UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-K







(Mark
One)


T
            Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




For
the fiscal year ended December 31, 2009





OR





o
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




For
the transition period from to





Commission
File Number 333-160700


SSGI,
Inc.


(Exact
name of registrant as specified in its charter)







Florida
            91-1930691(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)





8120
Belvedere Road, Suite 4


West
Palm Beach, Florida 33411


(Address
of principal executive offices)


Telephone
Number - Area code (561) 333-3600







Securities
registered pursuant to Section 12(b) of the Act:





Title
      of each class
            Name
      of each Exchange on which registeredCommon
      Stock par value $0.001 per share
            OTC
      (Pink Sheets) Market





Securities
registered pursuant to Section 12(g) of the Act: None







Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  o No  x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes  o No x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes   o
  No  x





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  x
  No   o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  £





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filero
            Accelerated
      fileroNon-accelerated
      filero
            Smaller
      reporting companyx


(Do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes  o
   No  x





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates on May 18, 2010, was approximately $8,847,507, determined using
the closing price of shares of common stock on the OTC (Pink Sheets) Market on
that date of $0.70.





As of May
18, 2010, there were 30,497,252 shares of the registrant’s common stock,
par value $0.001 per share, outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





None.








TABLE
OF CONTENTS





PagePART
      IItem
      1. Business
                  
                  4Item
      1A. Risk Factors
                  
                  10Item
      1B. Unresolved Staff Comments
                  
                  15Item
      2. Properties
                  
                  15Item
      3. Legal Proceedings
                  
                  15Item
      4. (Removed and Reserved)
                  
                  16PART
      IIItem
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and
      Issuer Purchases of Equity Securities
                  
                  16Item
      6. Selected Financial Data
                  
                  16Item
      7. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                  
                  16Item
      7A. Quantitative and Qualitative Disclosures About Market
    Risk
                  
                  23Item
      8. Financial Statements and Supplementary Data
                  
                  23Item
      9. Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure
                  
                  23Item
      9A. Controls and Procedures
                  
                  23Item
      9A(T). Controls and Procedures
                  
                  24Item 9B. Other Information
                  
                  24PART
      IIIItem
      10. Directors, Executive Officers and Corporate Governance
                  
                  24Item
      11. Executive Compensation
                  
                  26Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
                  
                  27Item
      13. Certain Relationships and Related Transactions, and Director
      Independence
                  
                  28Item
      14. Principal Accounting Fees and Services
                  
                  29PART
      IVItem
      15. Exhibits and Financial Statement Schedules
                  
                  30Signatures
                  
                  32FINANCIAL
      STATEMENTSContents
                  
                  F-1Report
      of Independent Registered Public Accounting Firm
                  
                  F-2Balance
      Sheets
                  
                  F-3Statements
      of Operations
                  
                  F-4Statements
      of Changes in Stockholders’ Deficit
                  
                  F-5Statements
      of Cash Flows
                  
                  F-6Notes
      to Financial Statements
                  
                  F-7




2




Forward-Looking
and Cautionary Statements





This
report contains certain statements that are, or may be deemed to be,
“forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Private Securities Litigation Reform Act of 1995 provides safe
harbor provisions for forward looking information. Some of the statements
contained in this annual report are forward-looking statements. All statements
other than statements of historical fact are, or may be deemed to be,
forward-looking statements. The words “believe,” “may,” “estimate,” “continue,”
“anticipate,” “intend,” “plan,” “expect” and similar expressions are intended to
identify forward-looking statements. Forward-looking statements include
information concerning our possible or assumed future financial performance and
results of operations.





We
have based these statements on our assumptions and analyses in light of our
experience and perception of historical trends, current conditions, expected
future developments and other factors we believe are appropriate in the
circumstances. Forward-looking statements by their nature involve substantial
risks and uncertainties that could significantly affect expected results, and
actual future results could differ materially from those described in such
statements. While it is not possible to identify all factors, factors that could
cause actual future results to differ materially include the risks and
uncertainties described under “Risk Factors” contained in Part I of this Annual
Report on Form 10-K.





Many
of these factors are beyond our ability to control or predict. Any of these
factors, or a combination of these factors, could materially and adversely
affect our future financial condition or results of operations and the ultimate
accuracy of the forward-looking statements. These forward-looking statements are
not guarantees of our future performance, and our actual results and future
developments may differ materially and adversely from those projected in the
forward-looking statements. We caution against putting undue reliance on
forward-looking statements or projecting any future results based on such
statements or present or prior earnings levels. In addition, each
forward-looking statement speaks only as of the date of the particular
statement, and we undertake no obligation to publicly update or revise any
forward-looking statement.


3





PART
I





Item
      1.
            Business.





General





SSGI,
Inc. and its wholly-owned operating subsidiary, Surge Solutions Group, Inc.
(collectively, the “Company”), is a petroleum contractor providing construction
and environmental compliance services for its government and private sector
clients. As a general contractor, the Company provides general contractor
services for commercial construction projects.





The
Company was originally incorporated in the State of Florida in July of 1997 as
All Product Distribution Corp. One year later, All Product Distribution Corp.
changed its name to Phage Therapeutics International, Inc (“Phage”) in
anticipation of entering the medical field. Phage did not commence operations.
Phage was a reporting company under the Securities Exchange Act of 1934 but
deregistered in 2005.





On
December 18, 2007, the Company entered into a Share Exchange Agreement (the
“Share Exchange Agreement”) with Surge Solutions Group, Inc, a Florida
corporation originally incorporated under the name of Surge Restoration, Inc.
(“Surge”).  Incorporated in November of 2001, Surge was formed to
serve residential, commercial and industrial customers with their general
contracting needs. The Company, through its relationships with insurance
companies, performed extensive restoration work from hurricane storm damage and
other insurance funded contracts. Also, the Company, through its relationship
with a national retail building supply firm, installed and serviced customer
purchases as a preferred vendor. Prior to execution of the Agreement, the
Company changed its name to SSGI, Inc.





Pursuant
to the Share Exchange Agreement, in January and February of 2008, the Company
affected a 35 for 1 reverse stock split, thereby reducing the number of shares
outstanding from 14,587,370 to 416,782, and then issued 33,025,000 shares of
common stock to Surge in a 1 for 1 exchange.  Surge became a 100%
owned subsidiary of the Company and its sole operating company.





Recent
Acquisition of B&M Construction Co., Inc.





On May
13, 2010, the Company acquired all of the outstanding shares of capital stock of
B&M Construction Co., Inc., a Florida corporation (“B&M”), from Bobby L.
Moore, Jr. (the “Majority B&M Shareholder”), Phillip A. Lee, William H.
Denmark and Evan D. Finch (Messrs. Lee, Denmark and Finch are collectively
referred to as the “Minority B&M Shareholders”).  B&M is a
construction company operating in the Southeastern United States that
specializes in the design, construction and maintenance of retail petroleum
facilities.  The consideration paid by the Company to the Majority
B&M Shareholder consisted of (a) $1,000,000 in cash, payable $300,000 at
closing, $250,000 within 30 days of the closing date, $250,000 within 60 days of
the closing date, and $200,000 within 90 days of the closing date, plus (b) $1,173,473
represented by a Promissory Note bearing interest at 4% per annum and payable in
forty-eight (48) equal monthly installments, commencing on the 30th day
following the closing date, plus (c) 4,124,622 shares of
the Company’s common stock.  The consideration paid by the Company to
the Minority B&M Shareholders consisted of (in the aggregate) (a) 2,000,000
shares of the Company’s common stock, and (b) warrants to purchase 250,000
shares of the Company’s common stock exercisable for five years at an exercise
price of $0.75 per share.  In addition, at the closing of the
acquisition, the Minority B&M Shareholders became employees of
Surge.


4





Our
Business Markets





At
inception, Surge’s primary focus was the insurance restoration
industry.  At that time, management saw an industry trend towards
vendor contractor programs as a means to reduce potential exposure for insurance
companies by providing the insured with a pre-approved contractor using
wholesale pricing in exchange for volume work.  Through good customer
service and an aggressive marketing plan, we experienced significant business
growth in this market through 2005 and 2006.





Markets





In order
to maintain a diversified revenue stream and increase growth,
management has streamlined its current business profile to allow the
Company to focus on the following three main markets:





Insurance
Restoration





Surge has
been in the insurance restoration business since its inception in 2001, which
was initially the core of the Surge business model. Surge is a contractor for
insurance companies and is qualified for residential, commercial and
industrial projects.  Surge has been successful in the insurance
restoration arena due to its ability to offer the insured, adjuster and carrier
a single source for mold remediation, flood mitigation, fire restoration,
emergency services, contents cleaning and inventory compilation services. 
Instead of using sub-contractors, Surge utilizes its own crews to
perform specialized remediation and restoration services which can give Surge’s
clients a more competitive price and better quality control of
their work.  Surge, through its infrastructure and business diversity,
has the ability to cover most of the State of Florida. This is a key factor for
insurance companies looking for contractors in the Florida market. Currently,
the Company works only in the state of Florida.





We are
certified as a CIEC (certified indoor environmental consultant).  A
CIEC is a professional that identifies the causes of poor indoor air quality. A
CIEC is trained to analyze a building’s interrelated systems in order to
diagnose the air quality issues properly. The CIEC must be able to gather and
interpret data from the various operating systems operating in a
building.  This designation allows the CIEC to identify the problem,
design the remedial plan and execute the remediation.





We are
also certified as a CMRS (certified mold remediation supervisor). This process
involves the removal of microbial contamination from a building and is required
to be performed by a microbial re-mediator. This person is trained to conduct a
thorough remediation process safely according to project specifications and in
compliance with relevant government regulations and industry standards.
Microbial re-mediators are trained in containment engineering, safety and
emergency procedures, remediation equipment operation, cleaning, removal and
restoration procedures, and project documentation.





We also
hold an IICRC certified technician designation.  The IICRC is an
independent certification body that sets and promotes high standards and ethics
and advances communication and technical proficiency within the inspection,
cleaning and restoration service industries, including mold remediation,
structural drying, and fire restoration.





Petroleum
Contracting





Petroleum
contracting involves the removal and replacement of obsolete single walled
tanks, piping and the related clean-up on any petroleum dispensing and/or
storage sites. These sites can be gas stations, factories, citrus farms or multi
faceted industrial facilities.





Currently,
the Florida legislature has imposed a December 31, 2009, deadline for the
replacement of obsolete or non-compliant tanks.  According to
information obtained from the state of Florida Department of Environmental
Protection (“DEP”), this leaves thousands of sites in the state of Florida
needing some level of compliance upgrade in the near future in order to comply
with the mandate.





Florida
has granted an extension for all tank owners through March 31, 2010, provided
that the owner has executed a contract with a licensed petroleum contractor in
the State of Florida, which contract must state that the work will be completed
by March 31, 2010.  If the owner is still out of compliance after the
extended deadline has passed, the tanks must be emptied, cleaned and no
longer used.  Once a tank is taken out of service, the owner has up to two
years to either remove the tank or complete the compliance upgrade to a double
walled tank by either replacing or relining the tank.


5




Although
the Florida mandate specifies a deadline of December 31, 2009, the Company
believes that it will continue to be active in the petroleum contracting
business during 2010 and well beyond.  As discussed above, tank owners
unable to comply by December 31, 2009, will have at least until March 31, 2010,
to comply.  In addition, non-compliant tank owners will have an
additional two years beyond the extended deadline to either remove their tanks
or complete the compliance upgrades to double walled tanks by either replacing
or relining the tanks.  This means that the Company’s petroleum
contracting business, at least in the State of Florida, will continue to be
active from the Florida mandate at least through 2012.  In addition,
the Company believes that it will be active in servicing existing tank owners
with upgrades relating to fuel dispensers, petroleum product spills and
construction related to service stations and state and local municipalities
fueling depots.  These services would be unrelated to the Florida
mandate.





The
Company expects its petroleum contracting business to be active in other states
that have yet to impose mandates similar to the Florida mandate, as discussed
below.





The
Company is already planning its geographic expansion into other states that have
yet to impose their own mandates.  The Company expects most, if not all,
states to eventually impose their own mandates.  As part of this
expansion effort, the Company has identified several southeastern states that
are currently working on their environmental cleanup of petroleum sites. 
We intend to expand into those states as they announce their state mandates. The
Company is currently in the process of becoming a licensed petroleum and
general contractor in the State of Georgia.





Regulation
of underground petroleum storage tanks began in the early 1980s with the
recognition that Florida’s groundwater, which provides 90% of the state’s needs,
was at risk of becoming contaminated. In 1982, petroleum contamination from a
leaking underground petroleum storage tank was documented in a well field for
the City of Bellevue, Florida drinking water. The legislative response to the
problem was the passage of the Water Quality Assurance Act of
1983.  Generally, the act provided for:





•
Prohibition against petroleum discharges;


•
Required cleanup of petroleum discharges;


• State
mandated cleanup if not done expeditiously;


• Strict
liability for petroleum contamination; and


•
Required tank inspections and monitoring.





Due
to a shortage of new in-ground petroleum tanks, there is currently a
significant lead time for the delivery of new 2009 compliant
tanks.  All indications are that this lead time will increase as
the deadline gets closer.  This creates incentive for the petroleum
tank owners to commit to an upgrade today.





The
Company offers an alternative to full tank replacement
by utilizing the Xerxes secondary containment system. This system
provides an alternative to full tank replacement.  By utilizing the
existing tank, we can save significant time and money in comparison to a
traditional tank replacement.





The
Xerxes system allows an owner to leave the existing tank in the ground and
create a tank inside the existing tank that meets the compliance requirements.
The existing tank is cleaned fully and checked for leaks. If leaks are found,
they are repaired with new welds. A coating of porcelain-like fiberglass coating
is sprayed on the inside of the tank. Two new corrosion resistant walls are then
applied using Parabeam®, a special 3 dimensional glass fabric. The Parabeam® is
then cured creating a space to which a second coat is then added. The space
between the new inner and outer walls provides continuous leak detection by
attaching a float like device in the bottom of the tank to detect a leak before
it can penetrate the second wall and contaminate the surrounding
area.





We have
entered into an agreement with Tank Tech, Inc. (“Tank Tech”), under which we
have the right to use its proprietary method of relining existing underground
storage tanks. This method is licensed to Tank Tech by ZCL/Xerxes Composites,
Inc. and is specific only to Florida government petroleum storage facilities
that are contracted to be relined instead of replaced. Our agreement with Tank
Tech, which expires on May 31, 2010, requires us to prepare the construction
site in advance of Tank Tech’s crews beginning the relining
process in accordance with a schedule agreed upon by Tank Tech and the
Company. We are required to collect funds and pay Tank Tech in accordance with
each contract as well as provide insurance for job site liabilities. We are
the primary obligor of each contract and the revenues are accounted for as
follows:  the gross amount of the contract is collected by the Company and
posted to the Company’s financial statements as contract revenues, while payment
is made to Tank Tech and posted in cost of goods sold under that job specific
contract.


6





The
Company has been awarded government contracts relating to fueling compliance
upgrades in accordance with the State of Florida mandate of existing tanks both
underground or above ground. These contracts included replacement and relining
of tanks, new construction of municipalities fueling operations or construction
of municipal buildings. We obtain a package that outlines the detailed
specification of the contract in a request for proposal (“RFP”). This RFP
contains performance standards, scope of work, schedule of values and bonding
requirements. We are required to post a completion bond typically in the range
of 30% of the contract value and are required by a third party bonding company
to purchase an insurance policy for the remaining 70%. This premium is typically
2% of the contract value.





Each of
these contracts requires a competitive bidding process.  After we
estimate our costs and receive bids from unrelated subcontractors, we submit our
bid. The contract is awarded to the lowest bidder. When we are successful, we
are required to show proof of bonding to the municipality.





Upon
successful completion of the contract, the completion bond is returned to us
with interest.





Currently,
the Company is licensed to work only in the state of Florida for petroleum
contracts.





Commercial/Retail
Construction





Surge, as
a full service general contractor, provides design/build and construction
services for commercial, industrial and retail customers throughout
Florida.  Surge provides construction management services for all types of
customers who require new construction as well as tenant improvements. Surge
oversees the actual construction process and provides the
following:





·
            Managing the sub-contractor
      bidding process and subsequent
  contracting


·
            Constructions permit processing
      and buildings code
compliance


·
            Design structure and
      plans


·
            Erection of building, landscaping
      and final inspection with local
  authorities





In
addition, for Surge’s new construction customers, Surge’s services allow the
customer to contract with Surge to complete the entire project utilizing both
its petroleum and general contracting license where needed. Many
competitors sub-contract the petroleum  portion of their project to
third parties whereas Surge can replace or reline tanks and also assist in
renovations to existing retail or government support facilities such as
convenience store renovation, municipal maintenance facilities or full service
marines where fuel services are available. Our construction model has provided a
dynamic synergy with our petroleum markets by providing our clients with this
turnkey (single source) solution for retail and wholesale petroleum storage
facilities. The Company is currently licensed to work only in the state of
Florida.





The
Company’s subsidiary, Surge Solutions Group, Inc., maintains a Website at
http:// www.surgesolutionsgroup.com.





Our
principal executive offices are located at 8120 Belvedere Road, Suite 4, West
Palm Beach, Florida 33411. Our telephone number is (561)
333-3600.  The information contained on our website is not part of
this prospectus.





Our
Business Strategy





The
Company’s primary objective is to achieve growth in each of our diversified
markets through geographic expansion, marketing, competitive pricing, and
quality of work.





Surge
will continue growth in the Insurance Restoration market by continuing to align
ourselves with new and re-emerging insurance companies in Florida as to expand
our vendor program participation and create a larger back log of
claims.  Surge plans to expand this market through a conservative
national growth plan as other Surge markets move into other states.





The Surge
Petroleum market will continue to see growth in Florida throughout the remainder
of the mandate and into 2010.   Surge will also endeavor to
develop proprietary relationships that will give us a competitive advantage in
core pricing and product diversity.  Geographic expansion based on the
institution of additional mandates nationally will fuel the demand and ultimate
growth in this market.  Surge will also implement a service program to
help sustain each market following the completion of any
mandate.  This would provide residual income from an already well
developed customer base in each mandated state.  Surge has also
partnered with former Governor Jeb Bush and associates to assist in the
procurement of public and private sector petroleum related
opportunities.  In addition Surge has recently been awarded a direct
vendor contract with the state of Florida where by Surge may now contract
directly with government and local municipalities throughout Florida and
circumvent the expensive and extensive public bid process.


7





The Surge
strategy for our commercial retail business and other new construction is to
utilize our internal synergies between our Petroleum and Construction services
business which gives us a competitive advantage by offering a “turnkey” single
source package to our clients.  Geographic expansion coupled with the
other Surge markets will also be a key to our overall growth strategy. Due to
the overall decline in the economy and new construction in Florida, Surge
expects a decline in the overall demand for new construction in the short
term.   With this in mind, the number of contractors will also
decline, potentially giving Surge a better opportunity as the construction
industry improves in the coming years.





