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SurgePays Announces First Quarter 2024 Financial Results

SurgePays, Inc.
SurgePays, Inc.

BARTLETT, Tenn., May 13, 2024 (GLOBE NEWSWIRE) -- 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 first quarter ended March 31, 2024.

Management Commentary

Chairman and CEO Brian Cox commented on the quarter’s results, “The first quarter of 2024 was highlighted by continued execution on our growth strategy and solid profitability. With a substantial cash balance of over $42 million and a full product suite, we believe we are well-positioned to become one of the country's largest distributors of prepaid wireless and underbanked financial technology services. The uncertainty surrounding ACP funding sparked a refreshing sense of urgency to grow our business. We believe our strategic hires, new technology, cash in the bank, and other corporate initiatives have put us in a great position.

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“First quarter revenues of $31.4 million were impacted by operational changes by management last year to shift our focus away from our non-core business Lead Generation subsidiary LogicsIQ. This effectively eliminated the $3.2 million of revenue that LogicsIQ contributed in 2023; however, it allowed our team to be completely focused on verticals aligned with our profitable and scalable business model. Despite the quarterly loss in Lead Generation revenue, we believe our new focus will benefit the Company in the long term. Most shareholders know there was a mandated pause in new ACP enrollments on February 7. Even with the pause in new enrollments, our Mobile Virtual Network Operator (MVNO wireless) revenue increased from $28.7 million in the first quarter of 2023 to $28.9 million in the first quarter of 2024. Net income was $1.2 million, which included $2 million in non-cash stock charges.

“Regarding the Affordable Connectivity Program, or ACP, there are currently several proposals in Congress to fund the program. Several members of Congress on both sides of the line have expressed support for the program, including but not limited to Senator Kaine, who said ‘Access to high-speed internet is a necessity. I was proud that we took steps to make internet more affordable for millions of families as part of the Bipartisan Infrastructure Law,’ and Senator Padilla who said, ‘We must fully fund this program to ensure millions of families can afford to get connected at home.’ Senator JD Vance stated ‘That’s why I’m doing all that I can to ensure the ACP has the funding it needs. I’m proud to introduce this amendment with Senator Luján because it reflects a bipartisan consensus of the Senate. I look forward to getting this done.’  We hope that based on the strong support from Congress on both sides, this essential program, which assists more than 20 million households, will continue to be funded. While we hope ACP funding passes, we aren't waiting for approval and have created a plan to expand revenue in our non-ACP businesses.

“Our team has put together a comprehensive strategic plan that we are confident will enable us to grow our SurgePays nationwide network, which is a product-agnostic delivery system to the underbanked and underserved utilizing convenience stores as the points of distribution. If the ACP is funded, we will be in a fantastic situation immediately. If the ACP is not funded, in the next 12 months, we will look to grow revenue to levels not just to replace the ACP revenue but exceed it with the rollout and scaling of our prepaid wireless company, LinkUp Mobile. Keep in mind that if ACP is not funded, millions will be looking for a new prepaid wireless company to replace their subsidized service. We believe our relationship with our existing ACP base and access to those utilizing other ACP companies will give us the upper hand in converting these folks into LinkUp Mobile customers. In any scenario, we believe we have the team, the products, and the distribution to be extremely successful regardless of how the ACP funding situation plays out.”

First 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 at 1Q24 Webcast Link, as well as on the company’s investor relations website at ir.surgepays.com.

Telephone access to the call will be available at 877-407-0784 (in the U.S.) or by dialing 201-689-8560 (outside U.S.).

A telephone replay will be available approximately one hour following completion of the call through May 27, 2024. To access the replay, please dial 844-512-2921 (in the U.S.) or 412-317-6671 (outside U.S.). Enter Access ID#: 13746599.

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 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 including but not limited to, our plans to expand our prepaid wireless company, the funding of the ACP program by the US government for the periods after April 2024, which at this time has not been funded. 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, the assumption that the ACP will be funded after April 2024, 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.

Investor Relations
Brian M. Prenoveau, CFA
MZ Group – MZ North America
SURG@mzgroup.us 
561 489 5315

SurgePays, Inc. and Subsidiaries

Consolidated Balance Sheets

 

 

March 31, 2024

 

 

December 31,
2023

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash

$

42,945,078

 

 

$

14,622,060

 

Accounts receivable - net

 

8,271,878

 

 

 

9,536,074

 

Inventory

 

7,343,739

 

 

 

9,046,594

 

Prepaids and other

 

499,908

 

 

 

161,933

 

Total Current Assets

 

59,060,603

 

 

 

33,366,661

 

 

 

 

 

 

 

 

 

Property and equipment - net

 

291,458

 

 

 

361,841

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

 

Note receivable

 

176,851

 

 

 

176,851

 

Intangibles - net

 

1,963,093

 

 

 

2,126,470

 

Internal use software development costs - net

 

483,717

 

 

 

539,424

 

Goodwill

 

4,166,782

 

 

 

1,666,782

 

Investment in CenterCom

 

480,562

 

 

 

464,409

 

Operating lease - right of use asset - net

 

420,107

 

 

 

387,869

 

Deferred income taxes - net

 

2,542,000

 

 

 

2,835,000

 

Total Other Assets

 

10,233,112

 

 

 

8,196,805

 

 

 

 

 

 

 

 

 

Total Assets

$

69,585,173

 

 

$

41,925,307

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

6,506,061

 

 

$

6,439,120

 

Accounts payable and accrued expenses - related party

 

564,389

 

 

 

1,048,224

 

Accrued income taxes payable

 

700,000

 

 

 

570,000

 

Deferred revenue

 

-

 

 

 

20,000

 

Operating lease liability

 

94,244

 

 

 

43,137

 

Note payable - related party

 

