Attached files

file filename
EX-31.1 - CERTIFICATION OF JORDAN M. ESTRA PURSUANT TO 18 U.S.C. ?1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ENSURGE INCex31-1.htm
EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. ?1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ENSURGE INCex32-1.htm
EX-31.2 - CERTIFICATION OF JEFF A. HANKS PURSUANT TO 18 U.S.C. ?1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ENSURGE INCex31-2.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, DC  20549

FORM 10-K / A
Amendment #2

(Mark One)
[ X ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended December 31, 2010
 
or 
 
[    ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ____________ to ____________
 
Commission File Number 033-03275-D
 
____________

ENSURGE, INC.
(Name of registrant as specified in its charter)
 
Nevada
(State or other jurisdiction of
incorporation or organization)
87-0431533
(I.R.S. Employer
Identification No.)
   
1001 Brickel Bay Drive, 27th Floor
Miami, Florida
(Address of Principal Executive Offices)
 
33131
(Zip Code)

Issuer's Telephone Number (888) 978-9994

Securities Registered Pursuant to Section 12(b) of the Exchange Act:  None

Securities Registered Pursuant to Section 12(g) of the Exchange Act:  None

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange. [  ] Yes [X] No

 
 

 

Note – Checking the box above will not relieve any registrant to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 such filing requirements for the past 90 days. [X] Yes [ ] No

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 (§ 229.405 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 [ ] No

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

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

Large accelerated filer
 
Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
 
Smaller reporting company R

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2010 was approximately $14,349,023.  The registrant had issued and outstanding 33,138,726 shares of its common stock on April 13, 2012.

EXPLANATORY NOTE

The purpose of this Amendment on Form 10-K/A for Ensurge, Inc. annual report on Form 10-K for the period ended December 31, 2010, filed with the Securities and Exchange Commission on April 7, 2011, is to amend the initial filing to update the disclosure of warrants sold to an investor.  The warrants were booked as an equity item and should have been booked as a derivative, and stock was issued for services at an incorrect value.

This Amendment No. 2 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of Ensurge, Inc. for the fiscal year ended December 31, 2010, originally filed with the Securities and Exchange Commission (“SEC”) on April 7, 2011 (the “Original Filing”) and amended again on February 6, 2012. This Form 10-K/A does not attempt to modify or update any other disclosures set forth in the Original Filing.  Additionally, this amended Form 10-K/A, except for the amended information, speaks as of the filing date of the Original Filing and does not update or discuss any other developments affecting us subsequent to the date of the Original Filing.


 
 

 

ENSURGE, INC.
FORM 10-K / A
FOR THE YEAR ENDED DECEMBER 31, 2010
 
PART I
   
ITEM 1.
BUSINESS
1
ITEM 2.
PROPERTIES
3
ITEM 3.
LEGAL PROCEEDINGS
3
ITEM 4.
(REMOVED AND RESERVED)
4
     
PART II
   
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
4
ITEM 6.
SELECTED FINANCIAL DATA
5
     
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
9
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
10
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
11
 
BALANCE SHEETS
12
 
STATEMENTS OF OPERATIONS
13
 
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
14
 
STATEMENTS OF CASH FLOWS
15
 
NOTES TO FINANCIAL STATEMENTS
16
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
26
ITEM 9A.
CONTROLS AND PROCEDURES
26
ITEM 9B.
OTHER INFORMATION
26
     
PART III
   
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
27
ITEM 11.
EXECUTIVE COMPENSATION
29
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
32
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
32
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
32
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
32
 
SIGNATURES
33
 
EXHIBIT INDEX
34
     
     
     
 
 
 

 

Forward-Looking Statements and Associated Risks
 
This Report, including all documents incorporated herein by reference, includes certain “forward-looking statements” within the meaning of that term in Section 13 or 15(d) of the Securities Act of 1934, and Section 21E of the Exchange Act, including, among others, those statements preceded by, followed by or including the words “believes,” “expects,” “anticipates” or similar expressions.
 
