UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


___________________


FORM 10-K





/X/
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009





OR





/  /
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





FOR THE TRANSITION PERIOD FROM __________ TO __________.





Commission File Number 0-24269


___________________





SURGE GLOBAL ENERGY, INC.


(Exact name of registrant as specified in its charter)





DELAWARE

(State or other jurisdiction of incorporation or organization)
34-1454529

(I.R.S. Employer Identification No.)990 Highland Drive, Suite 206, Solana Beach, California

(Address of principal executive offices)
92075

(Zip Code)





Registrant's telephone number, including are code:  (858) 720-9900





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





Title of each class
Name of each exchange on which registered

NONE


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





Common Stock, $.001 par value





(Title of Class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act


Yes o     Nox





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes x    Noo





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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.  Yesx      Noo





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 o       No o





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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  o





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.





Large accelerated filer     o

Accelerated file    oNon-accelerated filer     o  (Do not check if a smaller reporting company)

Smaller reporting company     x





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 registrant’s approximate 21,811,000 shares of common stock held by non-affiliates computed by reference to the closing sales price of such common equity (i.e. $0.07) as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2009) was $1,527,000.





The number of shares outstanding of the registrant’s common stock at April 1, 2010 was 32,637,387.











INDEX





PageCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
1PART I

1ITEM 1.
BUSINESS
1ITEM 1A.
RISK FACTORS
6ITEM 2.
PROPERTIES
14ITEM 3.
LEGAL PROCEEDINGS
15ITEM 4.
RESERVED
16PART IIITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
17ITEM 6.
SELECTED FINANCIAL INFORMATION
18ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
18ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
22ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
22ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
23ITEM9A (T).
CONTROLS AND PROCEDURES
23ITEM 9B.
OTHER INFORMATION
24PART IIIITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
25ITEM 11.
EXECUTIVE COMPENSATION
30ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
34ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
35ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
35PART IVITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
36













CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION





This Annual Report on Form 10-K, including exhibits thereto, contains 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. These forward-looking statements are typically identified by the words “anticipates,” “believes,” “expects,” “intends,” forecasts,” estimates,” “plans,” “future,” “strategy,” or words of similar meaning. In particular, the following types of statements are forward-looking:





●
statements regarding our potential growth opportunities;





●
statements regarding our ability to generate revenues from our operations;





●
statements regarding our anticipated exploration work;





●
statements regarding our ability to extract, refine, sell oil or sell oil properties;





●
statements regarding our ability to comply or continue to comply withgovernmental regulations; and





●
statements regarding our estimated future costs and expenses.





Various factors could cause actual results to differ materially from those expressed in the forward-looking statements, including those described in “Risk Factors” in this Form 10-K. The company assumes no obligations to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors, except as required by law.





PART I





As used in this Annual Report on Form 10-K, “we,” “us,” “our,” “Surge “ and our “company” refer to Surge Global Energy, Inc. (“Surge”), and our wholly owned subsidiaries, including Surge Energy Resources, Inc., 1294697 Alberta Ltd.,  and Cold Flow Energy ULC, unless the context otherwise requires. Peace Oil Corp. was sold in June, 2008.





ITEM 1.
BUSINESS





General Overview





Surge Global Energy, Inc. is a Delaware corporation dually traded on the OTC Bulletin Board and the Pink Sheets under the symbol “SRGG.” Our principal executive offices are located at 990 Highland Drive, Suite 206, Solana Beach, CA 92075. Our telephone number is (858) 720-9900. Our fax number is (858) 720-9902. We maintain a website at www.SurgeGlobalEnergy.com.





We are an oil and gas exploration and development company. Our primary objective is to identify, acquire and develop working interests in oil and gas projects. We intend to develop oil and gas properties and explore for oil and gas, focusing mainly in the United States and Canada. We will engage in oil and gas exploration, drilling of new and development wells, and acquiring and/or leasing producing properties as the most prudent ways to generate income and increase shareholder value to the extent that our limited cash resources will permit us to accomplish this. Our strategic initiative is to pursue potential high rate of return projects with reduced risk and explore ways to maximize values from our investments in Andora Energy Corporation, North Peace Energy Corp., 11 Good Energy, Inc. and our investment in oil and gas properties in Nevada, Wyoming and Oklahoma as described below.





All amounts are stated in U.S. dollars unless otherwise indicated.




1




Corporate History





We were incorporated as The Havana Group, Inc. on November 25, 1997 under the laws of the state of Delaware. Our initial business was the sale of pipes and tobacco products and we completed our initial public offering in May 1998. On October 13, 2004, Surge’s name was changed from The Havana Group, Inc to Surge Global Energy, Inc. and the symbol was changed to “SRGG”.





On December 31, 2003, our pipe and tobacco inventory was liquidated and the tangible and intangible assets related to that business were sold off.  In December 2004, we completed the restructuring of our balance sheet and the cancellation of outstanding Preferred A and Preferred B shares and indebtedness related to the discontinued tobacco and pipe business.





From 2005 through 2009, we engaged in a series of acquisition, divestiture and capital transactions in an effort to expand our business and provide the basis for long-term shareholder returns from oil and gas exploration and development.  Because our operations from 2005 forward have not generated any revenue, we have used our equity and the value of interests in other entities that we have controlled from time to time, to attempt to develop business opportunities we believed would be advantageous.  Our management has also undergone a number of changes during this period.





In 2008, we began the process of acquiring via lease oil and gas properties for drilling and development. Three properties were leased in 2008 and one in 2009. The two of the three properties acquired in 2008 were written off due to insufficient reserves. The first was drilled in November, 2008 in Crane County, Texas and was plugged and abandoned and fully impaired in 2008. The second well commenced drilling in November, 2008 in Park County, Wyoming. This well was completed with natural gas and oil results, but after two fracture procedures the well was deemed commercially unsuccessful and has been shut in pending an improvement in gas prices. The Wyoming was fully impaired for financial statement purposes in 2009 due to the lack of commercial reserves. The third lease, on 2,500 acres in Pine Valley, Nevada was acquired in July, 2008 and has not yet to been drilled.





Because we are an exploration stage company, the inability to develop successful oil and gas prospects has reduced our working capital and created the need for additional strategic transactions to raise capital and liquidate assets. The strategic transactions together with handling management and board changes and issues and certain litigation, the majority of which have now been settled, have occupied a great deal of our efforts over the last three years.  For a description of certain legal proceedings, see Item 3.





Oil and Gas Drilling Activities





In June 2008, we began acquiring oil and gas properties for drilling and exploration. Three properties were acquired in 2008, the first was Green Springs Prospect in White Pine County, Nevada which consists of two leases aggregating approximately 2,500 acres which has not yet been drilled; the second was an oil and gas prospect in Crane County, Texas which was drilled, logged and found non productive; and the third a deep gas well named the Qualmay #12-42 well, a 7,200 foot deep oil & gas well drilled on 40 acres of land in Park County, Wyoming which has been shut in due to low gas prices and limited production levels. The lease on the Nevada property was extended until September 1, 2010 at which time it will expire if not drilled.





In December, 2009, the Company entered into an equipment lease agreement with Mandalay Energy, Inc. to provide funds for the workover of four (4) oil and gas wells initially with an option to workover six (6) additional wells on a 40 acre lease located in Pawnee County, Oklahoma. After workover operations commenced the operations were delayed by a dispute over leasehold rights by a new owner of the lease. The Company is working on re-establishing drilling operations or transferring our investment into a similar property in Oklahoma and we expect that oil and gas production income should commence in the third or fourth quarter of 2010.





The Company's ability to invest in future oil and gas transactions is dependent upon our ability to obtain additional financing on terms satisfactory to us, if at all and/or liquidate our investment in Andora on terms satisfactory to us, if at all. See "Risk Factors."






2





Andora Energy Corporation (formerly Signet Energy)





In 2005, we formed a Canadian subsidiary that entered into an agreement to drill wells in the Sawn Lake Property located in Northern Alberta, Canada with Deep Well Oil & Gas, Inc. (“Deep Well”) and Northern Alberta Oil, Ltd. (“NAOL”).  In November 2005 that subsidiary, renamed Signet Energy, Inc. (“Signet”) was reorganized.  Surge issued 5,100,000 shares of its common stock to former Signet officers, directors and certain shareholders, and transferred shares of Signet to Deep Well and NAOL.  Surge retained 10,500,000 shares of Signet after the foregoing transaction (approximately 49%) of Signet on a non-diluted basis.  As a result, we became a minority shareholder in Signet, and obtained leases of oil and gas properties from Deep Well and NAOL.  In July 2006, our interest in Signet was further diluted by the issuance of additional equity by Signet.  On September 17, 2007, Signet combined with Andora Energy Corporation (“Andora”), resulting in further dilution of our interest in the combined entity to approximately 5.61% of the fully diluted shares of Andora.





As of December 31, 2009, we owned a total of 3,606,499 in Andora of which 2,384,561 were held in escrow pursuant to an agreement with Andora regarding litigation with Dynamo Energy Corp. As a result of the dismissal of the Dynamo lawsuit and a settlement agreement with Andora dated February 2, 2010, 375,000 Andora shares were paid to Andora in full payment of all outstanding claims, reducing the number of Andora shares owned to 3,231,499 all of which will be no longer subject to the escrow agreement.  See Subsequent Events and Legal Proceedings for further details.





Andora is a privately owned oil and gas company of which 53.2% is owned and controlled by Pan Orient Energy Corp., a Canadian energy company listed on the TSX Venture Exchange.  After the foregoing transactions, we currently own approximately 5.8% of Andora. For a more detailed description of this series of transactions, see Note B to our Consolidated Financial Statements, “Investment in Andora.”





North Peace Energy Corp. and related transactions





On March 2, 2007, Cold Flow Energy ULC (“Cold Flow”), a Canadian subsidiary of our 1294697 Alberta Ltd. subsidiary (also a Canadian company, formed in order to facilitate the transaction at the advice of Canadian tax counsel), acquired all of the outstanding shares of Peace Oil Corp (“Peace Oil”), another Canadian company.  Cold Flow paid consideration valued at CDN$16,620,000 in cash, promissory notes and exchangeable shares of Cold Flow preferred stock (the “Exchangeable Shares”).





At that time, each Exchangeable Share could be exchanged for two shares of our common stock for five years from the closing subject to certain redemption rights of Surge.  We also issued a warrant to purchase 1,000,000 shares of our common stock to 1304146 Alberta Ltd. at an exercise price of $1.00 per share subject to certain contingencies which remains outstanding.  Peace Oil was an oil and gas exploration and development company, and at the time held an undivided 30% working interest in 135 square miles (86,400 acres) of oil sands leases in the Red Earth area of Alberta, Canada (the “Red Earth Leases”).





On June 28, 2007, the Company and Peace Oil sold certain assets of Peace Oil to North Peace Energy Corp., a Canadian oil sands company listed on the TSX Venture Exchange (“North Peace”), including the Red Earth Leases.  The aggregate consideration was approximately CDN$20,000,000, consisting of CDN$15,000,000 in cash and CDN$5,000,000 in common shares of North Peace at an agreed price of CDN$2.20 per share (the “North Peace Transaction”).  We are utilizing and intend to utilize the proceeds from such sale to continue our current and future operations in the oil and gas business.  None of Peace Oil (since sold), Cold Flow or 1294697 Alberta Ltd. has any ongoing business operations at this time.





In December 2007, we determined that we had incurred Canadian tax liability estimated at $5.281 million as June 30, 2007 related to these transactions and as a result restated our June 30, 2007 and September 30, 2007 financial reports.   In June, 2008, we sold our Peace Oil Corp subsidiary and thereby mitigated that tax liability at a cost of approximately $1,573,000, which amount has been included in the financial statements as an expense of sale of Peace Oil Corp. See “Risk Factors.”





In June and July 2008, the Company exchanged a total of 584,929 North Peace Energy shares (NPE) for all of the outstanding Cold Flow Exchangeable shares and 3,689,617 common shares of the Company, leaving a balance of North Peace shares owned from the North Peace transaction at 1,739,129 shares, or 3.1% of North Peace as of December 31, 2008.  For financial statement purposes the Company recorded a realized gain of $57,638 and a net unrealized loss on the investment in NPE shares which are held as securities available-for-sale of $1,008,121 for the year ended December 31, 2008.






3





In the year ended December 31, 2009, we sold a total of 336,628 North Peace Energy shares for total proceeds of $155,799 and a loss on sales of $120,237 based on a cost basis of $0.82 per share and we recognized an impairment in the value of North Peace shares of $778,377 due to the decline in value of NPE shares from $0.82 per share to $0.262 per share.





As a result of these transactions, the Company now owns 1,402,501 shares (a 1.94% interest) in North Peace (NPE.V) valued at $366,905 as of December 31, 2009.  For a more detailed description of this series of transactions, see Note C to our Consolidated Financial Statements.





11 Good Energy, Inc. Investment





On September 29, 2008, we made an initial investment in the biofuels sector with 11 Good Energy, Inc., a developer of G2 Diesel, a next generation biodiesel. The Convertible Note earned interest at 8% per annum and was due and payable on June 30, 2009. The Note was also convertible at a 15% discount to 11 Good Energy’s next equity financing. We elected to accept payment in full on the note in June, 2009 and relinquished our conversion right. We retained our right to approximately 107,843 of warrants to purchase 11Good Energy common stock exercisable at $2.55 through June 30, 2010.





Also in 2008, Frederick C. Berndt, the CEO of 11 Good Energy and a former director of Surge, transferred to Surge 500,000 shares of restricted common stock from his personal holdings of 11 Good Energy, and Surge agreed to issue to Mr. Berndt a stock purchase warrant to purchase 1,000,000 shares of restricted Surge common stock at an exercise price of seventy-five cents ($0.75) per Surge share through December 31, 2009 which warrants were cancelled upon payment of the Note in June, 2009.





In October, 2009, we sold 450,000 11 Good Energy shares for $1.00 per share and realized proceeds of $450,000.  In February, 2010 we sold the remaining 50,000 11 Good Energy shares for $122,500.





Santa Rosa Dome Project, Mendoza Province, Argentina





On March 18, 2008, we entered into a Purchase and Sale Agreement, with Oromin Exploration, Irie Isle Limited; Cynthia Holdings Ltd. (“Cynthia”); and Chet Idziszek, pursuant to which the Company sold its 17.52% interest in Cynthia.  Cynthia owns a certain parcel of land in the eastern half of the Cuyana Basin in the Province of Mendoza, Argentina known as the Santa Rosa Dome Prospect.  We received six hundred thousand U.S. Dollars (US$600,000) in cash and the return of One Million (1,000,000) shares of the Company’s common stock previously issued for the Company’s purchase of its interest in Cynthia and after this transaction we owned no interest in this property.





Working Capital Activities





In March 2008, the Company sold its 17.52% in Cynthia Holdings, Ltd for $600,000 and a return of 1,000,000 shares of the Company’s common stock.





On June 27, 2008, Cold Flow Energy ULC, a wholly owned subsidiary, entered into a definitive agreement with a privately owned Canadian corporation (“Purchaser”), pursuant to which Cold Flow sold all issued and outstanding common and preferred shares of Peace Oil Corp.  Cold Flow Energy ULC indemnified the Purchaser for any tax liabilities in excess of CDN $4,175,042 and all other liabilities arising prior to the date of sale. As part of the sale, Cold Flow Energy ULC paid the Purchaser $1,340,987 and the Purchaser effectively assumed all tax liabilities of Peace Oil Corp. arising as a result of the purchase of common and preferred shares.





During 2008, the Company invested approximately $1,600,000 in oil and gas properties which have not generated any income through December 31, 2009.






4





In 2009, the Company sold 450,000 shares of 11 Good Energy for $450,000 and we invested $300,000 in an oil and gas equipment lease on property in Pawnee County, Oklahoma.





Competition





The oil and gas business is highly competitive. We will compete with private, public and state-owned companies in all facets of the oil business, including suppliers of energy and fuel to industrial, commercial and individual customers. Numerous independent oil and gas companies, oil and gas syndicates and major oil and gas companies actively seek out and bid for oil and gas prospects and properties as well as for the services of third-party providers, such as drilling companies, upon which we rely. Many of these companies not only explore for, produce and market oil and natural gas, but also carry out refining operations and market the resultant products on a worldwide basis. A substantial number of our competitors have longer operating histories and substantially greater financial and personnel resources than we do.  Competitive conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time by the government of the United States and other countries, as well as factors that we cannot control, including international political conditions, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources.





Government and Environmental Regulation





Our operations will be subject to extensive and developing federal, state and local laws and regulations in the US and Canada relating to environmental, health and safety matters; petroleum; chemical products and materials; and waste management. Permits, registrations or other authorizations are required for the operation of certain of our facilities and for our oil and gas exploration and production activities. These permits, registrations or authorizations are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with these regulatory requirements, the provisions of required permits, registrations or other authorizations, lease conditions, and violators are subject to civil and criminal penalties, including fines, injunctions or both. Failure to obtain or maintain a required permit may also result in the imposition of civil and criminal penalties. Third parties may have the right to sue to enforce compliance.





Foreign and domestic development, production and sale of oil are extensively regulated in Canada at both the federal and state levels. Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, in Canada and at federal and state levels, have issued rules and regulations binding on the oil and gas industry and its individual members, compliance with which is often difficult and costly and some of which carry substantial penalties for failure to comply. Canada and multiple state statutes and regulations where we intend to conduct operations require permits for drilling operations, drilling bonds and reports concerning wells. Such jurisdictions also have statutes and regulations governing conservation matters, including the unitization or pooling of oil and gas properties and establishment of maximum rates of production from oil and gas wells.





Some risk of costs and liabilities related to environmental, health and safety matters is inherent in our operations, as it is with other companies engaged in similar businesses, and there can be no assurance that material costs or liabilities will not be incurred. In addition, it is possible that future developments, such as stricter requirements of environmental or health and safety laws and regulations affecting our business or more stringent interpretations of, or enforcement policies with respect to, such laws and regulations, could adversely affect us. To meet changing permitting and operational standards, we may be required, over time, to make site or operational modifications at our facilities, some of which might be significant and could involve substantial expenditures. There can be no assurance that material costs or liabilities will not arise from these or additional environmental matters that may be discovered or otherwise may arise from future requirements of laws in the US and Canada.





Number of Total Employees and Number of Full-time Employees





From our inception through the period ended December 31, 2009, we have relied on the services of outside consultants for services in addition to two (2) full -time employees. In order for us to attract and retain quality personnel, we anticipate we will have to offer competitive salaries to future employees. As we continue to expand, we may incur additional costs for personnel and consultants. This projected increase in personnel is dependent upon our generating revenues and obtaining sources of financing. There is no guarantee that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the number of employees. None of our employees are covered by collective bargaining agreements, and we believe our relations with our employees are favorable.





5




ITEM 1A.
RISK FACTORS





An investment in our common stock is speculative and involves a high degree of risk and uncertainty. You should carefully consider the risks described below, together with the other information contained in our reports filed with the SEC, including the consolidated financial statements and notes thereto of our company, before deciding to invest in our common stock. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we presently consider immaterial may also adversely affect our company. If any of the following risks occur, our business, financial condition and results of operations and the value of our common stock could be materially and adversely affected.





RISKS RELATED TO OUR COMPANY





We will need additional financing to carry out our business plans and to finance our future operations.





We have a history of net losses and expect that our operating expenses will continue to deplete our cash reserves as we have no revenues.  Our business model contemplates expansion of our business by identifying and acquiring additional oil and gas properties.  To make these acquisitions, our capital needs will increase substantially.  We have limited working capital and cash resources to fund our oil and gas exploration operations. We are involved in various litigations, the outcome and legal expense of which could adversely affect our operations and cash resources. We plan to attempt to obtain our future funding that we will need to drill wells on leases owned, to lease additional properties and to otherwise finance our operations through debt and equity markets or joint venture agreements with third parties; however, we can provide no assurances that we will be able to obtain additional funding (and/or joint venture partners willing to fund specific exploration projects) when it is required or that it will be available to us on commercially acceptable terms, if at all.  If we fail to obtain the financing that we need when it is required, we may have to forego or delay potentially valuable opportunities to acquire new oil and gas properties or default on existing funding commitments to third parties and forfeit or dilute our rights in existing oil property interests.In the event additional financing is not available to us on commercially acceptable terms, if and when needed to finance our operations and to meet our cash needs as they come due, this may seriously harm our business, financial condition and results of operations and may adversely affect our ability to remain a going concern on a long term basis.





Our Nevada and Oklahoma properties may not produce oil and gas in commercial quantities sufficient to be profitable.





In December, 2009, the Company entered into a lease and equipment agreement with Mandalay Energy, Inc. to provide funds for the workover of four (4) oil and gas wells initially with an option to workover six (6) additional wells on a 40 acre lease located in Pawnee County, Oklahoma. After workover operations commenced the operations were delayed by a dispute over leasehold rights by a new owner of the lease. The Company is working on re-establishing drilling operations or transferring our investment into a similar property in Oklahoma. We can provide no assurances that the amount of natural gas and barrels of oil per day that are actually recovered from our Oklahoma property will be brought to the surface and sold in sufficient commercial quantities for us to profitably operate this property. See “Item 1 – Oil and Gas Drilling Activities.”








We are and may continue to be involved in litigation and other disputes.





Our business and operations may subject us to claims, litigation and other proceedings brought by private parties and governmental authorities. Any claim that is successfully asserted against us could result in significant damage claims and other losses. Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations, which adversely affect our financial condition, results of operations or cash flows.






6




We have a history of net operating losses.





We have a history of net operating losses and we will need to generate substantial revenues to achieve profitability. In the short term we must realize value from our existing assets or generate earnings from our oil and gas activities.  We may not be able to generate revenue either in the short term or the longer term.  Even if we do achieve profitability, we cannot assure you that we will be able to sustain or increase profitability on a quarterly or annual basis in the future. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether we will be able to continue expansion of our operations and sell or finance existing assets. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.  Our future performance is dependent upon our ability to identify, acquire and implement the strategy to develop oil properties for production or resale which may delay shareholder return on investment for years.





We may not be able to acquire other profitable oil and gas interests.





We can provide no assurance that oil and gas will be discovered in commercial quantities in any of the properties we currently hold interests in or properties in which we may acquire interests in the future. Our success will depend upon our ability to acquire working and revenue interests in properties upon which oil reserves are ultimately discovered in commercial quantities for production capability or to attract the interest of larger oil field companies. We do not have an established history of locating and developing properties that have oil and gas reserves.





We are an exploration stage company with an accumulated deficit of $37,722,268.





In January 2005, as a result of the disposal of our tobacco wholesale business in December 2004, and the restructuring of our management and ownership, we began implementing plans to establish an oil and gas exploration business. As a result, we are an exploration stage enterprise, as defined by Statement of Financial Accounting Standards No. 7 (“SFAS7”). We are an exploration stage company with only a limited operating history upon which to base an evaluation of our current business and future prospects, and we have just begun to implement our business plan. Since our inception and the inception of our exploration stage on January 1, 2005, we have suffered recurring losses from operations and have been dependent on new investment to sustain our operations. During the year ended December 31, 2009 we reported a net loss of $2,329,180 and a comprehensive income after unrealized losses on available for sale securities and foreign currency adjustments of $1,334,372. In 2008, we reported a net income of $607,835 after the reversal of a previously accrued tax credit of $4,847,978 and a comprehensive gain after taxes of $527,064. We cannot give any assurances that we can achieve profits from operations. For the period from inception of exploration stage through December 31, 2009, the Company has accumulated losses of $37,722,268.





We do not presently control any of our operations as our properties are operated by others.





