GlobeNewswire Inc | Nov 16, 2021 09:01AM EST

November 16, 2021

BARTLETT, Tenn., Nov. 16, 2021 (GLOBE NEWSWIRE) -- SurgePays, Inc. (Nasdaq: SURG) (SurgePays or the Company), a fintech company providing essential financial services and products to the underbanked population and software applications to a number of industry verticals, today announces financial results for the third quarter ended September 30, 2021 and provides a corporate update.

Recent Corporate Highlights:

-- Uplisted to the Nasdaq Capital Market and completed a $19.8 million public offering. -- Received 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 in 14 states. -- 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. -- Launched new custom private label gift card program for retail stores on the SurgePays fintech platform to provide additional convenience and loyalty opportunities for these locations customers -- Continued to progress towards an IPO of the Companys enterprise software subsidiary LogicsIQ, Inc. (formerly Surge Logics, Inc.) -- Appointed Anthony P. Nuzzo, Jr. as CEO of LogicsIQ subsidiary

The third quarter showed increasing revenue, margin expansion and a narrowing in the net loss. What Im really excited about, though, is we are now trading on NASDAQ with a significant infusion of capital which should allow us to take advantage of multiple growth initiatives and better execute on things in our pipeline, commented SurgePays CEO Brian Cox.

Our core mission has not changed: We are focused on utilizing our blockchain fintech software platform to bring essential financial services and products to the underbanked communities by targeting the stores most frequented by these customers. To this end, and with our newly available capital, we plan to shift from independent sales reps to building out a nationwide in-house sales team to more aggressively engage convenience stores, bodegas and community stores in order to expand beyond the 8,000 stores on our network. We have already identified an additional 30,000 stores for targeting, and over time the addressable market is literally hundreds of thousands of additional stores that could be transacting on the SurgePays network, Mr. Cox continued. The combination of increasing the number of stores within our network and increasing average sales per store is really the deep and wide approach at the heart of our growth strategy.

The capital generated from our recent NASDAQ listing allows us to greatly accelerate the rollout of the Emergency Broadband Benefit, or EBB, Program through our SurgePhone Wireless subsidiary. The successful limited launch in a handful of states suggests that a wider and more aggressive rollout can be the catalyst to our march towards profitability. We have ordered an additional 21,000 tablets to cover the remainder of 2021 and are aggressively putting more sales teams in place while exploring opportunities to expand our footprint beyond 14 states. We have already surpassed our short term goal of 15,000 EBB subscribers, ahead of schedule, which is a baseline of $750,000 per month in relatively higher-margin reoccurring revenue.

Our LogicsIQ subsidiary had its strongest quarter ever in the third quarter and generated nearly $7.5 million in revenue. This is on the heels of its second-best quarter ever in the second quarter of 2021 when it delivered approximately $4.5 million in revenue. The leaner COVID periods allowed the LogicsIQ team to essentially strengthen the underlying engine of its software platform and allow for the successful development of applications to target new verticals outside the core legal industry.

In summary, the uplist and capital raising process took a significant amount of our teams bandwidth for almost a year. Now that this is finally behind us, our focus is on efficient deployment of our capital to achieve maximum revenue growth and reach profitability in the near term. We believe being a profitable blockchain fintech will significantly increase overall shareholder value. Our team is encouraged with the opportunities immediately ahead of us across all business segments. I would like to thank the shareholders for their loyalty, patience and for believing in the management team. I have enjoyed preparing this update, and based on my view of the near future, I will enjoy the next corporate update even more as we execute on our growth strategy, Mr. Cox concluded.

Financial Results for Third Quarter 2021

Revenue in the third quarter of 2021 was $14.54 million vs. $12.80 million in the year-ago period. General and administrative expenses declined from $3.21 million in the third quarter of 2020 to $2.28 million in the third quarter of 2021. Net loss in the third quarter of 2021 improved to ($1.66 million) from ($2.50 million) in the year-ago period.

