Note 5 – Debt

The following represents a summary of the Company’s notes payable – SBA government, notes payable – related parties, convertible notes payable and notes payable, key terms, and outstanding balances at March 31, 2026 and December 31, 2025, respectively:

Notes Payable – SBA government

Economic Injury Disaster Loan (“EIDL”)

During 2020, the Company received Economic Injury Disaster Loan (“EIDL”) proceeds under a U.S. Small Business Administration program made available in response to the COVID-19 pandemic, which were used for working capital purposes. Monthly installment payments of principal and interest range from $74 to $731 and are payable over thirty (30) years from the date of the promissory note, with no prepayment penalty.

 Schedule of Loans Payable

Note Payable – Related Party

The following summarizes activity in the Company’s note payable to a related party (the Chief Executive Officer):

 Summary of Notes Payable - Related Parties

On March 12, 2024, the Company consolidated outstanding principal of $4,584,563 and accrued interest of $498,991 into a single unsecured note with a face amount of $5,083,554. The note bears interest at 10% per annum (15% upon default) and is repayable in monthly installments of $164,039 over 36 months, maturing in December 2026.

Beginning in July 2025, monthly payments were temporarily suspended due to cash flow constraints. The note holder confirmed that the suspension does not constitute an event of default. Interest continues to accrue at the contractual 10% rate, and the note terms were not modified. Management is evaluating options to resume or restructure payments.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Conversion of Related Party Note Payable to Common Stock

On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer in partial conversion of a related party note payable (see Note 9). The shares were valued at their fair market value of $707,200 ($0.884 per share), determined using the quoted closing market price on the issuance date. In connection with the transaction, the Chief Executive Officer forgave an additional $292,800 of principal on the note.

The forgiveness of debt by the Chief Executive Officer, in his capacity as both a principal shareholder and creditor, was accounted for as a capital contribution and credited to additional paid-in capital. No gain on debt extinguishment was recognized. The aggregate value of the transaction ($1,000,000) was applied as a reduction to the outstanding balance of the related party note payable.

The following is a detail of the Company’s Notes Payable - Related Party:

 Schedule of Notes Payable - Related Parties

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Convertible Notes Payable and Relate Debt Discounts

The Company has issued multiple convertible promissory notes to institutional and individual investors that are convertible into shares of the Company’s common stock. The following table summarizes the principal terms and the gross and net carrying value of the Company’s convertible notes payable as of March 31, 2026 and December 31, 2025:

The following is a summary of the Company’s Convertible Notes Payable and related Debt Discounts:

 Schedule of Convertible Notes Payable and related Debt Discounts

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

The following is a detail of the Company’s Convertible Notes Payable:

 Schedule of Convertible Notes Payable

Convertible Notes Payable - Notes #1 through #6

Overview

Year Ended December 31, 2025

The Company entered into six (6) Note Purchase Agreements with institutional investors and issued Convertible Notes (collectively, the “Notes”) with an aggregate obligation (including guaranteed interest) of $9,694,999. Note #1 is a senior secured obligation collateralized by a first-priority lien on substantially all of the Company’s and its subsidiaries’ assets. Notes #2 through #6 are unsecured obligations.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

The Notes are summarized in detail below.

Note #1 - Senior Secured Convertible Note

On May 12, 2025, the Company issued a Senior Secured Convertible Note (the “Note”) in the original principal amount of $6,999,999, resulting in net cash proceeds of $5,405,000 after $175,000 of legal fees and $420,000 of broker fees. The Note is fully guaranteed by certain of the Company’s subsidiaries. Concurrent with issuance, the Company repurchased 333,333 shares of its common stock from the investor at $3.00 per share; these shares were cancelled and retired and are recorded as treasury stock (see Note 9).

