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Merger Agreement

6 Months Ended

Jun. 30, 2019

4	MERGER AGREEMENT

As discussed in Note 1, the Company closed the merger transaction (the “Merger”) that was the subject of that certain Agreement and Plan of Reorganization (the “Merger Agreement”) with True Wireless, Inc., an Oklahoma corporation (“TW”) dated as of April 11, 2018. At closing, in accordance with the Merger Agreement, TW merged with and into TW Acquisition Corporation, a Nevada corporation (“Merger Sub”), a wholly-owned subsidiary of Surge Holdings, Inc. (the “Merger”), with TW being the surviving corporation. As a result of the Merger, TW became a wholly-owned subsidiary of the Company.

Pursuant to the terms of the Merger Agreement, TW, Inc. merged into Acquisition Sub in a transaction where TW, Inc. was the surviving company and become a wholly-owned subsidiary of the Company. The transaction was structured as a tax-free reverse triangular merger. In addition to the 12,000,000 shares of Company Common Stock and $500,000 cash which has been previously paid to the shareholders of TW, at the closing of the merger transaction, the shareholders of TW received the following as additional merger consideration:

● 152,555,416 shares of newly-issued Company Common Stock, which will gave the shareholders of TW, on a proforma basis, a 69.5% interest in the Company’s total Common Shares.

● An additional number of shares of Company Common Stock, if any, which were necessary to vest 69.5% of the aggregate issued and outstanding Common Stock in the shareholders of TW at the Closing.

● A Promissory Note in the original face amount of $3,000,000, bearing interest at 3% per annum maturing on December 31, 2018.

● 3,000,000 shares of newly-issued Company Series A Preferred Stock

Following the closing of the merger transaction the Company’s investment in TW consisted of the following:

	Shares		Amount
Consideration paid prior to Closing:
Cash paid			$	500,000
Common stock issued		12,000,000		1,200,000
Total consideration paid		12,000,000	$	1,700,000
Consideration paid at Closing:
Common stock to be issued at closing ⁽¹⁾		152,555,416	$	60,683,006
Series A Preferred Stock to be issued at closing		3,000,000		120,000
Note payable due December 31, 2018				3,000,000
Total consideration to be paid			$	63,803,006

Total consideration			$	65,503,006

(1)

The Common Shares issued at closing of the Merger Transaction had a closing price of approximately $0.40 per share on the date of the transaction.

Following the closing of the transaction, TW’s financial statements as of the Closing were consolidated with the Consolidated Financial Statements of the Company.

The following presents the unaudited pro-forma combined results of operations of the Company with the TW Business as if the entities were combined on January 1, 2018.

	Six Months Ended
	June 30, 2018
Revenues, net	$	7,927,317
Net loss	$	(237,332	)
Net loss per share	$	(0.00	)
Weighted average number of shares outstanding		76,206,307

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of January 1, 2018 or to project potential operating results as of any future date or for any future periods.

The Company consolidated TW as of the closing date of the agreement, and the results of operations of the Company include that of TW.