GlobeNewswire Inc | Aug 26, 2021 09:01AM EDT

August 26, 2021

BARTLETT, Tenn., Aug. 26, 2021 (GLOBE NEWSWIRE) -- SurgePays, Inc. (OTCQB: SURG) (SurgePays or the Company), a blockchain financial technology company building a next generation supply chain network in the U.S. for convenience stores, mini-marts, tiendas, bodegas, gas stations, and other merchants serving underbanked consumers, today announces financial results for the second quarter ended June 30, 2021 and provides a corporate update.

Recent Corporate Highlights:

-- Continued to progress towards an expected Nasdaq up-list of the Company through the customary regulatory process and filings -- Continued to progress towards an IPO of the Companys SaaS subsidiary LogicsIQ, Inc. (formerly Surge Logics, Inc.) -- Announced approval from the Emergency Broadband Benefit (EBB) Program to provide discounted broadband services through the Companys SurgePhone mobile virtual network operator (MVNO) subsidiary to qualified users -- Acquired Commander Communication, a provider of prepaid wireless payment products to approximately 500 convenience stores with intent to cross-sell other products and services into Commanders customer base -- Signed national distribution agreement with 1606 Corp. to distribute smokable-hemp products into the 8,000 convenience stores on the Companys platform -- Launched a proprietary, blockchain-supported, customer relationship management (CRM) and business intelligence (BI) platform called BLITZ to further penetrate the 34,000 retail stores in the Companys U.S. database -- Launched new custom private label gift card program for the Companys independent retail store clients to provide additional convenience and loyalty opportunities for these locations customers

The revenue initiatives we have announced in the last few months speak to the numerous market opportunities we have to execute our wide and deep strategy. We are poised to offer the thousands of convenience stores, mini-marts, and bodegas we serve additional higher margin products and services beyond the lower-margin prepaid wireless top-ups on which we founded the Company, said SurgePays Chief Executive Officer Brian Cox. We now have the ability to offer thousands of stores and, ultimately, the underbanked population that shop there, access to higher margin, innovative products and services, such as the smokable-hemp products from our partner 1606 Corp., more affordable wireless handsets and monthly wireless plans, retail gift cards, and even discounted broadband service through the EBB Program, that may otherwise be very difficult for them to purchase. Our expanded in-house sales team is dedicated to establishing and nurturing relationships with store owners to help us expand our network of customer stores, and acquisitions like Commander Communications will help us expand our geographical reach.

Meanwhile, our LogicsIQ subsidiary has seen a reacceleration in its business following a COVID-related slow-down in the second half of 2020. LogicsIQ had the second-best quarter of its existence with revenue in the second quarter of 2021 up nearly 32% over the first quarter of 2021, and this momentum has continued thus far into the third quarter. Anthony Nuzzo and his team at LogicsIQ have executed well during the leaner months with continued development and innovation and managed to continue to strategize for future growth despite the pressures from the pandemic.

Lastly, we believe we are making good progress in the legal and regulatory process involved in SurgePays up-list to the Nasdaq as well as the anticipated IPO of LogicsIQ. We believe both events will be transformational corporate moments for SurgePays that will create value for our shareholders over the longer term, Mr. Cox concluded.

Financial Results for Second Quarter 2021

Revenue in the second quarter of 2021 was $11.38 million vs. $14.51 million in the year-ago period. General and administrative expenses declined from $4.17 million in the second quarter of 2020 to $2.74 million in the second quarter of 2021. Net loss in the second quarter of 2021 improved to ($214,000) from ($2.43 million) in the year-ago period.

Cash and cash equivalents as of June 30, 2021 totaled $574,824, as compared to $673,995 as of December 31, 2020.

About SurgePays, Inc.

SurgePays, Inc. utilizes its blockchain software platform to offer a comprehensive suite of prepaid, financial services for the underbanked and top selling wholesale products to independently owned convenience stores, mini-marts, tiendas, and bodegas more cost efficiently than existing wholesale distribution models. Please visit www.SurgePays.com for more information.