Cash and cash equivalents as of September 30, 2021 was $635,527, as compared to $673,995 as of December 31, 2020. Subsequent to the end of the third quarter, the company raised $19.8 million in gross proceeds from a public offering.

About SurgePays, Inc.

SurgePays, Inc. is a B2B fintech with other verticals in the underbanked and software development space. SurgePays utilizes its blockchain software platform to offer a comprehensive suite of essential financial services for the underbanked, and top selling consumable products to 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 IR516-222-2560invest@surgeholdings.com

SURGEPAYS, INC. AND SUBSIDIARIESConsolidated Balance Sheets

September 30, December 31, 2021 2020 (Unaudited) (Audited) Assets Current Assets Cash $ 635,527 $ 673,995 Accounts receivable - net 1,667,630 180,499 Lifeline revenue - due from USAC - 212,621 Inventory 502,109 178,309 Prepaids 35,001 5,605 Total Current Assets 2,840,267 1,251,029 Property and equipment - net 217,070 236,810 Other Assets Note receivable 176,851 - Intangibles - net 3,596,861 4,125,742 Goodwill 866,782 866,782 Investment in Centercom - related party 411,056 414,612 Operating lease - right of use asset - net 522,072 368,638 Other - 61,458 Total Other Assets 5,573,622 5,837,232 Total Assets $ 8,630,959 $ 7,325,071 Liabilities and Stockholders? Deficit Current Liabilities Accounts payable and accrued expenses $ 4,159,473 $ 6,827,487 Accounts payable and accrued expenses - 2,293,926 1,753,837 related partyDeferred revenue 235,500 443,300 Operating lease liability 68,303 210,556 Line of credit - 912,870 Loans payable - related parties 1,027,500 2,389,000 Notes payable - net 593,205 250,000 Convertible notes payable - net 1,298,083 1,516,170 Derivative liabilities 1,567,508 1,357,528 Total Current Liabilities 11,243,498 15,660,748 Long Term Liabilities Loans payable - related parties 5,986,940 1,100,440 Notes payable - SBA government 1,499,424 1,134,682 Operating lease liability 447,002 155,167 Total Long Term Liabilities 7,933,366 2,390,289 Total Liabilities 19,176,864 18,051,037 Commitments and Contingencies (Note 8) Stockholders? Deficit Series A, Convertible Preferred stock,$0.001 par value, 100,000,000shares authorized, 13,000,000 and 13,000 13,000 13,000,000 shares issued andoutstanding, respectivelySeries C, Convertible Preferred stock,$0.001 par value, 1,000,000shares authorized, 721,598 and 721,598 722 722 shares issued andoutstanding, respectivelyCommon stock, $0.001 par value, 500,000,000shares authorized 3,289 2,543 3,288,429 and 2,542,624 shares issued andoutstanding, respectivelyAdditional paid-in capital 17,804,181 10,849,968 Accumulated deficit (28,367,097 ) (21,592,199 )Total Stockholders? Deficit (10,545,905 ) (10,725,966 ) Total Liabilities and Stockholders? Deficit $ 8,630,959 $ 7,325,071

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

For the Three Months Ended For the Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Revenues $ 14,538,353 $ 12,802,172 $ 36,905,373 $ 43,104,767 Costs and expensesCost of revenue 12,634,871 11,216,186 32,544,619 39,422,776 General andadministrative 2,279,374 3,210,910 8,254,443 12,014,616 expensesTotal costs and 14,914,245 14,427,096 40,799,062 51,437,392 expenses Loss from (375,892 ) (1,624,924 ) (3,893,689 ) (8,332,625 )operations Other income (expense)Interest (1,236,778 ) (1,164,409 ) (4,637,236 ) (2,348,175 )expenseDerivative - (33,239 ) (1,775,057 ) (529,294 )expenseChange in fairvalue of (202,784 ) 212,851 746,896 405,413 derivativeliabilitiesGain (loss) oninvestment inCentercom - 21,072 107,649 (3,556 ) 252,985 relatedpartyGain onsettlement of 136,487 - 979,469 2,556,979 liabilitiesGain ondeconsolidation - - 1,895,871 - of TrueWirelessOther income - - - 10,000 Total otherincome (1,282,003 ) (877,148 ) (2,793,613 ) 347,908 (expense) - net Net loss $ (1,657,895 ) $ (2,502,072 ) $ (6,687,302 ) $ (7,984,717 ) Loss per share- basic and $ (0.51 ) $ (1.09 ) $ (2.21 ) $ (3.69 )diluted Weightedaverage numberof shares - 3,264,274 2,293,669 3,024,487 2,164,930 basic anddiluted