Employees





During
2009 and 2008, the Company’s employees are leased through a Professional
Employer Organization (“PEO”).  In October of 2009, the Company
exercised its rights to terminate the agreement effective December 31, 2009.
Commencing in January of 2010, all previously leased employees became direct
employees of the Company.  Currently the Company employs has 21 full
time employees. There are no collective bargaining agreements between the
Company and its employees. The Company offers its employees group health
benefits after three months of employment and a 401K retirement program after
one year of employment. The Company considers that its relationship with its
employees is good.





Environmental
Regulation





Our
petroleum contamination cleanup services are subject to extensive regulatory
supervision and licensing by the Environmental Protection Agency and various
other federal, state, and local environmental authorities. These regulations
directly impact the demand for the services we offer. We believe that we are in
substantial compliance with all federal, state, and local regulations governing
our business.





The
Resource Conservation and Recovery Act is the principal federal statute
governing hazardous waste generation, treatment, storage, and disposal. The
Resource Conservation and Recovery Act, or the Environmental Protection
Agency-approved state programs, govern any waste handling activities of
substances classified as “hazardous.” Moreover, facilities that treat, store or
dispose of hazardous waste must obtain a Resource Conservation and Recovery Act
permit from the Environmental Protection Agency, or equivalent state agency, and
must comply with certain operating, financial responsibility, and site closure
requirements. Wastes are generally hazardous if they either are specifically
included on a list of hazardous waste, or exhibit certain characteristics
defined as hazardous, and are not specifically designated as non-hazardous. In
1984, the Resource Conservation and Recovery Act was amended to substantially
expand its scope by, among other things, providing for the listing of additional
wastes as “hazardous” and also for the regulation of hazardous wastes generated
in lower quantities than had been previously regulated. The amendments imposed
additional restrictions on land disposal of certain hazardous wastes, prescribe
more stringent standards for hazardous waste and underground storage tanks, and
provided for “corrective” action at or near sites of waste management units.
Under the Resource Conservation and Recovery Act, liability and stringent
operating requirements may be imposed on a person who is either a “generator” or
a “transporter” of hazardous waste, or an “owner” or “operator” of a waste
treatment, storage, or disposal facility.





Underground storage tank
legislation, in particular Subtitle I of the Resource Conservation and Recovery
Act, focuses on the regulation of underground storage tanks in which liquid
petroleum or hazardous substances are stored and provides the regulatory setting
for a portion of our business. Subtitle I of the Resource Conservation and
Recovery Act requires owners of all existing underground tanks to list the age,
size, type, location, and use of each tank with a designated state agency. The
Environmental Protection Agency has published performance standards and
financial responsibility requirements for storage tanks over a five-year period.
The Resource Conservation and Recovery Act and the Environmental Protection
Agency regulations also require that all new tanks be installed in such a manner
as to have protection against spills, overflows, and corrosion. Subtitle I of
the Resource Conservation and Recovery Act provides civil penalties of up to
$27,500 per violation for each day of non-compliance with such tank requirements
and $11,000 for each tank for which notification was not given or was falsified.
The Resource Conservation and Recovery Act also imposes substantial monitoring
obligations on parties that generate, transport, treat, store, or dispose of
hazardous waste.


8


The
Comprehensive Environmental Response Compensation and Liability Act of 1980
authorizes the Environmental Protection Agency to identify and clean-up sites
where hazardous waste treatment, storage, or disposal has taken place. The
Comprehensive Environmental Response Compensation and Liability Act also
authorizes the Environmental Protection Agency to recover the costs of such
activities, as well as damages to natural resources, from certain classes of
persons specified as liable under the statute. Liability under the Comprehensive
Environmental Response Compensation and Liability Act does not depend upon the
existence or disposal of “hazardous waste” as defined by the Resource
Conservation and Recovery Act, but can be based on the existence of any number
of 700 “hazardous substances” listed by the Environmental Protection Agency,
many of which can be found in household waste. The Comprehensive Environmental
Response Compensation and Liability Act assigns joint and several liability for
cost of clean-up and damages to natural resources to any person who, currently
or at the time of disposal of a hazardous substance, by contract, agreement, or
otherwise, arranged for disposal or treatment, or arranged with a transporter
for transport of hazardous substances owned or possessed by such person for
disposal or treatment, and to any person who accepts hazardous substances for
transport to disposal or treatment facilities or sites from which there is a
release or threatened release of such hazardous substances. Among other things,
the Comprehensive Environmental Response Compensation and Liability Act
authorizes the federal government either to clean up these sites itself or to
order persons responsible for the situation to do so. The Comprehensive
Environmental Response Compensation and Liability Act created a fund, financed
primarily from taxes on oil and certain chemicals, to be used by the federal
government to pay for these clean-up efforts. Where the federal government
expends money for remedial activities, it may seek reimbursement from the
potentially responsible parties. Many states have adopted their own statutes and
regulations to govern investigation and clean up of, and liability for, sites
contaminated with hazardous substances.





In
October 1986, the Superfund Amendment and Reauthorization Act were enacted. The
Superfund Amendment and Reauthorization Act increased environmental remediation
activities significantly. The Superfund Amendment and Reauthorization Act
imposed more stringent clean-up standards and accelerated timetables. The
Superfund Amendment and Reauthorization Act also contains provisions which
expanded the Environmental Protection Agency’s enforcement powers and which
encourage and facilitate settlements with potentially responsible parties. We
believe that, even apart from funding authorized by the Superfund Amendment and
Reauthorization Act, industry and governmental entities will continue to try to
resolve hazardous waste problems due to their need to comply with other
statutory and regulatory requirements.





The
liabilities provided by the Superfund Amendment and Reauthorization Act could,
under certain circumstances, apply to a broad range of our possible activities,
including the generation or transportation of hazardous substances, release of
hazardous substances, designing a clean-up, removal or remedial plan and failure
to achieve required clean-up standards, leakage of removed wastes while in
transit or at the final storage site, and remedial operations on ground water.
Such liabilities can be joint and several where other parties are involved. The
Superfund Amendment and Reauthorization Act also authorize the Environmental
Protection Agency to impose a lien in favor of the United States upon all real
property subject to, or effected by, a remedial action for all costs that the
party is liable. The Superfund Amendment and Reauthorization Act provide a
responsible party with the right to bring a contribution action against other
responsible parties for their allocable share of investigative and remedial
costs. The Environmental Protection Agency may also bring suit for treble
damages from responsible parties who unreasonably refuse to voluntarily
participate in such a clean up or funding thereof.





The Oil
Pollution Act of 1990, which resulted from the Exxon Valdez oil spill and the
subsequent damage to Prince William Sound, established a new liability
compensation scheme for oil spills from onshore and offshore facilities and
requires all entities engaged in the transport and storage of petroleum to
maintain a written contingency plan to react to such types of events. Under the
contingency plan, the petroleum products storage or transportation company must
retain an oil spill response organization and a natural resources/wildlife
rehabilitator. Oil spill response organizations are certified by the United
States Coast Guard and receive designations based upon the level of their
capabilities. In the event of an incident, the standby oil response organization
must respond by being on site with containment capability within two to six
hours of notification.





Our operations are also
subject to other federal laws protecting the environment, including the Clean
Water Act and Toxic Substances Control Act. In addition, many states also have
enacted statutes regulating the handling of hazardous substances, some of which
are broader and more stringent than the federal laws and
regulations.





Website
Access





Since the
Company’s registration statement first was effective on December 9, 2009, this
report is our initial filing as a fully reporting Company. Other current reports
such as Form 8-K and our Registration Statement on Form S-1, are made available
free of charge on Securities and Exchange Commission’s website. The address of
that site is www.sec.gov. The public may read and copy any materials we have
filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330.


9





Item
1A. Risk Factors.





o     Our results of operations have not
been consistent, and we may not be able to achieve
profitability.





We
incurred a net loss of $1,669,995 and $2,437,530 for the years ended December
31, 2009 and 2008, respectively. We have continued to incur substantial losses
and there are no assurances that we will become profitable in the future. Our
ability to generate a profit may be difficult due to the fact that we are a
young company in a highly competitive industry.





The
Company’s independent auditors have included an explanatory paragraph in our
financial statements for the years ended December 31, 2009 and 2008 stating
that the financial statements have been prepared on the assumption that the
Company will continue as a going concern and that financing uncertainties raise
substantial doubt about the Company’s ability to continue as a going
concern.





Our
business plan is speculative and unproven and there can be no assurance that we
will be successful in executing our business plan or, even if we successfully
implement our business plan, that we will achieve profitability now or in the
future. If we incur significant operating losses, our stock price may decline,
perhaps significantly.





We cannot
be sure that we will achieve profitability in fiscal 2010 or thereafter.
Continuing losses may exhaust our capital resources and force us to discontinue
operations or seek additional financing that will have a dilutive effect on our
current shareholders.





o    
We are dependent on key
executive and management personnel,  and the loss of their services would
have a material impact on our business.





Our
performance and success is substantially dependent on the continued services and
on the performance of our executive officers and other key employees, some of
whom have worked together for a limited period of time.  We are
dependent on attracting, retaining and motivating certain highly qualified
personnel.   While we believe our executive officers have no present
plans to leave the Company or to retire in the near future, the loss of the
services of their services or any of our other key executives could have a
material adverse effect on our business, results of operations or financial
condition.





o    
The credit and securities
markets have exhibited extreme volatility and disruption throughout 2009 and
2008. In light of this continuing volatility, the Company’s reliance on its line
of credit for a significant portion of its cash requirements could adversely
affect the Company’s liquidity and cash flow.





In
November of 2007, a financial institution extended the Company a line of credit
in the amount of $750,000. In November of 2008, the Company converted the line
of credit to a promissory note payable which required monthly principal and
interest payments of $35,000 commencing in January 2009. The interest rate for
the promissory note was 1.5% above the published prime rate.  On June
3, 2009, the promissory note was extended until December 2009.  On
February 26, 2010, the promissory note was once more extended for one year at
the same monthly payment with the interest rate fixed at 7%. The balance on the
promissory note at December 31, 2009 and 2008 was $353,691 and $745,000,
respectively. The current balance due is approximately $323,000.





The
inability of the Company to negotiate an additional extension of the loan or,
continue to make monthly principal and payments on the loan, or the
unwillingness of another financial institution to offer the Company a
replacement credit facility, could have a material adverse affect on the
Company’s liquidity position and cash flow.  This credit line is
collateralized with a blanket lien on the business assets of the Company and a
personal guarantee of our former Chief Executive Officer, Ryan
Seddon.





o    
Our operating results may
fluctuate.





We may
experience fluctuations in our operating results.  Fluctuations in our
operating results may be caused by many factors including, but not limited to,
the following:





·
            our
      ability to successfully market our
services;


·
            the
      timing of entry into new business
areas;


·
            competition
      and pricing in our industry;


·
            reduction
      in demand for our services;


·
            our
      ability to attract and retain strategic
  partners;


·
            the
      degree and rate of growth of the markets in which we compete and the
      accompanying demand for our
services;


10


·
            our
      ability to expand our internal and external sales
  forces;


·
            our
      ability to attract and retain key
personnel;


·
            general
      economic conditions; and


·
            change
      in government regulations




As a
result, comparing our operating results on a period-to-period basis may not be
meaningful, and you should not rely on past results as an indication of our
future performance.





o    
We must effectively manage the
growth of our operations, or our results of operations will
suffer.





Our
ability to successfully implement our business plan requires an effective
planning and management process. If funding is available, we may increase the
scope of our operations by expanding into new geographic markets. Implementing
our business plan will require significant additional funding and resources. If
we are successful in growing our operations, we will need to hire additional
employees and make significant capital investments. As we continue to grow our
operations, it may place a significant strain on our management and our
resources. As a result of our recent growth and any continued growth, we will
need to improve our financial and managerial controls and reporting systems and
procedures, and we will need to expand, train and manage our workforce. Any
failure to manage any of the foregoing areas efficiently and effectively could
cause our results of operations to suffer.





o    
We are highly leveraged, which
could result in the need for refinancing or new capital.





We
have a promissory note payable to a financial institution in the
approximate amount of $323,000, and a term note payable to an affiliated third
party in the approximate amount of $697,000.  At December 31, 2009,
the Company was in default with respect to timely payment due on the term note.
The Company requested and on May 12, 2010, received a waiver on the payment
terms through March 31, 2010.  We also owe approximately $186,000 in
amortizing notes to various lenders for the purchase of the Company’s vehicles.
  Our ability to make payments on our indebtedness and to fund planned
capital expenditures will depend on our ability to generate cash in the future.
Our ability to generate cash in the future will be subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond our
control.





In the
event our business does not generate sufficient cash flows from operations or
that we will have future borrowings available under our current credit
facilities in amounts sufficient to enable us to pay our indebtedness or to fund
other liquidity needs we may need to raise additional funds. This may be through
the sale of additional equity securities, the refinancing of all or part of our
indebtedness on or before the maturity thereof, or the sale of assets. Each of
these alternatives is dependent upon financial, business and other general
economic factors affecting the equity and credit markets generally or our
business in particular, many of which are beyond our control. Such alternatives
may not be available to us, and if available may not be on satisfactory terms.
While we believe that consolidated cash flow generated by our operations will
provide adequate sources of long-term liquidity, a significant drop in operating
cash flow resulting from economic conditions, competition or other uncertainties
beyond our control could increase the need for refinancing or new
capital.




o    
Economic downturns in general
would have a material adverse effect on the Company’s business, operating
results and financial condition.





The
Company’s operations may in the future experience substantial fluctuations from
period to period as a consequence of general economic conditions affecting
consumer spending. The Company has customers engaged in various
industries.  These industries may be affected by economic factors,
which may impact their ability to obtain financing for projects.  If
customers have difficulty obtaining financing for projects, this may impact the
Company’s ability to meet revenue and profitability goals.  Thus, any
economic downturn in general would have a material adverse effect on the
Company’s business, operating results and financial condition.





o    
The Company’s success is
dependent on market acceptance of its services.





Demand
for our services is primarily driven by the underlying consumer market demand
for our services.  Should the growth in demand be inhibited, our
business, results of operations, and/or financial condition would be adversely
affected.


11


o    
We face competition from
numerous sources and competition may increase, leading to a decline in
revenues.





We
compete primarily with well-established companies, many of which have greater
resources than us. We believe that barriers to entry in our service segments are
not significant and start-up costs are relatively low, so our competition may
increase in the future.  New competitors may be able to launch new
businesses similar to ours, and current competitors may replicate our business
model, at a relatively low cost.  If competitors with significantly
greater resources than ours decide to replicate our business model, they may be
able to quickly gain recognition and acceptance of their business methods and
products through marketing and promotion. We may not have the resources to
compete effectively with current or future competitors. If we are unable to
effectively compete, we will lose sales to our competitors and our revenues will
decline and investors could lose all or part of their investment.





o    
Compliance with environmental
regulations can be expensive and noncompliance with federal and state
environmental laws and regulations could result in fines or injunctions, which
may result in adverse publicity and potentially significant monetary damages and
fines.





Portions
of our business are heavily regulated by federal, state and local environmental
laws and regulations, including those promulgated by the U.S. Environmental
Protection Agency. These federal, state and local environmental laws and
regulations govern the discharge of hazardous materials into the air and water,
as well as the handling, storage, and disposal of hazardous materials and the
remediation of contaminated sites. Our businesses involve working around and
with volatile, toxic and hazardous substances and other regulated substances. We
may become liable under these federal, state and local laws and regulations for
the improper characterization, handling or disposal of hazardous or other
regulated substances. It is possible that some of our operations could become
subject to an injunction which would impede or even prevent us from operating
that portion of our business. Any significant environmental claim or injunction
could have a material adverse effect on our financial condition. Additionally,
environmental regulations and laws are constantly changing, and changes in those
laws and regulations could significantly increase our compliance costs and
divert our human and other resources from revenue-generating
activities.





o    
The failure to obtain and
maintain required governmental licenses, permits and approvals could have a
substantial adverse effect on our operations.





Portions
of our operations, particularly our restoration, petroleum contracting, and
construction services business segments, are highly regulated and subject to a
variety of federal and state laws, including environmental laws which require
that we obtain various licenses, permits and approvals.  We must
obtain and maintain various federal, state and local governmental licenses,
permits and approvals in order to provide our services.  We may not be
successful in obtaining or maintaining any necessary license, permit or
approval. Further, as we seek to expand our operations into new markets,
regulatory and licensing requirements may delay our entry into new markets, or
make entry into new markets cost-prohibitive.  Our activities in
states where necessary licenses or registrations are not available could be
curtailed pending processing of an application, and we may be required to cease
operating in states where we do not have valid licenses or
registrations.  We could also become subject to civil or criminal
penalties for operating without required licenses or
registrations.  These costs may be substantial and may materially
impair our prospects, business, financial condition and results of
operations.




o   
Environmental remediation
operations may expose our employees and others to dangerous and potentially
toxic quantities of hazardous products.





Toxic
quantities of hazardous products can cause cancer and other debilitating
diseases. Although we take extensive precautions to minimize worker exposure and
we have not experienced any such claims from workers or other persons, there can
be no assurance that, in the future, we will avoid liability to persons who
contract diseases that may be related to such exposure. Such persons potentially
include employees, persons occupying or visiting facilities in which
contaminants are being, or have been, removed or stored, persons in surrounding
areas, and persons engaged in the transportation and disposal of waste material.
In addition, we are subject to general risks inherent in the construction
industry. We may also be exposed to liability from the acts of our
subcontractors or other contractors on a work site. Any such claims could
subject us to potentially significant monetary damages. Regardless of merit or
eventual outcome, liability claims may result in:





·
            decreased
      demand for our products and
services;





·
            injury
      to our reputation;





·
            costs
      to defend the related litigation;





·
            substantial
      monetary awards; and





·
            loss
      of revenue.


12





o   
A substantial portion of our
revenues are generated as a result of requirements arising under federal and
state laws, regulations and programs related to protection of the
environment.  If these programs were modified this could affect demand
for our services.





Environmental
laws and regulations are, and will continue to be, a principal factor affecting
demand for our services, particularly our insurance restoration and petroleum
contracting businesses. The level of enforcement activities by federal, state
and local environmental protection agencies and changes in such laws and
regulations also affect the demand for such services. If the requirements of
compliance with environmental laws and regulations were to be modified in the
future, the demand for our services, and our business, financial condition and
results of operations, could be materially adversely affected.  In
addition, if federal or state compliance mandates (such as the Florida December
31, 2009 mandate) expire, then our petroleum contracting business could be
adversely affected because non-compliant tank owners could go out of business,
thereby reducing potential new contracts and revenue for the company, and
non-compliant customers of the company could get fined by the federal or state
compliance agencies (for failing to comply with the mandates), thereby adversely
affecting their ability to pay us for compliance upgrades.   In
general, the expiration of compliance mandates would in all likelihood decrease
the revenues that we expect to receive from our petroleum contracting
business.





o   
If the Company fails to
maintain adequate insurance, our financial results could be negatively
impacted.





