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Debt
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Debt

Note 5 – Debt

 

The following represents a summary of the Company’s notes payable – SBA government, loans payable – related parties, notes payable and convertible notes, key terms, and outstanding balances at September 30, 2021 and December 31, 2020, respectively:

 

Notes Payable – SBA government

 

(1) Paycheck Protection Program - PPP Loan

 

Pertaining to the Company’s eighteen (18) month loan and in accordance with the Paycheck Protection Program (“PPP”) and Conditional Loan Forgiveness, the promissory note evidencing the loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company.

 

Under the terms of the PPP loan program, all or a portion of this Loan may be forgiven upon request from Borrower to Lender, provided the Loan proceeds are used in accordance with the terms of the Coronavirus Aid, Relief and Economic Security Act (the “Act” or “CARES”), Borrower is not in default under the Loan or any of the Loan Documents, and Borrower has provided documentation to Lender supporting such request for forgiveness that includes verifiable information on Borrower’s use of the Loan proceeds, to Lender’s satisfaction, in its sole and absolute discretion.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

 

(2) Economic Injury Disaster Loan (“EIDL”)

 

This program was made available to eligible borrowers in light of the impact of the COVID-19 pandemic and the negative economic impact on the Company’s business. Proceeds from the EIDL are to be used for working capital purposes.

 

Installment payments, including principal and interest, are due monthly (beginning twelve (12) months from the date of the promissory note) in amounts ranging from $109 - $751/month. The balance of principal and interest is payable over the next thirty (30) years from the date of the promissory note. There are no penalties for prepayment. Based upon guidance issued by the SBA on June19, 2020, the EIDL Loan is not required to be refinanced by the PPP loan.

 

   PPP   EIDL   EIDL   PPP 
Terms  SBA   SBA   SBA   SBA 
                 
Issuance dates of SBA loans   April 2020    May 2020    July 2020    March 2021 
Term   18 months    30 Years    30 Years    5 Years 
Maturity date   October 2021    May 2050    July 2050    March 2026 
Interest rate   1%   3.75%   3.75%   1%
Collateral   Unsecured    Unsecured    Unsecured    Unsecured 
Conversion price   N/A    N/A    N/A    N/A 

 

                   Total 
                     
Principal  $498,082   $150,000   $486,600   $518,167   $1,652,849 
                          
Balance - December 31, 2019   -    -    -    -    - 
Gross proceeds   498,082    150,000    486,600    -    1,134,682 
Balance - December 31, 2020   498,082    150,000    486,600    -    1,134,682 
Gross proceeds   -    -    -    518,167    518,167 
Deconsolidation of subsidiary (“TW”)   -    -    (150,000)*   -    (150,000)
Repayments   -    (1,040)   (2,385)   -    (3,425)
Balance - September 30, 2021  $498,082   $148,960   $334,215   $518,167   $1,499,424 

 

* In connection with the deconsolidation of TW, $150,000 was assumed by the buyer.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

 

Notes Payable – Related Parties

   1  2
   Note Payable  Note Payable
Terms  Related Party  Related Party
       
Issuance dates of notes  Various  May 2020/January 2021
Maturity date  June 30, 2022 or January 1, 2023 due on demand  March 2021 and due on demand
Interest rate  10%  15%
Collateral  Unsecured  Unsecured
Conversion price  N/A  N/A

 

           Total   In-Default 
                 
Balance - December 31, 2019   2,205,440    -    2,205,440   $     - 
Gross proceeds   1,136,500    147,500    1,284,000      
Balance - December 31, 2020   3,341,940    147,500    3,489,440    - 
Gross proceeds   3,625,000    63,000    3,688,000      
Repayments   -    (163,000)   (163,000)     
Balance - September 30, 2021  $6,966,940   $47,500   $7,014,440   $- 

 

1 Activity is with the Company’s Chief Executive Officer and Board Director (Kevin Brian Cox). Prior to September 30, 2021, these notes were either due on demand or had a specific due date. Additionally, these advances had interest rates from 6%-15%. On September 30, 2021, all notes and related accrued interest were combined into two (2) new notes. The new notes had due dates of June 30, 2022 or January 1, 2023. All notes bear interest at 10%.

 

2 Activity is with the Company’s President, Chief Operating Officer and Board Director (Anthony Nuzzo). In 2021, the Company received advances of $63,000 in the quarter ended March 31, 2021, which were repaid in the quarter ended March 31, 2021 (this related to the January 2021 note). The remaining outstanding amount of $47,500 is due on demand.