1,567,254

 

 

 

4,584,563

 

Total Current Liabilities

 

9,431,948

 

 

 

12,705,044

 

 

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

 

Note payable - related party

 

3,147,879

 

 

 

-

 

Notes payable - SBA government

 

477,403

 

 

 

460,523

 

Operating lease liability

 

342,444

 

 

 

356,276

 

Total Long-Term Liabilities

 

3,967,726

 

 

 

816,799

 

 

 

 

 

 

 

 

 

Total Liabilities

 

13,399,674

 

 

 

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

 

69,985,592

 

 

 

43,421,019

 

Accumulated deficit

 

(13,961,608

)

 

 

(15,186,203

)

Stockholders’ equity

 

56,043,419

 

 

 

28,249,220

 

Non-controlling interest

 

142,080

 

 

 

154,244

 

Total Stockholders’ Equity

 

56,185,499

 

 

 

28,403,464

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

$

69,585,173

 

 

$

41,925,307

 

 

 

 

 

 

 

 

 


SurgePays, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

 

For the Three Months
Ended March 31,

 

 

2024

 

 

2023

 

 

 

 

 

 

 

Revenues

$

31,429,135

 

 

$

34,776,443

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

Cost of revenues

 

23,246,468

 

 

 

27,081,960

 

General and administrative expenses

 

6,430,806

 

 

 

2,989,421

 

Total costs and expenses

 

29,677,274

 

 

 

30,071,381

 

 

 

 

 

 

 

 

 

Income from operations

 

1,751,861

 

 

 

4,705,062

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Interest expense

 

(132,583

)

 

 

(192,326

)

Gain on investment in CenterCom

 

16,153

 

 

 

33,029

 

Total other income (expense) - net

 

(116,430

)

 

 

(159,297

)

 

 

 

 

 

 

 

 

Net income before provision for income taxes

 

1,635,431

 

 

 

4,545,765

 

 

 

 

 

 

 

 

 

Provision for income tax benefit (expense)

$

(423,000

)

 

 

-

 

 

 

 

 

 

 

 

 

Net income including non-controlling interest

 

1,635,431

 

 

 

4,545,765

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

(12,164

)

 

 

(576

)

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

1,224,595

 

 

$

4,546,341

 

 

 

 

 

 

 

 

 

Earnings per share - attributable to common stockholders

 

 

 

 

 

 

 

Basic

$

0.07

 

 

$

0.32

 

Diluted

$

0.07

 

 

$

0.31

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - attributable to common stockholders

 

 

 

 

 

 

 

Basic

 

17,693,283

 

 

 

14,131,276

 

Diluted

 

18,678,136

 

 

 

14,535,222

 

 

 

 

 

 

 

 

 


SurgePays, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

For the Three Months
Ended March 31,

 

 

2024

 

 

2023

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

Net income (loss) - including non-controlling interest

$

1,212,431

 

 

$

4,545,765

 

Adjustments to reconcile net income (loss) to net cash provided by operations:

 

 

 

 

 

 

 

Depreciation and amortization

 

233,760

 

 

 

233,758

 

Amortization of right-of-use assets

 

23,363

 

 

 

10,687

 

Amortization of internal use software development costs

 

55,707

 

 

 

32,265

 

Stock issued for services

 

411,740

 

 

 

307,458

 

Recognition of stock based compensation - unvested shares - related parties

 

1,497,417

 

 

 

-

 

Recognition of share based compensation - options - related party

 

6,196

 

 

 

9,294

 

Interest expense adjustment - SBA loans

 

19,750

 

 

 

-

 

Right-of-use asset lease payment adjustment true up

 

(46,338

)

 

 

-

 

Gain on equity method investment - CenterCom

 

(16,153

)

 

 

(33,029

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

(Increase) decrease in

 

 

 

 

 

 

 

Accounts receivable

 

1,264,196

 

 

 

(429,187

)

Inventory

 

1,702,855

 

 

 

(4,335,727

)

Prepaids and other

 

(337,975

)

 

 

(58,428

)

Deferred income taxes - net

 

-

 

 

 

-

 

Increase (decrease) in

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

(2,433,059

)

 

 

1,418,337

 

Accounts payable and accrued expenses - related party

 

15,156

 

 

 

(1,322,773

)

Accrued income taxes payable

 

130,000

)

 

 

-

 

Installment sale liability - net

 

-

 

 

 

2,026,713

 

Deferred revenue

 

(20,000

)

 

 

470,211

 

Operating lease liability

 

28,012

 

 

 

(9,548

)

Net cash provided by operating activities

 

4,040,058

 

 

 

2,865,796

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Capitalized internal use software development costs

 

-

 

 

 

(157,044

)

Net cash used in investing activities

 

-

 

 

 

(157,044

)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Proceeds from stock issued for cash

 

17,249,994

 

 

 

-

 

Proceeds from exercise of common stock warrants

 

8,799,257

 

 

 

-

 

Cash paid as direct offering costs

 

(1,395,000

)

 

 

 

 

Repayments of loans - related party

 

(368,421

)

 

 

(467,385

)

Repayments on notes payable

 

-

 

 

 

(410,468

)

Repayments on notes payable - SBA government

 

(2,870

)

 

 

(4,468

)

Net cash provided (used in) by financing activities

 

24,282,960

 

 

 

(882,321

)

 

 

 

 

 

 

 

 

Net increase in cash

 

28,323,018

 

 

 

1,826,431

 

 

 

 

 

 

 

 

 

Cash - beginning of period

 

14,622,060

 

 

 

7,035,654

 

 

 

 

 

 

 

 

 

Cash - end of period

$

42,945,078

 

 

$

8,862,085

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

Cash paid for interest

$

129,003

 

 

$

100,074

 

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

 

 

$

-