We carry
standard general liability insurance in amounts determined to be reasonable by
our management.  Although we believe we are adequately insured, if we
fail to adequately assess our insurance needs or if a significant amount of
claims are made by workers or others, the amount of such insurance may not be
adequate to cover all liabilities that we may incur. We intend to expand our
insurance coverage as our sales grow. Insurance coverage is, however,
increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost and we may not be able to obtain insurance coverage that will be
adequate to satisfy any liability that may arise.





o   
We are partially dependent on
a national tank reline firm in connection with our in service tank upgrade
business.





The
Company has a working relationship with a national petroleum tank remediation
firm (“Tank Tech”) which provides the Company with access to a significant
number of potential tank reline/upgrade opportunities in the State of Florida.
This relationship could also provide the Company opportunities to expand outside
of Florida into other states.  If Tank Tech should cease supplying us
with access to potential tank reline/upgrade opportunities, if the relationship
deteriorated, or if Tank Tech should encounter technical, operating or financial
difficulties of its own, it could delay shipment of products and harm
customer relations.




o   
If we raise additional funds
by selling additional shares of our capital stock, the ownership interests of
our shareholders will be diluted.





Our
Amended and Restated Articles of Incorporation authorize the issuance of
100,000,000 shares of common stock, par value $0.001 per share, of which
30,497,252 shares are currently issued and outstanding.  The future
issuance of additional shares of common stock may result in substantial dilution
in the percentage of our common stock held by our then existing shareholders. We
may value any common stock issued in the future on an arbitrary basis. The
issuance of common stock and/or warrants to purchase our stock for future
services or other corporate actions may have the effect of diluting the value of
the shares held by our shareholders, and might have an adverse effect on any
trading market for our common stock.





o  
Our common stock trades on the
Pink Sheets Over the Counter electronic quotation system and an active trading
market may never develop or if developed may not be sustained, and you may not
be able to resell your shares at or above the initial public offering
price.





The
Company’s common stock currently trades on the Pink Sheets electronic quotation
system under the symbol “SSGI.PK”. The Pink Sheets is a decentralized market
regulated by the Financial Industry Regulatory Authority (FINRA) in which
securities are traded via an electronic quotation system.   An active
trading market depends upon the existence of willing buyers and sellers at any
given time, the presence of which is dependent upon the individual decisions of
buyers and sellers over which the Company does not have
control.  Accordingly if an active and liquid trading market for our
common stock does not develop or that, if developed, does not continue it will
adversely affect the market price of the Company’s common stock.  The
market price of the shares of common stock is likely to be highly volatile and
may be significantly affected by factors such as actual or anticipated
fluctuations in the Company’s operating results, announcements of technological
innovations, new products or new contracts by the Company or its competitors,
developments with respect to proprietary rights, adoption of new government
regulations, general market conditions and other factors. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations.  These types of broad market fluctuations may adversely
affect the market price of the Company’s common stock. See Risk Factor “Our stock
price may be highly volatile” below.


13





o  
Our shares of common stock are
thinly traded, so shareholders may be unable to sell at or near ask prices or at
all if they need to sell shares to raise money or otherwise desire to liquidate
their shares.





Our
common stock has from time to time been “thinly-traded”, meaning that the number
of persons interested in purchasing our common stock at or near ask prices at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours, or purchase or recommend the purchase of our
shares until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price.  A broader or more active
public trading market for our common stock may never develop and if developed
may not be sustained. The failure of an active and liquid trading market to
develop would likely have a material adverse effect on the value of our common
stock.





o  
Our common stock is subject to
“penny stock” rules which may be detrimental to investors.





The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share. Our securities are subject to rules that impose additional sales
practice requirements on broker-dealers who sell such securities. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchaser of such securities and have received
the purchaser’s written consent to the transaction prior to the
purchase.  Additionally, for any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Securities and Exchange Commission relating
to the penny stock market.  The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer’s
presumed control over the market.  Finally, among other requirements,
monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks.





o   Shares eligible
for future sale may adversely affect the market price of our common stock, as
the future sale of a substantial amount of outstanding stock in the public
marketplace could reduce the price of our common stock.





Sales of
a substantial number of shares of our common stock in the public market could
materially adversely affect the market price of the common
stock.  Such sales also might make it more difficult for the Company
to sell equity securities or equity-related securities in the future at a time
and price that the Company deems appropriate.





o  
We do not anticipate paying
any dividends.





No
dividends have been paid on the common stock of the Company. The Company does
not intend to pay dividends (cash or otherwise) on its common stock in the
foreseeable future, and anticipates that profits, if any, received from
operations will be devoted to the Company’s future operations.  Any
decision to pay dividends in the future will depend upon the Company’s
profitability at the time, cash available and other relevant
factors.  Consequently, our shareholders should not rely on dividends
in order to receive a return on their investment.





o  Our stock price may be highly
volatile.





The
market price of our common stock, like that of many other solutions companies,
has been highly volatile and may continue to be so in the future due to a wide
variety of factors, including:





·
            our
      quarterly operating results and
performance;


·
            litigation
      and government proceedings;


·
            adverse
      legislation;


·
            changes
      in government regulations;


14


·
            economic
      and other external factors; and


·
            general
      market conditions.





Item
1B.  Unresolved Staff Comments.





None.





Item
2.  Properties.





We lease
properties in five domestic locations. The following locations represent our
major facilities.





Location
            
            Owned/Leased
            
            Description
            
            UsageWest Palm Beach, Florida
            
            Leased
            
            Industrial office and warehouse complex
            
            HeadquartersWest Palm Beach, Florida
            
            Leased
            
            Industrial office and warehouse complex
            
            WarehouseDeerfield Beach, Florida
            
            Leased
            
            Industrial office and warehouse complex
            
            Warehouse and officeLakeland, Florida
            
            Leased
            
            Industrial office and warehouse complex
            
            Warehouse and officeBall Ground, Georgia
            
            Leased
            
            Industrial office and warehouse complex
            
            Warehouse and office





The
Company leases its principal office at 8120 Belvedere Road, Suite 4, West Palm
Beach, Florida 33411.  The term of the lease, which commenced on
February 1, 2008, is for thirty (30) months.  The original monthly
base rent was $2,550, increasing annually by 3.5% per year.  Our
current monthly rental payment is $3,696.   There is no renewal
option in this lease.





The
Company leases approximately 4,445 square feet of warehouse space at 8010
Belvedere Road, Unit 9 and 10, West Palm Beach, Florida 33411.  The
term of this lease, which commenced on June 16, 2008, is for twenty-four (24)
months and is not renewable.  The monthly base rent was $2,963, but
the current monthly base rent is $3,426.  There is no renewal option
in this lease.





The
Company’s recently acquired wholly-owned subsidiary, B&M Construction Co.,
Inc. (“B&M”), leases office and warehouse space at 3706 DMG Drive, Lakeland,
Florida 33811.  This facility also houses Willis Electric, L.L.C., 70%
of the membership interests of which are owned by B&M.  The term
of the this is month to month.  The monthly base rent is
$3,500.  There is no renewal option in this lease.





B&M
leases office and warehouse space at 1412 S.W. 34th Avenue,
Deerfield Beach, Florida  33442.  The term of this lease is
month to month.  The monthly base rent is
$3,689.   There is no renewal option in this lease.





B&M
leases office and warehouse space at 921 Faulkner Lane, Ball Ground, Georgia
30107.  The term of this lease is month to month.  The
monthly base rent is $6,476.  There is no renewal option in this
lease.





The
Company believes that its current facilities are adequate for its needs through
the end of the relevant lease term, and that, should it be needed, suitable
additional space will be available to accommodate expansion of the Company’s
operations on commercially reasonable terms, although there can be no assurance
in this regard. There are no written agreements in place for new
facilities.





In the
opinion of the management of the Company, all of the properties described above
are adequately covered by insurance.





Item
3. Legal Proceedings.





There are
no material pending legal proceedings to which we are a party or to which any of
our property is subject, nor are there any such proceedings known to be
contemplated by governmental authorities.  None of our directors,
officers or affiliates is involved in a proceeding adverse to our business or
has a material interest adverse to our business.


15





Item 4. (Removed and Reserved).





Not
applicable.





PART
II





Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.





Our
common stock is traded on the OTC (Pink Sheets) Market under the symbol
“SSGI.PK”.  The following table sets forth, on a per share basis for
the periods indicated, the high and low sale prices per share for our common
stock as reported by the OTC (Pink Sheets) Market:





CommonStockPriceRangeHigh
                  
                  
                  LowFiscal
      Year 2009First
      quarter ended March 31, 2009
                  
                  $
                  0.80
                  
                  
                  $
                  0.35Second
      quarter ended June 30, 2009
                  
                  
                  0.80
                  
                  
                  
                  0.25Third
      quarter ended September 30, 2009
                  
                  
                  0.51
                  
                  
                  
                  0.43Fourth
      quarter ended December  31, 2009
                  
                  
                  2.00
                  
                  
                  
                  0.30Fiscal
      Year 2008First
      quarter ended March 31, 2008
                  
                  $
                  1.87
                  
                  
                  $
                  0.53Second
      quarter ended June 30, 2008
                  
                  
                  1.55
                  
                  
                  
                  1.05Third
      quarter ended September 30, 2008
                  
                  
                  1.40
                  
                  
                  
                  1.05Fourth
      quarter ended December 31, 2008
                  
                  
                  1.20
                  
                  
                  
                  0.37





At May
18, 2010 there were 167 shareholders of record.  In calculating the
number of shareholders, we consider clearing agencies and security position
listings as one shareholder for each agency or listing.





The
Company paid no dividends during the periods reported herein, and we do not
anticipate paying any dividends in the foreseeable future.





The
Company does not have any equity compensation plans.





Item
6. Selected Financial Data.





We are a
smaller reporting company as defined in Regulation S-K promulgated, and are not
required to provide the information under this item.





Item
7.  Management’s Discussion and Analysis of Financial Condition and Results
of Operations.




Introduction





The
purpose of management’s discussion and analysis (“MD&A”) is to increase the
understanding of the reasons for material changes in our financial condition,
results of operations, liquidity and certain other factors that may affect our
future results. The MD&A should be read in conjunction with the consolidated
financial statements and related notes.


16


Overview





SSGI was
incorporated in Florida on December 26, 1996 under the name All
Product Distribution Corp.  On July 29, 1998, the Company changed its
name to Phage Therapeutics International, Inc. (“Phage”).  On November
16, 2007, the Company changed its name from Phage to SSGI, Inc (“SSGI” or the
Company).




Surge
Solutions Group, Inc (“Surge”) was
incorporated in Florida on November 26, 2001. On March 30, 2007, Surge changed
its name from Surge Restoration, Inc. to Surge Solutions Group, Inc. On
December 18, 2007, the Company, Surge Solutions Group, Inc., Ryan Seddon,
Michael W. Yurkowsky and Peter Wilson entered into a Share Exchange Agreement
pursuant to which the Company purchased all of the shares of Surge Solutions
Group Inc.’s common stock in a one share for one share exchange (the “2007 Share
Exchange Agreement”).  The 2007 Share Exchange Agreement was
authorized by a written consent of the board or directors of the Company and the
majority of shareholders of the Company.  Pursuant to the terms of the
2007 Exchange Agreement, on or around January 15, 2008, the Company affected a
35 to 1 reverse stock split with the Company’s outstanding shares being reduced
from 14,587,370 to 416,782.  Also pursuant to the 2007 Exchange
Agreement, the Company changed its name on November 16, 2007 from Phage
Therapeutics International, Inc. to SSGI, Inc.  Additionally, pursuant
to the 2007 Exchange Agreement and the closing of the transactions contemplated
thereby, on or around February 22, 2008 the Company issued 33,025,000 shares of
its common stock to the shareholders of Surge Solutions Group, Inc. in exchange
for 33,025,000 shares of Surge Solutions Group, Inc. representing 100% of Surge
Solutions Group, Inc.’s outstanding shares of common stock.




Nature of
Operations
 
 SSGI,
Inc. (the “Company”) was incorporated under the laws of the State of Florida as
Phage Therapeutics International, Inc. on December 26, 1996. In February 2008,
through a share exchange, the company acquired Surge Solutions Group, Inc.
(“Surge”) As a consequence of the latter exchange, which qualified as a reverse
merger, Surge became the accounting acquirer and the reporting entity
prospectively.
 
 On July
7, 2009, the Company filed a Form S-1 with the Securities and Exchange
Commission to register a portion of their common stock and to become a fully
reporting Company in accordance with the Securities and Exchange Act of 1934. On
December 9, 2009, the Company’s registration statement was declared
effective.
 
 The
Company specializes in petroleum contracting and general construction in Florida
including insurance restoration and new commercial construction.  The
Company’s work is performed under cost-plus-fee contracts, fixed-price
contracts, and fixed-price contracts modified by incentive and penalty
provisions.  The length of the Company’s contracts typically range
from three months or less to one year.





The
Company is a multi disciplined solutions company specializing in three specific
markets of general construction including; insurance restoration, petroleum
contracting and commercial construction.





Results
of Operations for the Year Ended December 31, 2009 as Compared to Year Ended
December 31, 2008




Revenue





The
Company’s revenue of $7.78 million for the year ended December 31, 2009
increased $.98 million or 14%, compared to $6.80 million for the year ended
December 31, 2008.   This growth was primarily due to petroleum
contracting which increased from $3.49 million for the year ended December
31, 2008 to $7.35 million or 94% of total revenues for the year ended December
31, 2009 as opposed to 51% of total revenues for the year ended December 31,
2008. Non-petroleum construction decreased to $.43 million for the twelve months
ended December 31, 2009 from $3.31million for the same period in 2008. As an
installer, Surge has no control over sales or overall market share so that any
decline in revenues or market share directly affects our installation business.
The Company anticipated an overall downturn in the general construction industry
and devoted significant time and resource in 2008 to narrowing the Company’s
focus to that of petroleum contracting and commercial construction.





Gross Profit
(Loss)





For the
year ended December 31, 2009, the Company had a gross profit as a percentage of
contract revenues of 6.94% or $0.54 million on revenues of $7.78 million as
compared to a $.14 million gross loss on sales of $6.80 million for
the same period in 2008. The Company’s gross loss decreased from
a $140,837 to a gross profit of $544,517 for the year end December 31,
2008 and 2009, respectively.   The Company’s cost of revenues earned
increased approximately 4% from $6.94 million for the year ended December 31,
2008 to $7.24 million for the year ended December 31, 2009. This increase was
due primarily to the Company gaining additional experience in the petroleum
contracting field and as a result, increasing efficiencies on the job
site.  For the twelve months ended December 31, 2008, the Company was
transitioning to the petroleum contracting business





General and
Administrative





General
and administrative expenses decreased approximately 14% from $2.22 million for
the year ended December 31, 2008, to $1.90 million for the year ended December
31, 2009.  This decrease was due, in part, to labor
expenses which decreased approximately 28% from $1.20 million to
$.87 million for the years ended December 31, 2008 and 2009, respectively. The
Company decreased its marketing and advertising costs approximately 72% from
$0.18 million to $0.05 million as well as travel and entertainment expense and
auto and truck expenses which decreased approximately 65% and 57%, respectively,
between the two years. Professional fees did increase approximately 100% from
$0.14 million to $0.28 million between 2008 and 2009 due to the Company’s
accounting and legal costs associated with filing its registration statement
with the Securities and Exchange Commission and legal expenses incurred
collecting delinquent balances from its private sector petroleum clients.
General and administrative expenses as a percentage of contract revenue earned
for the years ended December 31, 2009 and 2008 were approximately 24% and 33%,
respectively.


17




Depreciation
expense and amortization decreased from $0.07 million for the year ended
December 31, 2008 to $0.04 million for the year ended December 31, 2009. The
decrease is primarily attributable to the change in our focus to the petroleum
contracting business where most heavy equipment used on the job site is rented
and is not a depreciable asset. The Company allocated $0.81 million and $0.61
million of the depreciation expense for the year end December 31, 2009 and 2008,
respectively, to cost of revenues earned.





For the
year ended December 31, 2009, we recorded bad debt expense of $0.19 million
which includes a reserve amount for doubtful accounts of $0.18 million. Our bad
debt expense was 2.4% of contract revenues earned and approximately 15% of our
contracts receivable balance of $1.27 million at December 31, 2009. During 2009,
the Company booked revenues on one contract of approximately $0.03 million where
the contracted party could not obtain financing and was unable to fulfill their
obligations under the contract. The Company also performed services on another
contract where the Customer supplied a defective underground fuel storage tank
that was not discovered until after installation. The Company booked receivables
for additional costs totaling $0.06 million and filed a claim against its
insurance carrier. The claim was denied resulting in a charge to bad debt
expense. An additional customer filed for bankruptcy protection in March of 2010
on a completed contract of $0.07 million for which the Company posted a charge
to bad debt expense. In March of 2010, the customer tendered a settlement offer
of approximately $0.03 million. The Company has countered and is waiting a
response. The Company has filed several successful lawsuits and received court
ordered judgments against two additional customers to collect delinquent
accounts receivable balances. The Company believes it will be successful in
collecting on these but it is not able to determine the amounts it may recover
at this time.





Contracts
receivable are customer obligations due under contractual terms. The Company
sells its services to residential, commercial, and retail customers as well as
municipalities.  On most projects, the Company has liens rights under
Florida law which are typically enforced on balances not collected within 90
days.   The Company includes any balances that are determined to
be uncollectible along with a general reserve in its overall allowance for
doubtful accounts. Collectability of our accounts receivable allowance is
reviewed on a monthly basis. Municipalities pay the Company based on a
percentage completion formula less a 10% retainage that is paid upon successful
completion of a contract.





Other Income and
Expenses





Interest
expense increased from $0.07 million for the year ended December 31, 2008 to
$0.14 million for the year ended December 31, 2009, or 100%.  The
increase is due to $0.06 million in interest paid or accrued on loans due to
shareholders for additional advances of $1.06 million made to the Company during
2009 by our Chief Executive Officer and a former director of the Company. The
Company paid interest to a financial institution on its promissory note during
the years ended December 31, 2009 and 2008 of  approximately $0.03
million for each year respectively.





Allocated
to cost of revenues earned and not shown under the other income and expense
classification is an additional $.06 million in interest paid on term notes
payable to related parties. The interest cost associated with this loan is
directly related to loans made to fund restricted cash deposits held by a third
party bonding agency for contracts requiring performance bonds. Each contracted
job is charged an interest cost based on the amount of proceeds from the term
note payable that funded the cash deposits held as collateral by the bonding
agency.





Interest
expenses associated with amortizing loans for the purchase of vehicles decreased
approximately 26% between the two years due to reduction in the
principal.





For the
years ended December 31, 2009 and 2008, the Company recorded a loss of $0.002
million and $0.013 million, respectively, on the disposition of
assets.





In
conjunction with the Company’s note payable to related parties, the Company
issued 632,000 warrants which the company valued at $0.18 million using the
Black Scholes valuation model and included this expense in the other income and
expense classification on its statement of operations for the year ended
December 31, 2009. The Company did not incur these costs in 2008.





