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Stockholders’ Equity | 9 Months Ended
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Sep. 30, 2024
Equity [Abstract] |
Stockholders’ Equity | Note 9 – Stockholders’ Equity At September 30, 2024, the Company had three (3) classes of stock: Common Stock
| - | 500,000,000 shares authorized
| - | Par value - $0.001
| - | Voting at 1 vote per share
Series A, Convertible Preferred Stock
| - | 13,000,000 shares authorized
| - | none issued and outstanding
| - | Par value - $0.001
| - | Voting at 10 votes per share
| - | Ranks senior to any other class of preferred stock
| - | Dividends - none
| - | Liquidation preference – none
| - | Rights of redemption - none
| - | Conversion into 1/10 of a share of common stock for each share held
SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 Series C, Convertible Preferred Stock
| - | 1,000,000 shares authorized
| - | None issued and outstanding
| - | Par value - $0.001
| - | Voting at 250 votes per share
| - | Ranks junior to any other class of preferred stock
| - | Dividends – equal to the per share amount (as converted basis) as the common stockholders should the Board of Directors declare a dividend
| - | Liquidation preference – original issue price plus any declared yet unpaid accrued dividends
| - | Rights of redemption - none
| - | Conversion into 250 shares of common stock for each share held
Securities and Incentive Plan In March 2023, the Company’s shareholders approved the 2022 Plan (the “Plan”) initially approved, authorized, and adopted by the Board of Directors in August 2022. The Plan initially provided for the following:
| 1. | 3,500,000 shares of common stock
| 2. | An annual increase on the first day of each calendar year beginning January 1, 2023 and ending on January 31, 2031 equal to the lesser of:
| a. | 10% of the common stock outstanding on the final day of the immediately preceding calendar year, or
| b. | Such smaller amount of common stock as determined by the Board of Directors.
| 3. | The shares may be issued as follows to directors, officers, employees, and consultants:
| a. | Distribution equivalent rights
| b. | Incentive share options
| c. | Non-qualified share options
| d. | Performance unit awards
| e. | Restricted share awards
| f. | Restricted share unit awards
| g. | Share appreciation rights
| h. | Tandem share appreciation rights
| i. | Unrestricted share awards
See the proxy statement filed with the SEC on January 19, 2023 for a complete detail of the Plan. Effective January 1, 2024, in accordance with the Plan, we increased the available amount of shares by 10% of the common stock outstanding on December 31, 2023, approximating an additional 1,400,000 shares of common stock. After this increase, total shares authorized and available to be issued under the Plan approximated 4,900,000 shares. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 Of the total shares authorized and available, the Company has reserved shares for its officers, directors and employees for non-vested shares that are expected to vest in accordance with the terms of the related employment agreements and stock options that may be converted into common stock. At September 30, 2024, the Company had sufficient authorized shares to settle any possible awards that vested or stock options eligible for conversion. Equity Transactions for the Nine Months Ended September 30, 2024 Stock Issued for Cash - Capital Raise The Company issued 3,080,356 shares of common stock for gross proceeds of $17,249,994 ($5.60/share). In connection with the capital raise, the Company paid cash as direct offering costs totaling $1,395,000, resulting in net proceeds of $15,854,994. This offering was made pursuant to the Company’s registration statement on Form S-3 (File No. 333-273110) previously filed with the Securities and Exchange Commission (the “SEC”) on July 3, 2023, as amended, and declared effective by the SEC on November 3, 2023. A preliminary and final prospectus supplement were filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933 (the “Securities Act”) on January 17, 2024 and January 19, 2024, respectively. The Offering closed on January 22, 2024. Exercise of Warrants - Cash During 2024, the Company issued 1,860,308 shares of common stock in connection with the exercise of 1,860,308 warrants for $8,799,257 ($4.73/share). See warrant table below. Exercise of Warrants - Cashless During 2024, the Company issued 40,238 shares of common stock in connection with the cashless exercise of warrants ($0.001/share). The transaction had a net effect of $0 on stockholders’ equity. See warrant table below. Stock Issued for Services The Company issued 47,386 shares of common stock for services rendered, having a fair value of $411,740 ($3.85 - $7.34/share), based upon the quoted closing trading price. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 See separate discussion below for the issuance and related vesting of common stock granted to the Company’s officers and directors. Treasury Stock Effective in July 2024, the Company implemented a share repurchase program. Under the terms of this program, the Company undertook the following:
| ● | Maximum dollar amount authorized for repurchase is $5,000,000,
| ● | The Company will not repurchase more than 20,000 shares per day,
| ● | The Company will not repurchase any shares greater than $5/share,
| ● | Share repurchases will only be made to the extent it does not prevent the Company from paying its debts; and
| ● | The shares may either be returned to the treasury and authorized for reissuance or cancelled and retired.
