Business Context and Reporting Period
This Form 8-K Current Report was filed by Surge Holdings, Inc. (referred to in the request as Surgepays, Inc.) on April 3, 2020, covering events occurring on April 1, 2020. The filing details the entry into a material definitive agreement involving a securities purchase and the creation of a direct financial obligation.
Key Financial Metrics and Transaction Details
- Capital Raised: $150,000.00 (Purchase Price).
- Debt Instrument: Promissory Note with a principal amount of $162,000.00.
- Interest Rate: 14% per annum.
- Maturity Date: March 15, 2021.
- Equity Issued: 172,000 shares of common stock issued as additional consideration.
- Repayment Schedule: No principal or interest payments due through August 2020. Repayment begins in September 2020 with seven fixed monthly payments of principal and interest.
Material Changes and Terms
The primary material change is the incurrence of new debt and the dilution of existing shareholders through the issuance of 172,000 shares. The transaction includes a "True-Up" provision: if the Volume Weighted Average Price (VWAP) of the common stock is less than $0.35 per share during the ten-day trading period immediately preceding the date that is six months and one day after issuance, the investor has the right to receive additional shares of common stock.
Outlook, Risks, and Contingencies
The filing does not provide specific forward-looking guidance, management commentary on future operations, or a discussion of general business risks beyond the terms of the agreement. The securities were issued unregistered, relying on exemptions under Section 4(a)(2) and/or Regulation D of the Securities Act. The shares are restricted pursuant to Rule 144 and cannot be immediately redistributed into the market.
Investor Verification Checklist
- Verify the current trading price of the stock to assess the likelihood of the "True-Up" provision being triggered (threshold: $0.35 VWAP).
- Confirm the total number of outstanding shares post-issuance to calculate the dilution impact of the 172,000 new shares.
- Review the full text of the Securities Purchase Agreement and Note, which are filed as exhibits to the Form 10-Q for the quarter ending March 31, 2020, for complete terms and conditions.
- Assess the company's liquidity position given the deferred payment schedule starting in September 2020.