Business Context and Reporting Period
This Form 8-K was filed on September 16, 2016, by KSIX Media Holdings, Inc. (Nevada), a company incorporated in Nevada with principal offices in Henderson, NV. The filing reports on material definitive agreements entered into regarding the company's senior secured credit facility. Note: The metadata provided lists "Surgepays, Inc." as the company name, but the filing text explicitly identifies the registrant as "KSIX Media Holdings, Inc." and the signature block references "North American Energy Resources, Inc."
Key Financial Metrics and Debt Structure
The filing details a restructuring of debt obligations rather than reporting standard operating financial metrics such as revenue or cash flow.
- Original Obligation: An advisory fee of $300,000 USD owed to TCA Global Credit Master Fund, LP (TCA) was settled via the issuance of 1,782,000 shares of restricted common stock (Advisory Fee Stock) in March 2016.
- New Debt Instrument: On September 15, 2016, the company entered into a First Amended Credit Agreement involving a third party, Salksanna, LLC.
- Replacement Note Amount: The first replacement promissory note issued to Salksanna is for $53,452.53.
- Interest Rate: The replacement note carries an interest rate of 18% per annum.
- Maturity Date: March 13, 2018.
- Liquidity Impact: Salksanna made an initial payment of $53,452.53 to TCA on September 16, 2016, which the company utilized to service the debt owed to TCA.
Material Changes Versus Prior Period
The primary material change is the amendment of the Senior Secured Credit Facility with TCA Global Credit Master Fund, LP. Previously, the company owed an advisory fee settled in stock. Under the new arrangement:
- Salksanna, LLC is purchasing portions of the debt underlying the TCA Agreement via a Debt Purchase Agreement.
- The company is issuing replacement convertible promissory notes to Salksanna in exchange for the funds used to pay TCA.
- TCA's ability to sell the previously issued Advisory Fee Stock is now restricted; they may only sell upon an event of default after notice and failure to cure.
Guidance, Outlook, and Risks
The filing does not provide forward-looking guidance, revenue outlook, or management commentary on future operations. However, it outlines specific terms and risks associated with the new debt instrument:
- Conversion Terms: The replacement note is convertible into common stock at a price equal to 85% of the lowest daily volume-weighted average price of the company's stock during the five business days immediately prior to the conversion date.
- Beneficial Ownership Limit: The holder (Salksanna) cannot convert an amount of stock that would result in beneficial ownership exceeding 4.99% of the issued and outstanding common stock on the day of conversion.
- Default Risk: TCA retains the Advisory Fee Stock but is restricted from selling it unless an event of default occurs.
Important Facts for Investor Verification
- Verify the correct registrant name, as the filing text identifies "KSIX Media Holdings, Inc." while the signature block references "North American Energy Resources, Inc."
- Confirm the total outstanding principal amount of the debt facility, as the filing only explicitly details the first replacement note of $53,452.53.
- Review the full text of the "First Amended Credit Agreement" and "Debt Purchase Agreement" (Exhibits 10.1 and 10.2) to understand the total scope of the debt restructuring.
- Assess the dilution impact of the 18% interest rate and the 85% discount conversion price on existing shareholders.
- Verify the current status of the 1,782,000 Advisory Fee Shares held by TCA and any restrictions on their sale.