These forward-looking statements are based largely on the Company’s current expectations and are subject to a number of risks and uncertainties.  The Company’s actual results could differ materially from these forward-looking statements.  Important factors to consider in evaluating such forward-looking statements include:
 
 
·
changes in the Company’s business strategy or an inability to execute its strategy due to unanticipated changes in the market,
 
 
·
the Company’s ability to raise sufficient capital to meet operating requirements,

 
·
various competitive factors that may prevent the Company from competing successfully in the marketplace, and

 
·
changes in external competitive market factors or in the Company’s internal budgeting process which might impact trends in the Company’s results of operations.
 
In light of these risks and uncertainties, there can be no assurance that the events contemplated by the forward-looking statements contained in this Report will, in fact, occur.
 
 
 

 

PART I

ITEM 1.
BUSINESS
 
Ensurge, Inc., a Nevada corporation (the “Company”) is a gold processing and mining company.

General - Development of Business
 
The Company was incorporated under the name Sunwalker Development, Inc. in the State of Utah on March 28, 1985, and was subsequently re-incorporated in Nevada on September 14, 1999.  The Company was formed for the purpose of providing a business framework within which capital could be raised and business opportunities, with profit potential, could be sought.  From the period of inception until December 31, 1989, the Company operated as a development stage corporation.  Effective February 1, 1990, the Company began permanent operations in the mining industry with emphasis on decorative rock used in landscaping.
 
In 1990, the Company acquired a mining property located in Morristown (near Wickenburg), Arizona.  In 1994 and 1995, the Company sold all of its assets and ceased active operations.
 
Effective October 7, 1999, the Company merged with ECenter, Inc, a Utah corporation.  Subsequently, the Company changed its name to iShopper.com, Inc.  As a result of the merger, the Company had two wholly-owned subsidiaries:  Outbound Enterprises, Inc. and iShopper Internet Services, Inc.  In November 1999, the Company refocused its efforts into becoming an Internet holding company.  In September 2000, Outbound Enterprises discontinued its operations.  In December 2000, iShopper Internet Services discontinued its operations.  On January 31, 2000, the Company entered into a sales agreement with Digital Commerce Bank, Inc. to purchase its assets.  This sales agreement was finalized January of 2002.
 
On November 1, 1999, the Company purchased NowSeven.com, Inc. for a total of 1,667 shares of the Company’s common stock.  NowSeven.com, Inc. has discontinued its operations.
 
On January 31, 2000, the Company purchased Stinkyfeet.com, Inc. for 13 shares of the Company’s common stock and cash of $40,000.  Stinkyfeet.com, Inc. was discontinued in December 2002.
 
On April 4, 2000, the Company purchased Uniq Studios, Inc. for 2,500 shares of the Company’s common stock and options to purchase 833 shares of common stock at $7.60 per share.  Effective November 2001 Uniq Studios, Inc. discontinued its operations.

On April 7, 2000, the Company purchased Totalinet.net, Inc. for 333 shares of common stock.  Effective December 5, 2000 Totalinet.net, Inc. discontinued its operations.

On May 31, 2000, the Company purchased Atlantic Technologies International, Inc. for 397 shares of common stock.  Effective April 27, 2001, Atlantic Technologies International, Inc. discontinued its operations.

On May 31, 2000, the Company purchased Internet Software Solutions, Inc. for 167 shares of common stock.  Effective April 27, 2001, Internet Software Solutions, Inc. discontinued its operations.

 
1

 

On June 1, 2000, the Company purchased KT Solutions, Inc. for 833 shares common stock and options to purchase 417 additional shares of the Company’s common stock.  Effective April 1, 2001, the Company sold KT Solutions Inc. to Knowledge Transfer Systems, Inc. for 13,333 shares of common stock.

On October 18, 2000, the Company changed its name from iShopper.com, Inc. to Ensurge, Inc.

On February 15, 2001, the Company completed a 5-for-1 forward split.  This provided each shareholder with five shares for every one share owned.  Prior to the split the Company had 14,386,775 shares issued and outstanding and subsequent to the split the Company had 71,933,875 issued and outstanding.  The accompanying financial statements reflect the split.
 
Effective May 8, 2006, the Company approved a 1-for-3,000 reverse split of its common stock.  The Company did not reverse any certificates that were for less than 100 shares or any certificates that were for more than 100 shares to an amount below 100 shares.  The accompanying financial statements have been presented to reflect this reverse stock split.
 
