Note 9 – Stockholders’ Deficit

At June 30, 2026 and December 31, 2025, the Company was authorized to issue one class of common stock and two designated series of preferred stock, as follows:

Common Stock

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

Series A, Convertible Preferred Stock

Series C, Convertible Preferred Stock

2022 Omnibus Securities and Incentive Plan

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

The Plan initially provided for the following:

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

See the proxy statement filed with the Securities and Exchange Commission (“SEC”) on January 19, 2023 for a complete detail of the Plan.

Effective January 1, 2025, in accordance with the Plan, the Company 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 for issuance 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 for issuance, 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 June 30, 2026 and December 31, 2025, the Company had sufficient authorized shares to settle any possible awards that vested or stock options eligible for conversion.

Equity Transactions for the Six Months Ended June 30, 2026

Stock Issued for Cash

Underwritten Public Offering

On January 20, 2026, the Company entered into an underwriting agreement with the representative of the underwriters for an underwritten public offering of 2,000,000 shares of common stock at a public offering price of $1.25/share, for gross proceeds of $2,500,000. In connection with this offering, the Company paid direct offering costs of $375,000, resulting in net proceeds of $2,125,000. 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 option expired unexercised on March 8, 2026. The Company intends to use the net proceeds for expansion of its Lifeline business and for working capital and general corporate purposes.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

In connection with the offering, the Company issued warrants to the underwriter to purchase 60,000 shares of common stock, equal to 3.0% of the total shares sold, at an exercise price of $1.38/share, equal to 110% of the public offering price. 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, as amended (the “Securities Act”), in reliance on the exemption provided by Section 4(a)(2) of the Securities Act.

The warrants were determined to be indexed to the Company’s common stock and settleable in the Company’s common stock and are therefore classified within stockholders’ deficit. The grant-date fair value of the warrants was recorded as a cost of the offering with a corresponding credit to additional paid-in capital, resulting in no net effect on total stockholders’ deficit.

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

The Company issued 7,323 shares of common stock under its at the market offering program at prices ranging from $1.98/share to $2.03/share, for gross proceeds of $14,820, less commissions of $445, resulting in net proceeds of $14,375. The shares were sold under the At the Market Offering Agreement described below. See Note 11.

Stock Issued for Services

The Company issued 585,000 shares of common stock for services rendered, having a fair value of $843,935 ($0.551 - $2.04/share), based upon the quoted closing trading price on the grant date.

Stock Issued for Services - Related Party

On April 1, 2026, the Company issued its Chief Executive Officer 500,000 shares of common stock for services rendered under his employment agreement, having a fair value of $360,000, or $0.72/share.

On June 1, 2026, the Company issued its Chief Executive Officer an additional 500,000 shares of common stock for services rendered under the same agreement, having a fair value of $297,900, or $0.5958/share.

An aggregate compensation expense of $657,900 was recognized.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

Recognition of Stock Based Compensation - Restricted Stock Awards – Employees

On December 16, 2025, the Company granted 54,331 restricted shares of common stock to employees, having an aggregate grant-date fair value of $93,449, or $1.72/share, which vest in full on the third anniversary of the grant date, with compensation cost recognized on a straight-line basis over the thirty-six (36) month requisite service period. The Company recognized $7,787 and $15,574 in compensation expense related to these awards during the three and six months ended June 30, 2026, respectively

Recognition of Stock Based Compensation - Non-Vested Shares - Related Parties

The Company recognized $60,313 and $110,208 in compensation expense during the three and six months ended June 30, 2026, respectively, related to non-vested shares of common stock awarded to members of the board of directors under their respective agreements. See Non-Vested Shares - Related Parties (Officer and Directors) below.

Debt Discount – Convertible Notes Payable – Common Stock

During the six months ended June 30, 2026, the Company issued 31,525 shares of common stock with an aggregate grant-date fair value of $54,828, based upon the quoted closing price, to four lenders (convertible notes #9, #10, #11 and #12) as additional consideration in connection with the issuance of convertible notes payable, at prices ranging from $0.83/share to $2.04/share. 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. See Note 5.

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/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.

Conversion of Debt to Common Stock

Holders of convertible notes payable converted an aggregate of $385,880 of principal and capitalized guaranteed interest into 935,843 shares of common stock, at effective conversion prices ranging from $0.3587/share to $0.4490/share. The conversions were effected under the original conversion terms of the respective notes, and accordingly the carrying amount of the notes converted, net of the related unamortized debt discount, was credited to common stock and additional paid-in capital with no gain or loss recognized. See Note 5.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

Treasury Stock

At June 30, 2026 and December 31, 2025, the Company held 695,953 shares of its common stock in treasury at an aggregate cost of $1,631,966. There was no treasury stock activity during the three and six months ended June 30, 2026.

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.

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.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

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. These warrants were determined to be indexed to the Company’s common stock and settleable in the Company’s common stock and are classified within stockholders’ deficit. 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. Together with 362,620 shares repurchased in prior years at a cost of $631,967, the Company held 695,953 shares in treasury at an aggregate cost of $1,631,966 at December 31, 2025.

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 (Former)

In November 2023, the Company granted 600,000 shares of restricted common stock to its 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

JUNE 30, 2026 AND 2025

Board of Directors

2026 Grant

On June 24, 2026, the Company granted an aggregate of 945,537 shares of common stock to three members of its Board of Directors, having an aggregate fair value of $375,000 ($0.3966/share), based upon the quoted closing trading price on the grant date. The shares vest upon the earliest of the following:

No shares were forfeited or cancelled during the three and six months ended June 30, 2026.

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 six months ended June 30, 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

JUNE 30, 2026 AND 2025

The following is a summary of the Company’s non-vested shares at June 30, 2026 and December 31, 2025.

 Schedule of Non-vested Shares Related Parties

Stock Options

Stock option transactions for the six months ended June 30, 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

JUNE 30, 2026 AND 2025

Six Months Ended June 30, 2026

Stock Options – Employee Terminations

424,476 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 year ended December 31, 2025 was $1,701,735.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

Warrants

Warrant activity for the six months ended June 30, 2026 and the year ended December 31, 2025 are summarized as follows:

 Schedule of Warrants Activity

Six Months Ended June 30, 2026

Warrants Issued with Convertible Debt

The Company issued 660,000 warrants in connection with convertible notes #7, #8, #18, #21 and #22. These warrants contain cash settlement features that are not within the Company’s control and, accordingly, were determined not to qualify for equity classification under ASC 815-40. They are classified as derivative liabilities and are measured at fair value at each reporting date, with changes in fair value recognized in earnings. See Notes 5,6 and 7.

Warrants Issued – Equity Offering

The Company issued 60,000 warrants in connection with a capital raise of $2,500,000. These warrants were determined to be indexed to the Company’s common stock and settleable in the Company’s common stock and are classified within stockholders’ deficit. See above.

Of the 1,450,000 warrants outstanding at June 30, 2026, 660,000 are classified as derivative liabilities and 790,000 are classified within stockholders’ deficit.

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025