The Company reacquired 280,770 shares of treasury stock for $485,131, at an average price of $1.73/share. Effective in October 2024, the Company ceased its share repurchase program. Prior to September 30, 2024, the Company acquired 81,850 shares of treasury stock for $146,836, at an average price of $1.79/share. Equity Transactions for the Year Ended December 31, 2023 Stock Issued for Services The Company issued 242,615 shares of common stock for services rendered, having a fair value of $1,290,024 ($4.19 - $9.40/share), based upon the quoted closing trading price. Exercise of Warrants - Cash The Company issued 43,814 shares of common stock upon the exercise of warrants with an exercise price of $4.73 for $207,240. Non-Vested Shares – Related Parties (Officer and Directors) – and related Vesting Chief Financial Officer In 2023, the Company granted common stock to its Chief Financial Officer (600,000 shares – see Note 8), having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 The shares will vest as noted above (see Note 8). The Company records stock compensation expense ratably over these vesting periods. All shares are expected to be vest in accordance with the terms of the agreement. For the nine months ended September 30, 2024 and 2023, the Company recognized stock compensation expense of $1,946,848 and $0, respectively, related to vesting. Board Directors In 2023, the Company granted an aggregate 95,000 shares of common stock to various members of the Board of Directors, having a fair value of $519,500 ($5.14 - $5.53/share), based upon the quoted closing trading price. The shares will vest at the earlier to occur:
| - | Board Member no longer serves in that capacity for any reason, except for reasons related to cause,
| - | Occurrence of a change in control; and
| - | Fifth anniversary of the effective date (2028)
The Company records stock compensation expense over the five (5) year vesting period. All shares are expected to vest in accordance with the terms of the employment agreement. For the nine months ended September 30, 2024 and 2023, the Company recognized stock compensation expense of $77,925 and $0, respectively, related to vesting. Chief Executive Officer In 2024, the Company granted common stock to its Chief Executive Officer (500,000 shares – see Note 8), having a fair value of $3,800,000 ($7.60/share), based upon the quoted closing trading price. The shares will vest as noted above (see Note 8). The Company records stock compensation expense ratably over these vesting periods. All shares are expected to vest in accordance with the terms of the agreement. For the nine months ended September 30, 2024 and 2023, the Company recognized stock compensation expense of $3,580,090 and $0, respectively, related to vesting. Director of Human Resources and Legal Services In 2024, the Company granted 100,000 shares of common stock to its Director of Human Resources and Legal Services, having a fair value of $672,000 ($6.72/share), based upon the quoted closing trading price. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 The shares will vest ratably over the period July 2024 – December 2024. The Company records stock compensation expense ratably over these vesting periods. All shares are expected to vest in accordance with the terms of the agreement. For the nine months ended September 30, 2024 and 2023, the Company recognized stock compensation expense of $633,113 and $0, respectively, related to vesting. For the nine months ended September 30, 2024 and 2023, the Company recognized total stock compensation expense of $6,237,976 and $0 related to vesting. The following is a summary of the Company’s non-vested shares at September 30, 2024 and December 31, 2023. Schedule of Non-vested Shares Related Parties
