$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: 

  1. 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.
  2. 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. 
  3. 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:

  1. Continue to grow our ACP revenue stream should Congress begin funding it again.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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

Paid-in

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

Paid-in

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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SOURCE SurgePays

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