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
tevers@surgeholdings.com

Media Relations:
Jules Abraham
Director of Public Relations
CORE IR
917-885-7378
julesa@coreir.com

Investor Relations:
CORE IR
Joseph Delahoussaye III
V.P. of Investor Relations
516-222-2560
invest@surgeholdings.com


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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