireless activations and top-ups, gift card activation and loads, and wireless SIM activation, providing a more precise direction as a public company as we implement our growth strategies and continue to work towards a listing on a major exchange. The SurgePays system drives value and growth by enabling retailers to instantly add credit to any prepaid wireless customer’s account for any carrier, providing the merchant commissioned transactions, increased foot traffic, and customer loyalty. Moreover, our platform offers an innovative supply-chain marketplace for convenience store, bodega and tienda owners to order many top selling products for their stores at a deeper wholesale discount than traditional distribution due to utilizing the Direct Store Delivery (DSD) model,” Mr. Cox concluded.

Financial Results for Third Quarter 2020

Revenue for the quarter ending September 30, 2020 was approximately $12.8 million compared to $4.9 million for the quarter ending September 30, 2019, an increase of $7.9 million or 161%. Revenue for the nine months ending September 30, 2020 was approximately $43.1 million compared to $12.3 million for the same period in 2019, an increase of $30.8 million or 251%.

Cost and expenses for the quarter ending September 30, 2020 were approximately $3,200,000 compared to approximately $3,016,000 for the same period in 2019. Cost and expenses for the nine months ending September 30, 2020 were approximately $12,014,000 compared to $9,260,000 for the nine months ending September 30, 2019.

Net loss for the quarter ending September 30, 2020 was approximately $2,500,000, or ($0.02) per common share, compared to approximately $1,150,000, or ($0.01) per common share, for the same period in 2019. Net loss for the nine months ending September 30, 2020 was approximately $7,984,000, or ($0.07) per share, compared to a net loss of approximately $5,270,000, or ($0.06) per share, for the nine months ending September 30, 2019.

Cash and cash equivalents as of September 30, 2020 totaled $421,315 compared to $143,903 as of September 30, 2019.

About SurgePays, Inc.

SurgePays, Inc. is meeting the needs of underserved markets in financial technology, telecommunications, and digital media. It offers prepaid wireless and underbanked financial products and services, along with popular consumer goods, to retail merchants (such as operators of convenience stores, bodegas, and gas stations) that address the needs of many store customers nationwide.

Company Contact:
Tony Evers CPA, CIA
Chief Financial Officer
Chief Operating Officer
Phone: (847) 648-7542 ext. 104
[email protected]

Media Relations:
Jules Abraham
Director of Public Relations
CORE IR
917-885-7378
[email protected]

Investor Relations:
CORE IR
Joseph Delahoussaye III
V.P. of Investor Relations
516-222-2560
[email protected]


SURGEPAYS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

    September 30,
2020
    December 31,
2019
 
    (unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 421,315     $ 346,040  
Accounts receivable, less allowance for doubtful accounts of $0 and $774,841, respectively     337,017       3,056,213  
Note receivable           14,959  
Lifeline revenue due from USAC     222,833       60,790  
Inventory     177,184        
Prepaid expenses     38,772       96,883  
Total current assets     1,197,121       3,574,885  
                 
Property and Equipment, less accumulated depreciation of $89,965 and $38,656, respectively     249,871       294,616  
Intangible assets less accumulated amortization of $1,347,024 and $519,404, respectively     4,406,497       4,769,117  
Goodwill     866,782       866,782  
Investment in Centercom     456,685       203,700  
Operating lease right of use asset, net     419,372       210,816  
Other long-term assets     61,458       66,457  
Total assets   $ 7,657,786     $ 9,986,373  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current liabilities:                
Accounts payable and accrued expenses - others   $ 5,479,508     $ 3,637,577  
Accounts payable and accrued expenses - related party     1,699,914       998,517  
Credit card liability     378,260       449,158  
Loss contingency           38,040  
Deferred revenue            
Derivative liability     1,415,238       190,846  
Operating lease liability     50,151       90,944  
Line of credit     912,870       912,870  
Convertible notes payable and current portion of long-term debt, net     1,324,629        
Debt – related party     463,000        
Notes payable and current portion of long-term debt, net     247,094       736,172  
Total current liabilities     11,970,664       7,054,124  
                 
Long-term debt less current portion – related party     2,225,440       2,205,440  
Operating lease liability – net     365,723       119,872  
Trade payables - long term     869,868       869,868  
Notes payable and long term portion of debt - net     1,134,582        
Convertible promissory notes payable - net           4,436,684  
Total liabilities     16,566,277       14,685,988  
                 
Commitments and contingencies                
                 
Stockholders’ deficit:                
                 
Series A preferred stock: $0.001 par value; 100,000,000 shares authorized; 13,000,000 and 13,000,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, 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 at September 30, 2020 and December 31, 2019, respectively     722       722  
Common stock: $0.001 par value; 500,000,000 shares authorized; 116,236,031 shares and 102,193,579 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively     116,235       102,193  
Additional paid in capital     9,816,841       6,055,042  
Accumulated deficit     (18,855,289 )     (10,870,572 )
Total stockholders’ deficit     (8,908,491 )     (4,699,615 )
Total liabilities and stockholders’ deficit   $ 7,657,786     $ 9,986,373  

