Surgepays, Inc. current report, 07 July 2016

Full document

Business Context and Reporting Period

This Form 8-K is a current report filed by KSIX Media Holdings, Inc. (formerly North American Energy Resources, Inc.) on July 7, 2016. The registrant is incorporated in Nevada with principal executive offices in Henderson, NV. The filing discloses multiple unregistered sales of equity securities that occurred between January 2016 and June 2016. Note: The request metadata references "Surgepays, Inc.," but the filing text explicitly identifies the registrant as KSIX Media Holdings, Inc.

Key Financial Metrics and Capital Structure

The filing does not provide standard financial metrics such as revenue, profit, cash flow, or operating margins. The document focuses exclusively on capitalization changes and debt settlements via equity issuance.

  • Total Shares Issued in Period: Approximately 5,976,545 shares of Common Stock were issued across various transactions.
  • Cash Raised: $10,000 from a subscription agreement with Edwin Winfield; $180,000 received as an initial payment for a unit offering (classified as a subscription receivable).
  • Debt Settlement: $20,000 of debt owed to Paywall, Inc. was forgiven in exchange for 454,545 shares.
  • Services for Equity: Significant shares were issued in lieu of cash for legal, consulting, and advisory services, totaling approximately $33,400 in stated service value.
  • Outstanding Shares: Post-transaction, the company reported 44,514,961 shares of Common Stock issued and outstanding.

Material Changes and Transactions

The filing details several material changes to the company's capital structure through unregistered sales of equity securities under Section 4(a)(2) of the Securities Act of 1933:

  • Legal and Consulting Fees: Issued 250,000 shares to John E. Dolkart, Jr. and 250,000 shares to Ted D. Campbell II for legal and consulting services valued at $2,500 each.
  • Advisory Fee Settlement: Issued 1,782,000 shares to TCA Global Credit Master Fund, LP to satisfy a $300,000 advisory fee obligation. TCA may sell these shares upon Rule 144 eligibility until $300,000 in gross proceeds are received.
  • Debt Conversion: Converted $20,000 of debt from Paywall, Inc. into 454,545 shares, subsequently assigned to Edwin Winfield.
  • Unit Offering: Entered a subscription agreement with Anthony P. Nuzzo Jr. for up to 5,000,000 Units (1 share + 2 warrants) at $0.10 per unit. An initial $180,000 was paid, with an option to purchase an additional $320,000 within 120 days.
  • Employee and Director Compensation: Issued shares to Hall Strategy, LLC (1,000,000 shares), Anthony P. Nuzzo Jr. (1,000,000 shares), Omnivance Advisors, Inc. (240,000 shares), and six employees/directors (Hayden, Kaplan, Lapitan, Pearson, Wolff, Luzuriaga) totaling 3,150,000 shares for services valued between $2,400 and $10,000 per recipient.

Guidance, Risks, and Contingencies

The filing does not contain forward-looking guidance, revenue outlook, or management commentary on future operations. Key risks and contingencies identified include:

  • Shareholder Dilution: The issuance of nearly 6 million shares in a short period significantly increases the share count, potentially diluting existing shareholders.
  • Liquidity Constraints: The company relied heavily on issuing equity to pay for services and settle debt, suggesting limited cash liquidity.
  • Restricted Securities: All issued shares are restricted under Rule 144, limiting immediate resale by recipients.
  • Contingent Liability: The TCA Global Credit Master Fund, LP holds shares that may be sold to satisfy a $300,000 obligation, creating potential future selling pressure.

Investor Verification Checklist

  • Verify the discrepancy between the metadata company name ("Surgepays, Inc.") and the filing registrant ("KSIX Media Holdings, Inc.").
  • Confirm the total number of outstanding shares (44,514,961) and the number of shareholders (approx. 62 certificate holders + 450+ street name holders).
  • Review the status of the $180,000 subscription receivable from Anthony P. Nuzzo Jr. and whether the remaining $320,000 option was exercised.
  • Assess the impact of the 1,782,000 shares issued to TCA Global Credit Master Fund, LP on future market liquidity once Rule 144 restrictions lapse.
  • Examine the valuation of services rendered for equity (e.g., $2,500 for 250,000 shares implies a price of $0.01/share, whereas the cash subscription was at $0.10/share) to understand potential valuation inconsistencies.