 

On November 4, 2021, the Company’s Chief Executive Officer converted notes totaling $2,415,560 into 561,758 shares of common stock, having a fair value of $1,808,861 ($3.22/share), based upon the quoted closing trading price. As a result of the debt conversion, the Company recognized a gain on debt extinguishment of $605,699. However, since this is a related party transaction, accordingly no gain can be recognized, resulting in an increase to additional paid-in capital.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

 

Notes Payable

Terms  Note  Note  Note  Notes
             
Issuance dates of notes  2016  2016  November 4, 2019  August/September 2021
Maturity date  2016  2017  November 3, 2020  August/September 2022
Interest rate  5%  10%  18%  10%
Collateral  Unsecured  Unsecured  Unsecured  Unsecured
Conversion price  N/A  N/A  N/A  N/A
Warrants issued as discount  N/A  N/A  N/A  2,406,250

 

                   Total   In-Default 
                         
Principal  $485,000   $27,500   $250,000   $853,386*  $1,615,886      
                               
Balance - December 31, 2019   485,000    27,500    223,672    -    736,172   $512,500 
Amortization of debt discount   -    -    26,328    -    26,328      
Repayments   (485,000)   (27,500)   -    -    (512,500)     
Balance - December 31, 2020   -    -    250,000    -    250,000    250,000 
Gross proceeds   -    -    -    853,386    853,386      
Debt discount   -    -    -    (265,268)**   (265,268)     
Amortization of debt discount   -    -    -    5,087    5,087      
Repayments   -    -    (250,000)   -    (250,000)     
Balance - September 30, 2021  $-   $-   $-   $593,205   $593,205   $- 

 

* In the event of default, notes with principal totaling $386,000 are convertible at 75% of the market price based upon the VWAP in preceding 10 days.
** Debt discount on notes totaling $386,000 includes original issue discounts of $36,000 and debt discounts associated with warrants totaling $229,268.

 

Subsequent to September 30, 2021, the Company repaid $386,000 and related accrued interest of $5,016. At this time the remaining debt discount was fully amortized to interest expense.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

 

Convertible Notes Payable – Net

 

Terms  Notes Payable  Notes Payable  Notes Payable
          
Issuance dates of notes  2019 and Prior  February 2020 - December 2020  January 2021 - March 2021
Maturity date  2020  February 2021 - September 2021  May 2021 - March 2022
Interest rate  14%  10% - 14%  5% - 12%
Collateral  Unsecured  Unsecured  Unsecured
Conversion price  A  A  B

 

               Total   In-Default 
                     
Principal  $-   $2,347,000   $2,550,000   $4,897,000      
                          
Balance - December 31, 2019  $4,436,684   $-   $-   $4,436,684   $- 
Gross proceeds   -    2,347,000    -    2,347,000      
Debt discount   -    (2,347,000)   -    (2,347,000)     
Amortization of debt discount   161,217    1,829,219    -    1,990,436      
Repayments - cash   (438,698)   (130,061)   -    (568,759)     
Repayments - common stock   (4,159,203)   (182,988)   -    (4,342,191)     
Balance - December 31, 2020   -    1,516,170    -    1,516,170    - 
Gross proceeds   -    -    2,550,000    2,550,000      
Debt discount   -    -    (2,460,829)   (2,460,829)     
Amortization of debt discount   -    517,781    1,458,912    1,976,693      
Repayments - cash   -    (1,132,170)   (250,000)   (1,382,170)     
Repayments - common stock   -    (978,728)   -    (978,728)     
Reclassified to receivable   -    76,947C   -    76,947      
Balance - September 30, 2021  $-   $-   $1,298,083   $1,298,083   $- 

 

A - Convertible at 65% multiplied by the lowest one (1) day volume weighted average price (“VWAP”) of the Company’s common stock during the ten (10) trading days prior to conversion.

 

B - Convertible at 70% - 75% multiplied by the lowest one (1) day volume weighted average price (“VWAP”) of the Company’s common stock during the ten (10) trading days prior to conversion.

 

C - During 2021, the Company overpaid a note holder by $76,947 when settling the outstanding balance. This overpayment had been recorded as a receivable and was repaid in full in April 2021.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

 

Line of Credit

 

The Company had a $1,000,000 line of credit with a bank, bearing interest at 6%, which was due in April 2021. The line of credit was secured by all of the Company’s assets and was personally guaranteed by the owner of the majority of the Company’s voting shares. The balance at September 30, 2021 and December 31, 2020 was $0 and $912,870. In connection with the deconsolidation of TW in May 2021, the buyer assumed the line of credit.