We do not operate any of our drilled properties or the entities in which we hold interests and we therefore have no influence over the testing, drilling and production operations of our properties. Our lack of control could result in the following:





●
the operator might initiate exploration or development on a faster or slower pace than we prefer;●
the operator might obtain additional financing which may further dilute our interest in the property as well as trigger additional asset impairment; and●
if an operator refuses to initiate a project, we might be unable to pursue the project.





Any of these events could materially reduce the value of our properties.






7




We may not have good and marketable title to our properties.





It is customary in the oil and gas industry that upon acquiring an interest in a non-producing property, only a preliminary title investigation be done at that time and that a drilling title opinion be done prior to the initiation of drilling, neither of which can substitute for a complete title investigation. We have followed this custom and intend to continue to follow this custom in the future. Furthermore, title insurance is not available for mineral leases, and we will not obtain title insurance or other guaranty or warranty of good title. If the title to our prospects should prove to be defective, we could lose the costs that we have incurred in their acquisition, or incur substantial costs for curative title work.





We rely heavily upon reserve, geological and engineering data when determining whether or not to invest in a particular oil and gas property.





The reserve, geological and engineering data information that we use in evaluating oil and gas prospects is based on estimates involving a great deal of uncertainty. Different engineers may make different estimates of reserves and cash flows based on the same available data. Reserve estimates depend in large part upon the reliability of available geologic and engineering data, which is inherently imprecise. Geologic and engineering data are used to determine the probability that a reservoir of oil and gas exists at a particular location, and whether oil and/or gas and natural gas are recoverable from a reservoir. Recoverability is ultimately subject to the accuracy of data including, but not limited to, geological characteristics of the reservoir, structure, reservoir fluid properties, the size and boundaries of the drainage area, reservoir pressure, and the anticipated rate of pressure depletion. The evaluation of these and other factors is based upon available seismic data, computer modeling, well tests and information obtained from production of oil and gas from adjacent or similar properties, but the probability of the existence and recoverability of reserves is less than 100% and actual recoveries of proved reserves can differ from estimates.





Information in this report regarding our future exploration and development projects reflects our current intent and is subject to change.





We do not currently have any new exploration and development plans other than developing our Nevada and Oklahoma properties. Whether we ultimately undertake additional exploration or development projects will depend on the following factors:





·
availability and cost of capital both by the company and our planned majority partners;





·
receipt of additional seismic data or the reprocessing of existing data;





·
current and projected oil or natural gas prices;





·
reserve results could be less than our anticipated recovery rate range;





·
success or failure of activities in similar areas;





·
changes in the estimates of the costs to complete the projects;





·
our ability to attract other industry partners to acquire a portion of the working interest to reduce costs and exposure to risks;





·
decisions of our joint working interest owners and partners; and





·
market prices for our oil field assets could change and could vary when the development efforts and subsequent oil field values accrue.





We will continue to gather data about our projects and it is possible that additional information will cause us to alter our schedule or determine that a project should not be pursued at all. You should understand that our plans regarding our projects might change.






8




Reserve estimates also require numerous assumptions relating to operating conditions and economic factors, including the price at which recovered oil and gas can be sold, the costs of recovery, assumptions concerning future operating costs, severance and excise taxes, development costs and workover and remedial costs, prevailing environmental conditions associated with drilling and production sites, availability of enhanced recovery techniques, ability to transport oil and gas to markets and governmental and other regulatory factors, such as taxes and environmental laws. A negative change in any one or more of these factors could result in quantities of oil and gas previously estimated as proved reserves becoming uneconomic. For example, a decline in the market price of oil or gas to an amount that is less than the cost of recovery of such oil or gas in a particular location could make production commercially impracticable. The risk that a decline in price could have that effect is magnified in the case of reserves requiring sophisticated or expensive production enhancement technology and equipment, such as some types of heavy oil. Each of these factors, by having an impact on the cost of recovery and the rate of production, will also affect the present value of future net cash flows from estimated reserves.





Our ability to produce sufficient quantities of oil and gas from our properties may be adversely affected by a number of factors outside of our control.





The business of exploring for and producing gas involves a substantial risk of investment loss. Drilling wells involves the risk that the wells may be unproductive or that, although productive, that the wells may not produce oil in economic quantities. Other hazards, such as unusual or unexpected geological formations, pressures, fires, blowouts, loss of circulation of drilling fluids or other conditions may substantially delay or prevent completion of any well. Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic due to pressure depletion, water encroachment, mechanical difficulties and other reasons which impair or prevent the production of oil and gas from the well.





There can be no assurance that oil and gas will be produced from the properties in which we have interests. In addition, the marketability of any oil and gas that we acquire or discover may be influenced by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. We cannot predict how these factors may affect our business.





In addition, the success of our business is dependent upon the efforts of various third parties that we do not control. We rely upon various companies to assist us in identifying desirable oil prospects to acquire and to provide us with technical assistance and services. We also rely upon the services of geologists, geophysicists, chemists, engineers and other scientists to explore and analyze oil prospects to determine a method in which the oil prospects may be developed in a cost-effective manner. In addition, we rely upon the owners and operators of oil drilling equipment to drill and develop our prospects to production or to attract the interest of larger oil field companies. Although we have developed relationships with a number of third-party service providers, we cannot assure that we will be able to continue to rely on such persons. If any of these relationships with third-party service providers are terminated or are unavailable on commercially acceptable terms, we may not be able to execute our business plan.





If we are unable to access our properties or conduct our operations due to legal or surface conditions, our business will be adversely affected.





Our exploration and development of oil and gas reserves depends upon access to the areas where our operations are to be conducted. We conduct a portion of our operations in regions where we are only able to do so on a seasonal basis. Unless the surface is sufficiently frozen, we are unable to access our properties, drill or otherwise conduct our operations as planned. In addition, if the surface thaws earlier than expected, we must cease our operations for the season earlier than planned. Our operations are affected by road bans imposed from time to time during the break-up and thaw period in the spring. Road bans are also imposed due to snow, mud and rock slides and periods of high water, which can restrict access to our well sites and production facility sites. Our inability to access our properties or to conduct our operations as planned will result in a shutdown or slow down of our operations, which will adversely affect our business.








9





Essential equipment might not be available.





Oil and gas exploration and development activities depend upon the availability of drilling and related equipment in the particular areas where those activities will be conducted. Demand for that equipment or access restrictions may affect the availability of that equipment to us and delay our exploration and development activities.





Pipeline capacity may be inadequate.





There may be periods of time when pipeline capacity is inadequate to meet our gas transportation needs. It is often the case that as new development comes online, pipelines are close to or at capacity. During periods when pipeline capacity is inadequate, we may be forced to reduce production or incur additional expense as existing production is compressed to fit into existing pipelines.





Our reliance on third parties for gathering and distribution could curtail future exploration and production activities.





The marketability of our production will depend on the proximity of our reserves to and the capacity of, third party facilities and services, including oil and natural gas gathering systems, pipelines, trucking or terminal facilities, and processing facilities. The unavailability or insufficient capacity of these facilities and services could force us to shut-in producing wells, delay the commencement of production, or discontinue development plans for some of our properties, which would adversely affect our financial condition and performance.





Complying with environmental and other government regulations could be costly and could negatively impact our production.





Our business is governed by numerous laws and regulations at various levels of government. These laws and regulations govern the operation and maintenance of our facilities, the discharge of materials into the environment and other environmental protection issues. The laws and regulations may, among other potential consequences, require that we acquire permits before commencing drilling, restrict the substances that can be released into the environment with drilling and production activities, limit or prohibit drilling activities on protected areas such as wetlands or wilderness areas, require that reclamation measures be taken to prevent pollution from former operations, require remedial measures to mitigate pollution from former operations, such as plugging abandoned wells and remediating contaminated soil and groundwater, and require remedial measures to be taken with respect to property designated as a contaminated site.





Under these laws and regulations, we could be liable for personal injury, clean-up costs and other environmental and property damages, as well as administrative, civil and criminal penalties. We are currently evaluating insurance coverage for sudden and accidental environmental damages as well as environmental damage that occurs over time. However, we do not believe that insurance coverage for the full potential liability of environmental damages is available at a reasonable cost. Accordingly, we could be liable, or could be required to cease production on properties, if environmental damage occurs.





The costs of complying with environmental laws and regulations in the future may harm our business. Furthermore, future changes in environmental laws and regulations could occur that result in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs, any of which could have a material adverse effect on our financial condition or results of operations.








Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls are time consuming, difficult and costly for us.





It may be time consuming, difficult and costly for us to develop and implement provisions of the Sarbanes-Oxley Act applicable to us. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls and other requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly-traded companies to obtain.






10





Review of Risks Arising from Compensation Policies and Practices


Wehave reviewed our compensation policies and practices for all employees and we concluded that any risks arising from our policies and practices are not reasonably likely to have a material adverse effect on the Company.




The loss of key employees would materially adversely affect our ability to operate our business and implement our business plan.





Our business operations are presently managed by one key employee, E. Jamie Schloss, who serves in the dual capacity as our Chief Executive Officer and our Chief Financial Officer. The loss of the services of such employee could seriously impair our business operations. Mr. Schloss’ employment contract expires on April 30, 2010. We do not have key man life insurance on any of our executives, directors or employees.





RISKS RELATED TO OUR INDUSTRY





The successful implementation of our business plan is subject to risks inherent in the oil and gas business.





Our oil and gas operations are subject to the economic risks typically associated with exploration, development production activities and locating suitable purchasers of our properties, including the necessity of significant expenditures to locate and acquire properties and to drill exploratory wells. In addition, the cost and timing of drilling, completing and operating wells is often uncertain In conducting exploration and development activities, the presence of unanticipated pressure or irregularities in formations, miscalculations or accidents may cause our exploration, development and production activities to be unsuccessful. This could result in a total loss of our investment in a particular property. If exploration efforts are unsuccessful in establishing proved reserves and exploration activities cease, the amounts accumulated as unproved costs will be charged against earnings as impairments.





The oil and gas industry is highly competitive.





The oil and gas industry is highly competitive. We compete with oil and gas companies and other individual producers and operators, many of which have longer operating histories and substantially greater financial and other resources than we do, as well as companies in other industries supplying energy, fuel and other needs to consumers. Many of these companies not only explore for and produce crude oil and gas, but also carry on refining operations and market petroleum and other products on a worldwide basis. In addition, we compete with other oil development firms in marketing their properties to other larger oil field operators. Our larger competitors, by reason of their size and relative financial strength, can more easily access capital markets than we can and may enjoy a competitive advantage in the recruitment of qualified personnel. They may be able to absorb the burden of any changes in laws and regulation in the jurisdictions in which we do business and handle longer periods of reduced prices of gas and oil more easily than we can. Our competitors may be able to pay more for productive oil and gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than we can. Our ability to acquire additional properties in the future will depend upon our availability of cash resources, ability to conduct efficient operations, evaluate and select suitable properties, implement advanced technologies and consummate transactions in a highly competitive environment.





Oil and gas operations involve various hazardous risks.





The oil and gas business involves operating hazards such as well blowouts, craterings, explosions, uncontrollable flows of crude oil, natural gas or well fluids, fires, formations with abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks. Personal injuries, damage to property and equipment, reservoir damage, or loss of reserves may occur if such a catastrophe occurs, any one of which could cause us to experience substantial losses. In addition, we may be liable for environmental damage caused by previous owners of properties purchased or leased by us.







11




Market fluctuations in the prices of oil and gas could adversely affect our business.





Prices for oil and gas tend to fluctuate significantly in response to factors beyond our control. These factors include, but are not limited to, acts of terrorists, the continued threat of war in the Middle East and actions of the Organization of Petroleum Exporting Countries and its maintenance of production constraints, the U.S. economic environment, weather conditions, the availability of alternate fuel sources, transportation interruption, the impact of drilling levels on crude oil and gas supply, and the environmental and access issues that could limit future drilling activities for the industry.





Changes in commodity prices may significantly affect our capital resources, liquidity and expected operating results. Price changes directly affect revenues and can indirectly impact expected production by changing the amount of funds available to reinvest in exploration and development activities. Reductions in oil and gas prices not only reduce revenues and profits, but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices could result in non-cash charges to earnings due to impairment.





Changes in commodity prices may also significantly affect our ability to estimate the value of producing properties for acquisition and divestiture and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on the value of the properties. Price volatility also makes it difficult to budget for and project the return on acquisitions and development and exploration of projects. We expect that commodity prices will continue to fluctuate significantly in the future.





RISKS RELATED TO OUR STOCK





Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur.





Our executive officers, directors, and principal stockholders who hold 5% or more of the outstanding common stock and their affiliates beneficially owned approximately 22,537,000 shares as of December 31, 2009, in the aggregate including warrants, stock options and voting rights exercisable with 60 days, approximately 51% of our fully diluted common stock.  These stockholders will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.





Future sales of our common stock may cause our stock price to decline.





Our stock price may decline by future sales of our shares or the perception that such sales may occur. If we issue additional shares of common stock in private financings under an exemption from the registration laws, then those shares will constitute “restricted shares” as defined in Rule 144 under the Securities Act. The restricted shares may only be sold if they are registered under the Securities Act, or sold under Rule 144, or another exemption from registration under the Securities Act.





All of our outstanding shares of common stock are either free trading or eligible for sale pursuant to Rule 144 in accordance with requirements and the limitation contained therein. We are unable to estimate the amount, timing, or nature of future sales of outstanding common stock. Sales of substantial amounts of our common stock in the public market may cause the stock’s market price to decline.





Our stock price can be extremely volatile.





Our common stock is traded dually on the OTC Bulletin Board and the Pink Sheets. There can be no assurance that an active public market will continue for the common stock, or that the market price for the common stock will not decline below its current price. Such price may be influenced by many factors, including, but not limited to, investor perception of us and our industry and general economic and market conditions. The trading price of the common stock could be subject to wide fluctuations in response to announcements of our business developments or our competitors, quarterly variations in operating results, and other events or factors. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial effect on the market prices of companies, at times for reasons unrelated to their operating performance. Such broad market fluctuations may adversely affect the price of our common stock.







12




We do not expect to pay dividends.





We have not paid dividends since inception on our common stock, and we do not contemplate paying dividends in the foreseeable future on our common stock in order to use all of our earnings, if any, to finance expansion of our business plans.





If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, we could be investigated by the SEC or we could incur liability to our shareholders.





Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under the Securities Exchange Act of 1934, as amended, and must be current in their reports in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. Failure to remain current in our reporting obligations might also subject us to SEC investigation or private rights of action by our shareholders.





Our common stock is subject to the “penny stock” rules off the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.





The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:





·
that a broker or dealer approve a person’s account for transactions in penny stocks; and





·
the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.





In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:





·
obtain financial information and investment experience objectives of the person; and





·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.





The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:





·
sets forth the basis on which the broker or dealer made the suitability determination; and





·
that the broker or dealer received, prior to the transaction but after a waiting period of at least two business days, a signed acknowledgement of the suitability determination from the investor and an agreement from the investor to purchase the penny stock.








13





Our stock price can be extremely volatile.





Our common stock is traded dually on the OTC Bulletin Board and the Pink Sheets. There can be no assurance that an active public market will continue for the common stock, or that the market price for the common stock will not decline below its current price. Such price may be influenced by many factors, including, but not limited to, investor perception of us and our industry and general economic and market conditions. The trading price of the common stock could be subject to wide fluctuations in response to announcements of our business developments or our competitors, quarterly variations in operating results, and other events or factors. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial effect on the market prices of companies, at times for reasons unrelated to their operating performance. Such broad market fluctuations may adversely affect the price of our common stock. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.





Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.








ITEM 2.
PROPERTIES





Our principal executive offices are presently located at 990 Highland Drive, Suite 206, Solana Beach, California 92075. In March, 2008 we executed a six month lease at a monthly rental of $825 per month for office space at this address in Suite 110-V, which represented approximately 366 square feet of rentable space.  On May 6, 2008, we cancelled our prior six-month lease at 990 Highland Drive and entered into a new lease for a larger space (Suite #206) in the same building. The new lease is a three-year lease which commenced May 6, 2008, The annual rentals are $25,740 for the period from May 6, 2008 to May 5, 2009, $26,676 for the period from May 6, 2009 to May 5, 2010, and $27,612 for the period from May 6, 2010 to May 5, 2011 for approximately 2,000 feet of space. Our Cold Flow subsidiary entered into a lease on July 18, 2006 which terminated on April 30, 2009 with a monthly base rent of approximately $200 per month. Our facilities are in good condition for their intended use as offices and are sufficient to meet our present needs.





We commenced oil and gas exploration activities in February 2005. However, (1) we did not engage in any production activities during the fiscal years ended December 31, 2008 and 2009, nor did we have any proved reserves at the end of such periods, and thus, were not required to provide any of the production data required by ASC 932 (formerly Statement of Financial Accounting Standards No. 69 (“SFAS 69”), (2) we did not engage in any drilling activities during the fiscal years ended December 31, 2007 and 2006 applicable to ASC932. We did commence drilling activities in 2008 but none of the properties were proved as of December 31, 2009.





Undeveloped acreage is considered to be those lease acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether or not that acreage contains proved reserves, but does not include undrilled acreage held by production under the terms of a lease. As is customary in the oil and gas industry, we can generally retain our interest in undeveloped acreage by drilling activity that establishes commercial production sufficient to maintain the leases or by paying delay rentals during the remaining primary term of such a lease.





In June 2008, we began acquiring oil and gas properties for drilling and exploration. Three properties were acquired in 2008, the first was Green Springs Prospect in White Pine County, Nevada which consists of two leases aggregating approximately 2,500 acres which has not yet been drilled, the second was an oil and gas prospect in Crane County, Texas which was drilled, logged and found non productive, and the third a deep gas well named the Qualmay #12-42 well, a 7,200 foot deep well oil & gas well drilled on 40 acres of land in Park County, Wyoming. This well has been tested and management was not satisfied that the estimated initial flow rate of natural gas and barrels of oil per day can be produced in sufficient commercial quantity for production of this site to be commercially viable and for us to recoup or initial investment and as a result this property was impaired at the December 31, 2008. The well was drilled pursuant to a participation agreement between Surge’s wholly owned subsidiary, Surge Energy Resources, Inc. and Delaphin Energy Resources III, LLC.






14





Surge Energy Resources owns a 35% working interest until payout, and a 21% working interest thereafter, in the Qualmay #12-42 well. Surge agreed to pay 35% of the estimated $1,670,560 drilling and completion costs, in return for a 35% working interest until payout, and a 21% working interest thereafter.   In addition, Surge Energy Resources owns the right to participate in three to five additional wells on 520 acres of adjoining land by paying 35% of the cost of the wells in return for a 35% working interest until payout and a 21% working interest the lease after payout.  As of December 31, 2009, we impaired the full value of this property due to insufficient reserves. The property is currently shut-in and may be re-evaluated in the future depending on gas prices.





In December, 2009, we entered into an equipment lease for four wells on a property in Pawnee County, Oklahoma which requires rework, which will rework commenced in 2009 but was not completed. Further rework will continue in 2010 after legal issues surrounding the lease are resolved. We paid $300,000 for the rights under the equipment lease which agreement provides that we will receive 75% of the net income until payout. Thereafter we would own a 25% working interest.





We do not have any obligations under existing contracts or agreements calling for the provision of fixed and determinable quantities of oil and gas over the next three years, and have therefore not filed any information or reports with any federal authority or agency, containing estimates of total, proved developed or undeveloped net oil or gas reserves.








ITEM 3.
LEGAL PROCEEDINGS





The Company’s business and operations may subject the Company to claims, litigation and other proceedings brought by private parties and governmental authorities. The Company has in the past been involved in contract and indemnity disputes in several litigation matters. Currently there is one open matter involving a contract dispute, Litigation can involve complex factual and legal questions and its outcome is uncertain. Any claim that is successfully asserted against us could result in significant damage claims and other losses and could adversely affect our financial condition. Even if the Company were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations, which adversely affect our financial condition, results of operations or cash flows.





Dynamo Litigation:  Dynamo Energy Corporation, a Canadian corporation (“Dynamo”), filed a civil complaint in San Diego Superior Court in 2006 in connection with an alleged breach of contract purportedly entered into on October 12, 2004. The Company's Board of Directors previously determined that the proposed agreement with Dynamo had not been authorized by the Board and made an offer of settlement, which was not accepted. The complaint was filed against the Company, Frederick Berndt, the Company's former V.P. and Director, E. Jamie Schloss, the Company's current Chief Executive and Chief Financial Officer, and Director, and Signet Energy, Inc. (“Signet”).  On November 7, 2007, the San Diego Court dismissed the 2006 case on the grounds that case filed in San Diego, CA was not a convenient forum to try the case and on January 8, 2008, the Court entered Dynamo’s dismissal request without prejudice.





On February 1, 2008, Dynamo filed a Statement of Claim in Canada in the Court of Queen’s Bench of Alberta, the Judicial District of Calgary against us, David Perez, our former Chief Executive Officer and Director, Signet, C.W. Leigh Cassidy, the former Chief Executive Officer of Signet, Andora Energy and three Canadian entities.





On September 8, 2009, the Company received final notice that the Court of Queen’s Bench of Alberta ruled that the Dynamo Energy Corporation lawsuit against Surge and all other defendants was dismissed in its entirety without prejudice or any awards grants to Dynamo. In view of this dismissal, Surge is in the process of seeking return of 2,384,563 Andora Energy Corporation (“Andora”) shares which were previously held in trust as security for any possible awards to Dynamo. See Subsequent Footnote to Financial Statements.






15





Approximately Cdn$600,000 was accrued at December 31, 2009 for unpaid legal fees incurred by third parties in this matter. The Company had previously placed 2,384,563 Andora shares into a trust account to act as security for claims arising from the Dynamo litigation. Based on an agreement reached in February, 2010, 375,000 escrowed shares will be used to pay unpaid legal fees.





Pursuant to a Settlement Agreement dated February 2, 2010, by and among Surge Global Energy, Inc. ("Surge"), 1350826 Alberta Ltd. (formerly known as Surge Global Energy (Canada) Ltd. and Signet Energy, Inc. ("Alberta") and Andora Energy Corporation ("Andora"), Surge agreed to pay Andora's indemnified expenses in connection with two prior legal actions arising from litigation with Dynamo Energy Corporation (both of which had previously been dismissed in the United States and Canada)  in an amount equal to Canadian $600,000 (approximately US$561,000).  Pursuant to this Settlement Agreement, in lieu of a cash payment, the Escrow Agent has been instructed to release 375,000 of Andora escrow shares to Andora, and release and deliver to Surge the remainder of shares held in escrow.





After this agreement, Surge will own 3,231,499 shares of Andora (approximately 5% on a fully diluted basis). The Settlement Amount had previously been accrued in its entirety on Surge’s prior period financial statements.





Granite Litigation: On April 11, 2008, a lawsuit was filed against the Company by Schwartz Semerdjian Haile Ballard & Cauley LLP in San Diego County alleging failure to pay a dishonored check. The amount of the lawsuit is $64,947 plus other costs related to the issuance of a check for legal fees of Daniel Schreiber, a former director, also relating to the Zemer matter, which the Company determined should not have been paid. The Company settled this litigation on July 13, 2009.





Perez Litigation: Effective March 31, 2009, the Company agreed to a total settlement and release of all claims agreement with Mr. Perez. The terms of the settlement are that the Company issued a promissory note for $225,000, payable in 14 equal installments and one final payment of $6,100. The note bears interest at 5% per annum. In return, the Company received 252,361 Andora shares valued at $225,000 previously in Mr. Perez’s possession plus the elimination of all further legal expenses or liability. The Company had previously accrued $445,952 in conjunction with this matter, which amount was reversed in the 2008 financial statements. If the Company realizes a net gain of $500,000 on any single transaction or accumulates $500,000 in cash and cash equivalents, the full amount of the Note Payable and accrued interest is due and payable within 30 days.  During the three months ended December 31, 2009, the Company made principal and interest payments of $45,000.





