Business Context and Reporting Period
This Form 8-K, dated July 18, 2017, is filed by KSIX Media Holdings, Inc. (a Nevada corporation), not Surgepays, Inc. The filing reports the entry into an "Amended Master Agreement for the Exchange of Common Stock, Management, and Control" with True Wireless, LLC ("TWL") and its sole owner, Kevin Brian Cox. TWL operates as a full-service telecommunications company specializing in FCC-regulated Lifeline Services in Oklahoma, Rhode Island, Maryland, Texas, and Arkansas. The transaction aims to make TWL a wholly-owned subsidiary of KSIX.
Key Financial Metrics and Capital Structure
The filing does not provide revenue, profit, cash flow, or margin data for either entity. However, it discloses the following capital structure and transaction-specific financial terms:
- KSIX Capital Stock: 10,000,000 shares of Series "A" Preferred Stock and 73,789,576 shares of Common Stock issued and outstanding as of July 18, 2017.
- Debt Obligation: KSIX issued a $1.5 million Promissory Note to Kevin Brian Cox, maturing on December 31, 2018.
- Equity Consideration: Upon the final "Equity Closing," KSIX will issue 114 million restricted shares of Common Stock and 45 million warrants (exercise price $0.50) to Cox and his assigns.
- Ownership Target: The transaction is structured to result in Cox holding approximately 69.5% of KSIX's outstanding stock.
Material Changes and Transaction History
The filing details a multi-stage negotiation process:
- December 7, 2016: Initial Master Agreement executed but not closed.
- March 30, 2017: First Addendum executed to extend deadlines to May 1, 2017.
- July 18, 2017: Amended Master Agreement executed, replacing prior agreements. This triggered the "Management Closing," where KSIX delivered the $1.5 million note and transferred 75% of Carter Matzinger's controlling Super Preferred Stock to Cox.
Outlook, Risks, and Contingencies
Regulatory Approval: The final "Equity Closing" is contingent upon receiving all required governmental and regulatory approvals, specifically from the FCC. The parties agree to expedite financial audits and due diligence.
Tax Contingency: The transaction is intended to qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code. If it fails to qualify, each party is responsible for its own tax consequences and must indemnify the other against related claims.
Shareholder Adjustments: Post-closing, Carter Matzinger will retain 14 million shares of Common Stock; any excess holdings will be retired to the treasury unless otherwise agreed in writing.
Investor Verification Checklist
- Verify the current status of FCC approval for the transfer of Lifeline licenses to KSIX.
- Confirm the exact number of shares to be issued to Cox, as the 114 million figure is subject to anti-dilution adjustments based on future issuances.
- Review the terms of the $1.5 million Promissory Note (Exhibit C) for interest rates and repayment conditions.
- Assess the impact of the 69.5% ownership concentration by Cox on corporate governance and minority shareholder rights.
- Investigate the financial health and audit status of TWL, as no financial statements were included in this filing.