Quarterly report pursuant to Section 13 or 15(d)

Merger Agreement

v3.10.0.1
Merger Agreement
6 Months Ended
Jun. 30, 2018
Business Combinations [Abstract]  
Merger Agreement

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 give 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, 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 were valued at approximately $0.40 per share.

 

Following the closing of the transaction, TW’s financial statements as of the Closing will be 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, 2017.

 

      Three Months Ended      

Six Months

Ended

     

Six Months

Ended

 
      June 30, 2017       June 30, 2017       June 30, 2018  
Revenues, net   $ 3,458,605     $ 7,290,490     $ 7,927,317  
Net (loss)   $ (833,118   $ (2,156,707   $ (237,332
Net (loss) per share   $ (0.01   $ (0.04   $ (0.00
Weighted average number of shares outstanding     67,450,740       58,335,657       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, 2017 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.