On July 13, 2009, the Company agreed to settle all claims with Granite Financial, Daniel Schreiber, and Schwartz Semerdjian Haile Ballard & Cauley LLP.  The terms were that $225,000 will be released from the restricted cash Trust account and paid to Granite. The Company will also transfer 75,000 Andora shares to Granite. The $225,000 and 75,000 Andora shares were to be paid by August 4, 2009, and the Company has made the payments.  In return, all outstanding liabilities accrued by the Company totaling about $315,000 were cancelled and the remaining funds of approximately $23,478 in the Trust account were returned to the Company.





Three Span Oil & Gas Litigation: On September 30, 2009, the Company’s wholly owned Nevada subsidiary, namely, Surge Energy Resources, Inc., was sued by Three Span Oil & Gas, Inc, in Midland Texas (Case #CC15386) for nonpayment of $60,125.  The action arises out of an operating agreement between the Plaintiff and the Defendant pursuant to which Surge Energy Resources is alleged to have agreed to make certain payments of $20,000 on August 14, 2009, September 1, 2009 and October 1, 2009 until a $56,239 deficiency was paid.  The entire amount of this claim was accrued by Surge Energy Resources, Inc. as of December 31, 2009. The action against Surge Energy Resources is for breach of contract, plus attorneys’ fees. Surge Energy Resources has no material assets or operations. A default judgment was entered into against Surge Energy Resources, Inc. for $60,125 plus fees in December, 2009.








ITEM 4.
RESERVED.






16





PART II





ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





Market for Common Stock





Our common stock is quoted dually on the OTC Bulletin Board and the Pink Sheets under the trading symbol “SRGG.” The following table sets forth the high and low bid prices for our common stock for the periods indicated. Such quotations are taken from information provided by “Yahoo! Finance” and reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not necessarily represent actual transactions.





Quarter Ended
High
LowMarch 31, 2009
$0.13
$.0.02June 30, 2009
$0.10
$0.02September 30, 2009
$0.09
$0.04December 31, 2009
$0.10
$0.04March 31, 2008
$0.16
$0.08June 30, 2008
$0.05
$0.10September 30, 2008
$0.17
$0.05December 31, 2008
$0.18
$0.05





American Stock Transfer (59 Maiden Lane, New York, NY 10038) is the registrar and transfer agent for our common shares. As of April 1, 2010, we had 32,637,837 shares of common stock outstanding and approximately 300 stockholders of record.





Dividend Policy





We have never declared or paid dividends on our common stock, and we do not anticipate that we will do so in the foreseeable future. We intend to retain future earnings, if any, for use in our operations and the expansion of our business.





Sale of Unregistered Securities





During the year ended December 31, 2009 and the three months ended March 31, 2010, there were no sales of securities by the Company, except as follows:





Date of Sale

Title of Security

Number

Sold

Consideration Received,

Commissions

Purchasers

Exemption from

Registration Claimed2009

Common Stock

Options (1)

5,100,000 shares

Grant of options for services rendered to executive officers and directors

Accredited Investors

Rule 506; Section 4(2)2010

Common Stock

and Warrants (2)

1,200,000 shares

1,200,000 warrants

$132,000  received from  3

Investors; $5,000  paid in

finders' fees

Accredited

Investors

Rule 506; Section 4(2)





(1)           Options granted to officers and directors, exercisable at prices ranging from $.055 per share to $.08 per share and vesting over a period of up to 12 months in some cases and up to 24 months in other cases.






17





(2)           The Company offered to sell in a private placement a Unit at a cost of $55,000 per Unit.  Each Unit consisted of 500,000 shares of Common Stock and Warrants to purchase 500,000 shares, exercisable over a period of two years at a price of $.25 per share.





Repurchase of Securities





During fiscal 2009, the Company did not repurchase any of its securities. However, see Item 13 regarding entering into consulting agreements in February 2010 with three of the Company's former directors. These consulting agreements involved the immediate cancellation of options to purchase 2,350,000 shares and the potential for the cancellation of options to purchase an additional 2,350,000 shares, at a total cost of $200,000, of which $100,000 was paid in February, 2010.








ITEM 6.
SELECTED FINANCIAL DATA





Not Applicable.








ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion of our financial condition, changes in financial condition and results of operations for the fiscal years ended December 31, 2009 and December 31, 2008, should be read in conjunction with the audited annual financial statements and the notes thereto. The Company began implementing plans to establish an oil and gas development business in 2005. As a result, the Company has not generated any revenues and has incurred significant operating expenses. Our consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles, although we have and have had interests in Canadian companies.





Overview





For the year ended December 31, 2009 we had a comprehensive net loss of $1,334,000 versus a comprehensive gain in 2008 of $527,000, a decrease of $1,861,000. In 2009, we had a net loss before income taxes of $2,329,000 versus a loss before taxes of $4,240,000 in 2008. After taxes, we had a loss of $2,329,000 versus a profit of $608,000 in 2008. Included in 2008 results was a reversal of an income tax accrual made in 2007 of $4,848,000. In both 2009 and 2008, we engaged in a number of strategic and capital transactions in an attempt to expand our business.  These are described in detail in the “Notes to the Consolidated Financial Statements” and are briefly summarized above in “Item 1 Business.”  Equity transactions and removal of a prior year’s tax liability helped provide increased shareholders equity in 2008. The Company continues to seek additional capital to utilize its assets to fund its operations, but there can be no assurance that we will be able to raise additional working capital or complete other financings in the future.





In 2010, our financial focus will be on continuing to reduce operating expenses, realizing value from our remaining assets in order to position Surge to take advantage of exploration opportunities, and raising additional financing to meet our cash liquidity needs as they arise through the sale of common stock and other convertible securities.





Results of Operations





For the year ended December 31, 2009, we had a comprehensive net loss of $1,334,000 versus comprehensive income after taxes in 2008 of $527,000, a decrease of $1,861,000. The comprehensive net income after taxes of $527,000 in 2008 arose primarily from a reversal of a prior income tax accrual of $4,848,000. Excluding this reversal, our net loss before taxes in 2008 was $4,240,000 versus a loss of $2,329,000 in 2009, an improvement of $1,911,000.





The Company had no operating revenues in the years ended December 31, 2009 and 2008; we had a gain of $206,000 from the sale of investments in 2009, compared with a gain on sale of investments of $658,000 in 2008. We also had an impairment of oil and gas investments of $572,000 in 2009 versus an impairment on oil and gas properties of $580,000 in 2008.






18





Selling general and administrative expenses for the year ended December 31, 2009 compared to 2008 decreased by $358,000 to $1,322,000 from $1,680,000 in the comparable prior period. Included within the $358,000 expense decrease in 2009 is a reduction of $74,000 of non-cash employee compensation costs, a decrease of $247,000 in payroll, consulting and related costs, a decrease of $75,000 in selling, general and administrative (SG&A) expenses, and an increase of $38,000 in legal and audit expenses. The decrease in non-cash compensation cost of $74,000 in 2009 was the result of fewer options and warrants issued.  Depreciation and amortization decreased $900 from $7,200 in 2008 to $6,300 in 2009.





Net financing income in 2009 was $143,000 versus interest income of $57,000 in 2008, an improvement of $86,000 in net interest costs.





Other differences between 2009 and 2008 include an impairment of marketable securities of $778,000 in 2009 versus $1,008,000 in 2008, a decrease of $230,000, a loss on redemption of preferred shares in 2008 of $105,000 with no comparable charge in 2009, and a loss of 1,573,000 on the sale of Peace Oil Corp. (before a reversal of $4,847,000 in accrued income taxes) in 2008 with no comparable charge in 2009.





Liquidity and Capital Resources





As of December 31, 2009, we had cash and cash equivalents of $57,000 versus cash of $657,000 at December 31, 2008, a reduction of $600,000.  This decrease was comprised of a net cash used in operating activities of $936,000, cash used in investing activities of $482,000, cash flow used in financing activities of $160,000, and the net effect of exchange rate changes on cash and cash equivalents of $14,000.





Our net working capital position at December 31, 2009 was a deficit of $72,000 versus working capital of $702,000 at December 31, 2008, a change of $774,000. Current assets declined by $812,000 caused primarily by a reduction in cash of $600,000, and a reduction in prepaid expenses of $177,000. Current liabilities decreased by $38,000, caused primarily by a decrease in accounts payable and accrued liabilities of $103,000 and an increase in notes payable of $65,000.





The net cash flow deficit from operating activities was $936,000 versus cash used in operating activities of $1,469,000 in 2008. The 2009 deficit consisted primarily of a reduction of operating expenses from $2,268,000 in 2008 to 1,900,000 in 2009, net interest income of $143,000 versus 57,000 in 2008, a gain from the sale of marketable securities of $206,000 versus $658,000 in 2008, $290,000 in net employee compensation expense arising from stock options and warrants issued to employees, directors and consultants, $105,000 in loss on redemption of preferred shares, $580,000 of impairment of oil and gas properties in 2008 with no comparable charge in 2009, an impairment  of marketable securities of $778,000 in 2009 versus $1,008,000 in 2008, a $177,000 decrease in prepaid expenses $42,000 and a decrease in accounts payable of $14,000.





The net cash flow provided from investing activities of $482,000 in 2009 was due to $606,000 in proceeds from the sale of marketable securities and $275,000 from the repayment of a note, less $399,000 paid in conjunction with capital expenditures for oil and gas properties.





The net cash flow used in financing activities of $160,000 in 2009 consists of the Company making principal payments on note payable as compared with $28,000 in 2008 which was incurred mainly for the repurchase of common stock .





We have a history of net losses and expect that our operating expenses will continue to deplete our cash reserves as we have no revenues.  Our business model contemplates expansion of our business by identifying and acquiring additional oil and gas properties.  To make these acquisitions, our capital needs will increase substantially.  We have limited working capital and cash resources to fund our oil and gas exploration operations. We are involved in various litigations, the outcome and legal expense of which could adversely affect our operations and cash resources. We plan to attempt to obtain our future funding that we will need to drill wells on leases owned, to lease additional properties and to otherwise finance our operations through debt and equity markets or joint venture agreements with third parties; however, we can provide no assurances that we will be able to obtain additional funding (and/or joint venture partners willing to fund specific exploration projects) when it is required or that it will be available to us on commercially acceptable terms, if at all.  If we fail to obtain the financing that we need when it is required, we may have to forego or delay potentially valuable opportunities to acquire new oil and gas properties or default on existing funding commitments to third parties and forfeit or dilute our rights in existing oil property interests. In the event additional financing is not available to us on commercially acceptable terms, if and when needed to finance our operations and to meet our cash needs as they come due, this may seriously harm our business, financial condition and results of operations and may adversely affect our ability to remain a going concern on a long term basis. See “Risk Factors” under “Item 1.A.”






19





Product Research and Development





We do not anticipate performing research and development for any products during the next twelve months.





Acquisition or Disposition of Plant and Equipment





On March 18, 2008, we entered into a Purchase and Sale Agreement, with Oromin, Irie Isle Limited; Cynthia Holdings Ltd. (“Cynthia”); and Chet Idziszek, pursuant to which the Company sold its 17.52% interest in Cynthia.  Cynthia owned a certain parcel of land in the eastern half of the Cuyana Basin in the Province of Mendoza, Argentina.  We received $600,000 in cash and the return of 1,000,000 shares of the Company’s stock previously issued for the Company’s purchase of its interest in Cynthia.





Number of Employees





From our inception through the period ended December 31, 2009, we have primarily relied on the services of outside consultants for services . In order for us to attract and retain quality personnel, we anticipate we will have to offer competitive salaries to future employees. As of December  31, 2009, we have two (2) full-time employees and we anticipate no increase in our administrative employment base during the next 12 months.





In the event that we continue to expand oil and gas operations, we will incur additional cost for oil and gas related personnel. This projected increase in personnel is dependent upon our generating revenues and obtaining sources of additional financing. There is no guarantee that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the number of employees.





None of our employees are covered by collective bargaining agreements, and we believe our relations with our employees are favorable.





Inflation





Management believes that inflation has not had a material effect on our operations.





Off Balance Sheet Arrangements





We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.





Critical Accounting Policies and Estimates





Our discussion and analysis of our financial condition and results of operation are based upon consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The following summarizes several of our critical accounting policies. See a complete list of significant accounting policies in Note A to the Consolidated Financial Statements.





Oil and Gas Properties





We follow the full cost accounting method to account for the costs incurred in the acquisition, exploration, development and production of oil and gas reserves. All costs, including internal costs, directly related to acquisition, exploration and development activities, are capitalized as oil and gas property costs.   The capitalized costs of oil and gas properties, excluding unevaluated or unproven properties, are amortized using a unit-of-production method based on estimated proved recoverable oil and gas reserves. Amortization of unevaluated property costs begins when the properties become proved or their values become impaired. Impairment of unevaluated prospects is assessed based on management’s intention with regard to future exploration and development of individually significant properties and our ability to obtain funds to finance such exploration and development. We anticipate our unevaluated property costs to remain as unevaluated for no longer than two years.






20





Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the “cost ceiling”) equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current economic and operating conditions, discounted at 10%, plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to earnings.





Given the volatility of oil and gas prices, it is reasonably possible that the estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline in the future, even if only for a short period of time, it is possible that additional impairments of oil and gas properties could occur. In addition, it is reasonably possible that additional impairments could occur if costs are incurred in excess of any increases in the present value of future net cash flows from proved oil and gas reserves, or if properties are sold for proceeds less than the discounted present value of the related proved oil and gas reserves.





Investment in unconsolidated subsidiary





Investee entities that the Company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Whether the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, among others, representation of the company’s board of directors and ownership level, generally 20% to 50% interest in the voting securities of the company including voting rights associated with the Company’s holdings in common, preferred and other convertible instruments in the company. Under the equity method of accounting, the Company’s share of the earnings or losses of these companies is included in the equity income (loss) section of the consolidated statements of operations.  Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.





Impairment of Long-Lived Assets





Long-lived assets and certain identifiable intangibles held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. We evaluate the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should an impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.





Stock Based Compensation





We measure and recognize compensation expense for all share-based payment awards made to employees and directors including employee stock options based on estimated fair values.





New Accounting Pronouncements





In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48 - Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.  FIN 48 prescribes detailed guidance for the financial statement recognition, measurement, and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.  Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods.  We adopted FIN 48 effective January 1, 2007.  The impact of the adoption of FIN 48 did not have a material effect on our financial position, results of operations, or cash flows.






21





In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements”.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.  This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007.  We implemented SFAS No. 157 effective January 1, 2008, and it did not have a significant impact on our financial position, results of operations, and cash flows.





In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB statement No. 115.” This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. If an entity elects the fair value option for a held-to-maturity or available-for-sale security in conjunction with the adoption of this Statement, that security shall be reported as a trading security under Statement 115, but the accounting for a transfer to the trading category under paragraph 15(b) of Statement 115 does not apply. Electing the fair value option for an existing held-to-maturity security will not call into question the intention of an entity to hold other debt securities to maturity in the future. We implemented SFAS No. 159 effective January 1, 2008, and it did not have a significant impact on our financial position, results of operations, and cash flows.





In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”.  This standard will significantly change the accounting and reporting related to noncontrolling interests in a consolidated subsidiary. After adoption, any noncontrolling interests will be classified as shareowner’s equity, a change from its current classification between liabilities and shareowner’s equity. Any earnings attributable to minority interests will be included in net earnings. Purchases and sales of minority interests will be reported in equity, deferring, perhaps permanently, recognition of the economic gain or loss on partial dispositions.  This statement is effective as of the first fiscal year that begins after December 15, 2008.





In December 2007, the FASB issued SFAS 141R, Business Combinations, This standard will significantly change the accounting for business combinations both during the period of the acquisition and in subsequent periods.  This statement is effective as of the first fiscal year that begins after December 15, 2008.





The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.





ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, stock and commodity prices. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure, except that we own equity securities in a private company held for long term investment and we hold equity securities in a publicly traded company whose value is marked to market on a quarterly basis. Our primary exposure to market risk is interest rate risk associated with our short term money market investments and the market price risk of our publicly traded investment. The Company does not have any credit facilities with variable interest rates.





ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The report of the Independent Registered Public Accounting Firm, Financial Statements and Schedules are set forth beginning on page F-1 of this Annual Report on Form 10-K following this page.











SURGE GLOBAL ENERGY, INC.
 (AN EXPLORATION STAGE COMPANY)
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 DECEMBER 31, 2009 AND 2008
 
 
 
 
 SURGE GLOBAL ENERGY, INC.
 (AN EXPLORATION STAGE COMPANY)
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 Page NoReport of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets at December 31, 2009 and 2008

F-3Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2009 and 2008, and for the period from January 1, 2005 (inception of exploration stage) through December 31, 2009

F-4Consolidated Statements of Stockholders' (Deficit) Equity for the period from January 1, 2005 (inception of exploration stage) through December 31, 2009

F-5 ~ F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008, and for the period from January 1, 2005 (inception of exploration stage) through December 31, 2009

F-9 ~ F-11Notes to Consolidated Financial Statements

F-12 ~ F-26
 
  F-1
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors
 Surge Global Energy, Inc.
 (An Exploration Stage Company)
 Solana Beach, California 92260
 
 
 We have audited the accompanying consolidated balance sheets of Surge Global Energy, Inc. and its subsidiaries (“the Company”)  as of December 31, 2009 and 2008 and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended, and for the period January 1, 2005 (inception of exploration stage) through December 31, 2009.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based upon our audits.
 
 We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America).  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 audit 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.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended, and for the period January 1, 2005 (inception of exploration stage) through December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 /s/ GBH CPAs, PC
 
 GBH CPAs, PC
 www.gbhcpas.com
 Houston, Texas
 
 April 13, 2010
  F-2
 
 SURGE GLOBAL ENERGY, INC.
 (AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED BALANCE SHEETS
  December 31,2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
56,756


$
656,843Convertible note receivable, net of discount of $0 and $137,500, respectively


-



137,500Production payments receivable


300,000



-Investment in marketable securities


380,655



577,585Prepaid expenses


65,363



242,700Total current assets


802,774



1,614,628Property and equipment, net of accumulated depreciationof  $27,319 and $20,968, respectively


6,656



13,007Oil and gas properties, using full cost accounting – unproved


553,241



1,016,199Investment in Andora Energy


3,675,948



3,540,639Total assets

$
5,038,619


$
6,184,473LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities

$
809,089


$
912,923Note payable


65,357



-Total current liabilities


874,446



912,923Asset retirement obligation


10,500



-Total liabilities

$
884,946


$
912,923Commitments and contingenciesStockholders' equity :Preferred stock, par value $0.001 per share; 10,000,000 shares authorized:Series A - none issued and outstanding


-



-Series B - none issued and outstanding


-



-Special Voting Preferred – 0 and 1 share issued and outstanding, respectively


-



-Common stock, par value $0.001 per share; 200,000,000 shares authorized; 31,437,387 and  31,437,387 shares issued and outstanding, respectively


31,437



31,437Additional paid-in capital


54,183,117



53,966,622Accumulated other comprehensive income


(1,101
)


(995,909
)Accumulated deficit


(12,337,512
)


(12,337,512
)Deficit from inception of exploration stage


(37,722,268
)


(35,393,088
)Total stockholders' equity


4,153,673



5,271,550Total liabilities and stockholders' equity

$
5,038,619


$
6,184,473
 
 See accompanying footnotes to consolidated financial statements
 
 F-3
  SURGE GLOBAL ENERGY, INC.(AN EXPLORATION STAGE COMPANY)CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)For the Year Ended

December 31,


For the period

from January 1,

2005 (inception

of exploration

stage) through

December 31,2009


2008


2009Operating expenses:Selling, general and administrative expenses
$
1,321,643


$
1,680,255


$
24,906,840Accretion, depreciation and amortization

6,351



7,238



470,434Oil and gas property impairment

571,948



580,397



7,473,361Total operating expenses

1,899,942



2,267,890



32,850,645Loss from operations

(1,899,942
)


(2,267,890
)


(32,850,645
)Equity in losses from affiliates

-




-


(2,099,663
)Loss on redemption of preferred shares

-



(105,376
)


(105,376
)Gain on sale of marketable securities

206,013



657,638



863,651Impairment of marketable securities

(778,377
)


(1,008,121
)


(3,707,514
)Warrants issued in connection with Peace Oil acquisition





-



(368,000
)Revaluation loss net of warrant liability





-



(431,261
)Interest income (expense)

143,126



57,055



(4,227,662
)Gain (loss) on disposition of Peace Oil property and Peace Oil Corp.

-



(1,573,449
)


(1,525,105
)Loss from continuing operations, before income taxes and minority interest
(2,329,180
)


(4,240,143
)


(41,401,364
)Benefit (provision) for income taxes

-



4,847,978



-Income (loss) before non-controlling interest

(2,329,180
)


607,835



(41,401,364
)Loss applicable to noncontrolling

-



-



3,679,096Net income (loss)
$
(2,329,180
)

$
607,835


$
(37,722,268
)Other comprehensive income (loss):Unrealized gain (loss) on available for sale securities

980,270



(980,270
)


-Foreign currency translation adjustment

14,538



899,499



(1,101
)Comprehensive income (loss)
$
(1,334,372
)

$
527,064


$
(37,723,369
)Income (loss) per common share - basic and diluted
$
(0.07
)

$
0.02Weighted average shares outstanding -  basic and diluted

31,437,387



33,555,151


See accompanying footnotes to consolidated financial statements




F-4







SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY


FOR THE PERIOD FROM JANUARY 1, 2005 (INCEPTION OF EXPLORATION STAGE)


THROUGH DECEMBER 31, 2009





Preferred Stock


Common Stock



Additional

Paid-inCapital



Deferred

Compensation



Common Stock

Subscription



Accumulated Other Comprehensive

Income



Accumulated Deficit During Exploration

Stage



Accumulated

Deficit



TotalShares


Amount


Shares



AmountBalance at January 1, 2005


-

$
-


23,367,097


$
23,367


$
18,996,881


$
(7,020,985
)

$
-


$
-


$
-


$
(12,337,511
)

$
(338,248
)Issuance of common stock in February 2005 in exchange for stock options exercised at $0.25 per share


-


-


100,000



100



24,900



-



-



-



-



-



25,000Issuance of common stock in August 2005 in exchange for cash, net of costs and fees at $1.00 per share


-


-


300,000



300



299,700



-



-



-



-



-



300,000Issuance of common stock in August 2005 in exchange for conversion of convertible notes payable at $1.00 per share


-


-


1,675,000



1,675



1,673,325



-



35,000



-



-



-



1,710,000Issuance of common stock in October 2005 in exchange for convertible notes converted in August 2005


-


-


35,000



35



34,965



-



(35,000
)


-



-



-



-Issuance of common stock in November 2005 in exchange for cash, net of costs and fees at $1.00 per share


-


-


800,000



800



799,200



-



-



-



-



-



800,000Beneficial conversion feature in connection with issuance of convertible notes payable


-


-


-



-



1,022,492



-



-



-



-



-



1,022,492Value of warrants attached to convertible notes payable


-


-


-



-



629,192



-



-



-



-



-



629,192Foreign currency translation adjustment


-


-


-



-



-



-







(185,414
)


-



-



(185,414
)Amortization of deferred compensation


-


-


-



-



-



3,039,038



-



-



-



-



3,039,038Valuation of warrant liabilities in connection with private placement


-


-


-



-



(2,245,100
)


-



-



-



-



-



(2,245,100
)Other stock options awards granted pursuant to employment agreement


-


-


-



-



202,418



-



-



-



-



-



202,418Increase in value of investment in Signet Energy, Inc.
