Net Loss





The
Company incurred net losses of $1.67 million and $2.44 million for the years
ended December 31, 2009 and 2008, respectively. The Company’s net losses
decreased approximately 32% or $0.77 million between the two
years.


18


During
the year ended December 31, 2009, the company incurred non-cash expenses
associated with financing costs under term notes payable to related parties,
employee stock and warrant awards, depreciation and amortization. Of the total
loss incurred, approximately 32% or $0.54 million is associated with these
items. The Company also experienced a 100% increase in interest expense from
$0.07 million for the year ended December 31, 2008 to $0.14 million for the year
ended December 31, 2009.  A significant portion of the loss for the
year ended December 31, 2008 was a result of the increase of the Company’s
infrastructure ramp up to enter the petroleum
business.





The
Company experienced losses on several of its contracts. These losses were a
result of several factors. The Company provided services on a contract where the
Customer supplied a defective underground fuel storage tank that was not
discovered until after installation. The Company incurred additional costs
totaling $0.06 million to reinstall the tank and piping and filed a claim
against its insurance carrier. The claim was denied resulting in a charge to bad
debt expense. The Company also discovered an error in estimating one of its
contracts that resulted in costs exceed its estimated cost of revenues and thus
resulting in a loss on the contract.





Liquidity and Capital
Resources





As of
December 31, 2009, the Company had total current assets of approximately $1.87
million, comprised of cash, contracts receivable, prepaid expenses and costs and
estimated earnings in excess of billings on uncompleted contracts. This compares
with current assets in the same categories of approximately $0.62 million for
December 31, 2008. Contracts receivable increased 221% from $0.34 million as of
December 31, 2008 to $1.09 million for the year ended December 31,
2009.   During 2008, the Company revenue base was comprised mainly in
the area of commercial construction as opposed to petroleum contracting for the
same period in 2009.  During 2008, the Company was involved with a
major home improvement chain that involved a large number of small contracts for
installation of the home improvement chains products. During 2008, the Company
entered the petroleum construction industry but still on average had a large
amount of contracts at a relatively small value. During 2009, the Company
completed the smaller contracts and began petroleum contracting which consisted
of fewer contracts but with a higher stated value. Costs and estimated earnings
in excess of billings on uncompleted contracts decreased $.08 million or
approximately 58% from December 31, 2008 to December 31, 2009 due to the Company
billings on government contracts more closely approximating costs. In government
contracts, in order to bill for services performed, the Company must present a
request for payment based on the percentage the job is completed.





The
Company’s revenue of $7.78 million for the year ended December 31, 2009
increased $.98 million or 14%, compared to $6.80 million for the year ended
December 31, 2008.   Our costs and estimated earnings in excess
of billings as a percentage of sales were approximately 1% and 2% for the years
ended December 31, 2009 and 2008, respectively. Likewise our accounts
payable increased significantly due to the increase in costs associated with the
increase in revenues. Government contracts require a significant expenditure for
materials, labor and overhead before the Company can bill and collect from the
municipality.





The
Company’s current liabilities are comprised primarily of accounts payable,
accrued expenses, current portions of notes payable to stockholders and third
parties and billings in excess of costs and estimated earnings on uncompleted
contracts. As of December 31, 2009, current liabilities totaled approximately
$3.65 million which increased approximately 71% over current liabilities of
$2.14 million as of December 31, 2008. Accounts payable and accrued
expenses increased approximately 167% from $0.73 million at December 31, 2008 to
$1.95 million at December 31, 2009 due in large part to the increase in
contracts in progress.  In place at December 31, 2008, was an
obligation due to a financial institution under a credit line of $0.75
million.  By December 31, 2009, this credit line was converted to a
term note payable to the same financial institution with a balance due of $0.35
million.   During 2009, the Company incurred debt on term notes
to a related party in the amount of approximately $.97 million, the proceeds of
which were used to fund performance bonds on municipal contracts. The Company
has failed to make timely payments as required under the terms of the term note
and is currently in default. This term note payable was not outstanding at
December 31, 2008. At December 31, 2009, billings in excess of costs and
estimated earnings on uncompleted contracts had a balance of $0.25 million which
was a decrease of approximately 49% over the balance of $0.49 million at
December 31, 2008.  This decrease is directly related to the size of
the contracts between periods and the increased amount of contracts with
governmental entities that require billings to approximate the percentage that a
contact is complete.  The Company had contracted for larger commercial
projects at December 31, 2009, as opposed to numerous small contracts for a
national home improvement chain at December 31, 2008.  The jobs for
the home improvement chain were small jobs that were usually completed within
one accounting period.  At December 31, 2009, the Company had fewer
but larger jobs that lasted over several accounting
periods.





Other
liabilities at December 31, 2009 increased approximately 95% over the same
period in 2008. This increase was due primarily to loans made by
stockholders to the Company which increased from $.14 million at December
31, 2008 or $750% to $1.19 million for the same period in 2009. Notes payable to
several financial institutions for the purchases of the Company’s transportation
equipment decreased from $0.27 million to $0.13 million between these two
periods due to amortization of the principal balance as a result of monthly
installment payments.


19





The
Company has insufficient working capital to fund ongoing operations and is
expecting to continue to incur further losses in the future. The Company has
increased its total liabilities 95% since 2008. Its accounts payable balance
exceeds its accounts receivable by $0.86 million. The Company has $0.51 million
in restricted cash deposits that are to be used to satisfy term notes payable to
related parties and does not have the capital reserves available to pay the
additional $0.46 million needed to satisfy the term notes principal balance that
will be due in April 2010.





Currently,
the Company is unable to fund the cost of revenues needed to begin new projects
for which it is contracted and is currently in default of its term note to
related parties.  Without significant capital infusions to satisfy the
Company’s cash flow shortage, the Company will not be able to continue
operations in the short term. The Company has been working on this situation for
a long period of time and has not yet been able to raise the additional capital
needed. Management is considering all options as it relates to the Company’s
current cash flow needs.




The
following is a summary of the Company’s cash flows provided by (used in)
operating, investing and financing activities for the years
ended December 31, 2009 and 2008 (in 000’s):





For the Year Ended
                  
                  
                  For the Year EndedDecember 31, 2009
                  
                  
                  December 31, 2008Net
      cash used in operating activities
                  
                  $
                  (1,394
                  )
                  
                  $
                  (1,596
                  )Net
      cash used in investing activities
                  
                  
                  (66
                  )
                  
                  
                  (11
                  )Net
      cash provided by financing activities
                  
                  
                  1,517
                  
                  
                  
                  1,615Net
      increase in cash
                  
                  
                  57
                  
                  
                  
                  8





Net cash
used in operations for the years ended December 31, 2009 and 2008 was $1.39
million and $1.60 million, respectively. The decrease in cash usage between the
two years was due primarily to the decrease in the net loss for the year ended
December 31, 2009 over the same period in 2008. The net losses for years ended
December 31, 2009 and 2008 were decreased by non-cash expenses in the amount of
approximately $0.42 million and $0.16 million, respectively, for stock and
warrants issued as compensation and loan financing costs. The increase in
contracts receivable and accounts payable over the previous year also
contributed to operating cash usage.





Net cash
used in investing activities for the years ended December 31, 2009 and 2008 was
approximately $0.07 million and $0.01 million, respectively. For the year
ended December 31, 2009 and 2008, proceeds from the sale of equipment of
approximately $0.01 and $0.11 million, respectively, was offset by the purchase
of new equipment in the amount of approximately $0.08 million and $0.12 million
for the same years, respectively.





Net cash
provided by financing activities were a result of additional loans made by Ryan
Seddon, our former Chairman of the Board, Chief Executive Officer and President,
and Ricardo Sabha, a former officer and director and current employee of the
Company.  On April 20, 2010, Mr. Seddon forgave all but $125,000 of
his loans to the Company, and Mr. Sabha forgave all of his loans to the
Company.  The Company received proceeds from a term note payable to a
related party for cash needs on performance bonds held by an unrelated third
party. The borrowing on the term note payable, to a related party and
stockholders were offset by principals payments made to these
lenders.





Critical
Accounting Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to select
appropriate accounting policies and to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. Our
critical accounting policies are described below to provide a better
understanding of how we develop our assumptions and judgments about future
events and related estimations and how they can impact our financial statements.
A critical accounting estimate is one that requires our most difficult,
subjective, or complex estimates and assessments and is fundamental to our
results of operations.





We base
our estimates on historical experience and on various other assumptions we
believe to be reasonable according to the current facts and circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. We
believe the following are the critical accounting policies used in the
preparation of our consolidated financial statements in accordance with
accounting principles generally accepted in the United States, as well as the
significant estimates and judgments affecting the application of these policies.
This discussion and analysis should be read in conjunction with our consolidated
financial statements and related notes.


20





Percentage of
completion.  Revenue from long-term contracts to provide
construction, engineering, design or similar services are reported on the
percentage-of-completion method of accounting. This method of accounting
requires us to calculate job profit to be recognized in each reporting period
for each job based upon our projections of future outcomes, which include
estimates of the total cost to complete the project; estimates of the project
schedule and completion date; estimates of the extent of progress toward
completion; and amounts of any probable unapproved claims and change orders
included in revenue. Progress is generally based upon physical progress,
man-hours or costs incurred depending on the type of job. Physical progress is
determined as a combination of input and output measures as deemed appropriate
by the circumstances.





At the
outset of each contract, we prepare a detailed analysis of our estimated cost to
complete the project. Risks relating to service delivery, usage, productivity,
and other factors are considered in the estimation process. Our project
personnel periodically evaluate the estimated costs, claims, change orders, and
percentage of completion at the project level. The recording of profits and
losses on long-term contracts requires an estimate of the total profit or loss
over the life of each contract. This estimate requires consideration of total
contract value, change orders, and claims, less costs incurred and estimated
costs to complete. We also take into account liquidated damages when determining
total contract profit or loss.  Our contracts often require us to pay
liquidated damages should we not meet certain performance requirements,
including completion of the project in accordance with a scheduled time. We
include an estimate of liquidated damages in contract costs when it is deemed
probable that they will be paid.  Anticipated losses on contracts are
recorded in full in the period in which they become evident. Profits are
recorded based upon the product of estimated contract profit at completion times
the current percentage-complete for the contract.





When
calculating the amount of total profit or loss on a long-term contract, we
include unapproved claims in contract value when the collection is deemed
probable based upon the four criteria for recognizing unapproved claims under
FASB ASC 605-35 regarding accounting for performance of construction-type and
certain production-type contracts. Including probable unapproved claims in this
calculation increases the operating income (or reduces the operating loss) that
would otherwise be recorded without consideration of the probable unapproved
claims.  Probable unapproved claims are recorded to the extent of
costs incurred and include no profit element. In all cases, the probable
unapproved claims included in determining contract profit or loss are less than
the actual claim that will be or has been presented to the customer. We are
actively engaged in claims negotiations with our customers, and the success of
claims negotiations has a direct impact on the profit or loss recorded for any
related long-term contract. Unsuccessful claims negotiations could result in
decreases in estimated contract profits or additional contract losses, and
successful claims negotiations could result in increases in estimated contract
profits or recovery of previously recorded contract losses.




At least
quarterly, significant projects are reviewed in detail by senior management. We
have a long history of working with multiple types of projects and in preparing
cost estimates. However, there are many factors that impact future costs,
including but not limited to weather, inflation, labor and community
disruptions, timely availability of materials, productivity, and other factors
as outlined in our “Risk Factors” contained in Part I of this Annual Report on
Form 10-K. These factors can affect the accuracy of our estimates and materially
impact our future reported earnings.





Income tax
accounting.   Deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that have been
recognized in the financial statements or tax returns.  A current tax
asset or liability is recognized for the estimated taxes payable or refundable
on tax returns for the current year.  A deferred tax asset or
liability is recognized for the estimated future tax effects attributable to
temporary differences between the financial reporting basis and the income tax
basis of assets and liabilities.  The measurement of current and
deferred tax assets and liabilities is based on provisions of the enacted tax
law, and the effects of potential future changes in tax laws or rates are not
considered.  The value of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
are not expected to be realized.


21





Off
balance sheet arrangements





Currently,
the Company is committed under leases for the following facilities:




Facility
                
                Monthly
                  Lease
                  Payment
                
                TermWarehouse
      – West Palm Beach, Florida
                
                $
                3,426
                
                Through
      July 2010Headquarters – West Palm Beach,
      Florida
                
                $
                3,696
                
                Through
      July 2010Office
      and Warehouse – Lakeland, Florida
                
                $
                3,500
                
                Month
      to monthOffice
      and Warehouse – Deerfield Beach, Florida
                
                $
                3,689
                
                Month
      to monthOffice
      and Warehouse – Ball Ground, Georgia
                
                $
                6,476
                
                Month
      to month





Currently,
the Company is committed under a vehicle lease for $448 per month through
February 2011.





Future
minimum lease payments currently due are as follows:





Year
                    
                    Amount2010
                    
                    
                    55,2302011
                    
                    
                    896Thereafter
                    
                    
                    -TOTAL
                    
                    $
                    56,126




The
Company maintains its cash balances with a high quality financial institution
which the Company believes limits its risk.  The balances are insured
by the Federal Deposit Insurance Corporation (FDIC) and Securities Investor
Protection Corporation (SIPC) up to $250,000.





The
Company has accounts receivable from customers engaged in various
industries.  These industries may be affected by economic factors,
which may impact accounts receivable.  The Company does not believe
that any single customer, industry, or concentration in a geographic area
represents significant credit risk.





Financial
Instruments Market Risk





We invest
excess cash and equivalents in short-term securities, primarily overnight time
deposits, which carry a fixed rate of return per a given tenor.





Environmental
Matters





We are
subject to numerous environmental, legal, and regulatory requirements related to
our operations worldwide. In the United States, these laws and regulations
include, among others: the Comprehensive Environmental Response, Compensation,
and Liability Act; the Resources Conservation and Recovery Act; the Clean Air
Act; the Federal Water Pollution Control Act; and the Toxic Substances Control
Act.


22




Recent
Accounting Pronouncements





In 2009,
the Company adoptedAccounting Standards
Codification(“ASC”)Standard ASC 105-10. ASC 105-10 will become the single source of
authoritative nongovernmental GAAP (US), superseding existing FASB, AICPA, EITF,
and related accounting literature. ASC 105-10 reorganizes the thousands of GAAP
pronouncements into roughly 90 accounting topics and displays them using a
consistent structure. Also included is relevant Securities and Exchange
Commission guidance organized using the same topical structure in separate
sections. The adoption of this standard did not have an impact on the Company’s
financial statements since all future references to authoritative accounting
literature will be references in accordance with the new ASC codification of
accounting standards topical index.





In 2009,
the Company also adopted ASC 855-10 Subsequent Events,formerly
Statement of Financial Accounting Standards (“SFAS”) No. 165, Subsequent Events. This
Statement establishes general standards of accounting for and disclosures of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events. The adoption of ASC
855-10 did not have a material impact on the Company’s financial
statements.





Item
7A. Quantitative and Qualitative Disclosures About Market Risk.





We are a
smaller reporting company as defined in Regulation S-K, and are not required to
provide the information under this item.




Item 8. Financial Statements and Supplementary
Data.





The financial statements of the Company, the accompanying notes
thereto and the independent registered public accounting firm’s report are
included in Part IV, Item 15 of this report and are incorporated
herein by reference.




Item 9. Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure.





None.





Item
9A. Controls and Procedures.





Evaluation
of Disclosure Controls and Procedures




Under the
supervision and with the participation of our management, including the
Principal Executive Officer and Principal Financial Officer, we have evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period
covered by this report.  Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of December 31,
2009, these disclosure controls and procedures were ineffective to ensure that
all information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is: (i) recorded, processed, summarized and
reported, within the time periods specified in the Commission’s rule and forms;
and (ii) accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.




There
have been no material changes in internal control over financial reporting that
occurred during the fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.




This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation
requirements by the Company’s registered public accounting firm pursuant to the
rules of the Securities and Exchange Commission that permit the Company to
provide only management’s report in this report.


23





Inherent
Limitations Over Internal Controls




Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations, including
the possibility of human error and circumvention by collusion or overriding of
controls.  Accordingly, even an effective internal control system may
not prevent or detect material misstatements on a timely basis.  Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions or
that the degree of compliance with the policies or procedures may
deteriorate.




Item
9A(T). Controls and Procedures.





Not
applicable.





Item
9B. Other Information





None.




PART
III





Item
10. Directors, Executive Officers and Corporate Governance.





The
following persons are our executive officers and directors.  Directors
are elected to hold offices until the next annual meeting of shareholders and
until their successors are elected or appointed and qualified. Officers are
appointed by the board of directors until a successor is elected and qualified
or until resignation, removal or death.




NAME
            
            AGE
            
            OFFICES HELDLarry
      M. Glasscock, Jr.
            
            53
            
            Chief
      Executive Officer and PresidentRodger
      Rees
            
            55
            
            Chief
      Financial OfficerRyan
      Seddon
            
            32
            
            DirectorMichael
      W. Yurkowsky
            
            37
            
            DirectorRobert
      P. Grammen
            
            55
            
            DirectorFrederico
      Pier
            
            42
            
            Director





Larry M. Glasscock, Jr. was
elected and appointed as our new President and Chief Executive Officer on April
20, 2010.   Since September 2009, Mr. Glasscock has been a
restructuring advisor and strategy consultant for Apollo Couriers, Inc., a Los
Angeles-based transportation services provider operating throughout Southern
California.  Since November 2008, Mr. Glasscock has also been the
President and Chief Executive Officer of Bettina Corporation, a Class II gaming
company.  From February 2003 through December 2008, Mr. Glasscock was
Senior Vice President of AirNet Systems, Inc., a provider of time-critical
air transportation services for small package shippers located in Columbus,
Ohio.  Mr. Glasscock received his B.A. from Rhodes College in 1979.
The business address for Mr. Glasscock is 8120 Belvedere Road, Suite 4, West
Palm Beach, Florida 33411.





Rodger Rees has been Chief
Financial Officer of the Company since May 2009. From June 2006 to April 2009,
Mr. Rees was a financial consultant with Space Coast Business Consultants and
Tatum, LLC. While a consultant, Mr. Rees provided financial services to small
public and private companies in the real estate, financial services, private
equity and marine industries.  While engaged by Tatum, LLC, Mr. Rees
provided consulting services to Bonds.com Holdings, Inc., a publicly traded
company, and subsequently acted as interim Chief Financial
Officer.  From May 2005 through May 2006, Rodger E. Rees served as
Chief Financial Officer and Secretary of Empire Financial Holding, Inc. (now
Jessup & Lamont, Inc.), a publicly traded brokerage, asset management, and
investment banking firm. From February 2001 through April 2005, Mr. Rees served
as director of independent broker-dealer services and in January 2004
subsequently became Chief Operating Officer of Empire Financial Group Inc., a
subsidiary of Empire Financial Holding, Inc.  From 1985 to 2001, Mr.
Rees was Chief Executive Officer, Chief Financial Officer and founder of two
financial services firms, Buckhead Financial Corporation and Centennial Capital
Management, the latter of which was sold to Empire Financial Holdings, Inc. in
2001. Mr. Rees holds a Bachelor of Science degree with a major in accounting
from East Tennessee State University and is a Certified Public Accountant
licensed in the state of Georgia. The business address for Mr. Rees is 8120
Belvedere Road, Suite 4, West Palm Beach, Florida 33411.