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, 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 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. 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, statements about our future financial performance, including our revenue, cash flows, costs of revenue and operating expenses; our anticipated growth; our predictions about our industry; the impact of the COVID-19 pandemic on our business and our ability to attract, retain and cross-sell to clients. 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, 2020. 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.

Company Contact:Tony EversCPA, CIAChief Financial OfficerPhone: (847) 648-7542 ext. 104tevers@surgeholdings.com

Media Relations:Henry Feintuch / Doug WrightFeintuch Communications914-548-6924 / 201-952-6033surgepays@feintuchpr.com

Investor Relations:CORE IR 516-222-2560invest@surgeholdings.com

SURGEPAYS, INC. AND SUBSIDIARIESConsolidated Balance Sheets

June 30, December 31, 2021 2020 (Unaudited) (Audited) Assets Current Assets Cash $ 574,824 $ 673,995 Accounts receivable - net 592,442 180,499 Lifeline revenue - due from USAC - 212,621 Inventory 175,359 178,309 Prepaids 6,067 5,605 Total Current Assets 1,348,692 1,251,029 Property and equipment - net 229,411 236,810 Other Assets Note receivable 176,851 - Intangibles - net 3,760,238 4,125,742 Goodwill 866,782 866,782 Investment in Centercom - related party 389,984 414,612 Operating lease - right of use asset - net 552,222 368,638 Other 61,458 61,458 Total Other Assets 5,807,535 5,837,232 Total Assets $ 7,385,638 $ 7,325,071 Liabilities and Stockholders? Deficit Current Liabilities Accounts payable and accrued expenses $ 5,800,859 $ 6,827,487 Accounts payable and accrued expenses - 448,559 1,753,837 related partyDeferred revenue 565,900 443,300 Operating lease liability 97,880 210,556 Line of credit - 912,870 Loans payable - related parties 4,419,000 2,389,000 Notes payable - 250,000 Convertible notes payable - net 837,741 1,516,170 Derivative liabilities 1,459,167 1,357,528 Total Current Liabilities 13,629,106 15,660,748 Long Term Liabilities Loans payable - related parties 1,130,440 1,100,440 Notes payable - SBA government 1,502,849 1,134,682 Operating lease liability 454,342 155,167 Total Long Term Liabilities 3,087,631 2,390,289 Total Liabilities 16,716,737 18,051,037 Stockholders? Deficit Series A, Convertible Preferred stock, $0.001par value, 100,000,000 shares authorized, 13,000 13,000 13,000,000 and 13,000,000 shares issued andoutstanding, respectivelySeries C, Convertible Preferred stock, $0.001par value, 1,000,000 shares authorized, 722 722 721,598 and 721,598 shares issued andoutstanding, respectively Common stock, $0.001 par value, 500,000,000shares authorized 161,504,920 and 127,131,210 161,505 127,131 shares issued and outstanding, respectivelyAdditional paid-in capital 17,115,280 10,725,380 Accumulated deficit (26,621,606 ) (21,592,199 )Total Stockholders? Deficit (9,331,099 ) (10,725,966 ) Total Liabilities and Stockholders? Deficit $ 7,385,638 $ 7,325,071

SURGEPAYS, INC. AND SUBSIDIARIESConsolidated Statements of Operations(unaudited)

For the Three Months Ended For the Six Months Ended June June 30, 30, 2021 2020 2021 2020 Revenues $ 11,377,928 $ 14,514,796 $ 22,366,876 $ 30,302,595 Costs and expensesCost of revenue 10,051,119 14,381,822 19,908,428 29,835,974 General andadministrative 2,736,435 4,165,436 5,976,244 7,174,322 expenses Total costs and 12,787,554 18,547,258 25,884,672 37,010,296 expenses Loss from (1,409,626 ) (4,032,462 ) (3,517,796 ) (6,707,701 )operations Other income (expense)Interest (2,096,600 ) (701,044 ) (3,400,459 ) (1,183,766 )expenseDerivative - (147,721 ) (1,775,057 ) (496,055 )expenseChange in fairvalue of 645,830 224,378 949,680 192,562 derivativeliabilitiesGain (loss) oninvestment in 49,145 112,967 (24,628 ) 145,336 Centercom -related partyGain onsettlement of 701,404 2,108,543 842,982 2,556,979 liabilitiesGain ondeconsolidation 1,895,871 - 1,895,871 - of TrueWirelessOther income - 10,000 - 10,000 Total otherincome 1,195,650 1,607,123 (1,511,611 ) 1,225,056 (expense) - net Net loss $ (213,976 ) $ (2,425,339 ) $ (5,029,407 ) $ (5,482,645 ) Loss per share- basic and $ (0.00 ) $ (0.02 ) $ (0.03 ) $ (0.05 )diluted Weightedaverage number 154,394,068 106,063,237 145,130,334 104,974,691 of shares -basic

