Note 9 – Stockholders’ Deficit

At March 31, 2026 and December 31, 2025, the Company had three (3) classes of stock:

Common Stock

● Authorized: 500,000,000 shares

● Par Value: $0.001 per share

● Voting Rights: One vote per share

● Dividends: None declared

● Liquidation Preference: Subordinate to all classes of preferred stock

Series A, Convertible Preferred Stock

● Authorized: 13,000,000 shares

● Issued and Outstanding: None

● Par Value: $0.001 per share

● Voting Rights: Ten votes per share

● Ranking: Senior to all other classes of preferred stock

● Dividends: None

● Liquidation Preference: None

● Redemption: Not redeemable

● Conversion: Each share convertible into one-tenth (1/10) of a share of common stock at the option of the holder

Series C, Convertible Preferred Stock

● Authorized: 1,000,000 shares

● Issued and Outstanding: None

● Par Value: $0.001 per share

● Voting Rights: 250 votes per share

● Ranking: Junior to all other classes of preferred stock

● Dividends: Participating with common stock on an as-converted basis, when and if declared by the Board of Directors

● Liquidation Preference: Original issue price plus any declared but unpaid dividends

● Redemption: Not redeemable

● Conversion: Each share convertible into 250 shares of common stock at the option of the holder

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Securities and Incentive Plan

In March 2023, the Company’s shareholders approved the 2022 Plan (the “Plan”) initially approved, authorized and adopted by the Board of Directors in August 2022.

The Plan initially provided for the following:

See the proxy statement filed with the SEC on January 19, 2023 for a complete detail of the Plan.

Effective January 1, 2025, in accordance with the Plan, we increased the available amount of shares by 10% of the common stock outstanding on December 31, 2024, approximating an additional 2,007,000 shares of common stock. After this increase, total shares authorized and available to be issued under the Plan approximated 6,907,000 shares.

Effective January 1, 2026, in accordance with the Plan, we increased the available amount of shares by 10% of the common stock outstanding on December 31, 2025, approximating an additional 2,185,000 shares of common stock. After this increase, total shares authorized and available to be issued under the Plan approximated 9,092,000 shares.

Of the total shares authorized and available, the Company has reserved shares for its officers, directors and employees for non-vested shares that are expected to vest in accordance with the terms of the related employment agreements and stock options that may be converted into common stock. At March 31, 2026 and December 31, 2025, the Company had sufficient authorized shares to settle any possible awards that vested or stock options eligible for conversion.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Equity Transactions for the Three Months Ended March 31, 2026

Stock Issued for Cash

Underwritten Public Offering

On January 20, 2026, the Company entered into an underwriting agreement with R.F. Lafferty & Co., Inc. for an underwritten public offering of 2,000,000 shares of common stock at a public offering price of $1.25 per share, for gross proceeds of approximately $2,500,000. The offering closed on January 22, 2026. The underwriter was granted a 45-day option to purchase up to an additional 300,000 shares at the public offering price to cover over-allotments. The Company paid fees of $375,000 for net proceeds of $2,125,000. The Company intends to use the net proceeds for expansion of its Lifeline business and for working capital and general corporate purposes.

In connection with the offering, the Company issued warrants to the underwriter to purchase a number of shares equal to 3.0% of the total shares sold (60,000 warrants – see table below), at an exercise price equal to 110% of the public offering price ($1.38/share). The warrants are exercisable commencing six months after the closing date and expire five years after the commencement of sales, and were issued without registration under the Securities Act of 1933 in reliance on the exemption provided by Section 4(a)(2).

Stock Issued for Cash – At the Market Offering (“ATM”)

The Company issued 7,323 shares of common stock for net proceeds of $14,375 ($1.98 - $2.03/share).

Stock Issued for Services

The Company issued 200,000 shares of common stock for services rendered, having a fair value of $334,000 ($1.67/share), based upon the quoted closing trading price.

Recognition of Stock Based Compensation - Restricted Stock Awards – Employees

The Company recognized $7,787 in compensation expense, related to the vesting of these awards.

Debt Discount – Convertible Notes Payable – Common Stock

During the year ended December 31, 2025, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828 to lenders as additional consideration in connection with the issuance of convertible notes payable. The fair value of the shares was recorded as a debt discount and is being amortized to interest expense over the term of the related notes using the effective interest method. See Note 5.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Conversion of Debt to Common Stock – Related Party

On March 23, 2026, the Company issued 800,000 shares of common stock to its Chief Executive Officer at a fair value of $707,200 ($0.884 per share) in partial settlement of a related party note payable. The Chief Executive Officer also forgave $292,800 of principal, which was accounted for as a capital contribution from a principal shareholder and credited to additional paid-in capital. The aggregate $1,000,000 was applied as a reduction of the related party note payable, and no gain on extinguishment was recognized. See Note 5.

Equity Transactions for the Year Ended December 31, 2025

Stock Issued for Cash – At the Market Offering (“ATM”)

In August 2025, the Company entered into an At the Market Offering Agreement (the “ATM Agreement”) with Titan Partners Group LLC, a division of American Capital Partners, LLC (“Titan”), pursuant to which the Company may, from time to time, offer and sell shares of its common stock, $0.001 par value per share, to or through Titan, acting as sales agent and/or principal, in transactions deemed to be “at-the-market offerings” under Rule 415(a)(4) of the Securities Act of 1933, as amended. Under the Prospectus Supplement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $15,000,000, which is within the Company’s current “baby shelf” limitations under General Instruction I.B.6. of Form S-3. The Company will pay Titan a commission of 3.0% of the gross proceeds from each sale. The Company intends to utilize the ATM Agreement, when appropriate, to fund working capital needs on an ongoing basis.