On June 19, 2006, the Company entered into an agreement with Portsmith Partner of Nevada, Inc., a stockholder of the Company (“Portsmith”), whereby Portsmith agreed to assume the debt of the subsidiaries of the Company, which totaled $2,614,380.  In return for this obligation, the Company issued 5,000 shares of common stock to Portsmith.  In a related transaction, on September 28, 2006, the Company sold all the shares of stock of all of its subsidiaries to Portsmith.  This transaction has been treated as a non-monetary transaction with a related party shareholder and the effects are reported through Stockholders’ Deficit.
 
Business Plan

In late 2009, the controlling shareholders of Ensurge, Inc. brought in new management and Directors to develop and implement a strategy for gold production in Brazil.  During the first quarter of 2010, a new strategy was developed.
 
Since the time of that transition, Ensurge has raised $2.3 million from new equity investors to enable management to begin the implementation of the business plan.
 
The plan focuses on the identification of existing tailings impoundments at existing or abandoned gold mines and the establishment of contractual agreements to construct metallurgical plants to recover gold remaining in tailings.  After extensive evaluation of gold mining in numerous regions of Brazil, Ensurge has settled on the Cuiaba Gold Belt in Mato Grosso State to implement its strategy.
 
Gold was first discovered in Cuiaba in 1719 and mining has been ongoing since that time along an important geological structure that runs 100 miles from Cuiaba southwest to Pocone, on the edge of the Pantanal (perhaps the world’s largest wetlands area).  There are literally hundreds of currently operating or abandoned gold mines along the Cuiaba Gold Belt.  Primarily only small family owned companies known locally as Garimpeiros operated in the region.
 
The gold formations along the Cuiaba Gold Belt are quartz veins that outcrop and dip at approximately 30 degrees from the surface.  In addition to the primary vein structures, there are also perpendicular veins that appear to have been formed during periods of secondary stress.
 
The gold is typically found at the contact of the quartz veins and the host rock and presents itself as “free” gold.  Grain size is often very fine (40% less than 100 mesh and 20% less than 200 mesh), with the remainder characterized as “coarse gold”.  Owing to the unusual grain size distribution of the gold, recovery of the gold in these mines has been very low, typically 35-50%.  The crude methods of gold recovery, utilizing hammer mills and ball mills to crush the ore and cyclones and centrifuges to concentrate the ore and finally mercury amalgamation to recover gold, have been responsible for the poor recoveries.
 
 
2

 
 
We believe with less than half the gold that has been mined over the past three centuries having been recovered, there is significant opportunity to recover gold from tailings.  The tailings are above ground and therefore readily identifiable.  This eliminates the costly, time consuming and highly risky exploration process generally required to enter the gold production business.
 
As the tailings are the waste product of the mining and milling operations, there is no requirement to invest in and operate costly mining equipment, nor is it necessary to invest in or operate the costly crushing equipment.  The tailings are already crushed to approximately 200 mesh.
 
Business Strategy and Growth
 
Ensurge management seeks to reduce the risk of gold production.  Specifically, it believes that by obtaining contractual rights to reprocess existing tailings from historic or current gold mining operations along the Cuiaba Gold Belt, it can:

 
·
Eliminate, or significantly reduce exploration risk.  The tailings impoundments are readily visible and the size (tonnage) can be quickly determined using GPS technology and satellite images.  Gold content, believed to be significant owing to the crude metallurgical recovery methods employed, still requires assessment by means of extensive auger drilling (typically on 40 meter centers), sampling (typically every one meter of depth down hole) and sampling by an independent metallurgical laboratory.
 
·
Enjoy lower than typical capital costs.  In most traditional mining operations, significant capital investment is required to develop and mine a deposit, transport ore to a processing plant, where it is crushed and processed to recover gold.  Tailings have already been mined and crushed.  While some of the gold content of the ore has already been removed from tailings, management believes that in the Cuiaba-Pocone region, gold recoveries from the gold in tailings can be accomplished on an economical basis.
 