24




Ryan Seddon has served as a
director since February 2008 and is currently a consultant to the
Company.  From February 2008 until April 20, 2010, Mr. Seddon served
as our Chairman of the Board, President and Chief Executive
Officer.  From November 2001 until April 20, 2010, Mr. Seddon also
served as the President/CEO and Director of Surge Solution Group, Inc, the
Company’s wholly-owned subsidiary. From 1998 through 2000, Mr. Seddon was a
Managing Partner of Discount Cellular, Inc., a national telecommunications firm
located in West Palm, Florida.  Mr. Seddon holds an Associate’s degree
from Palm Beach Community College and is a Florida state certified General
Contractor (CGC), a certified Pollutant Storage System Contractor (PSSC),
Certified Mold Remediation Supervisor (CMRS) and a Certified Indoor
Environmental Consultant (CIEC).  The business address for Mr. Seddon
is 8120 Belvedere Road, Suite 4, West Palm Beach, Florida 33411.





Michael W. Yurkowsky has
served as a director since April 2008.  Since August 2003, Mr.
Yurkowsky has been the Managing Director of Trenchant Asset Management, an asset
management company based in Dallas, Texas. From November 1997 to August 2003,
Mr. Yurkowsky was a Vice President of Investments at Wachovia Securities in
Dallas, Texas. The business address for Mr. Yurkowsky is Trenchant Asset
Management, 2828 Routh Street, Suite 500, Dallas, Texas 75201.





Robert P. Grammen has served
as a director since February 2009, and is a Senior Partner and Principal of
EFO Holdings, LP (“EFO”), an investment management firm with in excess of $250
Million under management.   EFO has offices in Dallas, Texas and
Naples, Florida, and Mr. Grammen serves as the Managing Director of
the Florida office.   Grammen is responsible for the origination,
analysis, structure and execution of direct debt and equity investments. Prior
to joining EFO in 1999, Mr. Grammen served as a Vice President of International
Trading Group focusing on the purchase, restructure and sale of distressed
municipal bond debt, and prior thereto as a Vice President of Landbase, Inc.
(1987-1994) working in 13 countries as an investment banker in the international
resort development industry.  Mr. Grammen serves as a director and
principal of several EFO portfolio companies including Laser Spine Institute,
LLC, Cypress Lending Group, Ltd., Family Access Exchange, Azunia Brands, LP,,
Surge Solutions Group and Melbourne Greyhound Park, LLC. Mr. Grammen received
his B.A. in Economics from Bethany College and conducted advanced business
studies in Oxford, England. The business address for Mr. Grammen is 8120
Belvedere Road, Suite 4, West Palm Beach, Florida 33411.





Frederico Pier has served as a
director since July 2009, and has been working in the financial
services industry for 19 years.  He holds a BBA in Corporate Finance
from the University of North Texas, and an MBA in Corporate and International
Finance from the Graduate School of Management at the University of
Dallas.  Mr. Pier has extensive international business experience
having worked both in the banking and investment sectors.  Mr. Pier is
a Senior Vice President with Oppenheimer & Co. Inc since November of
2007.  The business address for Mr. Pier is 13455 Noel Road, Suite
1200 Dallas, Texas 75240.





Compliance
with Section 16(a) of the Securities Exchange Act of 1934




Section
16(a) of the Securities Exchange Act requires our executive officers and
directors, and persons who own more than 10% of our common stock, to file
reports regarding ownership of, and transactions in, our securities with the
Securities and Exchange Commission and to provide us with copies of those
filings.  Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during fiscal year ended December 31, 2009, our officers, directors
and greater than 10% percent beneficial owners complied with all applicable
filing requirements.





Code
of Ethics





As a new
public company, we have not adopted a code of ethics.  We intend to
adopt a code of ethics for our senior officers, including our principal
executive officer, principal financial officer, principal accounting officer or
controller and any person who may perform similar functions as we gain
experience as a public company.




Director
Nominations




As of
December 31, 2009, we did not effect any material changes to the procedures by
which our shareholders may recommend nominees to our board of
directors.




25




Audit
Committee and Audit Committee Financial Expert




We do not
currently have a standing audit, nominating or compensation committee of the
board of directors, or any committee performing similar
functions.  Our board of directors performs the functions of audit,
nominating and compensation committees.  As of the date of this
prospectus, no member of our board of directors qualifies as an “audit committee
financial expert” as defined in Item 407(d)(5) of Regulation S-K promulgated
under the Securities Act.





Item
11. Executive Compensation.





Summary
Compensation Table





The
following summary compensation table sets forth the aggregate compensation we
paid or accrued during the Company’s last two completed fiscal years to (i) our
Chief Executive Officer (principal executive officer), (ii) our two most highly
compensated executive officers other than the principal executive officer who
were serving as executive officers on December 31, 2009, and (iii) up to two
additional individuals who would have been within the two-other-most-highly
compensated but were not serving as executive officers on December 31,
2009:





Summary
Compensation Table





NameandPrincipalPosition
                                  
                                  Year
                                  
                                  Salary
                                  
                                  
                                  OptionAwards
                                  
                                  
                                  AllOtherCompensation (1)
                                  
                                  
                                  TotalRyan
      Seddon
                                    Former
      Chairman of the Board, CEO and President
                                  
                                  2009
                                  
                                  $
                                  190,000
                                  
                                  
                                  $
                                  146,125
                                  
                                  
                                  $
                                  4,600
                                  
                                  
                                  $
                                  340,7252008
                                  
                                  $
                                  211,600
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  16,803
                                  
                                  
                                  $
                                  228,403Rodger
      Rees
                                    Chief
      Financial Officer
                                  
                                  2009
                                  
                                  $
                                  64,167
                                  
                                  
                                  $
                                  22,266
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  86,433Vaughn
      Stoll
                                    Former
      Chief Financial Officer
                                  
                                  2009
                                  
                                  $
                                  33,856
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  33,8562008
                                  
                                  $
                                  112,642
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  112,642





(1)
            Amounts
      represent reimbursements to Mr. Seddon for home office
      expenses.





Narrative
disclosure to summary compensation table





On April
1, 2007, Surge and Mr. Seddon entered into an employment agreement that
initially provided for an annual base salary of $240,000. Under this employment
agreement, Mr. Seddon also received use of a company vehicle, health care and
401(k) benefits, and other benefits customarily afforded to employees of
Surge.  The employment agreement was amended on August 1, 2009, to
reduce Mr. Seddon’s annual base salary from $240,000 to $190,000 and provide for
an annual issuance to Mr. Seddon of 500,000 warrants to purchase the Company’s
common stock. On April 20, 2010, this employment agreement was terminated in
connection with Mr. Seddon’s resignation as the Chairman of the Board, President
and Chief Executive Officer of the Company, and as an employee of
Surge.





On May
18, 2009, Surge and Mr. Rees entered into a one-year employment agreement that
provides for a base salary of $110,000 with a performance bonus paid annually
based on the profitability of the Company.  This employment agreement
further provides for the issuance to Mr. Rees of 250,000 warrants to purchase
the Company’s common stock at certain periods of continued employment ranging
from six months to two years.  Mr. Rees is also entitled to participate in
all benefit plans maintained by Surge for salaried employees.





Outstanding
Equity Awards





The
following table sets forth the outstanding equity awards for each named
executive officer outstanding as of December 31, 2009:




26




Outstanding
Equity Awards at Fiscal Year-End





Option
Awards




Name
                  
                  Number of Securities
                    Underlying
                    Unexercised Options
                    Exercisable
                  
                  Number of Securities
                    Underlying Unexercised
                    Options
                    Unexercisable
                  
                  Option Exercise Price
                  
                  Option Expiration DateRyan
      Seddon
                  
                  
                  500,000
                  
                  
                  
                  $
                  0.63
                  
                  6/29/2014Rodger
      Rees
                  
                  
                  50,000
                  
                  
                  
                  $
                  0.25
                  
                  5/17/2014Rodger
      Rees
                  
                  
                  100,000
                  
                  
                  
                  $
                  0.35
                  
                  5/17/2014Rodger
      Rees
                  
                  
                  
                  
                  100,000
                  (1)
                  $
                  0.45
                  
                  5/17/2014





(1)
            These
      options vest and become exercisable on May 18,
  2011.




Compensation
of directors





The
following summary compensation table sets forth the aggregate compensation we
paid or accrued during the fiscal year ended December 31, 2009, to our
directors:





Director
Compensation




Name
              
              Fees Earned or
                PaidinCash
              
              
              OptionAwards
              
              
              TotalMark
      S. Feldmesser
              
              $
              4,000
              
              
              
              5,511
              (1)
              
              $
              9,511Michael
      W. Yurkowsky
              
              $
              700
              
              
              
              5,511
              (2)
              
              $
              6,211




(1)
            The
      aggregate number of option awards to Mr. Feldmesser outstanding at
      December 31, 2009, was 12,000.


(2)
            The
      aggregate number of option awards to Mr. Yurkowsky outstanding at December
      31, 2009, was 62,000.




Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.





The
following table sets forth, as of May 18, 2010, certain information with regard
to the record and beneficial ownership of the Company’s common stock by (i) each
person known to the Company to be the record or beneficial owner of 5% or more
of the Company’s common stock, (ii) each director of the Company, (iii) each of
the named executive officers, and (iv) all executive officers and directors of
the Company as a group:




Title of Class
                                                    
                                                    Name and Address of
                                                      Beneficial
                                                      Owner
                                                    
                                                    Amount
                                                      And
      Nature of
                                                      Beneficial Ownership
                                                    
                                                    
                                                    Percent
      of
                                                      ClassCommon
      Stock
                                                    
                                                    Ryan
      Seddon (1)
                                                      8120
      Belvedere Road, Suite 4
                                                      West
      Palm Beach, Florida 33411
                                                    
                                                    
                                                    5,000,000
                                                    
                                                    
                                                    
                                                    15.87
                                                    %Common
      Stock
                                                    
                                                    Rodger
      Rees (2)
                                                      8120
      Belvedere Road, Suite 4
                                                      West
      Palm Beach, Florida 33411
                                                    
                                                    
                                                    150,000
                                                    
                                                    
                                                    
                                                    0.49
                                                    %Common
      Stock
                                                    
                                                    Larry
      M. Glasscock, Jr.
                                                      8120
      Belvedere Road, Suite 4
                                                      West
      Palm Beach, Florida 33411
                                                    
                                                    
                                                    0
                                                    
                                                    
                                                    
                                                    0
                                                    %Common
      Stock
                                                    
                                                    Michael
      W. Yurkowsky (3)
                                                      2828 Routh
      Street, Suite 500
                                                      Dallas,
      Texas 75201
                                                    
                                                    
                                                    847,000
                                                    
                                                    
                                                    
                                                    2.77
                                                    %Common
      Stock
                                                    
                                                    Robert
      P. Grammen (4)
                                                      9180
      Galleria Court  #600
                                                      Naples,
      Florida 34109
                                                    
                                                    
                                                    1,063,120
                                                    
                                                    
                                                    
                                                    3.48
                                                    %Common
      Stock
                                                    
                                                    Frederico
      Pier
                                                      13455
      Noel Road, Suite 1200
                                                      Dallas,
      Texas 75240
                                                    
                                                    
                                                    145,000
                                                    
                                                    
                                                    
                                                    0.48
                                                    %Common
      Stock
                                                    
                                                    William
      P. Esping (5)
                                                      2828 Routh
      Street, Suite 500
                                                      Dallas,
      Texas 75201
                                                    
                                                    
                                                    8,448,927
                                                    
                                                    
                                                    
                                                    26.84
                                                    %Common
      Stock
                                                    
                                                    Bobby
      L. Moore, Jr.
                                                      4215
      S.B. Merrion Road
                                                      Lakeland,
      Florida  33810
                                                    
                                                    
                                                    4,124,622
                                                    
                                                    
                                                    
                                                    13.52
                                                    %Directors
      and Officers as a Group
                                                    
                                                    
                                                    
                                                    
                                                    7,205,120
                                                    
                                                    
                                                    
                                                    22.68
                                                    %




27




(1)
            Includes
      warrants to purchase 1,000,000
shares.


(2)
            Includes
      warrants to purchase 150,000
shares.


(3)
            Includes
      warrants to purchase 62,000 shares.  Also includes 200,000
      shares owned by Trenchant Asset Management.  Mr. Yurkowsky has
      voting and investment control over the shares owned by Trenchant Asset
      Management.


(4)
            Includes
      warrants to purchase 62,920 shares.


(5)
            Includes
      warrants to purchase 982,261 shares.  Also includes 6,000,000
      shares owned by Underground Tank Partners.  Mr. Esping has sole
      voting and investment control over the shares owned by Underground Tank
      Partners.




Item
13. Certain Relationships and Related Transactions, and Director
Independence.





General





On April
20, 2010, Mr. Seddon resigned as the Chairman of the Board, President and Chief
Executive Officer of the Company, and as an employee of Surge.  Mr.
Seddon will remain as a member of the Board of Directors through the 2010/2011
term.  In connection with Mr. Seddon’s resignations, on April 20,
2010, the Company, Surge and Mr. Seddon executed and entered into a Modification
Agreement which provides for, among other things, the following:  (i)
Mr. Seddon surrendered to the Company for cancellation all of his shares of
common stock of the Company, except for 4,000,000 shares which he retained; (ii)
Mr. Seddon forgave all but $125,000 ($816,824 of principal and $45,944 in
accrued interest was forgiven) of the remaining balance of principal and
interest due by the Company or Surge to Mr. Seddon in connection with previous
loans made by Mr. Seddon to the Company and/or Surge (the $125,000 that was not
forgiven is now evidenced by the Company’s promissory note made payable to Mr.
Seddon, bearing interest at 5% per annum and payable in full on December 31,
2011); (iii) the Company and Mr. Seddon entered into a Consulting Agreement
pursuant to which Mr. Seddon will provide certain transitional consulting
services to the Company, on a limited basis, for 12 months in exchange for a
consulting fee equal to $9,333.33 per month; (iv) the Company granted and issued
to Mr. Seddon a Warrant to purchase 500,000 shares of the Company’s common stock
exercisable for five years at an exercise price of $0.60 per share; and (v) the
Company agreed to repay certain credit card indebtedness incurred by Mr. Seddon
solely on behalf of the Company and Surge, and to use its commercially
reasonable best efforts to repay all outstanding indebtedness or other
obligations of the Company or Surge, the payment or performance of which was
personally guaranteed by Mr. Seddon.





On May
18, 2009, Surge entered into a one year employment agreement with Rodger Rees to
serve as our Chief Financial Officer (the “Rees Agreement”).  The Rees
Agreement provides for a base salary of $110,000 with a performance bonus paid
annually based on the profitability of the Company. The Rees Agreement further
provides for the issuance of 250,000 warrants to purchase the Company’s common
stock at certain periods of continued employment from 6 months to 2 years.
 Mr. Rees is entitled to participate in all benefit plans maintained by the
Company for salaried employees.  The Rees Agreement also contains a
confidentiality provision and an agreement by Mr. Rees not to compete with us
upon its expiration.




28


On May
13, 2010, the Company acquired all of the outstanding shares of capital stock of
B&M Construction Co., Inc., a Florida corporation (“B&M”), from Bobby L.
Moore, Jr., an affiliate of the Company, Phillip A. Lee, William H. Denmark and
Evan D. Finch. The consideration paid by the Company to Mr. Moore consisted of
(a) $1,000,000 in cash, payable $300,000 at closing, $250,000 within 30 days of
the closing date, $250,000 within 60 days of the closing date, and $200,000
within 90 days of the closing date, plus (b) $1,173,473
represented by a Promissory Note bearing interest at 4% per annum and payable in
forty-eight (48) equal monthly installments, commencing on the 30th day
following the closing date, plus (c) 4,124,622 shares of
the Company’s common stock.  In connection with this acquisition, the
Company and Mr. Moore entered into a Pledge Agreement pursuant to which the
Company pledged to Mr. Moore the shares of B&M capital stock purchased from
Mr. Moore to secure payment of the remaining cash installment payments due to
Mr. Moore within 90 days of the closing date.  The Company and Mr.
Moore also entered into a Consulting Agreement pursuant to which the Company
retained Mr. Moore to render such business, management, advisory and transition
services as the Company may request from time to time.  The Consulting
Agreement has a term of 18 months, and requires the Company to pay Mr. Moore a
consulting fee at a rate of $400 per hour of service rendered to the Company
(subject to a maximum of $3,200 per day, regardless of how many hours of service
provided during that day), however, no consulting fee is due or payable during
the initial 120 days of the term of the Consulting Agreement.  In
addition, the Company and Mr. Moore entered into a Non-Competition and
Non-Solicitation Agreement pursuant to which Mr. Moore agreed, for five years,
not to compete with the Company or solicit its customers or employees, and a
Registration Rights Agreement pursuant to which the Company agreed to grant Mr.
Moore certain incidental registration rights with respect to the shares of the
Company’s common stock issued to Mr. Moore in the
acquisition.  Finally, the Company, B&M and Mr. Moore entered into
an Indemnification Agreement pursuant to which the Company and B&M, jointly
and severally, agreed to indemnify Mr. Moore for losses suffered or incurred by
Mr. Moore resulting from his personal guaranty of certain obligations of B&M
to Wachovia Bank pursuant to a $1,000,000 line of credit facility.





Loans
from Officers, Directors and Other Related Persons





During
2009 and 2010, Mr. Seddon made various loans to the Company.   On
April 20, 2010, Mr. Seddon forgave all but $125,000 in principal amount of these
loans.  The $125,000 that was not forgiven is now evidenced by the
Company’s promissory note made payable to Mr. Seddon, bearing interest at 5% per
annum and payable in full on December 31, 2011.





In April
2009, the Company borrowed $500,000 from William Esping, a significant
shareholder and affiliate of the Company. The term note evidencing this loan
bore interest of 9% with principal and unpaid interest due on October 27,
2009.  In September 2009, the Company repaid the principal amount of
this term note with proceeds from a new term loan from Alpina Lending, LP (a
limited partnership in which Mr. Esping and Robert P. Grammen, a director of the
Company, are partners), in the amount of $925,000.  In July 2009, this
term loan was amended to provide for an additional $445,000 in principal to
increase the face amount of the loan to $1,370,000.  The Company has
borrowed a total of $1,271,971 under the note evidencing this term
loan.  The note bears interest at 9% and all outstanding principal and
accrued but unpaid interest is due on October 27, 2009, December 31, 2009 and
April 27, 2010 (although the additional $445,000 in principal is due December
27, 2009).  At December 31, 2009, the Company failed to make timely
payments due under the Alpina Lending, LP term note and was in default of its
obligation. The Company requested that the lender waive the default. On May 12,
2010, the Company received a limited one-time waiver on the default through
March 31, 2010.