SURGEPAYS, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(unaudited)

For the Six Months Ended June 30, 2021 2020 Operating activities Net loss $ (5,029,407 ) $ (5,482,645 )Adjustments to reconcile net loss to net cash used in operationsDepreciation and amortization 398,240 569,811 Amortization of right-of-use assets 92,531 92,867 Amortization of debt discount 1,351,351 796,863 Recognition of share based compensation 45,099 68,169 Change in fair value of derivative (949,680 ) (192,562 )liabilitiesDerivative expense 1,775,057 496,055 Gain on settlement of liabilities (840,932 ) (2,681,586 )Gain (loss) on equity method investment - 24,628 (145,336 )Centercom - related partyGain on deconsolidation of subsidiary (1,895,871 ) - (True Wireless)Changes in operating assets and liabilities(Increase) decrease in Accounts receivable (411,943 ) 2,241,635 Lifeline revenue - due from USAC 105,532 (172,300 )Inventory (71,700 ) (102,682 )Prepaids (462 ) 64,534 Other - 66,457 Increase (decrease) in Accounts payable and accrued expenses 1,824,604 1,971,652 Accounts payable and accrued expenses - (1,305,278 ) - related partyDeferred revenue 122,600 317,148 Gain contingency - (38,040 )Operating lease liability (89,616 ) (101,029 )Net cash used in operating activities (4,855,247 ) (2,230,989 ) Investing activities Purchase of property and equipment (45,983 ) (2,836 )Cash disposed in deconsolidation of (325,316 ) - subsidiary (True Wireless)Net cash used in investing activities (371,299 ) (2,836 ) Financing activities Proceeds from stock and warrants issued 1,510,000 705,000 for cashRepurchase of common stock - (500,000 )Proceeds from loans - related party 2,123,000 200,000 Repayments of loans - related party (63,000 ) (100,000 )Proceeds from notes payable - 648,082 Repayments on notes payable (250,000 ) (27,500 )Proceeds from SBA notes 518,167 - Proceeds from convertible notes 2,550,000 1,912,000 Repayments on convertible notes - net of (1,260,792 ) (468,000 )overpaymentCash paid for debt issuance costs - (142,000 )Net cash provided by financing activities 5,127,375 2,227,582 Net decrease in cash (99,171 ) (6,243 ) Cash - beginning of period 673,995 346,040 Cash - end of period $ 574,824 $ 339,797 Supplemental disclosure of cash flow informationCash paid for interest $ 113,810 $ 64,646 Cash paid for income tax $ - $ - Supplemental disclosure of non-cash investing and financing activities Deconsolidation of subsidiary (True $ 2,434,552 $ - Wireless)Debt discount/issue costs recorded in $ 2,140,829 $ 1,234,546 connection with derivative liabilitiesStock issued in settlement of liabilities $ 1,755,150 $ - Conversion of debt into equity $ 858,158 $ - Right-of-use asset obtained in exchange $ 515,848 $ 355,203 for new operating lease liabilityTermination of ECS right-of-use lease 228,752 - Stock issued in connection with debt $ 108,931 $ - modificationStock issued under make-whole arrangement $ 90,401 $ - Stock issued for acquisition of membership $ 17,900 $ - interest in ECSStock issued for acquisition $ - $ 165,000 Stock and warrants issued with debt $ - $ 801,636 recorded as a debt discount