·
Enjoy lower than typical operating costs.  Since tailings have already been mined and crushed, there will be no labor or energy costs (or high maintenance costs) for mining or crushing.  Management believes  energy and labor costs will be less than in initial mining operations resulting in savings on not only up-front mining development costs but ongoing costs.

 
Crude Recovery Technology Creates Ensurge Opportunity

Typically, gold recovery facilities along the Cuiaba Gold Belt employ crude methods of gravity separation.  Run of mine ore is first crushed in hammer mills or jaw crushers to reduce the run of mine ore to 3” or smaller size.  Crushed ore is then sent to ball mills for further size reduction, to approximately 200 mesh or less.  The discharge of the ball mills is then subjected to gravitational gold concentration using cyclones and centrifugal drum concentrators.  Ensurge has contracted with a third party consulting engineering company to assist in technical assessment of opportunities, has estimated that recovery of gold in concentrate represents about 50% of the gold contained in ore.  The remaining 50% of the gold is discharged to tailings.  Modern metallurgical processing methods typically recover 85-90% of gold contained in ore.  It is the 50% of gold that is discharged to tailings that comprises the target for Ensurge development.  Until actual mining operations begin, the amount of the gold recoverable from the tailings will be unknown and we will not know if it will be economical to recover such gold.

 
3

 
 
Ensurge Contractual Agreements with Garimpeiros
 
Ensurge currently has contractual agreements to recover gold from tailings impoundments at four mining operations around Pocone (one is currently operating mines and three are from abandoned mining operations).  In addition, Ensurge is currently engaged in discussions with six additional owners of tailings and expects to reach contractual agreement soon to recover gold from those tailings impoundments.
 
It is our objective to add at least 5-7 new contractual agreements to recover gold from tailings each year for the next 4-5 years.
 
We are designing our plants to use modern, sophisticated multi-stage gravity recovery methods.  We will size the plants to fully process the tailings impoundments in 3-5 years.  Since the functional life of the equipment to be utilized is 15 years, we are designing the plants to be modular and portable (skid mounted) so that when tailings are fully processed at one location the plant can be disassembled, relocated and reassembled quickly and at cost significantly lower than required to construct a new facility.  Each of the plants should take 6-12 months to construct and positive cash flow should begin within months of plant startup.  Each plant, operating at full capacity will be able to process 5,000 tons of tailings per day.
 
Competition

In the Cuiaba-Pocone region of Mato Grosso Brazil, Ensurge management is not aware of any other company currently seeking to acquire tailings or obtain Contractual Agreements to process tailings.  This is so, in part, management believes, because major international mining companies that are coming to Brazil to develop gold mining operations are focusing on exploration in grass roots environs or near existing major gold producing mines with the hopes of finding “bonanza” type deposits.

However, management believes that if Ensurge is successful in implementing its strategy, competition will be drawn to the area and it will become more difficult and more expensive to obtain Contractual Agreements with the local garimpeiros.  With hundreds of garimpeiro operations in the Cuiaba-Pocone region, Ensurge management believes it will be able to secure additional agreements for the next several years, even in the face of new competition.

We believe we have developed a unique business model but recognize that there are very little barriers for others to copy our business model and we offer no new technology or position in the mining industry that will prevent existing gold producers or other companies for recreating our business model.  We believe our best competitive position is being one of the first to seek out the smaller mines in Brazil to reprocess their tailings.
 
Environmental Standards
 
The Company is not at this time involved in any project that would adversely affect the environment.

 
4

 

Employees
 
As of March 31, 2011, the Company has 4 employees.

ITEM 1A. Risk Factors

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Our disclosure and analysis in this report contains forward-looking information that involves risks and uncertainties and actual results could differ materially from those predicted in any such forward-looking statements. Except for historical information, all of the statements, expectations and assumptions contained in the foregoing are forward-looking statements. The realization of any or all of these expectations is subject to a number of risks and uncertainties and it is possible that the assumptions made by management may not materialize. Statements may involve risks and uncertainties; actual results may differ from the forward-looking statements. Sentences or phrases that use such words as “believes,” “anticipates,” “plans,” “may,” “hopes,” “can,” “will,” “expects,” “is designed to,” “with the intent,” “potential” and others indicate forward-looking statements, but their absence does not mean that a statement is not forward-looking. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially.  For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.