Loan
Guarantees





In order
to procure vehicle financing, leased facilities, and loans made to us, at
various times Mr. Seddon has acted as a guarantor under such financing
arrangements.





Director
Independence




Our board
of directors currently consists of four members:   Ryan Seddon,
Michael W. Yurkowsky, Robert P. Grammen and Frederico Pier.  As of the
date hereof, we have not adopted a standard of independence nor do we have a
policy with respect to independence requirements for our board members or that a
majority of our board be comprised of “independent directors”.  As of
the date hereof, only Mr. Pier would qualify as “independent” under standards of
independence set forth by a national securities exchange or an inter-dealer
quotation system.




Item
14. Principal Accounting Fees and Services.





We have
retained Mallah Furman to perform our annual audit, review our quarterly and
annual SEC filings and prepare our tax returns.




29




Audit
Fees




The
aggregate fees billed for professional services rendered by Mallah Furman for
the audit of our annual financial statements and for the review of our interim
financial statements, which are included in this report, and preparation of our
registration statement on Form S-1, and services that are normally provided in
connection with statutory and regulatory filings or engagements were $34,000 and
$18,156 for the years ended December 31, 2009 and 2008,
respectively.




Audit-Related
Fees





The
aggregate fees billed for assurance and related services rendered by Mallah
Furman for consulting services on regulatory matters were $51,620 and $18,800
for the years ended December 31, 2009 and 2008, respectively.





Tax
Fees





The
aggregate fees billed for professional services rendered by Mallah Furman for
tax compliance, tax advice and tax planning were $6,500 and $10,171 for the
years ended December 31, 2009 and 2008, respectively.





All
Other Fees





There
were no other fees billed by Mallah Furman for products or services other than
the above for the years ended December 31, 2009 and 2008,
respectively.




PART
IV





Item
15. Exhibits, Financial Statement Schedules.





(a)(1)           The
registrant’s financial statements together with a separate table of contents are
annexed hereto.





(a)(2)           Financial
Statement Schedules are listed in the separate table of contents annexed
hereto.





(a)(3)           Exhibits.





ExhibitNumber
                                                      
                                                      Description of Exhibits3.1
                                                      *
                                                      
                                                      Amended
      and Restated Articles of Incorporation3.2
                                                      *
                                                      
                                                      Amended
      and Restated By-Laws4.1
                                                      *
                                                      
                                                      Specimen
      common stock certificate10.1
                                                      *
                                                      
                                                      Form
      of Indemnification Agreement between the registrant and each director and
      executive officer10.2
                                                      *
                                                      
                                                      Employment
      Agreement between Surge Solutions Group, Inc. and Ryan Seddon dated April
      1, 200710.3
                                                      *
                                                      
                                                      Amendment
      to Employment Agreement between Surge Solutions Group, Inc. and Ryan
      Seddon dated August 1, 200810.4
                                                      *
                                                      
                                                      Employment
      Agreement between Surge Solutions Group, Inc. and Rodger Rees dated May
      18, 200910.5
                                                      *
                                                      
                                                      Promissory
      Note between the registrant and Wachovia Bank date June 3,
      200910.6
                                                      *
                                                      
                                                      Promissory
      Notes between the registrant and Ricardo Sabha and Ryan Seddon dated
      February 17, 200910.7
                                                      *
                                                      
                                                      Contractual
      Alliance between the registrant and Tank Tech, Inc. dated December 9,
      200810.8
                                                      *
                                                      
                                                      Share
      Exchange Agreement among the registrant, Surge Solutions Group, Inc., Ryan
      Seddon, Michael W. Yurkowsky and Peter Wilson dated December 18,
      200710.9
                                                      +
                                                      
                                                      Key
      Man Life Insurance Policy-Ryan Seddon10.10
                                                      +
                                                      
                                                      Employee
      Leasing Agreement10.11
                                                      +
                                                      
                                                      Seddon
      Note to Shareholder-Stock Purchase10.12
                                                      +
                                                      
                                                      Nevada
      Limited Partnership Term Note10.13
                                                      +
                                                      
                                                      Nevada
      Limited Partnership Warrant10.14
                                                      +
                                                      
                                                      Agreement
      with Jeb Bush and Associates10.15
                                                      +
                                                      
                                                      Agreement
      with the Horne Group10.16
                                                      +
                                                      
                                                      Sample
      of the registrant’s standard Work
  Authorization/Contract




30




10.17
                                                              #
                                                              
                                                              Stock
      Purchase Agreement among the registrant, B&M Construction Co., Inc.,
      and Bobby L. Moore, Jr., dated May 13, 201010.18
                                                              #
                                                              
                                                              Promissory
      Note, dated May 13, 2010, executed by the registrant and made payable to
      Bobby L. Moore, Jr.10.19
                                                              #
                                                              
                                                              Pledge
      Agreement between the registrant and Bobby L. Moore, Jr., dated May 13,
      201010.20
                                                              #
                                                              
                                                              Consulting
      Agreement between the registrant and Bobby L. Moore, Jr., dated May 13,
      201010.21
                                                              #
                                                              
                                                              Non-Competition
      and Non-Solicitation Agreement among the registrant, B&M Construction
      Co., Inc., and Bobby L. Moore, Jr., dated May 13, 201010.22
                                                              #
                                                              
                                                              Registration
      Rights Agreement between the registrant and Bobby L. Moore, Jr., dated May
      13, 201010.23
                                                              #
                                                              
                                                              Indemnification
      Agreement among the registrant, B&M Construction Co., Inc., and Bobby
      L. Moore, Jr., dated May 13, 201010.24
                                                              #
                                                              
                                                              Stock
      Purchase Agreement among the registrant, Phillip A. Lee, William H.
      Denmark and Evan D. Finch, dated May 13, 201010.25
                                                              #
                                                              
                                                              Form
      of Warrant for the Purchase of Shares of Common Stock issued by the
      registrant to each of Phillip A. Lee, William H. Denmark and Evan D. Finch
      on May 13, 201010.26
                                                              #
                                                              
                                                              Form
      of Employment Agreement between Surge Solutions Group, Inc., and each of
      Phillip A. Lee, William H. Denmark and Evan D. Finch, dated May 13,
      201010.27
                                                              
                                                              
                                                              Modification
      Agreement among the registrant, Surge Solutions Group, Inc., and Ryan
      Seddon, dated April 20, 201010.28
                                                              
                                                              
                                                              Consulting
      Agreement between the registrant and Ryan Seddon, dated April 20,
      201010.29
                                                              
                                                              
                                                              Promissory
      Note, dated April 20, 2010, executed by the registrant and made payable to
      Ryan Seddon10.30
                                                              
                                                              
                                                              Warrant
      for the Purchase of Shares of Common Stock issued by the registrant to
      Ryan Seddon on April 20, 201021
                                                              
                                                              
                                                              Subsidiaries
      of the registrant23
                                                              
                                                              
                                                              Consent
      of Independent Registered Public Accounting Firm31.1
                                                              
                                                              
                                                              Certification
      of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act
      of 200231.2
                                                              
                                                              
                                                              Certification
      of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act
      of 200232
                                                              
                                                              
                                                              Certification
      pursuant to §906 of the Sarbanes-Oxley Act of
  2002




*
                Previously
      filed (incorporated by reference to the Company’s Registration Statement
      on Form S-1 filed with the Securities and Exchange Commission on July 17,
      2009).+
                Previously
      filed (incorporated by reference to the Company’s Registration Statement
      on Form S-1/A filed with the Securities and Exchange Commission on
      September 29, 2009).#
                Previously
      filed (incorporated by reference to the Company’s Report on Form 8-K filed
      with the Securities and Exchange Commission on May 18,
    2010).




31


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





Dated:  May
24, 2010





SSGI,
      INC.By:
            /s/ Larry M. Glasscock,
  Jr.Larry
      M. Glasscock, Jr.President
      and Chief Executive Officer


Dated:  May
24, 2010





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:





Signature
                                      
                                      Title/s/ Larry M. Glasscock, Jr.
                                      
                                      President
      and Chief Executive OfficerLarry M. Glasscock, Jr.
                                      
                                      (Principal
      Executive Officer)/s/ Rodger Rees
                                      
                                      Chief
      Financial OfficerRodger Rees
                                      
                                      (Principal
      Financial Officer)/s/ Ryan Seddon
                                      
                                      DirectorRyan Seddon/s/ Robert P. Grammen
                                      
                                      DirectorRobert P. Grammen/s/ Michael W. Yurkowsky
                                      
                                      DirectorMichael W. Yurkowsky/s/ Frederico Pier
                                      
                                      DirectorFrederico Pier


32





SSGI,
INC.


(f/k/a
PHAGE THERAPEUTICS INTERNATIONAL, INC.)


DECEMBER
31, 2009 AND 2008


CONTENTS





PageREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              F-2FINANCIAL
      STATEMENTS:Balance
      Sheets
              F-3Statements
      of Operations
              F-4Statements
      of Changes in Stockholders’ Deficit
              F-5Statements
      of Cash Flows
              F-6Notes
      to Financial Statements
              F-7
      - F-22




F-1




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 SSGI,
Inc.(f/k/a Phage Therapeutics International, Inc.)
 
 We have
audited the accompanying balance sheets of SSGI, Inc. (f/k/a Phage Therapeutics
International, Inc.) ("the Company") as of December 31, 2009 and 2008, and the
related statements of operations, changes in stockholders' deficit and cash
flows for the years then ended. The financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of SSGI, Inc. (f/k/a Phage
Therapeutics International, Inc.) as of December 31, 2009 and 2008, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has insufficient working capital to fund ongoing
operations and expects to incur further losses which raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
are described in Note 2 to the financial statements. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
 
 /s/
Mallah Furman
 
 Fort
Lauderdale, Florida
 March 22,
2010, except for Note 19,
 as to
which the date is May 13, 2010




F-2





SSGI,
INC.


(f/k/a
PHAGE THERAPEUTICS INTERNATIONAL, INC.)


BALANCE
SHEETS


DECEMBER
31, 2009 AND 2008





2009
                    
                    
                    2008(restated)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                    
                    $
                    121,970
                    
                    
                    $
                    64,988Restricted
      cash deposits
                    
                    
                    507,028
                    
                    
                    
                    -Contracts
      receivable, net
                    
                    
                    1,091,343
                    
                    
                    
                    339,914Prepaid
      expenses
                    
                    
                    89,591
                    
                    
                    
                    79,457Costs
      and estimated earnings in excess of billings on ununcompleted
      contracts
                    
                    
                    57,411
                    
                    
                    
                    135,582Total
      current assets
                    
                    
                    1,867,343
                    
                    
                    
                    619,941PROPERTY
      AND EQUIPMENT, NET
                    
                    
                    347,874
                    
                    
                    
                    428,164OTHER
      ASSETS
                    
                    
                    15,538
                    
                    
                    
                    21,021$
                    2,230,755
                    
                    
                    $
                    1,069,126LIABILITIES
      AND STOCKHOLDERS’ DEFICITCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                    
                    $
                    1,951,881
                    
                    
                    $
                    734,113Estimated
      losses on uncompleted contracts
                    
                    
                    -
                    
                    
                    
                    59,354Current
      portion of long term debt
                    
                    
                    111,891
                    
                    
                    
                    100,292Promissory
      note payable
                    
                    
                    353,691
                    
                    
                    
                    745,000Term
      note payable, related party
                    
                    
                    965,458
                    
                    
                    
                    -Current
      portion of due to stockholders
                    
                    
                    11,395
                    
                    
                    
                    10,521Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                    
                    
                    251,797
                    
                    
                    
                    487,571Total
      current liabilities
                    
                    
                    3,646,113
                    
                    
                    
                    2,136,851OTHER
      LIABILITIES:Due
      to stockholders, net of current portion
                    
                    
                    1,185,091
                    
                    
                    
                    143,259Long
      term debt, net of current portion
                    
                    
                    133,540
                    
                    
                    
                    271,159Total
      liabilities
                    
                    
                    4,964,744
                    
                    
                    
                    2,551,269STOCKHOLDERS’
      DEFICIT:Common
      stock - $.0010 Par value, 100,000,000 shares authorized,34,687,630
      issued and outstanding in 2009 and34,672,630
      issued and outstanding in 2008
                    
                    
                    34,688
                    
                    
                    
                    34,673Additional
      paid in capital
                    
                    
                    3,138,628
                    
                    
                    
                    2,720,494Accumulated
      deficit
                    
                    
                    (5,907,305
                    )
                    
                    
                    (4,237,310
                    )Total
      stockholders’ deficit
                    
                    
                    (2,733,989
                    )
                    
                    
                    (1,482,143
                    )$
                    2,230,755
                    
                    
                    $
                    1,069,126




F-3





SSGI,
INC.


(f/k/a
PHAGE THERAPEUTICS INTERNATIONAL, INC.)


STATEMENTS
OF OPERATIONS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





2009
                    
                    
                    2008(restated)CONTRACT
      REVENUES EARNED
                    
                    $
                    7,784,942
                    
                    
                    $
                    6,802,107COST
      OF REVENUES EARNED
                    
                    
                    7,240,425
                    
                    
                    
                    6,942,944Gross
      profit (loss)
                    
                    
                    544,517
                    
                    
                    
                    (140,837
                    )GENERAL
      AND ADMINISTRATIVE EXPENSESPayroll
      and related costs
                    
                    
                    873,895
                    
                    
                    
                    1,202,430Insurance
                    
                    
                    204,360
                    
                    
                    
                    193,092Marketing
      and advertising
                    
                    
                    54,629
                    
                    
                    
                    178,930Office
      and technology expenses
                    
                    
                    179,209
                    
                    
                    
                    202,434Professional
      fees
                    
                    
                    277,688
                    
                    
                    
                    140,000Auto
      and truck expense
                    
                    
                    58,132
                    
                    
                    
                    133,987Travel
      and entertainment
                    
                    
                    16,824
                    
                    
                    
                    48,592Bad
      debt expense
                    
                    
                    185,657
                    
                    
                    
                    23,886Depreciation
      and amortization
                    
                    
                    41,100
                    
                    
                    
                    68,499Other
      operating expenses
                    
                    
                    6,751
                    
                    
                    
                    26,801Total
      general and administrative expenses
                    
                    
                    1,898,245
                    
                    
                    
                    2,218,651Loss
      from operations
                    
                    
                    (1,353,728
                    )
                    
                    
                    (2,359,488
                    )OTHER
      INCOME (EXPENSES):Interest
      expense
                    
                    
                    (141,268
                    )
                    
                    
                    (66,524
                    )Interest
      income
                    
                    
                    1,878
                    
                    
                    
                    143Financing
      costs
                    
                    
                    (181,201
                    )
                    
                    
                    -Loss
      on asset disposition
                    
                    
                    (2,305
                    )
                    
                    
                    (13,136
                    )Other
      income
                    
                    
                    6,629
                    
                    
                    
                    1,475Total
      other income (expenses), net
                    
                    
                    (316,267
                    )
                    
                    
                    (78,042
                    )LOSS
      BEFORE INCOME TAXES
                    
                    
                    (1,669,995
                    )
                    
                    
                    (2,437,530
                    )Income
      taxes
                    
                    
                    -
                    
                    
                    
                    -NET
      LOSS
                    
                    $
                    (1,669,995
                    )
                    
                    $
                    (2,437,530
                    )Loss
      per share:Basic
      and Diluted
                    
                    $
                    (0.048
                    )
                    
                    $
                    (0.072
                    )Weighted
      Average Outstanding Shares:Basic
      and Diluted
                    
                    
                    34,679,909
                    
                    
                    
                    34,020,307




F-4





SSGI,
INC.


(f/k/a
PHAGE THERAPEUTICS INTERNATIONAL, INC.)


STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





Common
                      
                      
                      Common
                      
                      
                      Additional
                      
                      
                      AccumulatedShares
                      
                      
                      Stock
                      
                      
                      Paid In Capital
                      
                      
                      Deficit
                      
                      
                      Total(restated)
                      
                      
                      (restated)BALANCE
      AT DECEMBER 31, 2007
                      
                      
                      33,000,000
                      
                      
                      $
                      33,000
                      
                      
                      $
                      1,374,600
                      
                      
                      $
                      (1,799,780
                      )
                      
                      $
                      (392,180
                      )Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (2,437,530
                      )
                      
                      
                      (2,437,530
                      )Issuance
      of stock  net of related expenses of $89,635
                      
                      
                      1,655,630
                      
                      
                      
                      1,656
                      
                      
                      
                      1,189,209
                      
                      
                      
                      -
                      
                      
                      
                      1,190,865Stock
      and warrants issued as compensation
                      
                      
                      17,000
                      
                      
                      
                      17
                      
                      
                      
                      156,685
                      
                      
                      
                      -
                      
                      
                      
                      156,702BALANCE
      AT DECEMBER 31, 2008
                      
                      
                      34,672,630
                      
                      
                      
                      34,673
                      
                      
                      
                      2,720,494
                      
                      
                      
                      (4,237,310
                      )
                      
                      
                      (1,482,143
                      )Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (1,669,995
                      )
                      
                      
                      (1,669,995
                      )Stock
      and warrants issued as compensation and fees
                      
                      
                      15,000
                      
                      
                      
                      15
                      
                      
                      
                      236,933
                      
                      
                      
                      -
                      
                      
                      
                      236,948Warrants
      issued as financing costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      181,201
                      
                      
                      
                      -
                      
                      
                      
                      181,201BALANCE
      AT DECEMBER 31, 2009
                      
                      
                      34,687,630
                      
                      
                      $
                      34,688
                      
                      
                      $
                      3,138,628
                      
                      
                      $
                      (5,907,305
                      )
                      
                      $
                      (2,733,989
                      )




F-5





SSGI,
INC.


(f/k/a
PHAGE THERAPEUTICS INTERNATIONAL, INC.)