The Company issued 697,691 shares of common stock for gross proceeds of $1,774,636 ($2.12 - $2.98/share). In connection with the capital raise, the Company paid cash as direct offering costs (including professional fees) totaling $123,197, resulting in net proceeds of $1,651,439.

Stock Issued for Services

The Company issued 324,000 shares of common stock for services rendered, having a fair value of $641,430 ($1.70 - $2.87/share), based upon the quoted closing trading price.

Stock Issued to Settle Accounts Payable

The Company issued 22,807 shares of common stock to settle outstanding vendor payables, having a fair value of $65,456 ($2.87/share), based upon the quoted closing trading price.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Debt Discount – Common Stock

In connection with the issuance of various convertible notes payable, the Company issued 103,000 shares of common stock, having a fair value of $271,880 ($1.90 - $2.86/share), based upon the quoted closing trading price on each respective grant date. This amount has been recorded as a debt discount. See Note 5 for discussion of the various common stock issuances related to convertible note offerings.

Debt Discount – Warrants

In connection with the issuance of various convertible notes payable and a note payable, the Company issued warrants to purchase shares of common stock, having an aggregate fair value of $1,133,345, comprised of $1,084,927 related to convertible notes payable and $48,418 related to the note payable. The fair value of each warrant was determined using the Black-Scholes pricing model on each respective grant date. These amounts have been recorded as a debt discount. See Note 5 for discussion of the assumptions and inputs used in these fair value calculations.

Treasury Stock

The Company repurchased 333,333 shares of its common stock from a convertible note payable holder for $999,999 ($3/share). In connection with the transaction, the principal balance of the related convertible note was increased by $999,999. See Note 5.

Restricted Stock Awards – Employees

On December 16, 2025, the Company granted 54,331 restricted stock awards (“RSAs”) of its common stock to various employees pursuant to the Company’s 2022 Omnibus Securities and Incentive Plan.

The RSAs vest in full on the third anniversary of the grant date and have a total grant-date fair value of $93,449 ($1.72 per share), based upon the quoted closing stock price on the grant date. Compensation expense of $93,449 will be recognized on a straight-line basis over the 36-month requisite service period.

Non-Vested Shares – Related Parties (Officer and Directors) – and related Vesting

Chief Financial Officer

In November 2023, the Company granted 600,000 shares of restricted common stock to its former Chief Financial Officer (CFO), having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price on the grant date. The award was structured in two tranches, with 400,000 shares vesting ratably over the period July 2024 through December 2024 and 200,000 shares vesting on December 31, 2025. All shares vested in accordance with their original vesting schedules. See Note 8 for additional information regarding the CFO employment agreement.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Board of Directors

2025 Grant

In May 2025, the Company granted an aggregate of 150,000 shares of common stock to various members of its Board of Directors, having a fair value of $474,000 ($3.16/share), based upon the quoted closing trading price on the grant date. The shares vest upon the earliest of the following:

Effective December 31, 2025, a board member resigned their position. In accordance with the terms of their agreement, all unvested shares vested immediately upon resignation. As a result, 88,880 shares of common stock vested on December 31, 2025.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense recognized for all officer and director arrangements for the three months ended March 31, 2026 and 2025:

 Schedule of Stock Based Compensation Expense Recognized for Officer and Director Arrangements 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

The following is a summary of the Company’s non-vested shares at March 31, 2026 and December 31, 2025.

 Schedule of Non-vested Shares Related Parties

Stock Options

Stock option transactions for the three months ended March 31, 2026 and the year ended December 31, 2025 are summarized as follows:

 Schedule of Stock Option Transactions

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Three Months Ended March 31, 2026

Stock Options – Employee Terminations

324,750 options expired due to forfeiture, including 318,318 options held by our former Chief Financial Officer.

Year Ended December 31, 2025

Stock Options – Chief Executive Officer, Chief Financial Officer and Employees

The Company granted an aggregate of 1,144,116 fully vested, seven-year stock options for services rendered, allocated as follows: 227,336 to its Chief Executive Officer (CEO), 143,979 to its Chief Financial Officer (CFO), and 772,801 to various employees. The aggregate grant-date fair value was $1,701,735, of which $552,286 related to the officers and $1,149,449 related to employees. All options have an exercise price of $1.75 per share.

The fair value of these stock options was determined using the Black-Scholes option pricing model with the following inputs:

 Schedule of Fair Value of Stock Options

Stock Options – Employee Terminations

17,253 stock options were cancelled in connection with employee terminations.

Stock-based compensation expense related to stock options for the three months ended March 31, 2026 and 2025, was as follows:

Schedule of Stock Based Compensation Expense

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025

Warrants

Warrant activity for the three months ended March 31, 2026 and the year ended December 31, 2025 are summarized as follows:

 Schedule of Warrants Activity

Three Months Ended March 31, 2026

Warrants Issued with Convertible Debt

The Company issued 375,000 warrants in connection with convertible notes #7 and #8. See Notes 5 and 6.

Warrants Issued – Equity Offering

The Company issued 60,000 warrants in connection with a capital raise of $2,500,000. See above.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026 AND 2025