v3.26.1
Subsequent Event
 6 Months Ended
Jun. 30, 2026
Subsequent Events [Abstract]  
Subsequent Event

Note 11 – Subsequent Event

 

Subsequent to June 30, 2026, the Company had the following transactions:

 

Convertible Notes Payable

 

Between July 2, 2026 and July 23, 2026 the Company issued four (4) convertible notes payable, being Convertible Notes #23 through #26, with an aggregate original principal amount of $1,265,000, comprising aggregate discount of $115,000 and net proceeds of $1,150,000. Each note bears guaranteed interest earned in full at issuance, aggregating $115,500, so that the aggregate obligation at issuance was $1,380,500.

 

Each note is subject to a 4.99% beneficial ownership limitation, increasable to 9.99% upon sixty-one (61) days’ prior written notice, and each note other than Convertible Note #26 permits the Company to effect a forced conversion at $6/share subject to specified price and trading volume conditions. The terms of each note are as follows:

 

·Convertible Note #23, issued July 2, 2026 and maturing July 2, 2027: principal of $275,000, original issue discount of $25,000, guaranteed interest of 8%, or $22,000, for a total obligation of $297,000, default rate of 22%, unsecured, and five (5) monthly amortization payments of $59,400 commencing March 2, 2027. Convertible at fixed prices of $2/share and $4/share, with the remaining balance convertible at 85% of the lowest daily volume weighted average price of the common stock during the five (5) trading days immediately preceding the conversion date, as described in Note 5.

 

·Convertible Note #24, issued July 6, 2026 and maturing July 6, 2027: principal of $275,000, original issue discount of $25,000, guaranteed interest of 8%, or $22,000, for a total obligation of $297,000, default rate of 22%, unsecured, five (5) monthly amortization payments of $59,400 commencing March 6, 2027, and 61,000 commitment shares of common stock earned in full at closing and valued at $0.46/share, or $28,133. Convertible at fixed prices of $1.50/share and $3/share, with the remaining balance convertible at 85% of the lowest daily volume weighted average price of the common stock during the five (5) trading days immediately preceding the conversion date, as described in Note 5.

 

·Convertible Note #25, issued July 16, 2026 and maturing July 16, 2027: principal of $165,000, original issue discount of $15,000, guaranteed interest of 10%, or $16,500, for a total obligation of $181,500, default rate of 22%, unsecured, and seven (7) monthly amortization payments of $25,928.57 commencing January 16, 2027. The note contains no fixed conversion price and is convertible only at 85% of the lowest daily volume weighted average price of the common stock during the five (5) trading days immediately preceding the conversion date, as described in Note 5.

 

·Convertible Note #26, issued July 23, 2026 and maturing January 23, 2028: principal of $550,000, a discount of $50,000, interest at 10% per annum of which the first year’s interest of $55,000 is guaranteed and earned in full at issuance, for a total obligation of $605,000, default rate of 18%, amortization payments of $13,750 due October 23, 2026, $123,750 on each of January 23, April 23 and July 23, 2027, $115,500 on October 23, 2027 and the remaining balance of $104,500 on January 23, 2028, and 375,000 commitment shares of common stock valued at $0.25/share, or $95,213. The note contains no fixed conversion price and is convertible only at 90% of the lowest daily volume weighted average price of the common stock during the five (5) trading days immediately preceding the conversion date. It is guaranteed by a subsidiary and secured by a junior perfected security interest in substantially all assets of the Company and the guarantor, on the same basis as the secured convertible notes described in Note 5, is subordinated to the Company’s senior indebtedness, and ranks pari passu with the other notes issued under the same financing.

 

The Market Price conversion rate on each note becomes exercisable only upon an event of default or the Company’s failure to pay an amortization payment when due. Convertible Notes #23 and #24 contain a price protection provision on the same terms as the convertible notes described in Note 5. None of these instruments existed at June 30, 2026. The embedded conversion feature of each note was evaluated at issuance on the terms then exercisable under ASC 815-15-25-1. No conversion feature was separated, and each will be evaluated again on the date its Market Price rate first becomes exercisable, as described in Note 5.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026 AND 2025

 

Conversion of Convertible Notes Payable

 

Holders of Convertible Notes #2, #3, #4, #5 and #6 converted principal and capitalized guaranteed interest aggregating $1,593,070 into 7,245,688 shares of common stock, at conversion prices ranging from $0.18/share to $0.30/share. Convertible Notes #2 and #5 were settled in full. Convertible Notes #3, #4 and #6 remain outstanding in part. The conversion features of Convertible Notes #2, #3, #4 and #5, which were separated and carried as derivative liabilities of $786,633 at June 30, 2026, were remeasured to fair value immediately before each conversion, and the portion attributable to the amounts converted was reclassified to additional paid-in capital. See Notes 5 and 6.

 

Stock Issued for Cash - At the Market Offering

 

Between July 13, 2026 and August 19, 2026 the Company issued 17,290,125 shares of common stock under it’s at the market offering program at an average price of $0.34/share, for gross proceeds of $5,854,044. The Company paid $175,621 in direct offering costs, resulting in net proceeds of $5,678,423.

 

Amendment to Employment Agreement – Related Party

 

On August 10, 2026, the Company amended its employment agreement with its CEO, Kevin Brian Cox, to defer the payment date of Mr. Cox’s bonus until October 1, 2026.

 

Board of Directors Restricted Stock Agreements

 

On July 29, 2026, the Company and its three independent directors entered into restricted share award agreements with an effective date of June 24, 2026, pursuant to which the Company granted to each of the directors restricted share awards of 315,179 shares of common stock vesting on the earlier of June 24, 2029, the date of a change of control, or the date that the director is no longer a director for any reason other than a termination for cause.

 

Stock Issued for Services

 

The Company issued 550,000 shares of common stock to consultants for services rendered, having a fair value of $151,050, ($0.27 - $0.28/share), based upon the quoted closing trading price on the grant date.

 

Formation of Redline Wireless Group, LLC

 

On August 3, 2026, the Company formed Redline Wireless Group, LLC, a Wyoming limited liability company, with a national wireless master distribution organization, to market, distribute and support prepaid wireless services through that organization’s independent dealer channel under the Company’s LinkUp Mobile brand. The Company holds a 51% membership interest and serves as managing member, and the distribution organization holds the remaining 49%. Redline is governed by a six (6) member board of directors, of which each member appoints three (3) directors.

 

The Company’s contributions consist entirely of in-kind assets and services, including a license of the LinkUp Mobile brand and related intellectual property and access to the Company’s platform, billing and provisioning systems, customer service and operations center under a master services agreement priced at documented cost with no markup or management fee. The Company made no cash capital contribution. The Company’s direct carrier relationships and wholesale agreements were not contributed and remain with the Company. Redline had no operations, no assets and no liabilities as of June 30, 2026, and accordingly the formation had no effect on the consolidated financial statements as of and for the periods presented. The Company is evaluating the accounting for the formation and the consolidation of Redline under ASC 810, Consolidation, which evaluation will be completed in the period of formation.