STATEMENTS
OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





2009
                
                
                2008(restated)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (1,669,995
                )
                
                $
                (2,437,530
                )Adjustments
      to reconcile net loss to net cash and cash equivalents used in operating
      activities:Depreciation
      and amortization
                
                
                122,084
                
                
                
                129,256Stock
      and warrants issued as compensation
                
                
                236,948
                
                
                
                156,702Warrants
      issued as financing costs
                
                
                181,201
                
                
                
                -Estimated
      losses on contracts
                
                
                (59,354
                )
                
                
                59,354Loss
      on disposal of assets
                
                
                2,305
                
                
                
                13,136(Increase)
      decrease in:Restricted
      cash
                
                
                (507,028
                )
                
                
                -Contracts
      receivable
                
                
                (751,429
                )
                
                
                (318,767
                )Prepaid
      expenses
                
                
                (10,134
                )
                
                
                (70,487
                )Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                
                
                78,171
                
                
                
                (119,150
                )Other
      assets
                
                
                741
                
                
                
                2,612Increase
      (decrease) in:Accounts
      payable and accrued expenses
                
                
                1,217,767
                
                
                
                609,523Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                
                
                (235,774
                )
                
                
                379,662Net
      cash used in operating activities
                
                
                (1,394,497
                )
                
                
                (1,595,689
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from sale of equipment
                
                
                9,400
                
                
                
                106,229Purchase
      of equipment, net
                
                
                (75,256
                )
                
                
                (116,820
                )Net
      cash used in investing activities
                
                
                (65,856
                )
                
                
                (10,591
                )CASH
      FLOWS FROM  FINANCING ACTIVITIES:Borrowings
      under term note payable, related party and promissory note
                
                
                1,349,444
                
                
                
                370,000Payments
      on term note payable, related parties and promissory note
                
                
                (874,815
                )
                
                
                (100,113
                )Due
      to stockholders
                
                
                1,042,706
                
                
                
                153,780Proceeds
      from issuance of stock
                
                
                -
                
                
                
                1,190,865Net
      cash provided by financing activities
                
                
                1,517,335
                
                
                
                1,614,532CHANGE
      IN CASH AND CASH EQUIVALENTS
                
                
                56,982
                
                
                
                8,252Cash
      and cash equivalents at beginning of the year
                
                
                64,988
                
                
                
                56,736Cash
      and cash equivalents at end of year
                
                $
                121,970
                
                
                $
                64,988SUPPLEMENTAL
      CASH FLOW INFORMATIONInterest
      paid during the year
                
                $
                201,635
                
                
                $
                66,524SUPPLEMENTAL
      DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIESPurchase
      of vehicles with long-term debt
                
                $
                21,163
                
                
                $
                257,573Financing
      of insurance premiums with current debt
                
                $
                90,168
                
                
                $
                -




F-6




NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Nature of
Operations





SSGI,
Inc. (the “Company”) was incorporated under the laws of the State of Florida as
Phage Therapeutics International, Inc. on December 26, 1996. In February 2008,
through a share exchange, the company acquired Surge Solutions Group, Inc.
(“Surge”) As a consequence of the latter exchange, which qualified as a reverse
merger, Surge became the accounting acquirer and the reporting entity
prospectively.





On July
7, 2009, the Company filed a Form S-1 with the Securities and Exchange
Commission to register a portion of their common stock and to become a fully
reporting Company in accordance with the Securities and Exchange Act of 1934. On
December 9, 2009, the Company’s registration statement was declared
effective.





The
Company specializes in petroleum contracting and general construction in Florida
including insurance restoration and new commercial construction.  The
Company’s work is performed under cost-plus-fee contracts, fixed-price
contracts, and fixed-price contracts modified by incentive and penalty
provisions.  The length of the Company’s contracts typically range
from three months or less to one year.





Accounting Standards
Codification





In June
2009, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Codification (“ASC”) Subtopic 105-10, Generally Accepted Accounting
Principles (“GAAP”)  (“FASB ASC 105-10”).  This Standard
establishes an integrated source of existing authoritative accounting principles
to be applied by all non-governmental entities and is effective for interim ad
annual periods ending after September 15, 2009.  The adoption of FASB
ASC 105-10 by the Company did not have a material impact on our financial
statements and only resulted in modifications in accounting reference in our
footnotes and disclosures.





Use of
Estimates





Management
uses estimates and assumptions in preparing these financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities and the
reported revenues and expenses.  Actual results could vary from the
estimates that were used. The significant areas requiring management’s estimates
and assumptions relate to determining the fair value of stock-based
compensation, fair value of shares issued for services and the determination of
percentage of completion in connection with the recognition of profit on
customer contracts.


F-7




NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Reclassification





Certain
reclassifications were made to the 2008 financial statements to conform to the
2009 presentation.





Cash and Cash
Equivalents





For the
purpose of reporting cash flows, the Company has defined cash equivalents as
those highly liquid investments purchased with an original maturity of three
months or less.





Revenue and Cost
Recognition





The
Company uses the cost to cost method to arrive at the percentage-of-completion
for long-term contracts more than three months in duration. Revenue of
individual long-term contracts are included in operations as the project are
completed by using costs incurred to date in relation
to the estimated total costs of the contracts to measure the stage of
completion. Original contract prices are adjusted for change orders in the
amounts that are reasonably estimated based on the Company’s historical
experience. The cumulative effects of changes in estimated total contract costs
and revenues (change orders) are recorded in the period in which the facts
requiring such revisions become known, and are accounted for using the
percentage-of-completion method. At the time it is determined that a contract is
expected to result in a loss, the entire estimated loss is
recorded.





Contract
costs include all direct material, subcontractors and direct labor and those
indirect costs related to contract performance, such as indirect labor and
supplies.  Selling, general, and administrative expenses are charged
to operations as incurred.





Prior to
the restatement disclosed in Note 3, the Company used the completed-contract
method of accounting for short-term contracts less than three months in
duration. Accordingly, revenue and costs of individual short-term contracts were
included in operations in the period during which they were completed. Losses
expected to be incurred on contracts in progress were charged to operations in
the period such losses were determined. The aggregate of costs on uncompleted
contracts in excess of related billings was shown as a current asset while the
aggregate of billings on uncompleted contracts in excess of related costs was
shown as a current liability.





Contracts
Receivable





Contracts
receivable are customer obligations due under contractual terms. The Company
sells its services to residential, commercial, government and retail
customers.  On most projects, the Company has liens rights under
Florida law which are typically enforced on balances not collected within 90
days. The Company includes any balances that are determined to be uncollectible
along with a general reserve in its overall allowance for doubtful
accounts.


F-8




NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Marketing and Advertising
Costs





Marketing
and advertising costs are expensed as incurred. Marketing and advertising costs
for the years ended December 31, 2009 and 2008 were $54,629 and $178,930,
respectively.




Financial
Instruments





Financial
instruments consist of cash and cash equivalents, restricted cash, contracts
receivable, accounts payable and accrued expenses, borrowings under promissory
and term notes as well other debt incurred in the ordinary course of business.
The carrying values of these instruments approximate their fair values due to
their relatively short lives to maturity.  The fair value of borrowings
under the promissory and term notes and other debt also approximate fair market
value, as these amounts are due at rates which are compatible to market interest
rates.





Concentration of Credit
Risk





The
Company maintains its cash balances with a high quality financial institution
which the Company believes limits its risk.  The balances are insured
by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At December
31, 2009 and 2008, respectively, the Company did not have any cash balances in
excess of FDIC limits.





The
Company has accounts receivable from customers engaged in various
industries.  These industries may be affected by economic factors,
which may impact the customer’s ability to pay.  The Company does not
believe that any single customer, industry, or concentration in any geographic
area represents significant credit risk.




Income
Taxes





Income
taxes are accounted for under the asset and liability method as stipulated by
Accounting Standards Codification (“ASC”) 740 formerly Statement of Financial
Accounting Standards (“SFAS”) No. 109, “Accounting for Income
Taxes”.  Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry
forwards.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.  Under ASC 740, the effect on deferred tax assets and
liabilities or a change in tax rate is recognized in income in the period that
includes the enactment date.  Deferred tax assets are reduced to
estimated amounts to be realized by the use of a valuation allowance. A
valuation allowance is applied when in management’s view it is more likely than
not (50%) that such deferred tax will not be utilized.


F-9




NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)




Income
Taxes (continued)





Effective
January 1, 2009, the Company adopted certain provisions under ASC Topic 740,
Income Taxes, (“ASC 740”), which provide interpretative guidance for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Effective with the Company’s adoption of
these provisions, interest related to the unrecognized tax benefits is
recognized in the financial statements as a component of income taxes. The
adoption of ASC 740 did not have an impact on the Company’s financial position
and results of operations.





In the
unlikely event that an uncertain tax position exists in which the Company could
incur income taxes, the Company would evaluate whether there is a probability
that the uncertain tax position taken would be sustained upon examination by the
taxing authorities. Reserves for uncertain tax positions would then be recorded
if the Company determined it is probable that a position would not be sustained
upon examination or if a payment would have to be made to a taxing authority and
the amount is reasonably estimable. As of December 31, 2009, the Company does
not believe it has any uncertain tax positions that would result in the Company
having a liability to the taxing authorities. The Company’s tax returns are
subject to examination by the federal and state tax authorities for the years
ended 2006 through 2009





Property and
Equipment





Property
and equipment is stated at cost net of accumulated depreciation and
amortization.  Depreciation is computed using the straight-line method
over the useful life of the related asset.  Amortization of leasehold
improvements is computed using the straight-line method over the term of the
related lease.  Capital expenditures that extend the useful life of an
asset are capitalized and depreciated over the remaining useful life of such
asset.  Maintenance and repairs that do not extend the life of an
asset are charged to expense when incurred.





Fair Value
Measurements





Effective
January 1, 2009, the Company adopted FASB ASC 820 “Fair Value Measurements”, for
its non-financial assets and liabilities and for its financial assets and
liabilities measured at fair value on a nonrecurring basis. This Standard
provides a framework for measuring fair value in generally accepted accounting
principles, expands disclosures about fair value measurements, and establishes a
fair value hierarchy that requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The adoption of FASB ASC 820 for the Company’s non-financial assets and
liabilities did not have a material impact on the Company’s consolidated
financial statements.


F-10




NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Basic and Diluted Net Income
(Loss) Per Share





The
Company computes net income (loss) per share in accordance with ASC Topic 260,
Earning per Share,
formerly Statement of Accounting Standards SFAS No. 128, “Earnings per Share”, which
requires presentation of both basic and diluted earnings per share (“EPS”) on
the face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) before and after
discontinued operations, by the weighted average number of common shares
outstanding (denominator) during the period, including contingently issuable
shares where the contingency has been resolved. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted loss per share excludes all dilutive
potential shares as their effect is anti-dilutive.





Stock Based
Compensation





The
Company applies the fair value method of ASC 718, Share Based Payment, formerly
Statement of Financial Accounting Standards (“SFAS”) No. 123R “Accounting for Stock Based
Compensation”, in accounting for its stock based compensation. This
standard states that compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period, which is
usually the vesting period. As the Company does not have sufficient, reliable
and readily determinable values relating to its common stock, the Company has
used the stock value pursuant to its most recent sale of stock for purposes of
valuing stock based compensation.





Common Stock Purchase
Warrants





The
Company accounts for common stock purchase warrants at fair value in accordance
with ASC 815-40 Derivatives
and Hedging, formerly Emerging Issues Task Force Issue (“EITF”) No.
00-19, “Accounting for
Derivative Financial Instruments Indexed to and Practically Settled in a
Company’s Own Stock”.  The Black-Scholes option pricing
valuation method is used to determine fair value of these warrants consistent
with ASC 718, Share Based
Payment, formerly Statement of Financial Accounting Standards (“SFAS”)
No. 123R “Accounting for Stock
Based Compensation. Use of this method requires that the Company make
assumptions regarding stock volatility, dividend yields, expected term of the
warrants and risk-free interest rates.


F-11




NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Common Stock Purchase
Warrants (continued)





The
Company accounts for transactions in which services are received in exchange for
equity instruments based on the fair value of such services received from
non-employees, in accordance with ASC 505-50 Equity Based Payments to
Non-employees, formerly EITF No. 96-18, Accounting for Equity Instruments
that are Issued to other than Employees for Acquiring, or in Conjunction with
Selling Goods or Services.





NOTE
2 – GOING CONCERN





At
December 31, 2009, the Company has not yet achieved profitable operations, has
insufficient working capital to fund ongoing operations and expects to incur
further losses. These circumstances cast substantial doubt about the Company’s
ability to continue as a going concern. The Company’s ability to continue as a
going concern is dependent upon its ability to generate future profitable
operations and to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations. The Company may
also be able to obtain additional financing if it is successful in achieving
profitability.





These
financial statements have been prepared in accordance with generally accepted
accounting principles applicable to a going concern, which assumes that the
Company will be able to meet its obligations and continue its operations.
Realization values may be substantially different from carrying values as shown
in the financial statements and do not give effect to adjustments that would be
necessary to the carrying values and classification of assets and liabilities
should the Company be unable to continue as a going concern.





NOTE
3 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS





The
accompanying 2008 financial statements have been restated to reflect a change in
the Company’s revenue recognition policy for its short term
contracts.  The Company had previously used the completed contract
method of accounting for short-term contracts less than three months in duration
and the percentage of completion method for all other contracts. Under the
completed contract method, revenues and costs of individual short-term contracts
were included in operations in the year during which they were completed.
Although using both methods simultaneously is an accepted accounting practice,
the Company now desires to only use the percentage of completion method to allow
for a more consistent presentation of revenue, cost of revenue and gross profit.
This restatement does not affect the ultimate gross profit and cash flows on the
contracts, but only the timing of the gross profit recognition.




F-12


NOTE
3 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
(continued)





Set forth
below are the effect of the restatement to the various 2008 financial statement
captions:





Balance sheetCosts
      and estimated earnings in excess of billings on uncompleted contracts
      as reported
                        
                        $
                        127,826Restatement
                        
                        
                        7,756As
      restated
                        
                        $
                        135,582Billings
      in excess of costs on uncompleted contracts as reported
                        
                        $
                        60,222Restatement
                        
                        
                        (60,222
                        )Billings
      in excess of costs on uncompleted contract as restated
                        
                        $
                        -Billings
      in excess of costs and estimated earnings on uncompleted contracts as
      reported
                        
                        $
                        426,253Restatement
                        
                        
                        61,318Billings
      in excess of costs and estimated earnings on uncompleted contracts as
      restated
                        
                        $
                        487,571Retained
      earnings (accumulated deficit)
                        
                        $
                        (4,243,970
                        )Restatement
                        
                        
                        6,660Retained
      earnings (accumulated deficit) as restated
                        
                        $
                        (4,237,310
                        )Stockholders’
      deficit as reported
                        
                        $
                        (1,488,803
                        )Restatement
                        
                        
                        6,660Stockholders’
      deficit as restated
                        
                        $
                        (1,482,143
                        )




F-13


NOTE
3 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
(continued)





Statement of OperationsRevenue
      as reported
                          
                          $
                          6,721,256Restatement
                          
                          
                          80,851Revenue
      as restated
                          
                          $
                          6,802,107Cost
      of revenues earned as reported
                          
                          $
                          6,883,572Restatement
                          
                          
                          59,372Cost
      of revenues earned as restated
                          
                          $
                          6,942,944Gross
      profit as reported
                          
                          $
                          (162,316
                          )Restatement
                          
                          
                          21,479Gross
      profit as restated
                          
                          $
                          (140,837
                          )


Net
      loss as reported
                            
                            $
                            (2,459,009
                            )Restatement
                            
                            
                            21,479Net
      increase in loss as restated
                            
                            $
                            (2,437,530
                            )Statement of Cash FlowsNet
      loss as reported
                            
                            $
                            (2,459,009
                            )Restatement
                            
                            
                            21,479Net
      loss as restated
                            
                            $
                            (2,437,530
                            )Contracts
      receivable as reported
                            
                            $
                            (303,763
                            )Restatement
                            
                            
                            (15,004
                            )Contacts
      receivable as restated
                            
                            $
                            (318,767
                            )




F-14





NOTE
3 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
(continued)





Costs
      and estimated earnings in excess of billings on uncompleted contracts
      as reported
                      
                      $
                      (116,798
                      )Restatement
                      
                      
                      (2,352
                      )Costs
      and estimated earnings in excess of billings on uncompleted contracts
      as restated
                      
                      $
                      (119,150
                      )Accounts
      payable and accrued expenses as reported
                      
                      $
                      594,798Restatement
                      
                      
                      14,725Accounts
      payable and accrued expenses as restated
                      
                      $
                      609,523Billings
      in excess of costs on uncompleted contracts as reported
                      
                      $
                      41,571Restatement
                      
                      
                      (41,571
                      )Billings
      in excess of costs on uncompleted contracts
    as restated
                      
                      $
                      -Billings
      in excess of costs and estimated earnings on uncompleted contracts as
      reported
                      
                      $
                      356,939Restatement
                      
                      
                      22,723Billings
      in excess of costs and estimated earnings on uncompleted contracts as
      restated
                      
                      $
                      379,662





NOTE
4 – RESTRICTED CASH DEPOSITS





In some
instances the Company is required to post performance bonds on contracts awarded
by certain state agencies and municipalities to guarantee performance in
accordance with the terms of the contracts. The Company deposits cash equal to a
percentage of the contract price with an independent third party bonding
agency that holds the deposits for the benefit of the state agency or
municipality that has awarded the contract to the Company. The Company also pays
a fee to guarantee performance on the percentage of the contract not covered by
the cash deposit. Following successful completion of the contract, the bonding
agency has up to 90 days to return the deposited cash along with interest in
accordance with the contract. Upon
successful completion of the contract, cash deposits are released by the bonding
agency. Such proceeds are used to pay the note holders as mentioned in Note 9.
If the Company fails to perform, these deposits could be claimed by the party
that suffers the loss pursuant to non-performance. At December 31, 2009, the
Company had $507,028 on deposit.





NOTE
5 – CONTRACTS RECEIVABLE





Contracts
receivable as of December 31, 2009 and 2008 are as follows:





2009
                      
                      
                      2008(restated)Completed
      contracts
                      
                      $
                      528,504
                      
                      
                      $
                      144,255Contracts
      in progress
                      
                      
                      744,284
                      
                      
                      
                      206,172Allowance
      for doubtful accounts
                      
                      
                      (181,445
                      )
                      
                      
                      (10,513
                      )$
                      1,091,343
                      
                      
                      $
                      339,914




F-15





NOTE
6 – COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS UNDER THE PERCENTAGE OF
COMPLETION METHOD





2009
                  
                  
                  2008(restated)Costs
      incurred on uncompleted contracts
                  
                  $
                  1,072,453
                  
                  
                  $
                  2,438,797Estimated
      earnings
                  
                  
                  269,282
                  
                  
                  
                  62,605Less:
      billings to date
                  
                  
                  (1,536,121
                  )
                  
                  
                  (2,853,391
                  )$
                  (194,386
                  )
                  
                  
                  (351,989
                  )





Included
in the accompanying balance sheets under the following captions:





2009
                            
                            
                            2008(restated)Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                            
                            $
                            57,411
                            
                            
                            $
                            135,582Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                            
                            
                            (251,797
                            )
                            
                            
                            (487,571
                            )$
                            (194,386
                            )
                            
                            $
                            (351,989
                            )




NOTE
7 – PROPERTY AND EQUIPMENT, NET





Property
and equipment consist of the following as of December 31, 2009 and
2008:





Category
                        
                        Estimated
                          Useful
                          Lives
                        
                        2009
                        
                        
                        2008Tools
      and equipment
                        
                        7
      Years
                        
                        $
                        146,774
                        
                        
                        $
                        98,070Leasehold
      Improvements
                        
                        2
      Years
                        
                        
                        31,852
                        
                        
                        
                        28,801Vehicles
                        
                        5
      Years
                        
                        
                        375,411
                        
                        
                        
                        431,714Office
      equipment
                        
                        5-7 Years
                        
                        
                        51,912
                        
                        
                        
                        50,574605,949
                        
                        
                        
                        609,159Less:
      accumulated depreciation and amortization
                        
                        
                        
                        
                        258,075
                        
                        
                        
                        180,995$
                        347,874
                        
                        
                        $
                        428,164




The
Company allocates a portion of its depreciation and amortization expense to cost
of revenues earned. Total depreciation and amortization for 2009 and 2008
amounted to $122,084 and $129,256, respectively. The portion included in General
and Administrative Expenses for 2009 and 2008 is $41,100 and $68,499,
respectively.