The Note accrues interest at 1.25% per month (15.00% per annum), payable monthly in cash or as payment-in-kind at the Company’s election. Following the Second Amendment (January 31, 2026) and Third Amendment (March 26, 2026), each evaluated and accounted for as a debt modification under ASC 470-50 (no gain or loss recognized; carrying value not adjusted), the Note currently amortizes in equal monthly installments of $500,000 commencing June 30, 2026, with the remaining balance due on the November 12, 2027 maturity date. Pursuant to the Third Amendment, the investor advanced an additional $500,000 of principal under the Note (increasing the aggregate principal to $7,499,999), and the Company agreed to obtain shareholder approval by July 17, 2026 to permit issuance of conversion shares in excess of 19.99% of the Company’s outstanding common stock (the “Exchange Cap”); until such approval is obtained, conversions are limited to the Exchange Cap pursuant to Nasdaq Rule 5635(d).

The Note is convertible at the investor’s option into shares of the Company’s common stock at $4.00 per share. The conversion option is indexed solely to the Company’s own common stock and satisfies the fixed-for-fixed criteria under ASC 815-10-15-74(a), qualifying for the scope exception from derivative accounting. Accordingly, the Note is accounted for in its entirety as a debt instrument.

Warrant Issuance

In connection with the issuance of the original note ($6,999,999), the Company issued warrants to purchase 700,000 shares of its common stock at an exercise price of $6.00 per share. The warrants are immediately exercisable and expire on May 12, 2030.

The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants at issuance was estimated at $1,084,927, which was recorded as a debt discount with a corresponding credit to additional paid-in capital.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

The assumptions used in the Black-Scholes model were as follows:

 Schedule of Fair Value of Warrants

Debt Discount

In connection with the issuance of the Note, the Company recorded total debt discounts of $1,679,927, consisting of the following:

 Schedule of Debt Discounts

Debt discounts are being amortized to interest expense over the revised contractual term of the Note through the Maturity Date (as amended) of November 12, 2027 using the effective interest method in accordance with ASC 835-30.

Notes #2 through #6

The Company issued five (5) separate one-year unsecured Convertible Notes summarized in the tables below (collectively, the “Notes”).

In accordance with ASC 835-30, original issue discounts, guaranteed interest capitalized at issuance, the fair value of common shares issued to the investors (determined based on the quoted closing price of the Company’s common stock on each respective grant date), and professional fees were recorded as a reduction of the carrying value of the respective Notes and are amortized to interest expense using the effective interest method over each Note’s one-year contractual term.

Each of these notes is convertible at the investor’s option into common stock at fixed conversion prices in three tranches: 25% of the total obligation at $4.00 per share, 25% at $6.00 per share, and 50% at $6.00 per share. Upon an event of default or the Company’s failure to pay any amortization payment when due, all tranches may alternatively be converted at 85% of the lowest daily volume-weighted average price (“VWAP”) of the Company’s common stock during the five (5) trading days immediately preceding the conversion date.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

The fixed conversion prices are subject to customary anti-dilution adjustments. Subject to specified price and volume conditions and the investor’s prior written consent, the Company may also effect a mandatory conversion of all or a portion of any 2025 Note.

The Company evaluated the embedded conversion features under ASC 815-10-15-74(a) and ASC 815-40. The fixed-price conversion options ($4.00 and $6.00 per share) satisfy the fixed-for-fixed criteria under ASC 815-40-15 and qualify for the scope exception from derivative accounting. The contingent VWAP-based conversion feature is exercisable only upon an event of default; management has assessed the likelihood of default as remote, and the feature is therefore considered clearly and closely related to the debt host under ASC 815-10-15-74(a) and qualifies for the equity scope exception. Each 2025 Note is accounted for in its entirety as a debt instrument. The Company reassesses the probability of default at each reporting date; should default no longer be considered remote, the contingent feature would be bifurcated and recognized as a derivative liability at fair value. As of March 31, 2026, the Company was in compliance with all terms of the 2025 Notes.

Convertible Notes Payable - Other (Notes #7 and #8) (Derivative Liabilities)

In March 2026, the Company issued two unsecured convertible promissory notes to institutional investors along with accompanying common stock purchase warrants.

The notes were issued at a discount due to original issue discount, capitalized guaranteed interest, debt issuance costs, and the fair value of the warrants. These discounts are recorded as a reduction of the notes’ carrying value and amortized to interest expense using the effective interest method over the contractual term.