6,890,785























6,890,785Net loss


-


-


-



-



-



-



-



-



(8,731,209
)


-



(8,731,209
)Balance at  December 31, 2005


-

$
-


26,277,097


$
26,277


$
28,328,758


$
(3,981,947
)

$
-


$
(185,414
)

$
(8,731,209
)

$
(12,337,511
)

$
3,118,954




See accompanying notes to consolidated financial information


F-5




SURGE GLOBAL ENERGY, INC.(AN EXPLORATION STAGE COMPANY)CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)FOR THE PERIOD FROM JANUARY 1, 2005 (INCEPTION OF EXPLORATION STAGE)

THROUGH DECEMBER 31, 2009





Preferred Stock


Common Stock



Additional

Paid-in

Capital



Deferred

Compensation



Common Stock

Subscription



Accumulated Other Comprehensive

Income



Accumulated Deficit during Exploration

Stage



Accumulated

Deficit



TotalShares


Amount


Shares



AmountBalance at  December 31, 2005


-

$
-


26,277,097


$
26,277


$
28,328,758


$
(3,981,947
)

$
-


$
(185,414
)

$
(8,731,209
)

$
(12,337,511
)

$
3,118,954Reversal of unamortized deferred compensation upon adoption of SFAS 123R


-


-


-



-



(3,981,947
)


3,981,947



-



-



-



-



-Issuance of common stock in April 2006 in exchange for cash, net of costs and fees at $1.50 per share


-


-


1,200,000



1,200



1,798,800



-



-



-



-



-



1,800,000Shares returned and cancelled in June 2006 related to the acquisition of Phillips & King International Inc. during August 2000


-


-


(450,000
)


(450
)


450



-



-



-



-



-



-Issuance of common stock in June 2006 in exchange for convertible notes in subsidiary


-


-


160,000



160



178,456



-



-



-



-



-



178,616Issuance of common stock in July 2006 in exchange for stock options exercised at $0.25 per share


-


-


400,000



400



99,600



-



-



-



-



-



100,000Issuance of common stock in November 2006 in exchange for cash, net of costs and fees at $0.45 per share


-


-


3,000,000



3,000



1,347,000



-



-



-



-



-



1,350,000Conversion of warrant liability upon registration of warrants in May 2006


-


-


-



-



3,787,861



-



-



-



-



-



3,787,861Valuation of warrant liabilities in connection with private placement


-


-


-



-



(3,420,900
)


-



-



-



-



-



(3,420,900
)Gain on investment


-


-


-



-



4,147,556



-



-



-



-



-



4,147,556Conversion to equity method


-


-


-



-



3,133,622



-



-



-



-



-



3,133,622Employee stock option expense


-


-


-



-



4,138,639



-



-



-



-



-



4,138,639Other stock options awards granted pursuant to employment agreement


-


-


-



-



640,491



-



-



-



-



-



640,491Foreign currency translation adjustment


-


-


-



-







-



-



339,014



-



-



339,014Net loss
































(15,926,093
)






(15,926,093
)Balance at  December 31, 2006


-

$
-


30,587,097


$
30,587


$
40,198,386


$
-


$
-


$
153,600


$
(24,687,302
)

$
(12,337,511
)

$
3,387,760




See accompanying notes to consolidated financial information


F-6











SURGE GLOBAL ENERGY, INC.(AN EXPLORATION STAGE COMPANY)CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)FOR THE PERIOD FROM JANUARY 1, 2005 (INCEPTION OF EXPLORATION STAGE)

THROUGH DECEMBER 31, 2009





Preferred Stock


Common Stock



Additional Paid-in

Capital



Deferred

Compensation



Common Stock

Subscription



Accumulated

Other Comprehensive

Income



Accumulated Deficit during Exploration

Stage



Accumulated

Deficit



TotalShares


Amount


Shares



AmountBalance at  December 31, 2006


-

$
-


30,587,097


$
30,587


$
40,198,386


$
-


$
-


$
153,600


$
(24,657,302
)

$
(12,337,511
)

$
3,387,760Issuance of common stock in January 2007 in exchange for stock options exercised at $0.24 per share


-


-


383,333



383



91,483



-



-



-



-



-



91,866Employee stock option expense


-


-


-



-



1,348,943



-



-



-



-



-



1,348,943Reclass warrant liability to APIC per EITF 00-19-2


-


-


-



-



2,309,400



-



-



-



-



-



2,309,400Gemini note conversion


-


-


(2,000,000
)


(2,000
)


(898,000
)


-



-



-



-



-



(900,000
)Peace Oil acquisition warrants


-


-


-



-



368,000



-



-



-



-



-



368,000Beneficial conversion feature in connection with issuance of convertible notes payable


-


-


-



-



1,076,575



-



-



-



-



-



1,076,575Exchange of Redeemable Preferred Shares into common stock








7,499,907



7,500



4,468,824



-



-



-



-



-



4,476,324Foreign currency translation adjustment


-


-


-



-



-



-



-



(1,068,738
)


-



-



(1,068,738
)Net loss


-


-


-



-



-



-



-



-



(11,343,620
)


-



(11,343,620
)Balance at December 31, 2007


-

$
-


36,470,337


$
36,470


$
48,963,611


$
-


$
-


$
(915,138
)

$
(36,000,922
)

$
(12,337,511
)

$
(253,492
)





See accompanying notes to consolidated financial information


F-7





SURGE GLOBAL ENERGY, INC.(AN EXPLORATION STAGE COMPANY)CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)FOR THE PERIOD FROM JANUARY 1, 2005 (INCEPTION OF EXPLORATION STAGE)

THROUGH DECEMBER 31, 2009   Preferred Stock


Common StockShares


Amount


Shares



Amount



Additional Paid-in

Capital



Deferred

Compensation



Common Stock

Subscription



Accumulated Other Comprehensive

Income



Accumulated Deficit during Exploration

Stage



Accumulated

Deficit



TotalBalance at December 31, 2007


-

$
-


36,470,337


$
36,470


$
48,963,611


$
-


$
-


$
(915,138
)

$
(36,000,922
)

$
(12,337,511
)

$
(253,492
)Employee stock option expense


-


-


-



-



265,691



-



-



-



-



-



265,691Stock compensation expense - Warrants


-


-


-



-



24,506



-



-



-



-



-



24,506Retirement of stock on sale of Cynthia Holdings, Ltd


-


-


(1,000,000
)


(1,000
)


1,000



-



-



-



-



-



-Options exercised


-


-


150,000



150



5,700



-



-



-



-



-



5,850Purchase and cancellation of stock


-


-


(993,333
)


(993
)


(67,940
)


-



-



-



-



-



(68,933
)Purchase and cancellation of stock from prior Cold Flow shareholders


-


-


(3,189,617
)


(3,190
)


4,774,054



-



-



-



-



-



4,770,864Unrealized loss on available for sale securities


-


-


-



-



-



-



-



(980,270
)


-



-



(980,270
)Foreign currency translation adjustment


-


-


-



-



-



-



-



899,499



-



-



899,499Net income


-


-


-



-



-



-



-



-



607,835



-



607,835Balance at December 31, 2008


-

$
-


31,437,387


$
31,437


$
53,966,622


$
-


$
-


$
(995,909
)

$
(35,393,088
)

$
(12,337,512
)

$
5,271,550Employee stock option expense


-


-


-







163,649



-



-



-



-



-



163,649Stock compensation expense - Warrants


-


-


-



-



52,846



-



-



-



-



-



52,846Unrealized gain on available for sale securities


-


-


-



-



-



-



-



980,270



-



-



980,270Foreign currency translation adjustment


-


-


-



-



-



-



-



14,538



-



-



14.538Net income


-


-


-



-



-



-



-



-



(2,329,180
)


-



(2,329,180
)Balance at December 31, 2009


-

$
-


31,437,387


$
31,437


$
54,183,117


$
-


$
-


$
(1,101
)

$
(37,722,268
)

$
(12,377,512
)

$
4,153,673




See accompanying notes to consolidated financial information


F-8





SURGE GLOBAL ENERGY, INC.(AN EXPLORATION STAGE COMPANY)CONSOLIDATED STATEMENTS OF CASH FLOWS





For the Year Ended

December 31


For the period

from January 1,

2005 (inception

of exploration

stage) through

December 31,2009


2008


2009Cash flows from operating activities:Net income (loss)

$
(2,329,180
)

$
607,835


$
(37,722,268
)Non-controlling interest


-



-



(3,679,096
)Adjustments to reconcile net income (loss) to net cash used in operating activities:Share of affiliate loss


-



-



2,099,663Depreciation and amortization


6,351



7,238



470,304Write-off of property and equipment


-



4,984



4,984Impairment of oil and gas properties


571,948



580,397



9,434,376Gain (loss) on sale of Peace Oil property and Peace Oil Corp.,net of liabilities


-



1,573,449



(1,525,105
)Amortization/write-off of debt discount-beneficial conversionfeature of convertible debenture


-



-



1,022,492Amortization of discount attributable to warrants


-



-



629,192Impairment of marketable securities


778,377



1,008,121



(1,786,498
)Interest on Gemini


-



-



230,000Amortization of discount on note receivable


(137,500
)






( 137,500
)Gain/loss on revaluation of warrant liability


-



-



431,261Gain on sale of marketable securities


(206,013
)


(657,638
)


(863,651
)Loss on redemption of preferred shares


-



105,376



105,376Beneficial conversion feature in conjunction  with issuance of convertible notes payable


-



-



1,076,575Founders stock


-



-



4,265,640Debt discount


-



-



1,010,679Non cash compensation costs


163,649



265,691



11,025,470Warrant expense


52,846



24,506



445,352Change in operating assets and liabilities:Other receivable


-



-



(132,384
)Prepaid expense and other assets


177,337



41,695



(84,623
)Other assets






-



80,958Accounts payable and accrued liabilities


(14,143
)


(182,939
)


813,516Income taxes payable


-



(4,847,978
)


-Net cash used in operating activities


(936,328
)


(1,469,263
)


(10,478,893
)





See accompanying notes to consolidated financial information


F-9








SURGE GLOBAL ENERGY, INC.(AN EXPLORATION STAGE COMPANY)CONSOLIDATED STATEMENTS OF CASH FLOWS





For the Year Ended

December 31


For the period

from January 1,

2005 (inception

of exploration

stage) through

December 31,2009



2008


2009Cash flows from investing activities:Purchases of property and equipment

-



(4,419
)


(115,055
)Production payment advanced

(300,000
)


-



(300,000
)Proceeds from sale of marketable securities

605,795



189,633



795,428Proceeds from sale of investment

-



600,000



600,000Payment for note receivable

-



(137,500
)


(137,500
)Proceeds from note receivable

275,000



-



275,000Purchase of oil and gas properties

(98,490
)


(1,596,596
)


(13,464,019
)Deposits

-



-



(9,913
)Proceeds from sale of oil leases

-



-



6,314,820Consideration paid on sale of subsidiary





(1,533,395
)


(1,533,395
)Proceeds from disposition of Peace Oil property





-



14,071,294Purchase of marketable securities





(383,879
)


(5,475,727
)Gemini repayment





-



(1,380,000
)Deduct June 2006 Signet cash balance





-



(5,626,405
)Net cash provided by (used in) investing activities

482,305



(2,866,156
)


(5,934,199
)Cash flows from financing activities:Proceeds from the sale of common stock subscription,

net of costs and fees

-



-



4,125,013Repurchase of common stock

-



(33,933
)


(33,933
)Principal payments on note payable

(159,643
)






(159,643
)Proceeds from exercise of options





5,850



97,717Proceeds from equity to debt conversion

-



-



250,000Net (payments for) proceeds from Joint Venture Partner

cash call obligations

-



-



125,000Proceeds from convertible debentures

-



-



1,710,000Proceeds from note payable, gross

-



-



10,421,933Proceeds from Signet stock, net of costs and fees

-



-



1,769,602Deferred financing costs

-



-



(1,208,375
)Net cash (used in) provided by financing activities

(159,613
)


(28,083
)


17,097,314Effect of exchange rates on cash and cash equivalents

13,579



(74,846
)


(787,401
)Net  increase (decrease) in cash and cash equivalents

(600,087
)


(4,438,348
)


(103,179
)Cash and cash equivalents at the beginning of the period

656,843



5,095,191



159,935Cash and cash equivalents at the end of the period
$
56,756


$
656,843


$
56,756





See accompanying footnotes to consolidated financial statements




F-10





SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)








For the Year Ended

December 31


For the period

from January 1,

2005 (inception

of exploration

stage) through December 312009


2008


2009Supplemental Disclosures of Cash Flow Information:Cash paid during the period for interest


7,032



10,838



513,530Cash paid during the period for taxes


-



8,112



8,112Supplemental Disclosures of Non-Cash Transactions:Amortization of debt discount-beneficial conversion feature of convertible debenture


-



-



2,099,067Common stock issued in exchange for convertible notes payable


-



-



1,710,000Unrealized loss on available for sale securities


(980,270
)


980,270



-Note payable issued on settlement of litigation


225,000



-



225,000Exchange of North Peace shares for common shares


-



35,000



35,000Asset retirement obligation


10,500



-



10,500Andora shares issued on settlement of litigation


89,687



-



89,687Cancellation of common shares


-



1,000



1,000Repurchase of common stock and redeemable preferred shares in exchange for marketable securities and issued preferred stock re Peace Oil


-


$
(5,930,156
)

$
-




See accompanying footnotes to consolidated financial statements







F-11





SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008








NOTE 1 - SUMMARY OF ACCOUNTING POLICIES





A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.





Business and Basis of Presentation





The consolidated financial statements include the accounts of Surge Global Energy, Inc., its wholly owned subsidiaries, Surge Energy Resources, Inc., Cold Flow Energy ULC, Peace Oil Corp. and 1294697 Alberta Ltd., and its partially owned subsidiary, Andora Energy Corporation ("Andora") (formerly Signet Energy, Inc. and Surge Global Energy (Canada), Ltd.) (see Note 5), (collectively the “Company”). Neither of Peace Oil Corp. (sold in June, 2008), or 1294697 Alberta Ltd. have any ongoing business operations at this time.





The Company’s Canadian subsidiaries are carried in their Canadian dollar functional currency and are presented in U.S. dollars upon consolidation. Any gain or loss on conversion into U.S. dollars is reflected in other comprehensive income.  All amounts stated in these financial statements are in $US unless otherwise noted.





In January 2005, the Company began implementing plans to establish an oil and gas development business. As a result, the Company is an exploration stage enterprise, as defined by ASC 915 (formerly Statement of Financial Accounting Standards No. 7 (“SFAS 7”)) and is now seeking to explore the acquisition and development of oil and gas properties in the United States and Canada. From its inception of exploration stage through the date of these financial statements, the Company has not generated any revenues from oil and gas operations and has incurred significant operating expenses. Consequently, its operations are subject to all risks inherent in the establishment of a new business enterprise.





For the period from January 1, 2005 (inception of exploration stage) through December 31, 2009, the Company has accumulated exploration stage losses of $37,722,268 excluding foreign currency losses. The Company will cease to be an exploration stage oil and gas corporation once it commences oil and gas drilling, exploration, and production.





Management Estimates





The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures.  While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates.





Reclassifications





Certainreclassifications have been made in the prior period financial statements to conform to the current period presentation. These reclassifications did not have any effect on comprehensive net income (loss) or shareholders' equity.





Oil and Gas Properties





The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income.





The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized using the units-of-production method based on estimated proved recoverable oil and gas reserves. Amortization of unevaluated and unproved property costs begins when the properties become proved or their values become impaired.  Impairment of unevaluated and unproved prospects is assessed periodically based on a variety of factors, including management’s intention with regard to future exploration and development of individually significant properties and the ability of the Company to obtain funds to finance such exploration and development.




F-12





SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008








NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)





Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the “cost ceiling”) equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current economic and operating conditions, discounted at 10%, plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to earnings.





Given the volatility of oil and gas prices, it is reasonably possible that the estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline in the future, even if only for a short period of time, it is possible that additional impairments of oil and gas properties could occur. In addition, it is reasonably possible that additional impairments could occur if costs are incurred in excess of any increases in the present value of future net cash flows from proved oil and gas reserves, or if properties are sold for proceeds less than the discounted present value of the related proved oil and gas reserves.





Investment in unconsolidated subsidiary





Investee entities that the Company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Whether the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, among others, representation of the Company’s board of directors and ownership level, generally 20% to 50% interest in the voting securities of the company including voting rights associated with the Company’s holdings in common, preferred and other convertible instruments in the company. Under the equity method of accounting, the Company’s share of the earnings or losses of these companies is included in the equity income (loss) section of the consolidated statements of operations.  A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.  The Company had no unconsolidated subsidiaries in which it held equity interests of over 20% as of December 31, 2009.





Cash and Cash Equivalents





For purposes of the Balance Sheet and Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.  The Company has $42,676 invested in cash in a short-term money market account maintained by a U.S. bank, of which $250,000 is subject to FDIC insurance, $7,754 in a national Canadian bank, and $6,306 in a liquid money market fund at December 31, 2009.





Marketablesecurities





All investment securities are classified as either as available-for-sale or trading, and are carried at fair value or quoted market prices. Unrealized gains and losses on available-for-sale securities losses are reported as a separate component of stockholders’ equity. Amortization, accretion, interest and dividends, realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are recorded in other income. This evaluation depends on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for possible recovery in the market value of the investment.




F-13








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)





Property and Equipment





Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Depreciation expenses from continuing operations amounted to $6,350 and $7,238 for the years ended December 31, 2009 and 2008, respectively.  Maintenance, repairs, and minor renewals are charged against earnings when incurred. Additions and major renewals are capitalized.





Income Taxes





Income taxes are provided based on the liability method for financial reporting purposes. Under this method 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 are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be removed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.





Earnings (Loss) Per Share





Basic earnings (loss) per share has been calculated based upon the weighted average number of common shares outstanding. During the years ended December 31, 2009 and 2008, convertible debt and securities, stock options, and warrants were excluded as common stock equivalents in the diluted earnings per share because they are anti-dilutive. The weighted average number of common shares outstanding used in the computations of income (loss) per share were 31,437,387 for the year ended December 31, 2009 and 33,555,151 for the year ended December 31, 2008.





Foreign Currency Translation





Assets and liabilities in foreign currency are translated at the rates of exchange at the balance sheet date, and related revenue and expenses are translated at average monthly exchange rates in effect during the period. Resulting translation adjustments are recorded as a separate component in stockholders' equity. Foreign currency transaction gains and losses are included in the statements of operations.





Fair Value of Financial Instruments





The carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.





Going Concern





As shown in the accompanying consolidated financial statements, the Company incurred losses from operations before taxes of $2,329,180 and $4,240,143 for the years ended December 31, 2009 and 2008, respectively. The Company’s cash position at December 31, 2009 was $56,756 compared with $656,843 at December 31, 2008, a decrease of $600,087. The Company's current liabilities, on a consolidated basis, exceeded its current assets by $71,672 as of December 31, 2009 compared with current assets in excess of current liabilities of $701,705 in the prior year, a decline of $773,377.  For the years ended December 31, 2009 and 2008, the Company used $936,328 and $1,469,263, respectively, of cash from operating activities. Income from production payments receivable and oil and gas investments are expected to commence in 2010. By reducing operating expenses in future periods and generating cash from the sale of marketable securities and long term investments and proceeds from stock offerings management believes it has sufficient capital resources to meet projected cash flow needs through the next twelve months.







F-14





SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)





Stock-Based Compensation





The Company measures and recognizes compensation expense for all share-based payment awards made to employees, consultants and directors including employee stock options based on estimated fair values.  Stock-based compensation expense recognized for the years ended December 31, 2009 and 2008 was $216,495 and $290,197, respectively.





Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s Consolidated statement of operations for the years ended December 31, 2009 and 2008 included compensation expense for share-based payment awards granted prior to, but not yet vested as of December 31, 2007.





The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based awards granted. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate.





Comprehensive Income





Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company’s other comprehensive income includes unrecognized gains (losses) on available for sale securities and foreign currency translation adjustments.





Subsequent Events





The Company evaluated events occurring between the end of the fiscal year, December 31, 2009, and the date when the financial statements were issued.





Recently Issued Accounting Pronouncements





In September 2006, the Financial Accounting Standards Board (“FASB”) issued ASC 820 (formerly SFAS No. 157, “Fair Value Measurements”).  ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.  Effective January 1, 2008, the Company adopted ASC 820 for financial assets and liabilities. ASC 820 establishes a framework for measuring fair value and expands disclosures about fair value measurements by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).





The three levels of the fair value hierarchy under ASC 820 are described as follows:





Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.





Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.





Level 3 Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.




F-15





SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)





The Company believes that the fair value of its financial instruments comprising cash, certificates of deposit, accounts receivable, notes receivable, accounts payable, and notes payable approximate their carrying amounts.  The fair values of the Company’s Level 1 financial assets are available for sale securities that primarily include shares of common stock in various companies, are based on quoted market prices of the identical underlying security. As of December 31, 2009 and 2008, The Company did not have any Level 2 or 3 financial assets or liabilities. The Level 1 available for sale securities have a carrying amount of $380,655 and a level 1 fair value of $380,655 based on quoted prices in active markets.





In February 2007, the FASB issued ASC 825 (formerly SFAS No. 159), “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of ASC 320 (formerly FASB statement No. 115).” This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. If an entity elects the fair value option for a held-to-maturity or available-for-sale security in conjunction with the adoption of this Statement, that security shall be reported as a trading security under ASC 320.  Electing the fair value option for an existing held-to-maturity security will not call into question the intention of an entity to hold other debt securities to maturity in the future.  The Company implemented ASC 825 effective January 1, 2008, and it did not have a significant impact on the Company’s financial position, results of operations, and cash flows.





In December 2007, the FASB issued ASC 810 (formerly SFAS 160), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”.  This standard significantly changes the accounting and reporting related to noncontrolling interests in a consolidated subsidiary. Noncontrolling interests are classified as stockholders’ equity, a change from its current classification between liabilities and stockholder’s equity. Any earnings attributable to minority interests are included in net earnings. Purchases and sales of minority interests are reported in equity, deferring, perhaps permanently, recognition of the economic gain or loss on partial dispositions.  This statement is effective as of the first fiscal year that begins after December 15, 2008. The Company implemented ASC 810 effective January 1, 2009, and it did not have a significant impact on the Company’s financial position, results of operations, and cash flows.








In December 2007, the FASB issued ASC 805 (formerly SFAS 141R), Business Combinations.  This standard significantly changes the accounting for business combinations both during the period of the acquisition and in subsequent periods.  This statement is effective as of the first fiscal year that begins after December 15, 2008.  The Company implemented ASC 805 effective January 1, 2009, and it did not have a significant impact on the Company’s financial position, results of operations, and cash flows.





In June 2009, the Financial Accounting Standards Board (“FASB”) issued an update of Accounting Standards Codification 105, “Generally Accepted Accounting Principles” (“ASC 105”) which establishes the FASB Accounting Standards Codification (the “ASC”). The ASC is the sole source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. The ASC superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the ASC is no longer authoritative. While the ASC does not change GAAP, it introduces a new structure that reorganizes the GAAP pronouncements into accounting topics. All content of the ASC carries the same level of authority.  The Company has adopted the requirements of ASC 105 and the adoption did not impact the Company’s results of operations or financial condition.