|  |  |  |  | Weighted Average |
Non-Vested Shares |  | Number of Shares |  |  | Grant Date Fair Value |
Balance - December 31, 2022 |  |  | - |  |  | $ | - |
Granted |  |  | 695,000 |  |  |  | 5.24 |
Vested |  |  | - |  |  |  | - |
Cancelled/Forfeited |  |  | - |  |  |  | - |
Balance - December 31, 2023 |  |  | 695,000 |  |  | $ | 5.24 |
Granted |  |  | 600,000 |  |  | $ | 7.60 |
Vested |  |  | (500,000 | ) |  |  | 6.55 |
Cancelled/Forfeited |  |  | - |  |  |  | - |
Balance - September 30, 2024 |  |  | 795,000 |  |  | $ | 6.08 |
Unrecognized Compensation |  | $ | 1,337,990 |  |  |  |  |
Weighted average period (years) |  |  | 0.93 |  |  |  |  |
SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 The following is a detail of the common stock granted, which is subject to the vesting provisions noted above at September 30, 2024 and December 31, 2023, respectively. Schedule of Stock Granted
|  |  |  |  |  |  |  |  |  |  | Director of |  |  |  |
|  | CEO |  |  | CFO |  |  | Directors |  |  | Human Resources/Legal |  |  | Total |
Balance - December 31, 2022 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Granted |  |  | - |  |  |  | 600,000 |  |  |  | 95,000 |  |  |  | - |  |  |  | 695,000 |
Vested |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Cancelled/Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance - December 31, 2023 |  |  | - |  |  |  | 600,000 |  |  |  | 95,000 |  |  |  | - |  |  |  | 695,000 |
Granted |  |  | 500,000 |  |  |  | - |  |  |  | - |  |  |  | 100,000 |  |  |  | 600,000 |
Vested |  |  | (250,000 | ) |  |  | (200,000 | ) |  |  | - |  |  |  | (50,000 | ) |  |  | (500,000 | )
Cancelled/Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance - September 30, 2024 |  |  | 250,000 |  |  |  | 400,000 |  |  |  | 95,000 |  |  |  | 50,000 |  |  |  | 795,000 |
Unrecognized Compensation |  | $ | 219,910 |  |  | $ | 680,910 |  |  | $ | 398,283 |  |  | $ | 38,887 |  |  | $ | 1,337,990 |
Weighted average period (years) |  |  | 0.05 |  |  |  | 0.57 |  |  |  | 0.01 |  |  |  | 0.30 |  |  |  | 0.93 |
Stock Options Stock option transactions for the nine months ended September 30, 2024 and the year ended December 31, 2023 are summarized as follows: Schedule of Stock Option Transactions
|  |  |  |  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Weighted |  |  | Remaining |  |  | Aggregate |  |  | Grant |
|  | Number of |  |  | Average |  |  | Contractual |  |  | Intrinsic |  |  | Date |
Stock Options |  | Options |  |  | Exercise Price |  |  | Term (Years) |  |  | Value |  |  | Fair Value |
Outstanding - December 31, 2022 |  |  | 17,004 |  |  | $ | 16.00 |  |  |  | 4.16 |  |  | $ | - |  |  |  |  |
Vested and Exercisable - December 31, 2022 |  |  | 6,801 |  |  | $ | 16.00 |  |  |  | 4.16 |  |  | $ | - |  |  |  |  |
Unvested and non-exercisable - December 31, 2022 |  |  | 10,203 |  |  | $ | 16.00 |  |  |  | 4.16 |  |  | $ | - |  |  |  |  |
Granted |  |  | 104,272 |  |  | $ | 6.45 |  |  |  |  |  |  |  |  |  |  | $ | 5.53 |
Exercised |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |  |  |  |  |
Cancelled/Forfeited |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding - December 31, 2023 |  |  | 121,276 |  |  | $ | 7.79 |  |  |  | 6.47 |  |  | $ | - |  |  |  |  |
Vested and Exercisable - December 31, 2023 |  |  | 116,174 |  |  | $ | 7.43 |  |  |  | 6.61 |  |  | $ | - |  |  |  |  |