The notes mature twelve months (12) from issuance and bear a one-time guaranteed interest charge of 8% on the original principal, fully earned at issuance. They are repayable in four monthly installments followed by a final payment of all remaining amounts, with a 22% default interest rate.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Each note includes embedded conversion features in three tranches:

The fixed-price conversion options in the first two tranches qualify for the ASC 815-40-15 scope exception and are not bifurcated. The third tranche is considered remote and is also not bifurcated. The notes are accounted for entirely as debt, with default probability reassessed each reporting period.

The Company also issued 5five-year warrants to purchase 375,000 shares of common stock at $1.25 per share (150,000 related to Note #7 and 225,000 related to Note #8). Due to certain cash settlement features, the warrants are accounted for as derivative liabilities. Their aggregate fair value at issuance ($215,223) was recorded as a derivative liability and debt discount. The warrants are remeasured at fair value each reporting period, with changes recognized in earnings.

See Note 6 for additional information on derivative liabilities.

Convertible Secured Notes Payable Financing – Notes #9 - #15

On January 6, 2026, the Board authorized a private placement of up to $20,000,000 of convertible secured promissory notes (the “Notes”). The Notes bear interest at 14.5% per annum, payable quarterly in arrears, and mature 24 months from the respective issuance date. Torch Wireless, a subsidiary, unconditionally guarantees the Notes, which are secured by a junior perfected security interest in substantially all of the Company’s assets, subordinated to existing senior indebtedness under an intercreditor agreement.

The Notes are convertible at the holder’s option at any time into common stock using tiered conversion prices (20% tranches) based on the portion of principal and accrued interest converted. Conversion pricing differs by closing:

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

All conversion prices are subject to customary anti-dilution adjustments for stock splits, stock dividends, and similar pro rata equity events. The Notes contain no down-round, full-ratchet, or variable conversion price provisions. Conversions are subject to a 4.99% beneficial ownership limitation (increaseable to 9.99% upon 61 days’ prior written notice) and are settled solely in shares of common stock.

Six months after issuance, the Company may force conversion at the applicable tiered prices, subject to no Event of Default, minimum volume-weighted-average price (VWAP) and trading volume thresholds, and freely tradeable shares.

Upon an uncured Event of Default, the outstanding principal, accrued and unpaid interest, and default interest at 18% per annum become immediately due and payable, and the holder may convert the Default Amount into common stock at the applicable tiered conversion price.

As of March 31, 2026, the Company had issued $975,000 in aggregate principal amount of Notes (Notes #9 through #15). Subsequent to March 31, 2026, the Company issued an additional $175,000 in principal amount under the lower-tier pricing.

In connection with the issuances, the Company issued an aggregate of 31,525 commitment shares of common stock to the holders as additional consideration for the financing. The commitment shares were recorded at fair value on the respective issuance dates, based on the closing market prices of the Company’s common stock, which ranged from $0.83 to $2.04 per share, for an aggregate fair value of $54,828. The fair value of the commitment shares was recorded as a debt discount against the carrying amount of the related Notes and is being amortized to interest expense over the contractual term of the Notes using the effective interest method.

The Company evaluated the embedded conversion features under ASC 815-15-25-1 and ASC 815-40. The tiered fixed conversion prices are indexed solely to the Company’s common stock and are subject only to standard anti-dilution adjustments, satisfying the fixed-for-fixed criterion and qualifying for the scope exception in ASC 815-10-15-74(a). The Notes are accounted for as a single liability under ASC 470-20, as amended by ASU 2020-06, with no separation of the conversion feature into an equity component.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

The following tables summarize each convertible note and their related debt discount components:

 Schedule of Key Terms and Debt Discount Components

Convertible Notes Payable - Net

Note #1 ($7,499,999) is a combination of principal from 2025 ($6,999,999) and 2026 ($500,000). Net cash proceeds in 2026 are reflected in the table above plus an additional $500,000, totaling $2,225,000, the Company also paid direct debt offering costs of $14,500.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Debt Discount Components

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

These convertible notes are repayable in either monthly or quarterly installments inclusive of the capitalized guaranteed interest, with any unpaid amounts due and payable as part of the final installment, as follows:

 Schedule of Note Payments

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Notes Payable

The following is a summary of the Company’s Notes Payable:

 Schedule of Notes Payable

The following is a detail of the Company’s Notes Payable:

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Note #1 - Note Issuance and Warrants

On September 9, 2025, the Company entered into a six-month (6) Senior Secured Note with an individual (the “Investor”), in the original principal amount of $1,000,000 (the “Note”).