In May 2009, the FASB issued ASC 855, “Subsequent Events,” which modifies the definition of subsequent events and requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date.  These requirements became effective for the Company on June 15, 2009. There was no effect of adoption of this standard on the financial statements.





In January 2010, the FASB issued ASU No. 2010-03, “Extractive activities — Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures”. The main provisions of ASU No. 2010-03 are the following: (1) expanding the definition of oil- and gas- producing activities to include the extraction of saleable hydrocarbons, in solid, liquid, or gaseous state, from oil sands, shale, coalbeds, or other nonrenewable resources that are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction; (2) entities should use first-day-of-the-month price during the 12-month period (the 12-months average price) in calculating proved oil and gas reserves and estimating related standardized measure of discounted net cash flows; (3) requiring entities to disclose separately information about reserves quantities and financial statement amounts for geographic areas that represent 15 percent or more of proved reserves; (4) separate disclosure for consolidated entities and equity method investments. ASU No. 2010-03 is effective for annual reporting periods ending on or after December 31, 2009. The Company adopted ASU No. 2010-03 for the 2009 annual financial statements. This adoption did not have a material impact on the Group’s reported reserves evaluation, results of operations, financial position or cash flows.





In June 2009, the FASB issued amendments to ASC No. 810 (former FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities”) to address the effects of the elimination of the qualifying special purpose entity concept. More specifically, it requires a qualitative rather than a quantitative approach to determine the primary beneficiary of a variable interest entity, it amends certain guidance pertaining to the determination of the primary beneficiary when related parties are involved, and it amends certain guidance for determining whether an entity is a variable interest entity. Additionally, these amendments require continuous assessment of whether an enterprise is the primary beneficiary of a variable interest entity. Amendments are effective on January 1, 2010, and the Company does not expect any material impact on its results of operations, financial position or cash flows upon adoption.





The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.


F-16




SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008








NOTE 2 – CONVERTIBLE NOTE RECEIVABLE





In September 2008, the Company paid $275,000 and issued 1,000,000 warrants at an exercise price of $0.75 per share and expiring December 31, 2009 for the purchase of 500,000 shares of common stock and a $275,000 convertible note receivable from 11 Good Energy, Inc. The convertible note receivable bore interest at a rate of 8% per annum and was scheduled to mature on June 30, 2009.





The Note was either redeemable at face value or convertible into 11 Good Energy common stock and an equal number of common stock purchase warrants exercisable until June 30, 2010, and was redeemable at the Company's election at the earlier of maturity date or upon notice of prepayment of the convertible note by 11 Good Energy, Inc.  The conversion price was to be calculated at 85% of the cash sales price per share of common stock to be offered by 11 Good Energy, Inc. in a private placement, with no value attributable to any warrants.  The number of warrants was to be equal to the number of common stock issuable upon conversion.  As a result of the foregoing, the Company owns warrants to purchase 107,843 shares of 11 Good energy common stock exercisable at $2.55 per share through the close of business on June 30, 2010.





The Company allocated the purchase price to the convertible note receivable and the marketable securities based on the relative fair values of the instruments received.  The allocation of the purchase price was $137,500 to the convertible note receivable and $137,500 to the 500,000 common shares of 11 Good Energy.  A discount of $137,500 was recorded on $275,000 face value of convertible note receivable.





On June 11, 2009, the note receivable, accrued interest and legal fees thereon, totaling $295,057, was received in full. The discount on the convertible note was fully amortized using the effective interest method. At the same time, the 1,000,000 warrants issued at $0.75 per share were cancelled.








F-17








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 3 – INVESTMENTS IN MARKETABLE SECURITIES





North Peace Energy Corp.





On June 28, 2007, Peace Oil sold certain assets to North Peace Energy Corp., a Canadian oil sands company listed on the TSX Venture Exchange (“North Peace”), including the Red Earth Leases.  The aggregate consideration was $CDN15, 000,000 in cash and 2,270,430 restricted common shares of North Peace initially valued at $2.20 per share. After the North Peace transaction, the Company held a 4.87% fully diluted interest in North Peace prior to the new transactions described below. The Company utilized the proceeds from the sale to fund its operations.





In June and July 2008, the Company exchanged a total of 606,402 North Peace Energy shares for all of the outstanding Cold Flow Exchangeable shares and 3,689,617 common shares of the Company, leaving a balance of North Peace shares owned from the North Peace transaction at 1,739,129 shares, or 3.1% of North Peace as of December 31, 2008.  As of December 31, 2008, the ten day weighted average closing price of the common stock of North Peace Energy Corp. (NPE) listed on the TSX Venture Exchange was $0.25. The net unrealized loss on the investment in NPE shares which are held as securities available-for-sale was $980,270 for the year ended December 31, 2008.  This loss was recorded as a decrease in other comprehensive income and a reduction in shareholders’ equity. Also in 2008, the Company recorded an impairment charge of $1,008,121 to reduce the value of North Peace shares to their year-end market value.





As of December 31, 2009, the Company owned 1,402,501 shares of North Peace Energy Corp valued at $366,905 or $0.262 per share.   In view of material declines in the value of North Peace Energy shares, the Company reduced the value of this stock from $0.82 to $0.262 per share in 2009, resulting in an other than temporary impairment of $778,377 for the year ended December 31, 2009.  As of December 31, 2008, the Company owned 1,739,129 shares valued at $440,085.   The Company recognized an other than temporary impairment of $1,008,121 in the year ended December 31, 2008.





11 Good Energy Inc. Shares





In October 2009, the Company sold 450,000 shares of 11 Good Energy stock for $450,000. As of December 31, 2009, the Company owned 50,000 shares of 11 Good Energy Inc., originally acquired in September 2008, valued at $13,750.





Sale of Peace Oil Corp





On June 27, 2008, Cold Flow Energy ULC, a wholly subsidiary, entered into a definitive agreement with a privately owned Canadian corporation (“Purchaser”), pursuant to which Cold Flow sold all issued and outstanding common and preferred shares of Peace Oil Corp.  Cold Flow Energy ULC indemnified the Purchaser for any tax liabilities in excess of $CDN 4,175,042 and all other liabilities arising prior to the date of sale. As part of the sale, Cold Flow Energy ULC paid the Purchaser $1,340,107 and the Purchaser effectively assumed all tax liabilities of Peace Oil Corp. arising as a result of the purchase of common and preferred shares.





The following summarizes the disposition of the Peace Oil:





Cash consideration paid to the purchaser

$
(1,340,107
)Tax liabilities previously recorded


4,847,978Other liabilities and adjustments


(40,934)Subtotal


3,466,937Expenses of sale


(192,408
)Net gain in 2008 on sale of Peace Oil

$
3,274,529








NOTE 4– PRODUCTION PAYMENTS RECEIVABLE





In December 2009, the Company paid $300,000 to a service company under the terms of an equipment lease agreement with a third party operator for redevelopment of four wells located in Pawnee County, Oklahoma. This $300,000 payment has been accounted for as a production payment receivable and is due from the operator.  The production payments and any net profits interest which would be earned from this investment are classified as a receivable until the amount due is paid.  Under the terms of the agreement, the Company is entitled to monthly repayment amounts of 75% of net income per well up to a maximum of $10,000 per well.  The repayments continue until such time as the Company has been repaid $354,000.  The first payment is due and payable with 10 days of receipt by the operator of oil and gas revenues and on the same date of each succeeding month thereafter.  As of December 31, 2009, no sales had occurred.  If the third party operator fails to pay amount due and payable or perform any provisions under the equipment lease agreement, the Company may be assigned a 75% working interest in the wells.  In addition, the Company may exercise additional remedies, including taking possession of any equipment.  The Company has performed an assessment of the recoverability of the production payment and believes the full amount is collectible.







F-18








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 5- OIL & GAS PROPERTIES





All of the Company’s oil and gas properties are located in the United States.  Costs excluded from amortization as of December 31, 2009 are as follows:




Year Incurred

Acquisition Costs


Exploration Costs


Development Costs


Total2008

$
553,241


$
0


$
-


$
553,241





The Company presently has no producing oil and gas properties.  In 2009, the Company recognized an impairment on oil and gas properties of $571,948 reflecting write-downs of oil and gas properties acquired in 2008 on its Wyoming property.





In 2008, the Company acquired drilling and exploration rights in three properties: White Pine County, Nevada; Park County, Wyoming and Crane County, Texas. The Company commenced drilling an exploration well on the Wyoming lease in 2008 and after completion of the well determined that the well did not produce commercial quantities of oil and/or gas and took an impairment charge for all of the costs incurred of $571,948 in 2009 as discussed above.





During 2008, the Company drilled unsuccessfully on its Crane County, Texas lease and the property was deemed impaired.  As a result, the costs incurred were transferred to the full cost pool and an impairment expense of $580,397 was recorded in 2008.





NOTE 6 - INVESTMENT IN ANDORA ENERGY CORPORATION





On September 19, 2007, Signet completed the proposed business combination of Signet and Andora Energy Corporation ("Andora"). As part of the combination, each of the issued and outstanding shares of Signet common stock was exchanged for 0.296895028 shares of Andora common stock.  The Company exchanged its 11,550,000 shares of Signet common stock for approximately 3,429,140 shares of common stock of Andora representing approximately 5.78% of the fully diluted shares of Andora.  2,349,321 shares of Andora common stock received by the Company were placed in an escrow account pursuant to an agreement with Valiant Trust Company, Andora and Signet.  In connection with the Dynamo litigation claim, Andora was entitled to recover a claim from the Company pursuant to a judgment of a court of competent jurisdiction and after exhausting all appeals.  After satisfying any judgment award, any remaining escrowed shares would be distributed to the Company upon a joint written notice from Andora and the Company to Valiant.





The net investment in Andora at December 31, 2009 and December 31, 2008 was $3,675,948 and $3,540,639, respectively. The change in value was due to the additional shares received and distributed in conjunction with the settlement of two lawsuits.  The Company owned a total of 3,606,501 common shares of Andora at December 31, 2009, of which 375,000 shares were disposed of subsequent to year end, leaving a balance of 3,231,501 shares.





The Company’s valuation of Andora is based on reserve reports furnished to the Company by Andora which the Company has relied upon in assessing the value of its investment in Andora.  Virtually all of these reserves will require alternative methods of production to enable them to be realized as income. Such methods require substantial investment in plant and equipment to be effective. Should Andora obtain equity financing in the future to finance drilling operations, the Company may sustain additional dilution to its equity interest in Andora.  See Subsequent Events.





NOTE 7 – NOTES PAYABLE





Effective March 31, 2009, the Company agreed to a total settlement and release of all claims agreement with its former CEO, David Perez. The terms of the settlement are that the Company issued a promissory note for $225,000, payable in 14 equal monthly installments and one final payment of $6,100. The note bears interest at 5% per annum. In return, the Company received 252,361 Andora shares valued at $225,000 previously in Mr. Perez’s possession plus the elimination of all further legal expenses or liability. At December 31, 2009, the balance payable on the Note was $65,357.  The Note is secured by a first priority security interest in 252,361 Andora shares.





If the Company realizes a net gain of $500,000 on any single transaction or accumulates $500,000 in cash and cash equivalents, the full value of the Note Payable and accrued interest is due and payable within 30 days.






F-19








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008








NOTE 8 – INCOME TAXES





Reconciliation between actual tax expense (benefit) and income taxes computed by applying the U.S. federal income tax rate and state income tax rate to income from continuing operations before income taxes is as follows:





For the Year Ended December 31 ,2009


2008Net Income/(Loss)

$
(2,329,000
)

$
607,835Income tax computed at combined U.S. and state statutory rates (40%)


(930,000)



243,000Permanent differences


-



-Changes in valuation allowance


930,000



(243,000
)Total

$
-


$
-





Tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred liabilities are presented below:





As of December 31,Deferred tax assets:

2009


2008Net operating loss carryforwards

$
5,650,000


$
4,720,000Less valuation allowance


(5,650,000)



(4,720,000
)Total

$
-


$
-





At December 31, 2009, Surge had net operating loss carryforwards of approximately $14,000,000 for federal and approximately $10,000,000 for state income tax purposes, which will begin to expire, if unused, beginning in 2021. The valuation allowance increased by approximately $930,000 in the year ended December 31, 2009 and decreased by $243,000 in 2008.  Internal Revenue Code Section 382 rules may place annual limitations on the Company’s net operating loss carryforward on a change in ownership. The above estimates are based upon management’s decisions concerning certain elections which could change the relationship between net income and taxable income. Management decisions are made annually and could cause the estimates to vary significantly.





NOTE 9 – REDEEMABLE PREFERRED SHARES





In connection with the Peace Oil acquisition on March 2, 2007, the Company’s indirect wholly owned subsidiary, Cold Flow Energy ULC, issued 8,965,390 redeemable preferred shares (“Exchangeable Shares”) to the former Peace Oil Corp. shareholders, each of which was exchangeable into two shares of the Company’s common stock or effectively a total of 17,930,780 common shares were issuable upon full conversion.





On November 6, 2007, three former Cold Flow shareholders exchanged 3,749,953.5 preferred shares into 7,499,907 common shares of the Company. After this exchange Cold Flow had 5,215,436.5 Exchangeable Shares issued and outstanding which, at that time, were convertible into 10,430,873 common shares of the Company. Since a holder of Exchangeable Shares could cause redemption of shares at any time, the Company classified the redemption amount outside permanent equity. At December 31, 2007 the Company’s Exchangeable Shares had a carrying value of US $5,930,156.





On June 17, 2008, the Company redeemed the balance of all the outstanding Exchangeable Shares in exchange for 584,929 shares of North Peace Energy valued at $1.10 per share after foreign exchange adjustments, or a total consideration of $644,744. After this transaction, no Exchangeable Shares were outstanding as of December 31, 2008.






F-20








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 10 - CAPITAL STOCK





Preferred Stock





On March 2, 2007, the Company issued one share of Special Voting Preferred Stock to Olympia Trust Company as trustee pursuant to the Voting and Exchange Trust Agreement. The preferred stock was issued in connection with the acquisition of Peace Oil Corp. The issuance of the preferred stock is exempt from registration pursuant to Regulation S promulgated under the Securities Act of 1933, as amended. The Special Voting Preferred Stock is not convertible into shares of any other series or class of our capital stock. The one share of Special Voting Preferred Stock referred to herein was cancelled in June 2008.





Common Stock





On February 22, 2007, the Company approved an increase to the Company's authorized shares of capital stock to an aggregate of 210,000,000 shares, consisting of 200,000,000 shares of common stock with a par value of $0.001 per share and 10,000,000 shares of preferred stock, pursuant to an amendment to our Certificate of Incorporation.





The Company is not currently subject to any contractual arrangements, which restrict its ability to pay cash dividends. The Company's Certificate of Incorporation prohibits the payment of cash dividends on the Company's Common Stock in excess of $0.05 per share per year so long as any one preferred stock remains outstanding unless all accrued and unpaid dividends on one preferred stock has been set apart and there are no arrearages with respect to the redemption of any preferred stock.





In November 2006, the Company issued an aggregate of 3 million shares of common stock to third party investors, Gemini Financial, in exchange for net proceeds of $1,350,000. In connection with this private placement, the Company issued to the investors an aggregate of six million warrants of the Company that are subject to registration rights and penalties amounting to 2% of the proceeds on a monthly basis if the registration was not effective by March 28, 2007. To address SEC comments, the Company was obligated to provide and disclose Peace Oil Corp. financial statements as well as a pro forma financial statement of the combined companies. The Company accounted for the warrants issued in accordance with ASC 815 (formerly EITF 00-19) “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”.   In December 2006, the FASB approved ASC 825 (formerly FSP EITF 00-19-2) “Accounting for Registration Payment Arrangements”, which establishes the standard that contingent obligations to make future payments under a registration rights arrangement shall be recognized and measured separately in accordance with Statement 5 and ASC 450 (formerly FASB Interpretation No. 14), “Reasonable Estimation of the Amount of a Loss”. The Company has evaluated the effect of how ASC 825 (formerly FSP EITF 00-19-2) and ASC 480 (formerly  EITF Topic D-98) affected these accompanying financial statements. In adopting ASC 825 (formerly FSP EITF 00-19-2) accounting pronouncement on January 1, 2007, the Company reclassified the remainder of the warrant liability of $2,309,400 to permanent equity.





In January 2007, the Company issued 383,333 shares of Common Stock to two of the Company’s directors in connection with stock options exercised at an average of $0.24 per share for net proceeds of $91,867.





In April 2007, the Company redeemed 2,000,000 shares of Common Stock for a note payable with Gemini, which 2,000,000 shares were cancelled.





In November 2007, Cold Flow shareholders exchanged 3,749,953.5 preferred shares into 7,499,907 common shares of the Company.





In March 2008, the Company received and cancelled 1,000,000 common shares in conjunction with its sale of the Cynthia Holdings, Ltd stock which entity owned the Santa Rosa property.





In May 2008, the Company issued 100,000 common shares in conjunction with the exercise of options and simultaneously purchased 433,333 common shares from the same party at the same time.  These purchased shares were cancelled immediately.





In June and July 2008, the Company redeemed an aggregate of 3,689,617 shares of common stock in connection with buyback of shares previously issued in conjunction with the purchase of Peace Oil Corp. See Note 3.





In September 2008, the Company issued 50,000 common shares in conjunction with stock options exercised at $0.115 per share for total proceeds of $5,750.





In December 2008, the Company purchased and cancelled 60,000 shares for $3,600 or $0.06 per share.





There were no capital stock transactions during the twelve months ending December 31, 2009.







F-21







SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 11 - WARRANTS AND STOCK OPTIONS





Class A Warrants.  The following table summarizes the balances of warrants outstanding at December 31, 2009.





Warrants Outstanding

Warrants ExercisableExercise Prices


Number

Outstanding

Weighted Average

Remaining

Contractual Life

(Years)

Weighted

Average

Exercise Price

Number

Exercisable

Weighted

Average

Exercise Price$
0.08



500,000

2.86


0.08

500,000

$
0.080.10



375,000

0.50


0.10

375,000


0.100.11



300,000

0.50


0.11

200,000


0.110.12



120,000

0.50


0.12

80,000


0.120.60



3,000,000

2.41


0.60

3,000,000


0.601.00



1,000,000

0.49


1.00

1,000,000


1.001.45



200,000

0.91


1.45

200,000


1.451.60



1,005,000

0.03


1.60

1,005,000


1.60$
2.00



1,200,000

1.20


2.00

1,200,000


2.007,700,000

1.47

$
0.94

7,700,000

$
0.94





Transactions involving the Company's warrant issuance or expiration are summarized as follows:


Number of

Shares


Weighted Average

Price Per ShareOutstanding at December  31, 2007


10,805,000


$
0.94Granted


1,620,000



0.50Exercised


-



-Canceled or expired


(4,500,000
)


0.67Outstanding at December 31, 2008


7,925,000


$
1.00Granted


775,000



0.09Exercised


-



-Canceled or expired


(1,000,000
)


0.75Outstanding at December 31, 2009


7,700,000


$
0.94





For the year ended December 31, 2009, the Company issued warrants to purchase 775,000 shares of common stock to two consultants for legal services and financial consulting services at an average exercise price of $0.09 per share with a two year term and vesting immediately. Of the 775,000 warrants, 400,000 warrants vested during the three months ended September 30, 2009 as a result of terminating a consulting agreement.  Prior to the termination, the 400,000 warrants were to vest annually over a remaining 4 year term.  The fair value of $52,846 was recorded as warrant expense during the year ended December 31, 2009 and the warrants were valued using the Black-Scholes option-pricing model.  Variables used in the Black-Scholes pricing model for the 775,000 warrants include: (1) discount rate of 1.90%, (2) warrant life of 1.5 years, (3) expected volatility of 108% and (4) zero expected dividends.  The warrants had $0 intrinsic value at December 31, 2009.





Pursuant to an agreement with 11 Good Energy, Inc. to repay the September 11, 2008 note receivable, during the year ended December 31, 2009, the Company canceled 1,000,000 warrants with an exercise price of $0.75 per share.







F-22








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 11 - WARRANTS AND STOCK OPTIONS (Continued)





During 2008, the Company issued 1,620,000 warrants to purchase 1,620,000 shares of common stock to consultants and other third parties at exercise prices of $0.08 to $0.75 per share with terms from one to two years, of which 1,200,000 shares vested immediately on the date of grant and the remainder vest monthly thereafter: 100,000 of these warrants were issued in settlement of a lawsuit were exercisable at $0.10 per share and expired unexercised in December 2008; 520,000 were issued in conjunction with consulting agreements at an average price of $0.1065 per share; and 1,000,000 warrants were issued to Frederick C. Berndt in conjunction with the 11 Good Energy Note at an exercise price of $0.75 per share.  Fair value of $24,506 was recorded in 2008 and $368,000 in 2007 using the Black-Scholes method of warrant-pricing model.  Variables used in the Black-Scholes pricing model for warrants issued during the year ended December 31, 2008 include (1) discount rate range of 1.94% to 2.09%, (2) warrant life of 1 to 2 years, (3) expected volatility of 71% to 108% and (4) zero expected dividends.  During the year ended December 31, 2008, 4,500,000 warrants expired: 1,500,000 due to non-exercise, 2,000,000 warrants issued in conjunction with the Company’s financing in March 2007 to Gemini Financial and 1,000,000 warrants issued to Mark Fritz, a director, expired because of contractual agreements.





Stock Options





The following table summarizes the balances of options issued to officers and directors outstanding at December 31, 2009.





Options Outstanding

Options ExercisableExercise Prices


Number

Outstanding

Weighted Average

Remaining

Contractual

Life (Years)

Weighted Average

Exercise Price

Actual

Number

Exercisable

Weighted Average

Exercise Price$
0.055



2,700,000

4.31


0.06

1,750,000


0.060.07



2,400,000

4.92


0.07

100,000


0.07$
0.08



5,200,000

3.16

$
0.08

5,200,000

$
0.080.09



500,000

3.73


0.09

500,000


0.090.10



500,000

3.21


0.10

500,000


0.10$
0.12



250,000

3.53


0.12

250,000


0.1211,550,000

3.81

$
0.07

8,300,000

$
0.08





Transactions involving the Company's options issuance are summarized as follows:

Number of

Shares


Weighted

Average Price

Per ShareOutstanding at December 31, 2007


8,125,203


$
0.64Granted


6,500,000



0.08Exercised


(150,000
)


0.04Canceled or expired


(8,025,203
)


0.65Outstanding at December 31, 2008


6,450,000


$
0.08Granted


5,100,000



0.06Exercised


-



-Canceled or expired


-



-Outstanding at December 31, 2009


11,550,000


$
0.074





During 2009, options to purchase 5,100,000 shares of common stock were granted to its directors at exercise prices of $0.055 to $0.07 per share and vests from 1 to 2 years. No options were exercised in 2009. These options have a term of five years from the date of grant and a total of 1,850,000 of the 2009 options vested in 2009 and 1,331,666 of the 2008 options also vested in 2009.








F-23








SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 11 - WARRANTS AND STOCK OPTIONS (Continued)





The options were valued using the Black-Scholes option-pricing model.  Variables used in the Black-Scholes pricing model for options issued during the year ended December 31, 2008 include (1) discount rate range of 2.21% to 3.03%, (2) option life of 5 years, (3) expected volatility of 63% to 108% and (4) zero expected dividends.