SURGE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

    For the Three Months
Ended

September 30,
    For the Nine Months
Ended

September 30,
 
    2020     2019     2020     2019  
                         
Revenue   $ 12,802,172     $ 4,901,864     $ 43,104,767     $ 12,295,058  
                                 
Cost of revenue     11,216,186       3,023,292       39,422,776       7,814,614  
                                 
Gross profit     1,585,986       1,878,572       3,681,991       4,480,444  
                                 
Cost and expenses                                
Depreciation and amortization     306,341       17,926       876,152       39,050  
Selling, general and administrative     2,904,569       2,998,359       11,138,464       9,222,923  
Total costs and expenses     3,210,910       3,016,285       12,014,616       9,261,973  
                                 
Operating profit (loss)     (1,624,924 )     (1,137,713 )     (8,332,625 )     (4,781,529 )
                                 
Other income (expense):                                
Interest expense     (1,164,409 )     (20,767 )     (2,348,175 )     (93,157 )
Derivative expense     (33,239 )           (529,294 )      
Change in fair value of derivative liability     212,851             405,413        
Gain on investment in Centercom     107,649       6,134       252,985       70,909  
Gain/(loss) on settlement of liabilities                 2,556,979       (466,187 )
Other income                 10,000        
Total other income (expense)     (877,148     (14,633     347,908       (488,435 )
                                 
Net loss before provision for income taxes     (2,502,072 )     (1,152,346 )     (7,984,717 )     (5,269,964 )
                                 
Provision for income taxes                        
                                 
Net loss   $ (2,502,072 )   $ (1,152,346 )   $ (7,984,717 )   $ (5,269,964 )
                                 
Net loss per common share, basic and diluted   $ (0.02 )   $ (0.01 )   $ (0.07 )   $ (0.06 )
                                 
Weighted average common shares outstanding – basic and diluted     114,683,442       98,452,560       108,246,505       94,225,836  

SURGE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

    Nine Months Ended September 30,  
    2020     2019  
             
Operating activities                
Net loss   $ (7,984,717 )   $ (5,269,964 )
Adjustments to reconcile net income loss to net cash used in operating activities:                
Depreciation and amortization     876,512       39,051  
Amortization of right of use assets     146,647       35,015  
Amortization of debt discount     1,417,524       -  
Stock-based compensation     127,992       307,873  
Change in fair value of derivative liability     (405,413 )     -  
Derivative expense     529,294       -  
(Gain) loss on settlement of liabilities     (2,681,586 )     474,953  
Gain on equity investment in Centercom     (252,985 )     (70,909 )
Changes in operating assets and liabilities:                
Accounts receivable     2,719,196       (5,163,347 )
Lifeline revenue due from USAC     (162,043 )     619,162  
Customer phone supply     -       1,355,201  
Inventory     (177,184 )     -  
Prepaid expenses     58,111       (100,600 )
Other assets     4,999       -  
Credit card liability     (70,898 )     165,914  
Deferred revenue     -       (50,000
Loss contingency     (38,040 )     (30,000 )
Current portion of operating lease liability     (150,145 )     (35,015 )
Accounts payable and accrued expenses     2,665,117       2,767,632  
Net cash used in operating activities     (3,377,619 )     (4,955,034 )
                 
Investing activities                
Repayments of notes receivable     14,959       -  
Purchase of equipment     (4,147 )     (222,000
Net cash provided by (used) in investing activities     10,812       (222,000
                 
Financing activities                
Issuance of Common Stock and warrants     705,000       3,190,500  
Repurchase of Common Stock     (500,000 )     -  
Note payable, related party - borrowings     723,196       -  
Note payable, related party - repayments     (240,196 )     -  
Note payable - borrowings     1,134,582       -  
Note payable - repayments     (27,500 )     (70,000 )
Convertible promissory notes - borrowings     2,182,000       233,000  
Convertible promissory notes - repayments     (373,000 )     -  
Cash paid for debt issuance costs     (162,000 )     -  
Line of credit - advances     -       1,130,000  
Line of credit - repayments     -       (217,130 )
Loan proceeds under related party financing arrangement     -       1,316,000  
Loan repayments under related party financing arrangement     -       (674,000 )
Net cash provided by financing activities     3,442,082       4,908,370  
                 
Net change in cash and cash equivalents     75,275       (300,709
                 
Cash and cash equivalents, beginning of period     346,040       444,612  
                 
Cash and cash equivalents, end of period   $ 421,315     $ 143,903  
                 
Supplemental cash flow information                
Cash paid for interest and income taxes:                
Interest   $ 98,113     $ 65,600  
Income taxes   $ -     $ -  
                 
Non-cash investing and financing activities:                
Exchange of related party advances for Series C Preferred Stock   $ -     $ 389,502  
Exchange of investment in CenterCom for Series C Preferred Stock   $ -     $ 178,508  
Common Stock issued for an acquisition   $ 210,794     1,000,000  
Debt acquired in acquisition   $ -     $ 4,000,000  
Common Stock and warrants issued with debt recorded as debt discount   $ 906,098     $ -  
Derivative liability on convertible notes recorded as debt discount   $ 1,366,636     $ -  
Operating lease liability   $ 355,203     $ 230,812  
Make whole Common Stock issued pursuant to SPA   $ 196,341     $ -  
Issuance of Common Stock for modification of debt   $ 49,890     $ -  


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Source: Surge Holdings, Inc.