Risk Factors

Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include the following.

We are a start-up company with limited operating history, limited revenue and have to rely on our ability to raise capital to fund operations and there can be no assurance we will ever reach profitability or be able to continue to raise capital to fund operations.

With the commencement of our new business plan, we have limited operating history and experience in mining on which to make an investment decision.  Failure to implement the business strategy could materially adversely affect our business, financial condition and results of operations. Through December 31, 2010, the Company’s business has not shown a profit in operations and has generated no revenue.  There can be no assurance we will achieve or attain profitability or be able to raise sufficient capital to stay in business. If we cannot achieve operating profitability or raise capital, we may not be able to meet our working capital requirements, which could have a material adverse effect on our business operating results and financial condition resulting in the loss of an investors’ entire investment in us.

We need substantial additional capital to grow and fund our present and planned business and business strategy.

Our current and planned operations contemplate funding with milestones of at least $15,000,000 in 2011.  Failure to meet these funding milestones may have a significant adverse effect on our growth and anticipated revenues and we may have to curtail our business strategy.  If we receive less funding than planned, we will have to revise our business model and reduce proposed expansion.  Without significant funding, we will not be able to execute on our business operations and may be forced to cease operations.  At this time, there can be no assurance we will be able to obtain the funding we need and even if we obtain such funding that it will be on terms and conditions favorable to us and our existing shareholders.  Without funding we will not be able to proceed with planned operations or meet existing obligations.

 
5

 

Our business operations are unproven and we do not know if we will be able to produce gold in commercial economic amounts which would result in our inability to stay in business.

There is no assurance of success in being able to extract gold from the tailings or even if we are able to extract gold that we can do so in quantities that will produce profits.  The inability to operate a mining company or extract gold in economic quantities will have a substantial negative effect on our business and could result in our inability to stay operating.

All of our operations will be in Brazil and we will be subject to its laws and rules in relation to our operation.  Additionally, we will be dependent on contracts with local mines and the rules and regulations related thereto.  The costs of operating in Brazil will be substantial and create many uncertainties as to its laws and rules with which management are not familiar.  Although we have retained attorneys and advisors in Brazil, no member of management is familiar with operations in Brazil and we will be dependent on third parties for guidance.  The operations in Brazil and its rules and regulations create uncertainty for us and may have a negative effect on our business and will increase our costs.

Our auditor’s “Going Concern” qualification in our financial statements might create additional doubt about our ability to stay in business, which could result in a total loss on investment by our shareholders.

Our accompanying financial statements have been prepared assuming that we will continue as a “going concern.” As discussed in Notes to the financial statements, we have no revenues, have incurred a loss from operations and have negative operating cash flows since inception. These issues raise substantial doubt about our ability to continue as a “going concern.” Our ability to stay in business will, in part, depend on our ability to raise additional funding.  Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Our business is highly dependent on the price of gold.

During 2010 the price of gold continued to increase, however, there is no certainty that it will maintain these prices.  Our business plan is provides some ability to offset the decrease in the price of gold, but if it drops to a certain price level it will make our operations difficult to continue profitably.

We conduct business internationally, which exposes us to additional risks

Our international operations expose us to certain additional risks, including:
 
·
Different political and regulatory conditions;
 
·
Currency fluctuations;
 
·
Adverse tax consequences;
 
·
Difficulty in staffing international subsidiary operations;
 
·
Dependence on other economies;

ITEM 2.
PROPERTIES
 
The Company does not own any real property and uses executive office space.  The address is 2825 East Cottonwood Parkway, Suite 500, Salt Lake City, Utah 84121.  Currently monthly rent obligations are less than $1,000 per month and we are on a month to month basis.  The Company’s management believes its current office facility is sufficient for its current operations.  As we expand operations to Brazil, we may look to opening offices in Brazil, but do not anticipate any offices until we commence construction and/or production from a tailings operation.
 
ITEM 3.
LEGAL PROCEEDINGS

We are not currently a party to any legal proceedings that we believe will have a material adverse effect on our financial condition or results of operations.
 
