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Installment Sale Liability | 9 Months Ended
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Sep. 30, 2024
Installment Sale Liability |
Installment Sale Liability | Note 11 – Installment Sale Liability Agreement In 2022, the Company executed a two-year (2) financing arrangement with Affordable Connectivity Financing (“ACF”, “Seller”) to receive up to $25,000,000 to purchase devices for sale. This agreement was based upon the Company submitting a purchase order and ACF approving the request. The Company could cancel the purchase order prior to ACF paying for the devices. The agreement could be extended by a period of one (1) year upon mutual consent. Under the terms of the agreement, ACF was directly purchasing products and reselling them to the Company at a markup. At December 31, 2022, the markup was 9.85%. Effective April 1, 2023 and each quarter thereafter, this amount was subject to increase based upon the secured overnight financing rate. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 Repayment Period Each installment sale contract was to be repaid over a period of nine (9) months. Security This arrangement was fully secured by all assets of the Company. Minimum Outstanding Balance 3 month rolling average of 70% of the installment sale credit amount. Prepayment Penalty The Company was subject to a cancellation fee of 3% during the first year and 2% during the second year. Administrative Fee The Company was required to pay $2,000 per month. Default Rate For any unpaid amounts under this agreement, the Company was subject to a fee of 1.35% per month (16.2% annualized). Commitment Fee ACF charged a 2% commitment fee on the initial installment sale, and 2% for each incremental increase of $5,000,000 in the installment sale credit amount. For example, if the initial installment sale credit amount is $15,000,000, the credit availability fee would be $300,000 (2%). Any subsequent increase of $5,000,000 or more would result in an additional fee of $100,000 (2%). Commitment fees are paid over a period of 12 months as part of the Seller’s monthly invoicing. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 Covenants At December 31, 2023, the Company was in compliance with all of the following ratios:
| 1. | Company adjusted EBITDA,
| 2. | Total Leverage Ratio,
| 3. | Fixed Charge Coverage Ratio,
| 4. | Minimum Subscriber Base; and
| 5. | Minimum Liquidity
Additionally, the Company is required to provide various data to the vendor on a periodic basis. The Company has not received notice from the vendor regarding any instances of non-compliance. Lockbox The Company will maintain a lockbox for the benefit of the Seller. Installment Sale Liability At December 31, 2023, the Company recorded an installment sale liability of $0. During the year ended December 31, 2023, the Company paid $491,536. These amounts were included as a component of cost of goods sold. The liability was repaid in full in 2023 and the agreement was cancelled.

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