On January 30, 2020, Surge Holdings, Inc. (the “Company”), entered into a Membership Interest Purchase Agreement (the “MIPA”) by and among the Company, ECS Prepaid, LLC, a Missouri limited liability company (“ECS Prepaid”), Dennis R. Winfrey, an individual, and Peggy S. Winfrey, an individual (together, the “Winfreys”), whereby the Company purchased from the Winfreys all of the Membership Interests of ECS Prepaid owned by the Winfreys (the “ECS Prepaid Membership Interests”). In consideration for the ECS Prepaid Membership Interests, the Company issued to Suray Holdings LLC, an entity jointly controlled by the Winfreys (“Suray”), 450,000 shares of common stock of the Company (the “Common Stock”) (the “ECS Prepaid Purchase Share Issuance”). Although the MIPA is dated January 24th, it was signed on January 30th.
ECS and CSLS Stock Purchase Agreement
On January 30, 2020, the Company entered into a Stock Purchase Agreement (the “ECS and CSLS SPA”) by and among the Company, Electronic Check Services, Inc., a Missouri corporation (“ECS”), Central States Legal Services, Inc., a Missouri corporation (“CSLS”), and the Winfreys, whereby the Company purchased from the Winfreys all of the issued and outstanding stock of each of ECS and CSLS (the “ECS and CSLS Stock”). In consideration for the ECS and CSLS Stock, the Company issued 50,000 shares of Common Stock to Suray (the “ECS and CLS Purchase Share Issuance”). Although the ECS and CSLS SPA is dated January 24th, it was signed on January 30th.
Guaranty
As of January 30, 2020, the bank accounts of ECS Prepaid, ECS, and CSLS collectively had balances of $300,000 (the “Bank Accounts Balance”). The Company will issue 25,000 shares of Common Stock to a trust controlled by the Winfreys on a monthly basis until the Bank Accounts Balance is returned to the Winfreys (the “Ongoing Share Issuance”). The Company has to repay the Bank Accounts Balance to the Winfreys by January 30, 2021. Mr. Cox signed a Guaranty to repay the Bank Accounts Balance. As consideration for Mr. Cox’s guarantee of repayment, the Company and Mr. Cox signed a Guarantor Fee Agreement whereby the Company will pay Mr. Cox a fee of $2,500 per month until the Bank Accounts Balance is repaid (the “Guarantor Fee Agreement”). Although the Guarantor Fee Agreement is dated January 24th, it was signed on February 18th.
January SPAs and Notes
On January 30, 2020, the Company entered into those certain Securities Purchase Agreements (the “January SPAs”), with three (3) accredited investors (the “January Investors”), pursuant to which the January Investors purchased from the Company, for an aggregate purchase price of $500,000.00 (the “January Purchase Price”), Promissory Notes in the aggregate principal amount of $540,000.00 (the “January Notes”). The January Notes will be repaid according to a schedule of fixed interest and principal payments beginning in August 2020. The January Notes will be repaid according to a schedule of fixed interest and principal payments beginning in August 2020. The January Notes are dated January 29, 2020, were signed on January 30th, and the January Purchase Price was paid on January 31, 2020. As additional consideration for the January Investors loaning the January Purchase Price to the Company, the Company issued to each of the January Investors 250,000 shares of Common Stock for a total of 750,000 shares (the “January Share Issuance”).
Six months and one day following the issuance of the January Notes, in the event the VWAP for the Common Stock was, during the preceding ten day trading period, at less than $0.35 per share, each of the January Investors shall have the right to receive additional shares of Common Stock equal to the True-Up Amount (as defined in the January SPAs).
The January Notes shall accrue interest at a rate of fourteen percent (14%) per annum and will mature on February 5, 2021. No payments of principal or interest are due through July 2020 (five (5) months following issuance) and then there are seven (7) fixed payments of principal and interest due on a monthly basis until maturity. In the event of an uncured default, and only in that event, the January Notes may be converted into common stock at a thirty-five percent (35%) discount to a certain market price.
February SPAs and Note
On February 3 and February 6, 2020, Surge Holdings, Inc. (the “Company”) entered into those certain Securities Purchase Agreements (the “February SPAs”), with two (2) accredited investor (the “February Investors”), pursuant to which the January Investors purchased from the Company, for an aggregate purchase price of $400,000.00 (the “February Purchase Price”), Promissory Notes in the principal amount of $432,000.00 (the “February Notes”). The February Notes will be repaid according to a schedule of fixed interest and principal payments beginning in August 2020. The February Purchase Price for the February Notes was paid by the February Investors on February 3 and 6, 2020. As additional consideration for the February Investors loaning the February Purchase Price to the Company, the Company issued to each of the February Investors 300,000 shares of Common Stock for a total of 600,000 shares (the “February Share Issuance”).
The terms of the February Notes are substantially the same as the terms of the January Notes.
Item 1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of and does not purport to be a complete description of the rights and obligations of the parties to the MIPA, the ECS and CSLS SPA, the Guaranty, the Guarantor Fee Agreement, the January SPAs, the January Notes, the February SPAs, and the February Notes, and such descriptions are qualified in their entirety by reference to the full text of the MIPA, the ECS and CSLS SPA, the Guaranty, the Guarantor Fee Agreement, the January SPAs, the January Notes, the February SPAs, and the February Notes, which will be filed as exhibits to the Company’s Form 10-Q for the quarter ending March 31, 2020
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Lots of new debt, is very clear.
Newly issued SURG shares, is very clear
In fact, 1,850,000 to 2,150,000 newly issued $SURG shares, is very clear.
AI