During 2008, options to purchase 6,500,000 shares of common stock were granted by Surge Global Energy, Inc. to its officer and directors at exercise prices of $0.08 to $0.12 per share. These options have a term of five years from the date of grant. 1,260,000 shares vested immediately on the date of grant and the remainder vest 1/12th per month thereafter.  Fair value expense of $265,691 was recorded in 2008 using the Black-Scholes method of option-pricing model.  Variables used in the Black-Scholes pricing model for options issued during the year ended December 31, 2008 include (1) discount rate range of 2.21% to 3.03%, (2) option life of 5 years, (3) expected volatility of 63% to 108% and (4) zero expected dividends.  Options for 5,200,000 shares were issued at an exercise price of $0.08 per share, 500,000 options were issued at $0.10 per share, 500,000 options were issued at $0.09 per share, and 300,000 options were issued at $0.115 per share (of which 50,000 shares were exercised).





Non cash compensation expense of $163,649 and $265,891 was charged to operations for expenses arising from the issuance of options during the years ended December 31, 2009 and 2008, respectively.





During the year ended December 31, 2008, a total of 8,025,203 out of the money stock options issued to prior directors and officers were cancelled due to their resignation pursuant to the terms of the Company’s employee stock option plan.





NOTE 12 – GAIN (LOSS) ON SALE OF INVESTMENTS





On October 22, 2009, the Company sold 450,000 shares of 11 Good Energy stock for $450,000 resulting in a gain on sale of $326,250.





During 2009, the Company sold a total of 336,628 North Peace Energy shares at a loss of $120,327.





On March 18, 2008, the Company sold its entire 17.52% interest in Cynthia Holdings, Ltd for $600,000 in cash and 1,000,000 shares of the Company’s common stock.  A gain on the sale of $600,000 is reflected in the consolidated financial statements for the year ended December 31, 2008. This investment had been acquired in 2004 for $600,000 and was impaired prior to January 1, 2007. The Company also recorded a gain on sale of $57,638 on the sale of North Peace Energy shares.





During the year ended December 31, 2008, the Company exchanged 584,929 shares of North Peace Energy shares for all outstanding Cold Flow Exchangeable Shares, resulting in a loss on the exchange of $105,376 after foreign exchange adjustments.





NOTE 13 - RELATED PARTY TRANSACTIONS





On May 1, 2008, the Company entered into an Employment Agreement with Mr. E. Jamie Schloss as CEO which provided for initial salary for the period from June 17, 2008 through December 31, 2008 at the rate of $9,500 per month. Thereafter, an increase to $10,500 per month until June 30, 2009, then $11,500 per month until April 30, 2010. Mr. Schloss received payment for services rendered prior to the execution of the agreement for the periods May 1, 2008 through June 16, 2008 and February 11, 2008 through April 30, 2008 at the rate of $9,500 per month.





During 2009, the Company settled lawsuits with a former director, Daniel Schreiber, and its former Chairman and CEO, David Perez.





NOTE 14 – LITIGATION MATTERS





The Company’s business and operations may subject the Company to claims, litigation and other proceedings brought by private parties and governmental authorities. The Company is currently involved in contract and indemnity disputes in several litigation matters:  Litigation can involve complex factual and legal questions and its outcome is uncertain. Although it is not possible at this early stage to predict the likely outcome of this action, an adverse result could have a material adverse effect on us. Any claim that is successfully asserted against us could result in significant damage claims and other losses. Even if the Company were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations, which adversely affect our financial condition, results of operations or cash flows.







F-24






SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





Dynamo Energy Corporation, a Canadian corporation (“Dynamo”), filed a civil complaint in San Diego Superior Court in 2006 in connection with an alleged breach of contract purportedly entered into on October 12, 2004. On November 7, 2007, the San Diego Court dismissed the 2006 case on the grounds that case filed in San Diego, CA was not a convenient forum to try the case and on January 8, 2008, the Court entered Dynamo’s dismissal request without prejudice.





On February 1, 2008, Dynamo filed a Statement of Claim in Canada in the Court of Queen’s Bench of Alberta, the Judicial District of Calgary against us, David Perez, our former Chief Executive Officer and Director, Signet, C.W. Leigh Cassidy, the former Chief Executive Officer of Signet, Andora Energy and three Canadian entities. This complaint was dismissed in July, 2009.





A total of $570,000 has been accrued at December 31, 2009 for legal fees incurred by third parties in this matter. See Subsequent Events, Note 14.





During 2009, the Company settled all legal claims with its former Chairman and CEO, David Perez, and its former director, Daniel Schreiber as follows:  Effective as of March 31, 2009, the Company agreed to a total settlement and release of all claims agreement with Mr. Perez. The terms of the settlement were that the Company issued a promissory note for $225,000, payable in 14 equal installments and one final payment of $6,100. The note bears interest at 5% per annum. In return, the Company received 252,361 Andora shares valued at $225,000 for financial statement purposes which had been previously in Mr. Perez’s possession plus the elimination of all further legal expenses or liability.  The Company also agreed to settle all claims with Granite Financial, Daniel Schreiber, and Schwartz Semerdjian Haile Ballard & Cauley LLP on July 13, 2009.  The terms of the Schreiber settlement were that $225,000 was released from the restricted cash Trust account and paid to Granite. The Company issued 75,000 Andora shares to Granite. The $225,000 and 75,000 Andora shares were to be paid on August 4, 2009. In return, all outstanding liabilities accrued by the Company totaling about $315,000 were cancelled and the remaining funds of approximately $23,478 in the Trust account were returned to the Company.





On October 1, 2009, a lawsuit was filed in Midland County, Texas by Three Span Oil & Gas, Inc. against the Company’s wholly owned subsidiary, Surge Energy Resources, Inc. for unpaid expenses of approximately $60,125 incurred in conjunction with drilling the Crane County, Texas well. A default judgment for $60,125 was entered into in December, 2009 and has been fully accrued in the consolidated financial statements.





A legal action was entered into by the landowner of the Foust property in Pawnee County, Oklahoma against the operator of the property, Mandalay Energy Resources (Mandalay) and other working interest owners. The Company was not named in the lawsuit but, as a result of the claims alleged, operations on the Company’s leasehold interests in this property were suspended until all legal issues can be resolved. The operator of the Foust lease,  Mandalay,  has filed a counterclaim on behalf of all working interest owners against the landowner denying all claims. The Company has invested $300,000 in the Foust property and believes that it will ultimately be successful in resuming operations.








NOTE 15 – COMMITMENTS AND CONTINGENCIES





Operating Leases





In March 2008, the Company relocated to its executive offices to 990 Highland Drive Suite 110-V Solana Beach, California for a term of six months and monthly rent of $825.  On May 6, 2008, the Company cancelled its prior six-month lease at 990 Highland Drive Suite 110-V and entered into a new lease. The new lease is for Suite 206 at the same address and is a three-year lease commencing May 6, 2008, the annual rentals are $25,740 for the period from May 6, 2008 to May 5, 2009, $26,676 for the period from May 6, 2009 to May 5, 2010, and $27,612 for the period from May 6, 2010 to May 5, 2011.





Employment Agreements





The company has an employment agreement with its Chief Executive Officer until April 30, 2010.





Consulting Agreements





The Company has a consulting agreement with an outside contractor for legal services which provides for the payment of approximately $3,000 per month for salary and related payroll taxes for a legal assistant. This agreement is cancellable upon 120 days written notice.








F-25







SURGE GLOBAL ENERGY, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009 AND 2008





NOTE 16 – SUBSEQUENT EVENTS





After commencing workover operations in December, 2009 on the Foust lease located in Pawnee County Oklahoma, the installation of equipment in the workover of four wells was delayed by a legal dispute over leasehold rights by a new owner of the lease. Mandalay, the operator of the property, has filed a cross complaint and is pursuing its legal remedies to preserve the rights to the Foust lease. The Company is working with the Operator to re-establish drilling operations or transferring our investment into a similar property in Oklahoma.





Pursuant to a Settlement Agreement dated February 2, 2010, by and among Surge Global Energy, Inc. ("Surge"), 1350826 Alberta Ltd. (formerly known as Surge Global Energy (Canada) Ltd. and Signet Energy, Inc. ("Alberta") and Andora Energy Corporation ("Andora"), Surge agreed to pay Andora's indemnified expenses in connection with two prior legal actions arising from litigation with Dynamo Energy Corporation (both of which had previously been dismissed in the United States and Canada)  in an amount equal to approximately US$570,000 (CDN $600,000).  Pursuant to this Settlement Agreement, in lieu of a cash payment, the Escrow Agent released 375,000 of Andora escrow shares to Andora, and released to Surge the remainder of shares held in escrow.  After this agreement, Surge will own 3,231,499 unrestricted shares of Andora.





On February 12, 2010, the Company sold its remaining 50,000 shares of 11 Good Energy for $122,500 and will recognize a gain on sale of $108,750 in the quarter ending March 31, 2010.





On February 19, 2010 the following directors of the Company resigned from the Board: Jeffrey Bernstein, Barry Nussbaum and Kenneth Polin (the “Former Directors”).  At the same time, the Company entered into consulting agreements with these three Former Directors for a period of six months or until August 18, 2010.  The agreed upon compensation for the Former Directors is, in the aggregate, an initial payment of $100,000, which was paid on February 19, 2010, and six equal  installments of $16,667 per month commencing April 19, 2010.  The payments will be divided among the Former Directors on a pro rata basis based on the number of options being canceled previously held by each Former Director.  Also pursuant to the consulting agreements, the Company and the Former Directors agreed to cancel immediately one-half of the outstanding stock options (2.35 million stock options) previously issued to the Former Directors.  The remaining 2.35 million stock options will be cancelled after all consulting payments due are made.





On March 10, 2010 the Company extended the term of its Nevada lease with Tetuan Resources, Inc. Pursuant to this extension, the Company has the right to drill a test well on its Green Valley, Nevada property until September 1, 2010.





In January and February, 2010, the Company sold common stock Units in a private placement.  Each full Unit’s cost was $55,000 and consisted of 500,000 shares of common stock and 500,000 warrants.  The warrants are exercisable over a period of two years at a price of $.25 per share.  The Company sold a total of 2.4 units totaling 1,200,000 shares and issued 1,200,000 warrants for net proceeds of $127,000 (net of offering costs of $5,000).





On March 15, 2010, the Company filed a complaint in U.S. District Court against XL Specialty Insurance Company (hereafter “XL”). The complaint alleges a breach of contract and bad faith breach of contract against XL and seeks to recover all costs of defense and legal fees incurred in the two Dynamo lawsuits, which legal fees approximate $900,000. The Company is unable to measure how much of this claim is recoverable, we may recover zero dollars and will incur costs of $25,000 to $50,000.







F-26






ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


Dismissal of RBSM LLP
 
 On September 19, 2008, Surge Global Energy, Inc. (the “Company”) dismissed RBSM LLP (“RBSM”) as the Company’s independent registered public accounting firm. The Audit Committee of the Board of Directors of the Company (the “Audit Committee”) recommended and approved the decision to change independent registered public accounting firms. RBSM’s report on Registrant’s financial statements for each of the two years ended December 31, 2007 and 2006 (collectively, the “Prior Fiscal Years”) did not contain an adverse opinion or disclaimer of opinion, nor was such report qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report for the year ended December 31, 2006 contained an explanatory paragraph describing the existence of substantial doubt about the Registrant's ability to continue as a going concern. There were no disagreements (“Disagreements”) between Registrant and RBSM during either (i) the Prior Fiscal Years, or (ii) the period January 1, 2008 through September 19, 2008 (the “Interim Period”) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which Disagreement, if not resolved to the satisfaction of RBSM, would have caused RBSM to make reference to the subject matter of the Disagreement in connection with its report for the Prior Fiscal Years.
 
 There were no reportable events under Item 304(a)(1) (v) of Regulation S-K, during either (i) the Prior Fiscal Years or (ii) the Interim Period.
 
 Engagement of GBH CPAs, PC
 
 On September 19, 2008, the Company engaged GBH CPAs, PC (“GBH”) to serve as the Company’s independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ending December 31, 2008. The Audit Committee approved the Company’s engagement of GBH.
 
 The Company did not, nor did anyone on its behalf, consult GBH during the Company’s two most recent fiscal years and any subsequent interim periods prior to the Company’s engagement of that firm regarding the application of accounting principles to a specified transaction (completed or proposed), the type of audit opinion that might be rendered on the Company’s financial statements, any matter being the subject of disagreement or reportable event, or any other matter as defined in Regulation S-K, Item 304 (a)(1)(iv) or (a)(1)(v).





ITEM 9A(T).
CONTROLS AND PROCEDURES





Under the supervision and with the participation of our management, including the Chief Executive and Chief Financial Officer  and the Audit Committee, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report.
 
 Report of Management on Internal Control Over Financial Reporting
 
 Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
 
 Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control – Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal controls over financial reporting for the fiscal year ended December 31, 2009 did not contain the level of documentation for disclosure controls and procedures required under Section 404(a) of the Sarbanes-Oxley Act of 2002, as amended. Management intends to cure this weakness in fiscal 2010. There were no significant changes in our internal control over financial reporting during the year ended December 31, 2009, except as described above, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our independent auditors have not audited and are not required to audit this assessment of our internal control over financial reporting for the fiscal year ended December 31, 2009.
   23
  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 by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
 
 Limitations on Effectiveness of Controls and Procedures
 
 Our management, including our Chief Executive Officer and Audit Committee, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
 Changes in internal controls
 
 There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 2007 Report on Controls and Procedures and Corrections made in 2008
 
 Our management, including the Chief Executive Officer and Audit Committee, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2007 based on the framework defined inInternal Control – Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that, as of December 31, 2007, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. We also discovered the following material weakness in our internal control over financial reporting: we had no procedure to determine how gains would be treated for tax purposes under Canadian law.  This material weakness led to the following mistakes in our financial statements, which have since been corrected.
 
 On January 31, 2008, the Board, in consultation with management of the Company, determined that previously issued (i) consolidated financial statements for the quarters ended (a) June 30, 2007 contained in the Company’s Quarterly Report on Form 10-QSB filed August 20, 2007, and (b) September 30, 2007 contained in the Company’s Quarterly Report on Form 10-QSB filed November 16, 2007, needed to be restated to correct an error in accounting for Canadian income taxes in connection with the disposition of certain assets by Peace Oil Corp. (“Peace Oil”), the Company’s indirectly-owned Canadian subsidiary, Cold Flow Energy ULC.  Upon advice from Canadian tax counsel and accounting advisors, the Board determined that the purchase and sale of the Peace Oil assets required different treatment under Canadian tax laws.  We have amended the financial statements listed above to correctly account for the Canadian income taxes in connection with the disposition of certain assets by Peace Oil.
 
 After consultation with Canadian counsel and accountants, the Board determined that the reserve for Canadian income taxes was incorrect and needed to be restated.  The amounts reported in the Company’s financial statements for its quarters ended June 30, 2007 and September 30, 2007 did not properly reflect tax consequences of the sale of certain assets by Peace Oil.  The 2007 financial statements were amended to properly reflect the tax consequences of the sale of certain assets by Peace Oil. Subsequently in June, 2008, the Company sold its Peace Oil subsidiary.






ITEM 9B.
OTHER INFORMATION





None




24





PART III





ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Board of Directors





The following tables and narrative description sets forth, as of April 14, 2010, the age, principal occupation and employment, position with us, directorships in other public corporations, and year first elected as one of our directors, of each person currently serving as a director.  Unless otherwise indicated, each director has been engaged in the principal occupation or occupations described below for more than the past five years. We currently have four vacancies on our board of directors.





Name
Age
Director Since
Present Position with SurgeE. Jamie Schloss
66
2008
Chief Executive Officer, DirectorCharles Sage (2)
65
2008
Chairman, DirectorEd Korhonen (1)
74
2008
DirectorWarren Dillard(2)
65
2009
DirectorDave Rapaport (1)
55
2009
DirectorFred Zaziski (1)
56
2009
Director




(1)           Current member of Audit Committee


(2)           Current member of Compensation Committee








E. Jamie Schloss, Chief Executive Officer, Director





Mr. Schloss, a certified public accountant for more than 30 years, joined our Board on February 11, 2008 and previously served on the Surge's Board from October 2004 to July 2006.  Mr. Schloss served as Chief Financial Officer from December 2005 to June 2006 and was appointed to serve as our Chief Executive Officer and Chief Financial Officer on February 19, 2008. Prior to his appointment as Chief Financial Officer in 2004, Mr. Schloss' company Castle Rock Resources, Inc. was engaged as a consultant to Surge. Castle Rock participated in the drilling of more than 20 deep oil & gas wells in Texas, New Mexico, and Louisiana from 1990 to 1995 through joint venture partnerships. In June 1995, Castle Rock and partners sold seven wells in the Townsend (Sublime) Field in south Texas to Weeks Exploration Company for an aggregate of $16,000,000.  Castle Rock continues to own and manage two oil & gas wells in south Texas which have been producing oil and gas for more than 15 years. Mr. Schloss has a Juris Doctorate (JD) degree, a B.A. from the University of Pennsylvania, and an MBA equivalent from Pace College in New York. Mr. Schloss worked as a Certified Public Accountant in California and New Jersey from 1966-1970. Prior to his experience in the oil & gas drilling and exploration business, Mr. Schloss was an executive and officer of several entertainment industry firms including MCA-Universal., Warner Bros. Television Distribution, Western-World Television, and Hal Roach Studios.





Charles Sage, Chairman of the Board





Mr. Sage joined our Board on February 11, 2008.  Mr. Sage was employed by the Goodyear Tire & Rubber Company from 1967 until 2000 where he held senior sales, marketing and general management positions.  Responsibilities included strategic planning, product and process rationalization, organizational development, merger and acquisitions, and succession planning. Since 2001, he has been engaged as a consultant to industrial rubber products companies seeking to broaden market presence through the acquisition of North American operations.  Mr. Sage has a Bachelor of Science (BS) degree from the Kelley School of Business at Indiana University, Bloomington, Indiana.







25




Edwin J. Korhonen, Director





Edwin J. Korhonen, P.Eng. joined our Board on July 14, 2008. He is a graduate of Queen’s University Kingston ON (1957) with a BS.C in Electrical Engineering. He is a member of the Professional Engineers of Ontario. Mr. Korhonen began his career as a Sales Engineer with Allen-Bradley selling electric motor controls. He then joined Campbell Soup in Toronto in 1963 and worked in production management and as Director of Engineering in the US, returning in 1973 as President of the Canadian Company. He subsequently became President of Nabisco Brands and then Maple Leaf Flour Mills in Canada until 1991. For the past 15 years, he has been involved as President with smaller, early-stage businesses, including Tracker Corporation, a bar code identification system to identify and return lost and stolen items; Eco Logic, a high temperature hydrogen technology to destroy hazardous and toxic materials; and since 1998 as President and investor in Northstar Multicorp, manufacturer of a peat-based absorbent to clean up oil spills, currently exported to over 15 countries. He also served 21 years on the Board of Governors of the Queensway Hospital in Toronto, including serving as Treasurer and Chairman of the finance and audit committee for five years. Mr. Korhonen is currently a director of ISG Preventive Technology Inc, a start-up Toronto based company with a patented integrated strain gauge technology that can be used to estimate and predict fatigue life of materials and structures.





Warren M. Dillard, Director





Warren M. Dillard, age 67, has been active in the financial management world for nearly 40 years. A graduate of the Harvard Business School he entered business managing mutual funds, has had top level operating responsibility in a number of positions and is currently active in private investment banking. Mr. Dillard is currently President of Enecor, Inc., a Los Angeles based energy company active in assembling a considerable inventory of lease in the state of Utah on state and federal lands holding deposits of oil sands. Until early 2006, Mr. Dillard was recently a Founder, Chairman and CEO of Global Card International, LLC, an international marketing company that sells and services debit cards to the “unbanked” populations of the world.. Mr. Dillard is the former Vice Chairman of The Gordon Group, of Los Angeles, California, and was responsible for financial and strategic planning, capital formation and corporate coordination of all of The Gordon Group of companies.  Previously, Mr. Dillard was President and Chief Financial Officer of the Group upon its founding in 2000 and was instrumental in developing each of its five business units.  This included a position as Chief Strategic Officer and Director of what is now known as iPayment Holdings, a now-public e-commerce payment gateway serving 20,000 merchants.  For the past 20 years, Mr. Dillard has been active in private investment banking for new and emerging growth companies in a variety of industries including real estate, oil & gas, financial services and technology.  This activity included raising private and public equity capital for an early stage high tech company in Silicon Valley that he took public, to which he was also appointed Chief Operating Officer, Chief Financial Officer and Director.  Mr. Dillard provides capital formation and business strategy consulting for early stage ventures in energy, technology and electronic commerce.  He received his BBA in Accounting from Texas A & M University and his MBA in Finance with Honors from the Harvard Business School.




David A. Rapaport, Director





David A. Rapaport, Esq., age 67, is currently Executive Vice President & General Counsel for High Capital Funding. He was a director and General Counsel for Middle Kingdom Alliance Group, a special purpose acquisition corporation which went public in December 2006 until July, 2009. He served as a director and on the audit committee of Reconditioned systems, Inc. a NASDCS listed refurbisher and distributor of office furniture from 2002 until 2005. His prior experience includes serving on several Boards of directors and managing Initial Public Offerings (IPO’s). Mr. Rapaport has a LLB from St. John’s University School of Law and is admitted to practice law in Georgia and New York.





Fred B. Zaziski, Director





Fred B. Zaziski, age 56, is a senior manager with comprehensive background in domestic and international oil and gas development, operations and strategic management. Mr. Zaziski has more than 20 years diversified oil and gas experience working for Halliburton, National Petroleum Company in Saudi Arabia, and Com Oxy, Houston TX. He was formerly President and Chief Executive Officer or Epsilon Energy, Inc. based in Toronto, Canada and Houston, Texas. He has a BS in Petroleum Engineering from Pennsylvania State University and is a member of the Society of Petroleum Engineers (SPE) and the American Petroleum Institute.





There are no family relationships among any of the directors, executive officers or persons nominated to become a director or executive officer.





26




Independence of the Board of Directors





An "independent director" defined by Rule 10A-3 under the Securities Exchange Act of 1934.  In order to be considered to be independent for purposes of Rule 10A-3, a member of an audit committee of an issuer that is not an investment company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (A) accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer or any subsidiary thereof, provided that, unless the rules of the national securities exchange or national securities association provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the listed issuer (provided that such compensation is not contingent in any way on continued service); or (B) be an affiliated person of the issuer or any subsidiary thereof. Accordingly, an independent director may not be an employee of the Company.





Consistent with these considerations, after review of all relevant transactions and relationships between each director and each nominee recommended by the Board, or any of his or her family members, and Surge, its senior management and its independent auditors, the Board has determined further that Charles Sage, Ed Korhonen, Warren Dillard, Dave Rapaport and Fred Zaziski are independent under the Board’s definition.  In making this determination, the Board considered that there were no new transactions or relationships between its current independent directors and Surge, its senior management and its independent auditors since last making this determination.





Executive Sessions of Independent Directors





Our non-employee directors meet regularly in executive sessions where only non-employee directors are present.  Persons interested in communicating with the non-employee directors may address correspondence to a particular director, or to the non-employee directors generally, in care of Corporate Secretary, Surge Global Energy, Inc., 990 Highland Drive, Suite 206, Solana Beach, California 92075.





