Surgepays, Inc. current report, 30 April 2015

Business Context and Reporting Period

Company: North American Energy Resources, Inc. (Note: Request metadata listed "Surgepays, Inc." but the filing text identifies the registrant as North American Energy Resources, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: April 30, 2015
Event: The Company entered into a Share Exchange Agreement on or about April 27, 2015, to acquire 100% of the common stock of KSIX Media, Inc. ("KSIX"). KSIX operates a diverse advertising network through subsidiaries KSIX, LLC and BMG Media Group, LLC. The transaction marks a strategic shift from the Company's current oil and gas operations to digital advertising and SaaS solutions.

Key Financial Metrics and Transaction Details

Transaction Consideration: The Company issued 28,000,000 restricted shares of its common stock to acquire 22,600,000 shares of KSIX common stock.
Post-Transaction Capitalization: Total issued and outstanding common stock is 31,115,000 shares.
Ownership Structure: Carter Matzinger (KSIX shareholder) now owns 24,778,761 shares, representing 79.64% of the outstanding common stock.
Financial Statements: The filing states that financial statements of the business acquired and pro forma financial information are "Not applicable."
Revenue/Profit/Cash Flow: The filing text does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures for the Company or KSIX.

Material Changes Versus Prior Period

  • Business Pivot: The Company intends to eventually divest its oil and gas assets and establish the operations of KSIX (digital advertising, offer walls, and content lockers) as its principal business.
  • Change in Control: Effective control of the Company transferred to KSIX shareholders, specifically Carter Matzinger, following the issuance of new shares.
  • Management Turnover:
    • Clinton W. Coldren resigned as CEO, CFO, and Chairman but retained a directorship.
    • Alan G. Massara and Michael D. Pruitt resigned from all positions.
    • Carter Matzinger was appointed President, Secretary, Treasurer, CEO, and Chairman.
    • Ted D. Campbell II and Allan Rosenthal were elected as new directors.

Guidance, Outlook, and Risks

Outlook: Management plans to expand direct advertiser initiatives, roll out new technology (host and post/co-reg offerings), and increase focus on mobile advertising. The Company targets the substantial digital ad market, estimated at $50.71 billion in the U.S. in 2014.
Risks and Contingencies:

  • Asset Divestiture: The Company intends to divest existing oil and gas assets, which introduces uncertainty regarding the timing and value of such divestitures.
  • Unregistered Securities: The 28,000,000 shares issued were sold under Section 4(2) of the Securities Act as a private transaction; these shares are restricted.
  • Market Competition: The digital advertising market is competitive, relying on proprietary technologies like RewardTool and AccessTool.

Investor Verification Checklist

  • Verify the current status and valuation of the Company's existing oil and gas assets pending divestiture.
  • Confirm the financial performance (revenue, EBITDA) of KSIX Media, Inc. and its subsidiaries, as no specific figures were provided in this filing.
  • Review the Share Exchange Agreement (Exhibit 2.01) for details on earn-outs, representations, warranties, and post-closing obligations.
  • Assess the liquidity of the Company's common stock and the impact of the 79.64% ownership concentration by Carter Matzinger.
  • Monitor future filings for the completion of the oil and gas asset divestiture and the integration of KSIX operations.