F-16




NOTE
8 – LONG TERM DEBT





A summary
of long-term debt as of December 31, 2009 and 2008 is as follows:




2009
                                    
                                    
                                    20087.99%
      notes payable to Chrysler Financial collateralized by vehicles and
      guaranteed by founding stockholders. Due in monthly installments of $881
      including interest through 2012.
                                    
                                    $
                                    15,435
                                    
                                    
                                    $
                                    32,3898.75%
      to 8.99% notes payable to Ford Credit collateralized by vehicles and
      guaranteed by founding stockholders. Due in monthly installments of $2,918
      including interest through 2013.
                                    
                                    
                                    47,002
                                    
                                    
                                    
                                    108,3816.50%
      to 7.15% notes payable to Wachovia Bank collateralized by vehicles and
      guaranteed by founding stockholders. Due in monthly installments of $5,654
      including interest through 2012.
                                    
                                    
                                    113,170
                                    
                                    
                                    
                                    195,0527.50%
      note payable to Wells Fargo collateralized by a vehicle and
      equipment.  Due in monthly installments of $967 including
      interest through 2012.
                                    
                                    
                                    28,759
                                    
                                    
                                    
                                    35,629




5.40%
      note payable to Premium Financing Specialists. Due in monthly installments
      of $11,952 including interest through 2010
                              
                              
                              23,743
                              
                              
                              
                              -7.65%
      note payable to SunTrust Bank collateralized by a vehicle. Due in monthly
      installments of $349 including interest through 2014
                              
                              
                              17,322
                              
                              
                              
                              -245,431
                              
                              
                              
                              371,451Less
      current portion of long term debt
                              
                              
                              111,891
                              
                              
                              
                              100,292$
                              133,540
                              
                              
                              $
                              271,159


Maturities
of long-term debt for the years subsequent to December 31, 2009 are as
follows:





Year
                          
                          Amount2010
                          
                          $
                          110,3362011
                          
                          
                          85,7872012
                          
                          
                          34,4482013
                          
                          
                          10,9102014
                          
                          
                          3,950$
                          245,431




F-17




NOTE  9–
PROMISSORY NOTE PAYABLE





In
November of 2007, a financial institution extended the Company a line of credit
in the amount of $750,000. In November of 2008, the Company converted the line
of credit to a promissory note payable which required monthly principal and
interest payments of $35,000 commencing January 2009. The interest rate for the
promissory note was 1.5% above the published prime rate.  On June 3,
2009, the promissory note was extended until December 2009. On February 26,
2010, the promissory note was once more extended for one year at the same
monthly payment with the interest rate fixed at 7%.





The
balance on the promissory note at December 31, 2009 and 2008 was $353,691 and
$745,000, respectively. The Company paid $30,192 in interest for the twelve
months ended December 31, 2009 and $27,285 for the same period in
2008.




NOTE
10 –TERM NOTE PAYABLE, RELATED PARTY





In April
2009, the Company borrowed against a line of credit from an existing shareholder
in the amount of $500,000. In June 2009, the Company paid the principal amount
of the line of credit with proceeds from a new term note from a Nevada limited
partnership in the principal amount of $925,000. The term note bears interest at
9% per annum with $425,000 in principal due on October 27, 2009 and $500,000 on
April 27, 2010. A director of the company and a stockholder are limited partners
in the Nevada limited partnership. The Company used a portion of the proceeds to
pay premiums on performance bonds, escrow deposits required by performance bonds
and working capital. Once the performance bonds for the government construction
contracts are completed, the escrow deposits are returned to the Company with
accrued interest. The terms of the note require the Company to use the proceeds
from the deposits to repay the term note.





For the
twelve months ended December 31, 2009, the Company paid $60,367 in interest on
the term loan. Interest on the term note was allocated to the contracts that
required the bonding and included in cost of revenues earned in the Company’s
statement of operations.  At December 31, 2009, the balance due on the
term note is $965,458.





As
additional compensation on the term note, the Company has issued 632,000
warrants to purchase the Company’s common stock at $0.30 per share. The warrants
vested at the time the loans were funded. The Company valued the warrants using
the Black-Scholes option pricing model and has recorded an expense of $181,201
as financing costs on its statement of operations with a corresponding increase
to the Company’s additional paid-in-capital account.




NOTE
11 – COMMITMENTS





As of
December 31, 2009, the Company was committed under leases for the following
facilities:





Facility
                      
                      Monthly Lease
                        Payment
                      
                      TermWarehouse,
      West Palm Beach, Florida
                      
                      $
                      3,156
                      
                      Through
      July 2010Headquarters,
      West Palm Beach, Florida
                      
                      $
                      3,649
                      
                      Through
      July
2010





Rent
expense for the years ended December 31, 2009 and 2008 was approximately $91,000
and $119,000, respectively. A portion of these amounts have been allocated to
costs of revenues earned and general and administrative,
respectively.





As of
December 31, 2009, the Company was committed under a vehicle lease for $448 per
month through February 2011.





Future
minimum lease payments as of December 31, 2009 are as follows:





Year
                    
                    Amount2010
                    
                    $
                    53,011Thereafter
                    
                    
                    896TOTAL
                    
                    $
                    53,907





NOTE
12 – COMMON STOCK PURCHASE WARRANTS





During
2008, the Company completed private placements resulting in the issuance of
units consisting of one share of Company restricted common stock and one warrant
(each warrant is exercisable into one share of Company restricted common
stock).  As part of the transaction, the Company also issued common
stock purchase warrants to certain individuals who assisted with the private
placement. There was no value assigned to these warrants when they were
granted.





During
2009, the Company issued 1,543,499 warrants to purchase the Company’s common
stock. At December 31, 2009, 1,343,499 of the warrants are vested and 200,000 of
the warrants will vest in 5 to 17 months. The vested warrants were expensed
during 2009 with the remaining warrants amortized over the vesting period. The
Company used the Black-Scholes option pricing method to value the warrants.
These warrants were accounted for on the Company’s financial statements as a
$212,009 charge to payroll and related costs. This charge includes $13,827
related to stock awarded to a Company employee. An additional $181,201 was
expensed to financing costs for warrants issued in conjunction with the
Company’s term loan and $24,939 was expensed to professional fees in payment of
directors’ fees and legal costs. These non-cash expenses were offset by a
corresponding increase to additional paid-in-capital and capital
stock.




F-18




NOTE
12 – COMMON STOCK PURCHASE WARRANTS, (continued)




The
Company also canceled 752,500 warrants previously issued to employees who were
terminated or have left the company. Stock compensation expense was adjusted to
reflect this decrease.





A summary
of the change in common stock purchase warrants for the year ended December 31,
2009 is as follows:





Number of
                    Warrants
                    Outstanding
                  
                  
                  Weighted
                    Average
                    Exercise Price
                  
                  
                  Weighted
                    Average
                    Remaining
                    Contractual
                    Life (Years)Balance,
      December 31, 2008
                  
                  
                  2,734,054
                  
                  
                  $
                  0.59
                  
                  
                  
                  4.58Warrants
      issued
                  
                  
                  1,543,499
                  
                  
                  $
                  0.45
                  
                  
                  
                  6.33Warrants
      exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Warrants
      cancelled
                  
                  
                  752,500
                  
                  
                  $
                  0.25
                  
                  
                  
                  5.00Balance,
      December 31, 2009
                  
                  
                  3,525,053
                  
                  
                  $
                  0.70
                  
                  
                  
                  5.36





The
balance of outstanding and exercisable common stock warrants as at December 31,
2009 is as follows:





Number of
                      Warrants
                      Outstanding
                    
                    
                    Exercise Price
                    
                    
                    Remaining
                      Contractual
                      Life (Years)3,525,053
                    
                    
                    $
                    0.70
                    
                    
                    
                    1.5
      – 9.6




F-19




NOTE
12 – COMMON STOCK PURCHASE WARRANTS, (continued)





The fair
value of stock purchase warrants granted using the Black-Scholes option pricing
model was calculated using the following assumptions:





Years Ended December 31,2009
                      
                      2008Risk
      free interest rate
                      
                      .5%
      - 1.8%
                      
                      .5%
      - 1.5%Expected
      volatility
                      
                      20%
      - 86%
                      
                      20%
      - 86%Expected
      term of stock warrant in years
                      
                      1.5
      – 5.0
                      
                      2.5
      – 4.75Expected
      dividend yield
                      
                      0%
                      
                      0%Average
      value per option
                      
                      .13
      - .73
                      
                      .13
      - .57





Expected
volatility is based on historical volatility of the Company and other comparable
companies. Short Term U.S. Treasury rates were utilized.  The expected
term of the options was calculated using the alternative simplified method newly
codified as ASC 718, formerly





Staff
Accounting Bulletin (“SAB”) 107, which defines the expected life as the average
of the contractual term of the options and the weighted average vesting period
for all option tranches.  Since trading volumes and the number of
unrestricted shares are very small compared to total outstanding shares, the
value of the warrants was decreased for lack of marketability.





NOTE
13 – INCOME TAXES





Following
is a summary of all the components giving rise to the income tax provisions for
the years ended December 31, 2009 and 2008:





2009
                  
                  
                  2008Current
      payable:Federal
      and state
                  
                  $
                  -
                  
                  
                  $
                  --
                  
                  
                  
                  -Deferred:Federal
      and state
                  
                  
                  (363,244
                  )
                  
                  
                  (988,432
                  )Total
      deferred
                  
                  
                  (363,244
                  )
                  
                  
                  (988,432
                  )Less
      increase in valuation allowance
                  
                  
                  363,224
                  
                  
                  
                  988,432Net
      income tax provision
                  
                  $
                  -
                  
                  
                  $
                  -




F-20





NOTE
13 – INCOME TAXES, (continued)





A
reconciliation of the differences between the effective income tax rate and the
statutory federal tax rate for 2009 and 2008 are as follows:


2009
                  
                  
                  2008Tax
      benefit at U.S. statutory rate
                  
                  
                  34.00
                  %
                  
                  
                  34.00
                  %State
      taxes, net of federal benefit
                  
                  
                  3.63
                  
                  
                  
                  3.63Change
      in valuation allowance
                  
                  
                  (37.63
                  )
                  
                  
                  (37.63
                  )-
                  %
                  
                  
                  -
                  %





The tax
effect of temporary differences that give rise to significant portions of the
deferred tax assets and liabilities at December 31, 2009 and 2008 consisted of
the following:





Deferred Tax Assets
                  
                  2009
                  
                  
                  2008(restated)Net
      Operating Loss Carryforward
                  
                  $
                  1,958,000
                  
                  
                  $
                  1,400,000Other
                  
                  
                  173,000
                  
                  
                  
                  202,971Total
      Deferred Tax Assets
                  
                  
                  2,131,000
                  
                  
                  
                  1,602,971Deferred
      Tax Liabilities
                  
                  
                  ( 222,000
                  )
                  
                  
                  (57,215
                  )Net
      Deferred Tax Assets
                  
                  
                  1,909,000
                  
                  
                  
                  1,545,756Valuation
      Allowance
                  
                  
                  (1,909,000
                  )
                  
                  
                  (1,545,756
                  )Total
      Net Deferred Tax Assets
                  
                  $
                  -
                  
                  
                  $
                  -





As of
December 31, 2009, the Company had a net operating loss carry forward for income
tax reporting purposes of approximately $5,200,000 that may be offset against
future taxable income through 2028.  Current tax laws limit the amount
of loss available to be offset against future taxable income when a substantial
change in ownership occurs.  Therefore, the amount available to offset
future taxable income may be limited.  No tax asset has been reported
in the financial statements, because the Company believes there is a 50% or
greater chance the carry-forwards
will expire unused.  Accordingly, the potential tax benefits of the
loss carry forwards are offset by a valuation allowance of the same
amount.




NOTE
14 – RETIREMENT PLAN





The
Company’s 401(k) savings plan allows all qualified employees to
participate.  The plan is a defined contribution retirement plan.
Under the agreement the Company contributes to the plan a portion of employee
contributions plus additional funds at its discretion.  All
contributions are subject to certain limitations and are allocated to each
individual’s account in the plan.  At the option of the participants,
plan funds are invested in various pooled investments offered by the
Trustee.  The plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).  The Company
contributed approximately $11,245 and $55,755 to the plan in 2009 and 2008,
respectively.




NOTE
15 – MAJOR CUSTOMERS





In 2008,
two of the Company’s major customers contributed more than 10% of
revenues.  Revenues from these customers were approximately $1,400,000
during the year ended December 31, 2008.  During 2009, the Company’s
revenue stream moved into the direction of petroleum contracting and no single
customer contributed more than 10% of revenues.  The Company expects
petroleum contracting to be a primary source of revenue in the near
future.  A change in the demand for petroleum contracting could affect
operating results.


F-21




NOTE
16 – MAJOR SUBCONTRACTOR





In 2008,
the Company had two major subcontractors.  During the year ended
December 31, 2008, the Company paid its major subcontractors, approximately
$1,730,000 for subcontracting work. The amounts paid approximated 35% of
contract costs incurred during the period.





In 2009,
the Company had one subcontractor that it paid approximately $795,000 or 11% of
contract costs during the period.





A change
in these subcontractors could cause delays in the Company’s contracts, which
could ultimately affect operating results.





NOTE
17 – RELATED PARTY TRANSACTIONS





In order
to procure vehicle financing and leased facilities, at various times the
founding stockholders of the Company have acted as guarantors under such
financing arrangements.





Founding
stockholders have also loaned the Company a total of $1,196,486 and $153,780 as
of December 31, 2009 and 2008, respectively.  Beginning in November
2008, these stockholder loans accrued interest at rates ranging from 7.5% to
8.5%. Interest accrued on these loans at December 31, 2009 was
$61,280.





In
addition, the Company purchased insurance through the spouse of a corporate
officer via an arm’s length transaction.





In 2008,
a founding stockholder of the Company also provided collateral in the amount of
$247,000 in order to secure a performance bond required for a construction
project.  The collateral was released back to the stockholder in the
first six months of 2009 upon completion of the project.




NOTE
18 – LEGAL MATTERS





The
Company is a party in legal proceedings in the ordinary course of
business. The Company does not believe that the ultimate outcome of the
legal proceedings will have an impact on the financial statements.




The
Company has filed a lawsuit against several customers for non-payment of
contract revenues and has been awarded summary judgments in various cases. While
the outcome of continuing collection efforts is unknown, it is the opinion of
management that the Company will be successful in collecting a majority of court
ordered awards.




NOTE
19 – SUBSEQUENT EVENTS





The
Company has evaluated subsequent events through the date the financial
statements were available for issuance.
 
 As of
December 31, 2009, the Company was in default on the term note payable to
related party due to its failure to make timely payments required under the term
note.  On May 12, 2010, the lender provided the Company a limited
consent and waiver of these payment provisions. The waiver is a one-time waiver
and limited only to the payment default and applies only through March 31, 2010.
The lender has not taken any action to collect on the term note.  The
lender has also agreed to extend certain principal payment due on
the note in April 2010 until June 30, 2011.
 
 In
January and February of 2010, the Company received proceeds from two performance
bonds held with the Company’s third party bonding agent in the aggregate amount
of $271,371 of which $260,897 was applied to the principal of the term loan and
$10,474 paid accrued interest.
 
 In
February of 2010, the promissory note to a financial institution which was
originally due in February 2009 was extended for one year at the same
monthly payment of $35,000 at a fixed interest rate of 7%.
 
 In
February of 2010, the Company’s Chairman of the Board, President and Chief
Executive Officer, who held these positions at that time, loaned the Company an
additional $60,000. During the period from January 1 to April 2 of 2010, the
Company paid $33,747 in principal against loans payable to him. A portion
of these principal reductions were also applied against loans made by one of the
Company’s founding stockholders.
 
 On April
10, 2010, the Chairman of the Board, President and Chief Executive Officer
resigned these positions and remained as director of the Company.
In connection with the resignation, the Company and the former Chairman of the
Board, President and Chief Executive Officer entered into a Modification
Agreement that required the former officer to surrender to the Company all
shares of common stock held with the exception of  4,000,000 shares.
The former officer also forgave the Company for all except for $125,000 of
remaining principal and accrued interest of previous loans made by the
former officer to the Company. The $125,000 not forgiven is evidenced by a
promissory note bearing interest at 5% and payable in full on December 31,
2011. The Modification Agreement also requires the former
officer to provide certain transitional consulting services to
the Company , on a limited basis, for 12 months in exchange for a consulting fee
of $9,333 per month as well as the issuance of 500,000 warrants
to purchase the Company’s common stock at $0.60 per share exercisable for five
years. The Company also agreed, as part of the Modification Agreement, to use
its best efforts to repay outstanding credit card indebtedness incurred by the
Company and personally guaranteed by the former officer and
director.
 
 On May
13, 2010, the Company acquired all of the outstanding common shares of a Florida
construction company licensed to operate in the Southeastern United States. This
newly acquired subsidiary specializes in the design, construction and
maintenance of retail petroleum facilities.  The Company believes that
this acquisition will allow the Company to add experienced personnel in the
petroleum industry and existing relationships with large petroleum companies.
The Company will also be able to expand its operations in the Southeastern
United States. As consideration for the acquisition, the Company paid $1,000,000
in cash, $300,000 due at closing, $250,000 within 30 days of the closing
date, $250,000 within 60 days of the closing date, and $200,000 within 90 days
of the closing date. In addition the Company issued a Promissory Note in the
amount of $1,173,473 bearing interest at 4% per annum and payable in 48 equal
monthly installments commencing on the 30th day
following the closing date and issued 6,124,622 shares of the Company’s common
stock. The Company has valued the transaction at $6,460,708 utilizing $0.70 as
the market value of the Company’s stock at the date of acquisition as listed on
the OTC market and cash paid.  The Company pledged the shares of the
acquired company to secure payment of the remaining cash installments. The
Company also issued warrants to certain employee shareholders of the acquired
company to purchase 250,000 shares of the Company’s common stock at $0.75 per
share exercisable for five years.
  Audited
financial statements of the acquired company were not available at the time of
acquisition. If the company had been combined for the years ended December 31,
2009 and 2008, the combined revenues would have been $26,399,000 and
$31,631,000, respectively. The pre-tax results of operations for
the same periods would have been losses of $1,438,000 and $1,325,000,
respectively. The acquired company has operated as a S Corporation since
its inception.
  F-22