As of March 31, 2026, this note ($1,000,000) was in default.

Warrant Issuance and Classification

In connection with the issuance of the Note, the Company also issued warrants to purchase 30,000 shares of its common stock at an exercise price of $2.50/share. The warrants are immediately exercisable and remain outstanding through September 9, 2028.

Debt Discount

In connection with the issuance of the $1,000,000 note, the Company issued warrants to purchase 30,000 shares of common stock. The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants was estimated to be $48,418, which was recorded as a debt discount and is being amortized to interest expense over the term of the note. The Company also recorded a corresponding increase to additional paid-in capital of $48,418. See Note 9.

The fair value of the warrants was determined using the Black-Scholes model with the following assumptions:

 Schedule of Fair Value of Warrants

The debt discount will be fully amortized over the contractual term of the note (1 year).

Note #2 – Accounts Receivable Financing Facility

On September 9, 2025, the Company entered into a one-year Business Loan and Security Agreement (the “Agreement”) with Paragon Bank (“Paragon”) establishing a $1,500,000 accounts receivable financing facility (the “Facility”). The Facility matures on September 9, 2026 and is secured by a first-priority lien on substantially all of the Company’s accounts receivable and related collateral. The Facility is a full-recourse arrangement under which the Company remains liable to Paragon for all advances, including amounts related to uncollected or disputed customer receivables.

Because the Company retains substantially all of the risks and rewards of ownership of the receivables transferred to Paragon under the full-recourse terms of the Agreement, the transactions do not qualify as sales under Accounting Standards Codification (ASC) 860-10-40. Accordingly, the underlying receivables remain on the Company’s consolidated balance sheets as accounts receivable, and the related cash advances received from Paragon are reported as a secured borrowing within current liabilities on the consolidated balance sheets. Service charges and related finance fees are recognized as interest expense in the consolidated statements of operations as incurred.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Borrowings under the Facility are available based on eligible accounts receivable, with maximum advances of up to 85% of the eligible borrowing base, subject to customary reserves, concentration limits, and reporting requirements. The Facility does not bear stated interest; the Company’s cost of funds under the Facility consists of service charges and related finance fees assessed by Paragon on factored invoice volume, together with a one-time loan origination fee of $5,000 paid at inception. Proceeds from the Facility are used to provide working capital financing and liquidity support for the Company’s operations.

Paragon retains a reserve account equal to 15% of receivables financed under the Facility to cover charge-backs, customer adjustments, and service fees. Amounts held in the reserve are released to the Company upon collection of the related underlying receivables, net of any applicable charge-backs and fees. The reserve is maintained in a Company-owned deposit account at Paragon Bank, subject to Paragon’s first-priority security interest and restrictions on withdrawal, and is presented as restricted cash on the Company’s consolidated balance sheets. At March 31, 2026 and December 31, 2025, the reserve balance was $424,995 and $281,811, respectively.

Service charges and related finance fees were $38,472 and $0 for the three months ended March 31, 2026 and 2025, respectively, and are recognized as interest expense in the consolidated statements of operations.

The Agreement contains customary affirmative and negative covenants, including:

The Agreement also provides that a change in ownership of 25% or more of the Company’s common stock constitutes an event of default. As of March 31, 2026 and December 31, 2025, the Company was in compliance with all covenants and other terms of the Agreement.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Debt Maturities

The following represents the maturities of the Company’s various debt arrangements for each of the five (5) succeeding years and thereafter as follows:

 Schedule of Debt Maturities