Board Meetings





During the fiscal year ended December 31, 2009, the Board held 13 meetings. Each director attended at least 75% of the aggregate total number of meetings of the Board plus the total number of meetings of all committees of the Board on which he served. We encourage, but do not require, our directors to attend the annual meeting of our stockholders




Corporate Governance
  Our business, property and affairs are managed by, or under the direction of, our Board, in accordance with the General Corporation Law of the State of Delaware and our By-Laws. Members of the Board are kept informed of our business through discussions with the Chief Executive Officer and other key members of management, by reviewing materials provided to them by management.
  We continue to review our corporate governance policies and practices by comparing our policies and practices with those suggested by various groups or authorities active in evaluating or setting best practices for corporate governance of public companies. Based on this review, we have adopted, and will continue to adopt, changes that the Board believes are the appropriate corporate governance policies and practices for our Company. We have adopted changes and will continue to adopt changes, as appropriate, to comply with the Sarbanes-Oxley Act of 2002 and subsequent rule changes made by the SEC and any applicable securities exchange.
  Director Qualifications and Diversity
  The board seeks independent directors who represent a diversity of backgrounds and experiences that will enhance the quality of the board’s deliberations and decisions. Candidates shall have substantial experience with one or more publicly traded companies or shall have achieved a high level of distinction in their chosen fields. The board is particularly interested in maintaining a mix that includes individuals who are active or retired executive officers and senior executives, particularly those with experience in the natural resource, finance and capital market industries.
  In evaluating nominations to the Board of Directors, our Board also looks for certain personal attributes, such as integrity, ability and willingness to apply sound and independent business judgment, comprehensive understanding of a director’s role in corporate governance, availability for meetings and consultation on Company matters, and the willingness to assume and carry out fiduciary responsibilities. Qualified candidates for membership on the Board will be considered without regard to race, color, religion, sex, ancestry, national origin or disability.
   27
 Risk Oversight
  Enterprise risks are identified and prioritized by management and each prioritized risk is assigned to a board committee or the full board for oversight as follows:
  Full Board – Risks and exposures associated with corporate governance, and management and director succession planning, strategic, financial and execution risks and other current matters that may present material risk to our operations, plans, prospects or reputation.
  Audit Committee – Risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, financial policies, investment guidelines and credit and liquidity matters.





Committees of the Board





The Board has two committees: an Audit Committee (established in accordance with Section 3(a)(58)(A) of the Exchange Act), and a Compensation Committee, with the members of each committee indicated below.





●
The Audit Committee consists of Dave Rapaport (Chair), Fred Zaziski and Edwin Korhonen.





●
The Compensation Committee consists of Charles Sage (Chair), Warren Dillard and one vacancy.





Audit Committee





The Audit Committee consists of Dave Rapaport, Fred Zaziski and Edwin Korhonen. The functions of the Audit Committee include reviewing and supervising the financial controls of the Company, appointing the Company’s independent registered public accounting firm, reviewing the books and accounts of the Company, meeting with the officers of the Company regarding the Company’s financial controls, acting upon recommendations of the auditors and taking such further actions as the Audit Committee deems necessary to complete an audit of the books and accounts of the Company. The Audit Committee met four times in 2009. Our Board has adopted a written Audit Committee Charter.





The Board has reviewed the definition of independence for Audit Committee members in Rule 10A-3(b)(1) of the Exchange Act and  has determined that all members of our Audit Committee are independent under such standards.  The Board has determined that Mr. Rapaport qualifies as an “audit committee financial expert,” as defined in applicable Securities Exchange Commission (“SEC”) rules.  The Board made a qualitative assessment of Mr. Rapaport’s level of knowledge and experience based on a number of factors, including his education and business experience. The term “Financial Expert” is defined as a person who has the following attributes: an understanding of generally accepted accounting principles and financial statements; has the ability to assess the general application of such principals in connection with the accounting for estimates, accruals and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities; an understanding of internal controls and procedures for financial reporting; and an understanding of audit committee functions.





Compensation Committee





The current members of the Compensation Committee are Charles Sage (Chair), Warren Dillard and one vacancy.  Each member of the Compensation Committee is “independent” under the Board’s definition. The Compensation Committee’s functions include making recommendations to the Board regarding compensation matters and determining compensation for the Chief Executive Officer and Chief Financial Officer. In addition, the Compensation Committee administers the Company’s stock plans (if any) and, within the terms of the respective stock plan, determines the terms and conditions of issuances. The Compensation Committee met three times in 2009. Our Board has adopted a written Compensation Committee Charter.





The Compensation Committee has the central role in determining all aspects of executive compensation. The Compensation Committee makes recommendations to the Board with respect to the overall compensation program for officers, including incentive compensation plans, equity-based plans, severance plans, deferred compensation arrangements, retirement benefits, perquisites and any other compensation programs that primarily benefit officers. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of the company’s Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”). The Compensation Committee also evaluates the CEO’s performance in light of these goals and objectives. Based on individual and company performance, competitive compensation information and other considerations, the committee makes recommendations on CEO pay for approval by the Board. The Compensation Committee tracks the total compensation of each Executive Officer by reviewing, at least once a year, tally sheets that summarize the major elements of compensation. In addition, the Compensation Committee is responsible for reviewing and making recommendations to the Board with respect to new or amended broad-based, “qualified” benefit plans and programs and for reporting to the Board annually on succession planning.  The Compensation Committee has sole authority for compensating, retaining and terminating outside consultants and advisors who assist the Compensation Committee in performing its responsibilities.






28





Our CEO serves as both CEO and CFO and does not determine or approve any element or component of his own base salary, annual incentive awards, long-term incentives or other aspects of compensation. The CEO does provide input and make recommendations to the Compensation Committee. These recommendations are based on various factors including individual contribution and performance, company performance, labor market conditions, complexity and importance of roles and responsibilities, reporting relationships, retention needs and internal pay relationships.





Nominating Committee





The Board does not currently have a nominating committee. The Board previously had a Nominating and Governance Committee, which met one time in 2008.





Stockholder Nominations





The policy of the Board is to consider properly submitted stockholder nominations for candidates for membership on the Board as described below in the section entitled “Identifying and Evaluating Nominees for Directors” and in our Bylaws. In evaluating such nominations, the Board will address the membership criteria set forth below in the section entitled “Director Qualifications”. Any stockholder nominations proposed for consideration by the Board should include the nominee’s name and qualifications for membership on the Board and other information in accordance with the Company’s Bylaws and should be addressed to:





Surge Global Energy, Inc.


990 Highland Drive, Suite 206


Solana Beach, California 92075


Attn: Board Chairman





Director Qualifications





Members of the Board should possess certain core competencies, some of which may include broad experience in business, finance or administration, familiarity with national and international business matters, and familiarity with the oil and gas industry. In addition to having one or more of these core competencies, members of the Board are identified and considered on the basis of knowledge, experience, integrity, diversity, leadership, reputation, and ability to understand our business.





Identifying and Evaluating Nominees for the Board





The Board utilizes a variety of methods for identifying and evaluating nominees for the Board. However, there are no specific minimum qualifications that the Board requires to be met by a director nominee recommended for a position on the Board, nor are there any specific qualities or skills that are necessary for one or more of our Board to possess, other than as are necessary to meet any requirements under rules and regulations applicable to us. Although the Board does not have a specific policy with respect to the diversity, the Board considers the extent to which potential candidates possess sufficiently diverse skill sets and diversity characteristics that would contribute to the Board's overall effectiveness. The Board has the duty of regularly assessing the composition of the Board, including the size of the Board, diversity, age, skills and experience in the context of the needs of the Board. In addition, the Board also has the duty of identifying individuals qualified to become members of the Board. Candidates may come to the attention of the Board through current members of the Board, professional search firms, stockholders or other persons. These candidates will be evaluated by the Board and may be considered at any point during the year. As described above, the Board will consider properly submitted stockholder nominations for candidates for the Board. Following verification of the stockholder status of persons proposing candidates, recommendations will be aggregated and considered by the Board. If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials will be forwarded to the Board.




We have previously, and we may in the future, review materials provided by professional search firms or other parties to identify, evaluate and recruit potential director nominees who are not proposed by a stockholder.  In addition, a professional search firm may be used to make initial contact with potential candidates to assess, among other things, their availability, fit and major strengths.





Communications with the Board





Stockholders may communicate with the Company by writing to Surge Global Energy, Inc., Attention: Corporate Secretary, 990 Highland Drive, Suite 206, Solana Beach California 92075. Communications received from stockholders are forwarded directly to the Board, or to any individual member or members, as appropriate, depending on the facts and circumstances outlined in the communication. The Board has authorized the Secretary of the Company to exclude communications that are patently unrelated to the duties and responsibilities of the Board, such as spam, junk mail and mass mailings. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that any communication that is filtered out by the Secretary pursuant to the policy will be made available to any non-management director upon request.





Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. To our knowledge, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us by reporting persons, and any written representations made to us by such persons that no other reports were required during the fiscal year ended December 31, 2009, all reports were timely filed by our executive officers and directors in 2009.





29





ITEM 11.
EXECUTIVE COMPENSATION





Executive Officers





The following table identifies persons who served as our executive officers serving during any part of the fiscal year ended December 31, 2009, the positions they hold or held, and the year(s) in which they served.  Our officers are elected by the Board to hold office until their successors are elected and qualified.





Name
Position
Age
Served as OfficerE. Jamie Schloss
Chief Executive Officer, Chief Financial Officer, Director
66
2008 – present





Summary Compensation Table





The following table sets forth the overall compensation earned over the fiscal years ended December 31, 2009 and 2008 by (1) each person who served as the principal executive officer of the Company during fiscal year 2009; (2) the Company’s two most highly compensated executive officers as of December 31, 2009 with compensation during fiscal year 2009 of $100,000 or more; and (3) those two individuals, if any, who would have otherwise been in included in section (2) above but for the fact that they were not serving as an executive of the Company as of December 31, 2009.





Name and

Principal

Position

Fiscal

Year

Salary/Fees

($)

Bonus ($)

Restricted

Stock

Awards (1)

OptionsAwards

($)(1)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All

Other

Compensation

($) (2)

Total

($)E, Jamie Schloss,

2009

$ 126,000

$-0-


$ -0-


25,020

-0-

-0-

11,000


$ 162,020Chief ExecutiveOfficer and Chief FinancialOfficer (3)

2008

97,000

-0-


-0-


81,960

-0-

-0-

6,000


184,960
  (1)
The options and restricted stock awards presented in this table for 2009 and 2008 reflects the entire amount to be expensed over the service period as if the total dollar amount were earned in the year of grant. However, the accompanying financial statements reflect the dollar amount expensed by the company during applicable fiscal year for financial statement reporting purposes pursuant to guidance issued by the FASB. Such guidance requires the company to determine the overall value of the stock awards and options as of the date of grant. The stock awards are valued based on the fair market value of such shares on the date of grant and are charged to compensation expense over the related vesting period. The options are valued at the date of grant based upon the Black-Scholes method of valuation, which is expensed over the service period over which the options become vested. As a general rule, for time-in-service-based options, the company will immediately expense any option or portion thereof which is vested upon grant, while expensing the balance on a pro rata basis over the remaining vesting term of the option. For a description of the guidance issued by the FASB and the assumptions used in determining the value of the options under the Black-Scholes model of valuation, see the notes to the consolidated financial statements included with this Form 10-K.





(2)
Includes all other compensation not reported in the preceding columns, including (i) perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000; (ii) any “gross-ups” or other amounts reimbursed during the fiscal year for the payment of taxes; (iii) discounts from market price with respect to securities purchased from the company except to the extent available generally to all security holders or to all salaried employees; (iv) any amounts paid or accrued in connection with any termination (including without limitation through retirement, resignation, severance or constructive termination, including change of responsibilities) or change in control; (v) contributions to vested and unvested defined contribution plans; (vi) any insurance premiums paid by, or on behalf of, the company relating to life insurance for the benefit of the named executive officer; and (vii) any dividends or other earnings paid on stock or option awards that are not factored into the grant date fair value required to be reported in a preceding column.





(3)
Mr. Schloss was appointed to our Board on February 11, 2008 and did not receive any cash compensation for service on the Board during 2009. Mr. Schloss received $126,000 and $97,000 as salaried compensation for being the both the Chief Executive Officer and Chief Financial Officer during 2009 and 2008, respectively. Mr. Schloss was awarded 600,000 options in 2009 that vested over 24 months at an exercise price of $0.055 per share with a full value of $25,020 per FAS 123R and he received 1,700,000 options in 2008 that vested over  12 months at an exercise price of $.08 per share with a full value of $81,960 per FAS 123R. Mr. Schloss received an auto allowance of $9,000 and his wholly owned corporation, Castle Rock Resources, Inc., received $2,000 for tax preparation pursuant to his employment agreement.





No outstanding common share purchase option or other equity-based award granted to or held by any named executive officer in 2009 were re-priced or otherwise materially modified, including extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined, nor was there any waiver or modification of any specified performance target, goal or condition to payout.







30




Employment Agreement





On June 17, 2008, the Company entered into an employment contract with E. Jamie Schloss, Chief Executive Officer and Chief Financial Officer, for employment either directly or indirectly through his controlled company. The guaranteed contract runs for the period June 17, 2008 through April 30, 2010, and also covers reimbursement of expenses for services rendered since February 11, 2008 and adjusted compensation from May 1, 2008 until June 16, 2008.





Mr. Schloss’ (hereafter “Executive’s”) new base salary is as follows: An initial salary for period June 17 through December 31, 2008 at the rate of $9,500 per month. Thereafter, an increase to $10,500 per month until June 30, 2009, then $11,500 per month until April 30, 2010. Executive will also serve as CEO of each subsidiary of the Company at no additional compensation. Executive will also receive payment for the periods May 1, 2008 through June 16, 2008 (the “Pre-Employment Contract Period”) for services rendered prior to the execution of this agreement at the rate of $9,500 per month and reimbursement of other expenses as set forth below.





The agreement also contains the following material provisions:





FRINGE BENEFITS: Company to pay normal payroll taxes directly or reimburse for actual payroll tax amounts owed. Company will also pay Executive’s out of pocket health, dental, vision, and long term care insurance premiums, prescription drug plan, actual out of pocket medical, dental & drugs, not to exceed $1,500 per month in total for medical plans & expenses.





OTHER EXPENSES: Company to reimburse Executive’s normal travel and related expenses while away from Executive’s base of operations which are now Palm Desert, CA for about 10 months of the year and Lexington KY for about 2 months of the year. Company to pay actual out of pocket expenses at Executive’s home for supplies, telephones, cell phone, Internet, and related expenses attributable to Company business commencing from February 11, 2008. Executive will supply all his current furniture & equipment, including without limitation, such things as computers, printers, Fax machines, and telephones at no cost to the Company, but the Company agrees to pay all repairs and maintenance of said items and replace any item which fails or becomes inadequate or obsolete during the term of employment. If Executive relocates to Solana Beach area at Company’s request, Company will pay reasonable actual and relocation costs.




Executive Officer Outstanding Equity Awards At Fiscal Year-End





The following table provides certain information concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive officers that were outstanding as of December 31, 2009.





Name
Number of

Securities

Underlying

Unexercised

Options(#)

Exercisable
Number of

Securities

Underlying

Unexercised

Options(#)

Unexercisable
Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options (#)
Option

Exercise

Price ($)
Option

Expiration

Date
Number of

Shares or

Units of

Stock That

Have Not

Vested (#)
Market

Value

of

Shares

or

Units

of

Stock

That

Have

Not

Vested
Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

VestedE. Jamie Schloss
1,700,000
-0-
-0-
$0.08
2/26/2013
N/A
N/A
N/A(1)
200,000
400,000
-0-
$0.055
4/22/2014
N/A
N/A
N/A
  (1)
Mr. Schloss was appointed to our Board on February 11, 2008. Mr. Schloss was awarded 1,700,000 options in 2008 that vested over 12 months with a full value of $81,960 per FAS 123R and he was awarded 600,000 options in May, 2009 that are vesting over 24 months with a full value of $25,020 per FAS 123R




Director Compensation





Director compensation is developed by the Compensation Committee in coordination with management and submitted to the entire Board for approval.   As of February 12, 2008, all director fees to be paid to members of the Board were eliminated. Accordingly, directors do not presently receive compensation for serving on the Board or on its committees other than the grant of stock options and/or restricted stock awards. Depending on the number of meetings and the time required for the Company’s operations, the Company may decide to compensate its directors in the future.







31




Travel Expenses
 
 All directors shall be reimbursed for their reasonable out of pocket expenses associated with attending the meeting, such amounts are not reflected in the compensation table below.


Compensation Table





The following table shows the overall compensation earned for the 2009 fiscal year with respect to each current and former non-employee and non-executive director who served solely in the capacity of a director during fiscal 2009.


Name and

Principal

Position

Stock

Awards ($)(5)

Option

Awards ($)

(1)

Non-Equity

Incentive Plan

Compensation

($) (2)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation ($)

(3)(4)(6)

Total ($)Directors:Barry Nussbaum (4)  (11)
$
-0-

$
-0-

$
25,020

-0-

-0-

$
-0-

$
25,020Jeffrey Bernstein (5)  (11)
$
-0-

$
-0-

$
12,510

-0-

-0-

$
-0-

$
12,510Mark Fritz (6)  (11)
$
-0-

$
-0-

$
12,510

-0-

-0-

$
-0-

$
12,510Edwin Korhonen (7)
$
-0-

$
-0-

$
12,510

-0-

-0-

$
-0-

$
12,510Kenneth Polin (8)  (11)
$
-0-

$
-0-

$
12,510

-0-

-0-

$
-0-

$
12,510Charles Sage (9)
$
-0-

$
-0-

$
12,510

-0-

-0-

$
-0-

$
12,510Warren Dillard (10)
$
-0-

$
-0-

$
43,920

-0-

-0-

$
-0-

$
43,920David A. Rapaport(10)
$
-0-

$
-0-

$
43,920

-0-

-0-

$
-0-

$
43,920Fred B. Zaziski (10)
$
-0-

$
-0-

$
43,920

-0-

-0-

$
-0-

$
43,920
  (1)
The restricted stock awards presented in this table for 2009 reflects the entire amount to be expensed over the service period as if the total dollar amount were earned in the year of grant. However, the accompanying financial statements reflect the dollar amount expensed by the company during applicable fiscal year for financial statement reporting purposes pursuant to guidance issued by the FASB.  Such guidance requires the company to determine the overall value of the restricted stock awards and options as of the date of grant based upon the Black-Scholes method of valuation, and to then expense that value over the service period over which the restricted stock awards and options become vested. As a general rule, for time-in-service-based options, the company will immediately expense any restricted stock awards and option or portion thereof which is vested upon grant, while expensing the balance on a pro rata basis over the remaining vesting term of the restricted stock awards and options. For a description guidance issued by the FASB and the assumptions used in determining the value of the restricted stock awards and options under the Black-Scholes model of valuation, see the notes to the financial statements included with this Form 10-K.





(2)
Excludes awards or earnings reported in preceding columns.





(3)
Includes all other compensation not reported in the preceding columns, including (i) perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000; (ii) any “gross-ups” or other amounts reimbursed during the fiscal year for the payment of taxes; (iii) discounts from market price with respect to securities purchased from the company except to the extent available generally to all security holders or to all salaried employees; (iv) any amounts paid or accrued in connection with any termination (including without limitation through retirement, resignation, severance or constructive termination, including change of responsibilities) or change in control; (v) contributions to vested and unvested defined contribution plans; (vi) any insurance premiums paid by, or on behalf of, the company relating to life insurance for the benefit of the director; (vii) any consulting fees earned, or paid or payable; (viii) any annual costs of payments and promises of payments pursuant to a director legacy program and similar charitable awards program; and (ix) any dividends declared or other earnings paid on stock or option awards that are not factored into the grant date fair value required to be reported in a preceding column.(4)
Mr. Nussbaum received in 2009 options to purchase 600,000 shares exercisable at $.055 per share vesting over 24 months.  The total dollar value of the options in the table above represents the full value of the options pursuant to ASC 718







32




(5)
Mr. Bernstein received in 2009 options to purchase 300,000 shares exercisable at $.055 per share vesting over 12 months. The total dollar value of the options in the table above represents the full value of the options pursuant to ASC 718.





(6)
Mr. Fritz received in 2009 options to purchase 300,000 shares exercisable at $.055 per share vesting over 12 months. The total dollar value of the options in the table above represents the full value of the options pursuant to ASC 718





(7)
Mr. Korhonen received in 2009 options to purchase 300,000 shares exercisable at $.055 per share vesting over 12 months. The total dollar value of the options in the table above represents the full value of the options pursuant to ASC 718





(8)
Mr. Polin received in 2009 options to purchase 300,000 shares exercisable at $.055 per share vesting over 12 months. The total dollar value of the options in the table above represents the full value of the options pursuant to ASC 718





(9)
Mr. Sage received in 2009 options to purchase 300,000 shares exercisable at $.055 per share vesting over 12 months. The total dollar value of the options in the table above represents the full value of the options pursuant to ASC 718





(10)
Messrs. Dillard, Rapaport and Zaziski each received in 2009 options to purchase 800,000 shares exercisable at $.07 per share vesting over 24 months. The dollar value of the options shown in the table above represents the full value of the options pursuant to ASC 718





(11)
Represents a person who resigned from the Board since December 31, 2009





Equity Compensation Plan Information





The following table sets forth information about shares of our common stock that may be issued upon exercise of options under all of our equity compensation plans as of December 31, 2009.





Plan category
Number of securities to be

issued upon exercise

of outstanding options,

warrants and rights

(a)
Weighted average exercise

price of outstanding options,

warrants and rights

(b)
Number of securities

remaining available

for future issuance

(c)Equity compensation plans approved by security holders
--
--
--





(1)
We do not have any equity compensation plans, but we have entered into individual compensation arrangements with officers and directors providing options to purchase our common stock in exchange for services to us.





Pension Plans





We had sponsored a voluntary qualified 401(k) savings plan and a pension plan, available to full-time employees in 2007 and this plan was cancelled at the end of 2008. Our pension plan is a non-contributory defined contribution plan. Our 401(k) plan provides for discretionary employee contribution of up to 100% of annual pre-tax earnings, subject to the maximum amount established annually under Section 401(k) of the Internal Revenue Code. In the years ended December 31, 2009, 2008 and 2007, we made discretionary contributions totaling $-0-, $-0- and $-0-, respectively, to our 401(k) saving plan and pension plan and reduced base salaries to leave total gross compensation unchanged.  Total expense relative to these plans for the years ended December 31, 2009, 2008 and 2007 was $-0-, $-0- and $-0-, respectively.




COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION





None of the members of the Compensation Committee during the fiscal year ended December 31, 2009 was, during such year or prior thereto, an officer or employee of the Company or any of its subsidiaries. During fiscal 2009, no executive officer of the Company served as a director or member of the compensation committee (or other Board committee performing similar functions, or in the absence of such committee, the entire Board) of another entity, one of whose executive officers served as a director or member of the Compensation Committee of the Company.








33








ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





As of April 14, 2010, the following persons were directors, nominees, executive officers (each a “Named Executive Officer”), or others with beneficial ownership of five percent or more of our voting securities.  The information set forth below has been determined in accordance with Rule 13d-3 under the Exchange Act based upon information furnished to us or to the SEC by the persons listed.  Unless otherwise noted the address of each of the following persons is c/o Surge Global Energy, Inc., 990 Highland Drive, Suite 206, Solano Beach, CA 92075.





Beneficial Owner

Shares Beneficially Owned
PercentageDirectorsWarren Dillard

200,000

(2)
0.81David A. Rapaport

200,000

(2)
0.81Fred B. Zaziski

200,000

(2)
0.81Edwin Korhonen

781,227

(3)
2.36Charles Sage

1,150,000

(4)
3.44Named Executive Officers/DirectorsE. Jamie Schloss

4,050,000

(6)
11.7Directors and officers as a group (6 persons)

6,781,227

(7)
18.5Other Beneficial OwnersGemini Master FundLtd.