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

For the Nine Months Ended September 30, 2021 2020 Operating activities Net loss $ (6,687,302 ) $ (7,984,717 )Adjustments to reconcile net loss to net cash used in operationsDepreciation and amortization 579,372 876,512 Amortization of right-of-use assets 122,681 146,647 Amortization of debt discount 2,008,036 1,417,524 Recognition of share based compensation 8,441 127,992 Change in fair value of derivative (746,896 ) (405,413 )liabilitiesDerivative expense 1,775,057 529,294 Gain on settlement of liabilities (935,375 ) (2,556,979 )(Gain) loss on equity method investment- Centercom - related 3,556 (252,985 )partyGain on deconsolidation of subsidiary (1,895,871 ) - (True Wireless)Changes in operating assets and liabilities(Increase) decrease in Accounts receivable (1,487,131 ) 2,719,196 Lifeline revenue - due from USAC 105,532 (162,043 )Inventory (398,450 ) (177,184 )Prepaids (29,396 ) 58,111 Other 61,458 4,999 Increase (decrease) in Accounts payable and accrued expenses 166,163 2,469,612 Accounts payable and accrued expenses - 540,089 - related partyDeferred revenue (207,800 ) - Gain contingency - (38,040 )Operating lease liability (126,533 ) (150,145 )Net cash used in operating activities (7,144,369 ) (3,377,619 ) Investing activities Purchase of property and equipment (51,396 ) (4,147 )Cash disposed in deconsolidation of (325,316 ) - subsidiary (True Wireless)Repayment of notes receivable - 14,959 Net cash provided by (used in) (376,712 ) 10,812 investing activities 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 3,688,000 723,196 Repayments of loans - related party (163,000 ) (240,196 )Proceeds from notes payable 853,386 1,134,582 Repayments on notes payable (250,000 ) (27,500 )Proceeds from SBA notes 518,167 - Repayments on SBA notes (3,425 ) - Proceeds from convertible notes 2,550,000 2,182,000 Repayments on convertible notes - net (1,220,515 ) (373,000 )of overpaymentCash paid for debt issuance costs - (162,000 )Net cash provided by financing 7,482,613 3,442,082 activities Net decrease in cash (38,468 ) 75,275 Cash - beginning of period 673,995 346,040 Cash - end of period $ 635,527 $ 421,315 Supplemental disclosure of cash flow informationCash paid for interest $ 117,836 $ 98,113 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 inconnection with derivative $ 2,140,829 $ 1,366,636 liabilitiesDebt discount recorded in connection $ 265,268 with notes payableStock issued in settlement of $ 1,879,785 $ - liabilitiesConversion of debt into equity $ 948,002 $ - Right-of-use asset obtained in exchangefor new operating lease $ 515,848 $ 355,203 liabilityTermination of ECS ROU lease $ 228,752 $ - Stock issued in connection with debt $ 108,931 $ 49,890 modificationStock issued under make-whole $ 90,401 $ 196,341 arrangementStock issued for acquisition of $ 17,900 $ - membership interest in ECSTrue up adjustment related to initial $ 87,596 acquisition of True WirelessStock issued for acquisition $ - $ 210,794 Stock and warrants issued with debt $ - $ 906,098 recorded as a debt discount