ITEM 4.
(REMOVED AND RESERVED)
 
 
6

 
 
PART II
 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Price Range of Common Stock
 
The Company’s common stock trades on the OTC Bulletin Board under the symbol “ESGI.OB”.  The following table sets forth the range of the high and low bid quotations of the Company’s common stock for the fiscal quarters indicated, as reported by OTC.   Quotations represent inter-dealer prices, without retail markup, markdown, or commission and may not necessarily represent actual transactions.

   
HIGH
   
LOW
 
2009
           
First Quarter
 
$
0.33
   
$
0.25
 
Second Quarter
   
0.40
     
0.25
 
Third Quarter
   
0.51
     
0.25
 
Fourth Quarter
   
0.35
     
0.30
 
                 
2010
               
First Quarter
 
$
1.57
   
$
0.35
 
Second Quarter
   
1.25
     
0.55
 
Third Quarter
   
2.40
     
0.18
 
Fourth Quarter
   
5.00
     
2.00
 
 
Approximate Number of Equity Security holders
 
On March 31, 2011, there were 395 stockholders of record of the Company’s common stock.  Because many of such shares are held by brokers and other institutions on behalf of shareholders, the Company is unable to estimate the total number of stockholders represented by these record holders.  As of April 7, 2011, our common stock had a bid and ask price of $4.00 and $4.50.
 
Dividends
 
The Company does not presently pay dividends on its common stock.  The Company intends for the foreseeable future to continue the policy of retaining earnings, if any, to finance the development and growth of its business.

Recent Sales of Unregistered Securities

In December 2009, the Company converted $1,971,480 of debt and accrued interest into common stock.  In exchange for the release of the debt, the Company issued 25,524,085 shares of common stock to the holders of the debt.

In February 2010 and March 2010, the Company sold an aggregate of 2,100,000 shares of common stock to investors for an aggregate purchase price of $525,000 in a private placement.  In July 2010, the Company received $560,000 in exchange for warrants exercisable for the right to purchase 4,000,000 shares of the Company’s common stock in a private placement.  In December 2010, the Company sold an aggregate of 1,000,000 shares of common stock and 500,000 warrants exercisable for $1 to investors for an aggregate purchase price of $500,000 in a private placement.  In December 2010, the Company received $800,000 in exchange for warrants exercisable for the right to purchase 1,600,000 shares of the Company’s common stock in a private placement.  These transactions were exempt from registration pursuant to Section 4(2) of the Securities Act.

 
7

 

ITEM 6.
SELECTED FINANCIAL DATA
 
Not Applicable.

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

Results of Operations

We had no revenues for 2010 and 2009.  During 2010, the Company entered into two agreements; 1) Mineracao Nova Esperansa and 2) Rodui Transportes & Locacoes, of Pocone, Mato Grosso, Brazil.  The Company has agreed to purchase additional capital equipment to process gold from the existing tailings.  We will share in the after tax net profits from these operations.  We have completed a preliminary engineering study with positive results and have engaged the engineering firm to do a study of the entire tailings area.  The construction of the tailing processing facility can be completed in 6 to 12 months subject to final engineering studies and the raising of capital to cover the costs of plant development and construction.

The Company is continuing to look for opportunities to create revenue, and has several options it is pursuing as acquisitions or joint ventures.

General and administrative expenses for the year ended December 31, 2010 and 2009 were $3,134,967 and $49,336, respectively.  These costs are made up of audit, legal, and consulting fees, along with travel expenses looking for acquisitions.

Interest expense was $0 and $7,067,097 for the years ended December 31, 2010 and 2009, respectively.  All of the interest expense is loan interest from the notes payable the Company has incurred over the last several years.  In December 2009, the Company converted $1,971,480 of debt and accrued interest into common stock.  In exchange for the release of the debt, the Company issued 25,524,085 shares of common stock to the holders of the debt.

Interest income for the year ended December 31, 2010 and 2009 were, respectively, $1,836 and $0.  This income is from interest bearing cash bank accounts.

The warrant derivative expense and day-one loss for the years ended December 31, 2010 and 2009 were, respectively, $9,591,573, $2,362,308, $0 and $0.  This expense is due to change in value of the warrants derivative liability from July to December 2010.
 