Unvested and non-exercisable - December 31, 2023 |  |  | 5,101 |  |  | $ | 16.00 |  |  |  | 3.16 |  |  | $ | - |  |  |  |  |
Granted |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |  |  |  |  |
Cancelled/Forfeited |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding - September 30, 2024 |  |  | 121,276 |  |  | $ | 7.79 |  |  |  | 5.72 |  |  | $ | - |  |  |  |  |
Vested and Exercisable - September 30, 2024 |  |  | 121,276 |  |  | $ | 7.79 |  |  |  | 5.72 |  |  | $ | - |  |  |  |  |
Unvested and non-exercisable - September 30, 2024 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  |  |
Nine Months Ended September 30, 2024 Stock Options - Related Party – Chief Financial Officer The remaining 5,101 stock options were vested. Stock-based compensation expense for the three months ended September 30, 2024 and 2023 was $0 and $9,294, respectively. Stock-based compensation expense for the nine months ended September 30, 2024 and 2023 was $6,196 and $27,880, respectively. SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 Year Ended December 31, 2023 Stock Options - Related Party – Chief Financial Officer 5,101 stock options vested. Stock Options - Employees The Company granted 104,272 seven (7) year stock options to various employees for services rendered, having a fair value of $576,625. These options have an exercise price of $6.45 per share. The fair value of these stock options was determined by using a Black-Scholes option pricing model with the following inputs: Schedule of Fair Value of Stock Options
Expected term |  | 7 years |
Expected volatility |  |  | 106 | %
Expected dividends |  |  | 0 | %
Risk free interest rate |  |  | 3.88 | %
Warrants Warrant activity for the nine months ended September 30, 2024 and the year ended December 31, 2023 are summarized as follows: Schedule of Warrants Activity
|  |  |  |  |  |  |  | Weighted |  |  |  |
|  |  |  |  |  |  |  | Average |  |  |  |
|  |  |  |  | Weighted |  |  | Remaining |  |  | Aggregate |
|  | Number of |  |  | Average |  |  | Contractual |  |  | Intrinsic |
Warrants |  | Warrants |  |  | Exercise Price |  |  | Term (Years) |  |  | Value |
Outstanding - December 31, 2022 |  |  | 5,681,392 |  |  | $ | 5.05 |  |  |  | 1.85 |  |  | $ | 10,026,387 |
Vested and Exercisable - December 31, 2022 |  |  | 5,681,392 |  |  | $ | 5.05 |  |  |  | 1.85 |  |  | $ | 10,026,387 |
Unvested - December 31, 2022 |  |  | - |  |  | $ | - |  |  |  | 0.00 |  |  | $ | - |
Granted |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |
Exercised |  |  | (43,814 | ) |  | $ | 4.73 |  |  |  |  |  |  |  |  |
Cancelled/Forfeited |  |  | (63,325 | ) |  | $ | 26.39 |  |  |  |  |  |  |  |  |
Outstanding - December 31, 2023 |  |  | 5,574,253 |  |  | $ | 4.81 |  |  |  | 0.86 |  |  | $ | 9,348,348 |
Vested and Exercisable - December 31, 2023 |  |  | 5,574,253 |  |  | $ | 4.81 |  |  |  | 0.86 |  |  | $ | 9,348,348 |
Unvested - December 31, 2023 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |
Granted |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |
Exercised |  |  | (1,953,308 | ) |  | $ | 4.73 |  |  |  |  |  |  |  |  |
Cancelled/Forfeited |  |  | (49,792 | ) |  | $ | 8.15 |  |  |  |  |  |  |  |  |
Outstanding - September 30, 2024 |  |  | 3,571,153 |  |  | $ | 4.81 |  |  |  | 0.11 |  |  | $ | - |
Vested and Exercisable - September 30, 2024 |  |  | 3,571,153 |  |  | $ | 4.81 |  |  |  | 0.11 |  |  | $ | - |
Unvested and non-exercisable - September 30, 2024 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |

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