12220 El Camino

Real, Suite 400,

San Diego, CA 92130

2,000,000

(8)
5.81216848 Alberta Ltd.

9702 71st Avenue,

Grande Prairie,

Alberta,

Canada T8V 5E1

4,022,790

(9)
12.2Barry Nussbaum

2,082,500

(10)
6.06Mark C. Fritz

4,462,500

(5)
12.9




(1)
Includes all shares beneficially owned, whether directly and indirectly, individually or together with associates, jointly or as community property with a spouse, as well as any shares as to which beneficial ownership may be acquired within 60 days of April 1, 2010 by the exercise of options, warrants or other convertible securities.  All percents of class are based upon a total outstanding amount of 32,637,387 shares of our voting securities outstanding as of April 1, 2010.  Unless otherwise specified in the footnotes that follow, the indicated person has sole voting power and sole investment power with respect to the shares.





(2)
Includes vested options or options that will vest through June 5, 2010 at the rate of 33,333 shares per month.





(3)
Includes 331,227 shares and options to purchase 550,000 shares.





(4)
Includes 50,000 shares owned by his wife, Patricia E. Sage and 800,000 shares issuable upon exercise of stock options.(5)
Includes 2,612,500 shares of common stock, 1,050,000 shares of common stock issuable upon exercise of warrants and 800,000 shares of common stock issuable upon exercise of stock options.(6)
Includes 400,000 shares of common stock owned by Castle Rock Resources, Inc., of which Mr. Schloss is the sole owner and 2,300,000 shares issuable upon exercise of stock options which have vested or will vest through May 23, 2010.





(7)
Includes 4,449,992 shares of common stock issuable upon exercise of options.





(8)
Gemini Master Fund, Ltd., a Cayman Island company, beneficially owns warrants to purchase 2,000,000 shares of the Company’s common stock. Gemini Strategies, LLC is the investment manager for Gemini Master Fund and Steven Winters is its managing member. The information set forth under Item 12 for Gemini is based upon a Schedule 13G for December 31, 2007 filed with the Securities and Exchange Commission on January 30, 2008.





(9)
1216848 Alberta Ltd. is controlled by George Brown.(10)
Includes 332,500 shares, options to purchase 1,550,000 shares and warrants to purchase 200,000 shares.





34





ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE




Transactions prior to January 1, 2009





For a description of certain relationships and related transactions that occurred prior to fiscal 2009, the Company incorporates by reference Item 13 of its Form 10-K for its fiscal year ended December 31, 2008.





Transactions since January 1,2009





On February 19, 2010 the following directors of the Company resigned from the Board: Jeffrey Bernstein, Barry Nussbaum and Kenneth Polin (the “Former Directors”).  At the same time, the Company entered into consulting agreements with these three Former Directors for a period of six months or until August 18, 2010.  The consulting agreement provides for the cancellation of previously issued stock options which were granted to compensate the three Former Directors for their services to the Company.





The agreed upon compensation for the Former Directors is, in the aggregate, an initial payment of $100,000 due on February 19, 2010 and six equal  installments of $16,667 per month commencing April 19, 2010.  The payments will be divided among the Former Directors on a pro rata basis based on the number of options being canceled previously held by each Former Director.





Also pursuant to the consulting agreement, the Company and the Former Directors agreed to cancel immediately one-half of the outstanding stock options (2.35 million stock options) previously issued to the Former Directors.  The remaining 2.35 million stock options will be cancelled after all consulting payments due are made.





Independence of Directors





Reference is made to Item 10 for a definition of independent directors and management's identification of which directors the board has determined to be independent.








ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit Fees





The aggregate fees RBSM LLP (our previous auditors) billed us for in 2009 (for fiscal 2008) for professional services it rendered to us for the review of the financial statements included in our annual report on Form 10-K, as well as for services that are normally provided by RBSM LLP in connection with statutory and regulatory filings or engagements for 2008 was $7,500.





Our current auditors, GBH CPAs, PC, billed us $73,000 and $76,146 for professional services it rendered to us for the audit of the annual financial statements and review of the quarterly financial statements for 2009 and 2008, respectively.





Audit-Related Fees





The aggregate fees RBSM LLP (our previous auditors) billed us in fiscal year 2008 for professional services rendered for audit related-fees was $0 in fiscal 2008. The aggregate fees GBH CPAs, PC billed us in fiscal year 2009 for professional services rendered for audit-related fees was $0 in fiscal 2009.





Tax Fees





The aggregate fees RBSM LLP (our previous auditors) billed us in fiscal year 2008 for professional services rendered for tax compliance, tax advice or tax planning was $0 in fiscal 2008. The aggregate fees GBH CPAs PC billed us in fiscal year 2009 for professional services rendered for tax compliance, tax advice or tax planning was $0 in fiscal 2009. We paid $2,000 to Castle Rock Resources, Inc.(EJ Schloss) for tax related services.





35





All Other Fees





RBSM LLP (our previous auditors) and GBH CPAs, PC (our new auditors) did not provide us, or bill us for, any products or services in the last two fiscal years, other than the services performed in connection with the fees reported under the captions “Audit Fees,” “Audit-Related Fees” and “Tax Fees” above.








Audit Committee Pre-Approval Policies and Procedures





The Audit Committee of our Board (the “Audit Committee”) has adopted a policy requiring that all services provided to us by our independent registered public accounting firm be pre-approved by the Audit Committee. The policy pre-approves specific types of services that the independent registered public accounting firm may provide us if the types of services do not exceed specified cost limits. Any type of service that is not clearly described in the policy, as well as any type of described service that would exceed the pre-approved cost limit set forth in the policy, must be explicitly approved by our Audit Committee prior to any engagement with respect to that type of service. Our Audit Committee reviews the pre-approval policy and establishes fee limits annually, and may revise the list of pre-approved services from time to time.








PART IV





ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





All exhibits are filed herewith unless otherwise noted.





3.1
Certificate of Incorporation filed with the State of Delaware on November 25, 1997, as amended (including Certificate of Merger, filed November 25, 1997, Certificate of Designation, filed February 2, 1998, Certificate of Amendment, filed May 12, 1998, Certificate of Renewal, filed August 20, 2003, Certificate of Amendment, dated August 20, 2003 and Certificate of Amendment, filed September 30, 2004) (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





3.2
Certificate of Amendment to Certificate of Incorporation filed with the State of Delaware on February 22, 2007 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed February 22, 2007)





3.3
Amended and Restated Certificate of Designations, Preferences, Rights and Limitations of Special Voting Preferred Stock filed with the State of Delaware on March 7, 2007 (incorporated herein by reference to Exhibit 3(i).1 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





3.4
Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3(ii).1 to the Company’s Current Report on Form 8-K, filed October 25, 2006)





9.1
Voting Trust Agreement by and among the Company, Northern Alberta Oil Ltd. and Deep Well Oil and Gas (Alberta) Ltd. dated November 15, 2005 (incorporated herein by reference to Exhibit 10.20 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.1
Employment Agreement by and between the Company and David Perez dated November 30, 2004 (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.2
Sublease by and between the Company and Granite Financial Group dated November 22, 2004 (incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.3
Farmout Agreement by and among the Company, Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.), Northern Alberta Oil Ltd. and Deep Well Oil & Gas, Inc. dated February 25, 2005 (incorporated herein by reference to Exhibit 10.5 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)







36




10.4
Farmout Amending Agreement by and among the Company, Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.), Northern Alberta Oil Ltd. and Deep Well Oil & Gas, Inc. dated November 15, 2005 (1) (incorporated herein by reference to Exhibit 10.6 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.5
Form of Note and Warrant Purchase Agreement by and between the Company and each of Mark C. Fritz, Victor G. Mellul and Irving L. Plaksin dated March 17, 2005 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed March 24, 2005)





10.6
Form of Convertible Note by and between the Company and each of Mark C. Fritz, Victor G. Mellul and Irving L. Plaksin dated March 17, 2005 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed March 24, 2005)





10.7
Form of Warrant by and between the Company and each of Mark C. Fritz, Victor G. Mellul and Irving L. Plaksin dated March 17, 2005 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed March 24, 2005)





10.8
Letter Agreements by and between the Company and each of Mark C. Fritz, Victor G. Mellul and Irving L. Plaksin dated July 17, 2005 (incorporated herein by reference to Exhibit 10.10 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.9
Form of Securities Purchase Agreement by and among the Company, Mark Fritz, Chet Idziszek, Gary Vandergrift, Burton Gersh and Irving Plaksin effective as of August 19, 2005, relating to the private placement offering of common stock and warrants for an aggregate purchase price of $300,000 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 25, 2005)





10.10
Form of Warrant by and among the Company, Mark Fritz, Chet Idziszek, Gary Vandergrift, Burton Gersh and Irving Plaksin effective as of August 19, 2005 (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.11
Form of Registration Rights Agreement by and among the Company, Mark Fritz, Chet Idziszek, Gary Vandergrift, Burton Gersh and Irving Plaksin effective as of August 19, 2005 (incorporated herein by reference to Exhibit 10.13 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.12
Securities Purchase Agreement by and between the Company and Pawnee Holding Corporation dated October 24, 2005 (incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.13
Warrant by and between the Company and Pawnee Holding Corporation dated October 24, 2005 (incorporated herein by reference to Exhibit 10.15 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.14
Registration Rights Agreement by and between the Company and Pawnee Holding Corporation dated October 24, 2005 (incorporated herein by reference to Exhibit 10.16 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.15
Form of Subscription Agreement for 7% Convertible Debentures, by and between Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd) and certain purchasers dated November 15, 2005 (incorporated herein by reference to Exhibit 10.17 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.16
Agency Agreement by and among the Company, Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.), and MGI Securities Inc. dated November 15, 2005 (incorporated herein by reference to Exhibit 10.18 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





37




10.17
Shareholders Agreement by and among the Company, Leigh Cassidy, Fred Kelly and Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) dated November 15, 2005 (incorporated herein by reference to Exhibit 10.19 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.18
Trust Indenture by and among the Company, Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) and Valiant Trust Company dated November 15, 2005 (incorporated herein by reference to Exhibit 10.21 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.19
Registration Rights Agreement by and among the Company and MGI Securities, Inc., as agent to the purchasers of the debentures dated November 15, 2005 (incorporated herein by reference to Exhibit 10.22 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.20
Release and Indemnification Agreement by and between the Company and Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.), dated November 15, 2005 (incorporated herein by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-KSB, filed April 17, 2006)





10.21
Escrow Agreement by and among the Company, Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) and Valiant Trust Company, dated November 15, 2005 (incorporated herein by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-KSB, filed April 17, 2006)





10.22
Securities Purchase Agreement by and between the Company and the Zemer Family Trust dated November 16, 2005 (incorporated herein by reference to Exhibit 10.23 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.23
Warrant by and between the Company and the Zemer Family Trust dated November 16, 2005 (incorporated herein by reference to Exhibit 10.24 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.24
Registration Rights Agreement by and between the Company and the Zemer Family Trust dated November 16, 2005 (incorporated herein by reference to Exhibit 10.25 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.25
Securities Purchase Agreement by and between the Company and Benjamin Financial Limited Partnership dated November 30, 2005 (incorporated herein by reference to Exhibit 10.26 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.26
Warrant by and between the Company and Benjamin Financial Limited Partnership dated November 30, 2005 (incorporated herein by reference to Exhibit 10.27 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.27
Registration Rights Agreement by and between the Company and Benjamin Financial Limited Partnership dated November 30, 2005 (incorporated herein by reference to Exhibit 10.28 to the Company’s Registration Statement on Form SB-2, filed December 30, 2005)





10.28
Indenture by and between Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) and Valiant Trust Company dated December 20, 2005 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed December 28, 2005)





10.29
Form of 7% Secured Convertible Debentures Certificate dated December 20, 2005 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed December 28, 2005)





10.30
Form of Subscription Agreement for Flow-Through Shares by and between Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) and certain purchasers dated December 20, 2005 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December 28, 2005)





10.31
Form of Subscription Agreement for 7% Secured Convertible Debentures by and between Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) and certain purchasers dated December 20, 2005 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed December 28, 2005)







38




10.32
Agency Agreement by and between Signet Energy, Inc. (f/k/a Surge Global Energy (Canada) Ltd.) and MGI Securities, Inc. dated December 20, 2005 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed December 28, 2005)





10.33
Form of Securities Purchase Agreement effective as of March 14, 2006, relating to the private placement offering of common stock and warrants for an aggregate purchase price of $1,800,000 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 23, 2006)





10.34
Form of Warrant, effective as of March 14, 2006, relating to the private placement offering of common stock and warrants for an aggregate purchase price of $1,800,000 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed March 23, 2006)





10.35
Form of Registration Rights Agreement, effective as of March 14, 2006, relating to the private placement offering of common stock and warrants for an aggregate purchase price of $1,800,000 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed March 23, 2006)





10.36
Form of Non-Employee Director Agreement (incorporated herein by reference to Exhibit 10.37 to the Company’s Registration Statement on Form SB-2, filed December 20, 2006)





10.37
Form of Nonstatutory Stock Option Agreement (incorporated herein by reference to Exhibit 10.38 to the Company’s Registration Statement on Form SB-2, filed December 20, 2006)





10.38
Consulting Agreement by and between the Company and Richard Collato dated October 6, 2006 (incorporated herein by reference to Exhibit 10.39 to the Company’s Registration Statement on Form SB-2, filed December 20, 2006)





10.39
Securities Purchase Agreement by and between the Company and each of Gemini Master Fund Limited and Mark C. Fritz dated November 28, 2006 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December 4, 2006)





10.40
Registration Rights Agreement by and between the Company and each of Gemini Master Fund Limited and Mark C. Fritz dated November 28, 2006 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed December 4, 2006)





10.41
Common Stock Purchase Warrants dated November 28, 2006 issued by the Company to each of Gemini Master Fund Limited and Mark C. Fritz (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed December 4, 2006)





10.42
“Greenshoe” Common Stock Purchase Warrants dated November 28, 2006 issued by the Company to each of Gemini Master Fund Limited and Mark C. Fritz (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed December 4, 2006)





10.43
Stock Purchase Agreement among Cold Flow Energy ULC, the Company, Peace Oil Corp., and Shareholders of Peace Oil Corp. dated November 30, 2006 (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed December 4, 2006)





10.44
Employment Agreement between the Company and William Greene dated December 14, 2006 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, filed with the Securities and Exchange Commission on December 18, 2006)





10.45
First Amendment to Stock Purchase Agreement by and among Cold Flow Energy ULC, the Company, Peace Oil Corp., and the shareholders of Peace Oil dated March 2, 2007 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 8, 2007)







39




10.46
Voting and Exchange Trust Agreement by and among the Company, Cold Flow Energy ULC, and Olympia Trust Company dated March 2, 2007 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed March 8, 2007)


10.47
Support Agreement by and among the Company, Cold Flow Energy ULC, and 1294697 Alberta Ltd. dated March 2, 2007 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.48
Promissory Note dated March 2, 2007 issued by Cold Flow Energy ULC in the principal amount of CDN$1,500,000 with a maturity date of June 30, 2007 (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.49
Promissory Note dated March 2, 2007 issued by Cold Flow Energy ULC in the principal amount of CDN$1,000,000 with a maturity date of July 30, 2007 (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.50
Promissory Note dated March 2, 2007 issued by Cold Flow Energy ULC in the principal amount of CDN$1,500,000 with a maturity date of August 30, 2007 (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.51
Promissory Note dated March 2, 2007 issued by Cold Flow Energy ULC in the principal amount of CDN$1,600,000 with a maturity date of December 31, 2007 (incorporated herein by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.52
Petroleum, Natural Gas and General Rights Conveyance by and among 1304146 Alberta Ltd., Peace Oil Corp., Cold Flow Energy ULC, and the Company dated March 2, 2007 (incorporated herein by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.53
Escrow Agreement by and among Burstall Winger LLP, Peace Oil Corp., the Company, Cold Flow Energy ULC, and 1304146 Alberta Ltd. dated March 2, 2007 (incorporated herein by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.54
Royalty Agreement by and between 1304146 Alberta Ltd. and Peace Oil Corp. dated March 2, 2007 (incorporated herein by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.55
Warrant to purchase 1,000,000 shares of Surge common stock dated March 2, 2007 (incorporated herein by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed March 8, 2007)





10.56
Second Amendment to Stock Purchase Agreement among Cold Flow Energy ULC, the Company, Peace Oil Corp. and the Shareholders of Peace Oil Corp. dated April 16, 2007 (incorporated herein by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K/A, filed May 16, 2007)





10.57
Exchange, Purchase and Amendment Agreement dated as of April 19, 2007 by and between the Company and Gemini Master Fund, Ltd. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 25, 2007)





10.58
Convertible Note Due May 1, 2008 Issued to Gemini Master Fund, Ltd. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed April 25, 2007)





10.59
Agreement to Vote dated May 22, 2007 between the Company, Signet Energy, Inc., Andora Energy Corporation and David Perez (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 29, 2007)





10.60
Letter Agreement dated June 13, 2007 between the Company, Peace Oil Corp. and North Peace Energy Corp. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 15, 2007)





40




10.61
Agreement of Purchase and Sale dated as of June 25, 2007 among Peace Oil Corp., North Peace Energy Corp. and the Company (incorporated herein by reference to Exhibit 10.63 to the Company’s Registration Statement on Form SB-2, filed July 3, 2007)





10.62
Addendum to Employment Agreement between William Greene and the Company, dated as of June 29, 2007 (incorporated herein by reference to Exhibit 10.64 to the Company’s Registration Statement on Form SB-2, filed July 3, 2007)





10.63
Stock Option Agreement dated July 17, 2007 between the Company and David Perez  (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 23, 2007)





10.64
Stock Option Agreement dated July 17, 2007 between the Company and William Greene (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed July 23, 2007)





10.65
Escrow Agreement dated August 8, 2007 between the Company and Gemini (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed August 10, 2007)





10.66
Redemption Agreement dated August 8, 2007 between the Company and Gemini (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 10, 2007)





10.67
Agreement to Vote dated August 17, 2007 between Signet Energy Inc., Andora Energy Corporation, the Company and David Perez (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB/A, filed March 25, 2008)





10.68
First Supplemental Trust Indenture dated August 17, 2007 between the Company, Signet Energy, Inc., and Valiant Trust Company (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-QSB/A, filed March 25, 2008)





10.69
Addendum to Employment Agreement dated December 31, 2007 by and between the Company and William Greene (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 4, 2008)





10.70
Purchase and Sale Agreement dated March 18, 2008, by and among Surge Global Energy, Inc.; Oromin Enterprises, Ltd.; Irie Isle Limited; Cynthia Holdings Ltd.; and Chet Idziszek (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 24, 2008)





10.71
Stock Option Agreement between the Company and Charles V. Sage dated February 27, 2008 and entered into on or about April 10, 2008





10.72
Stock Option Agreement between the Company and Barry Nussbaum dated February 27, 2008 and entered into on or about April 10, 2008





10.73
Stock Option Agreement between the Company and Jeffrey Lewis Bernstein dated February 27, 2008 and entered into on or about April 10, 2008





10.74
Stock Option Agreement between the Company and E. Jamie Schloss dated February 27, 2008 and entered into on or about April 10, 2008.





10.75
Stock Option Agreement between the Company and Kenneth Polin dated March 18, 2008 and entered into on or about April 10, 2008.





10.76
Employment Agreement for E. Jamie Schloss dated as of June 17, 2008. (Incorporated by reference to Form 8-K/A - June 17, 2008 - date of earliest event filed on April 15, 2009)





10.77
Left blank intentionally.




41





10.78
Share Purchase Agreement – Purchase of 1,405,145 CFE Preferred Shares owned by Fisher Family Trust (Incorporated by reference to the Company’s Form 8-K filed June 23, 2008 - date of earliest event – June 17, 2008)





10.79
Share Purchase Agreement – Purchase of 1,905,145 CFE Preferred Shares owned by Stouthearted Family Trust (Incorporated by reference to the Company’s Form 8-K filed June 23, 2008  - date of earliest event – June 17, 2008)





10.80
Share Purchase Agreement – Purchase of 500,000 common shares of the Registrant from the Fisher Family Trust (Incorporated by reference to the Company’s Form 8-K filed June 23, 2008  - date of earliest event – June 17, 2008)





10.81
Share Purchase Agreement – Purchase of 1,905,145 CFE Preferred Shares owned by Cairns Family Trust. (Incorporated by reference to the Company’s Form 8-K filed June 23, 2008  - date of earliest event – June 17, 2008)





10.82
Share Purchase Agreement – Purchase of 806,886 common Shares of the Registrant from the Liu Family Trust.  (Incorporated by reference to the Company’s Form 8-K filed June 23, 2008  - date of earliest event – June 17, 2008)





10.83
Share Purchase Agreement – Purchase of 1,882,732 common Shares of the Registrant from the Ma Family Trust. (Incorporated by reference to the Company’s Form 8-K filed June 23, 2008  - date of earliest event – June 17, 2008)





10.84
Purchase and Sale Agreement dated June 27, 2008 by and among Cold Flow Energy ULC., Peace Oil Corp, and CPO Acquisition Corp.  (Incorporated by reference to the Company’s Form 8-K filed July 2, 2008  - date of earliest event - June 27, 2008)





10.85
Complaint filed June 23, 2008 David Perez vs. Surge Global Energy, Inc. (Incorporated by reference to the Company’s Form 8-K filed July 2, 2008 - date of earliest event - June 27, 2008)





10.86
Share Purchase Agreement – Purchase of 500,000 shares owned by Fisher Family Trust. (Incorporated by reference to the Company’s Form 8-K filed July 16, 2008  - date of earliest event – July 11, 2008)





10.87
Left blank intentionally.





10.88
Agreement dated as of August 15, 2008 with Tetuan Resources Inc. (Incorporated by reference to the Company’s Form 8-K filed August 21, 2008  - date of earliest event – August 15, 2008)





10.89
Settlement Agreement dated February 2, 2010 by and among Surge Global Energy, Inc., 1358026 Alberta Ltd., Signet Energy and Andora Energy Corporation. (Incorporated by reference to Form 8-K dated February 2, 2010 filed with the SEC on February 8, 2010.)





10.90
Consulting Agreement of February 19, 2010 - Jeffrey Bernstein. (Incorporated by reference to Form 8-K - date of earliest event - February 19, 2010 filed with the SEC on February 23, 2010.)





10.91
Consulting Agreement of February 19, 2010 - Barry Nussbaum. (Incorporated by reference to Form 8-K - date of earliest event - February 19, 2010 filed with the SEC on February 23, 2010.)





10.92
Consulting Agreement of February 19, 2010 - Kenneth Polin. (Incorporated by reference to Form 8-K - date of earliest event - February 19, 2010 filed with the SEC on February 23, 2010.)





31.1
Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1
Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





42




SIGNATURES





In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





Dated:  April 15, 2010
SURGE GLOBAL ENERGY, INC.By:
/s/ E. Jamie SchlossE. Jamie Schloss

Chief Executive Officer and

Chief Financial Officer

(Principal Executive and Accounting Officer)





In accordance with the Exchange Act, 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
DATE/s/ E. Jamie Schloss

Chief Executive Officer, Chief Financial Officer and Director
April 15, 2010E. Jamie Schloss/s/ David A. Rapaport

Director
April 15, 2010David A. Rapaport/s/ Edwin Korhonen

Director
April 15, 2010Edwin Korhonen/s/ Charles Sage

Chairman of the Board
April 15, 2010Charles Sage/s/ Warren Dillard

Director
April 15, 2010Warren Dillard/s/ Fred B. Zaziski

Director
April 15, 2010Fred B. Zaziski








43