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Stockholders’ Equity
 9 Months Ended
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.

 

       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.

 

               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:

 

           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:

  

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:

 

           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   -   $-    -   $-