 
8

 

Liquidity and Capital Resources

We are a start-up company with limited operating history, limited revenue and have to rely on our ability to raise capital to fund operations and there can be no assurance we will ever reach profitability or be able to continue to raise capital to fund operations.  With the commencement of our new business plan, we have limited operating history and experience in mining on which to make an investment decision.  Failure to implement the business strategy could materially adversely affect our business, financial condition and results of operations. Through December 31, 2010, the Company’s business has not shown a profit in operations and has generated no revenue.  There can be no assurance we will achieve or attain profitability or be able to raise sufficient capital to stay in business. If we cannot achieve operating profitability or raise capital, we may not be able to meet our working capital requirements, which could have a material adverse effect on our business operating results and financial condition resulting in the loss of an investors’ entire investment in us.

We need substantial additional capital to grow and fund our present and planned business and business strategy.  Our current and planned operations contemplate funding with milestones of at least $15,000,000 in 2011.  Failure to meet these funding milestones may have a significant adverse effect on our growth and anticipated revenues and we may have to curtail our business strategy.  If we receive less funding than planned, we will have to revise our business model and reduce proposed expansion.  Without significant funding, we will not be able to execute on our business operations and may be forced to cease operations.  At this time, there can be no assurance we will be able to obtain the funding we need and even if we obtain such funding that it will be on terms and conditions favorable to us and our existing shareholders.  Without funding we will not be able to proceed with planned operations or meet existing obligations.
 
The Company has financed its operations to date primarily through private placements of equity securities and current sales.  During 2010, the Company sold an aggregate of 3,100,000 shares of common stock to investors for an aggregate purchase price of $1,025,000 in a private placement.  The Company received $1,360,000 in exchange for warrants exercisable for the right to purchase 5,600,000 shares of the Company’s common stock in a private placement.  The holder of these warrants may at any time exercise the warrants for common stock with no additional cash outlay.  This inflow of cash will be used by the Company to research and develop mining ventures in South America.

The Company has made progress in creating relationships with Corporate and Tax Council, Banks, and Engineering firms within Brazil.  By having these areas completed, we have entered into our first two agreements and are in discussion with several other groups.  Once a project is identified and an agreement is in place, then a two part engineering study is done.  The first part is to perform a preliminary test of a small area for the appropriate amount of gold within the tailings.  The second part is a complete testing of the area and depth to determine amount of ore per tonnage of tailings.  The Company will then build a processing plant to strip the gold from the remaining tailings.  The estimated cost of these plants will be $13 to $15 million depending on the size of the production and tailings.  We will have to raise additional capital to fund such projects and would anticipate dilution to current investors as we seek additional equity capital.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

 
9

 


ITEM 8.
FINANCIAL STATEMENTS

The following constitutes a list of Financial Statements included in Part III of this Report beginning at page 7 of this Report:


ENSURGE, INC.

INDEX TO FINANCIAL STATEMENTS

 
Page
   
Report of Independent Registered Public Accounting Firm
11
   
 Balance Sheets – December 31, 2010 and 2009
12
   
 Statements of Operations – for the Years Ended December 31, 2010 and 2009
13
   
 Statements of Changes in Stockholders’ Deficit – for the Years Ended December 31, 2010 and 2009
14
   
 Statements of Cash Flows – for the Years  Ended December 31, 2010 and 2009
15
   
Notes to  Financial Statements
16-21
 
 
10

 
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Officers and Directors
 
 
Ensurge, Inc.
 
 
We have audited the accompanying balance sheets of Ensurge, Inc. ( an Exploration Stage Company) as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended and the period January 1, 2010 (inception of exploration stage) through December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States 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. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ensurge, Inc. as of December 31, 2010 and 2009, and the results of its operations, and its cash flows for the years then ended and for the period January 1, 2010 (inception of exploration stage) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
 
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses from operation, has a liquidity problem, and requires funds for its operational activities. These factors raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Since our previous report date April 5, 2011, as sdescribed in Note 10, the Company discovered material errors in its presentation of its financial statements. However, the Company has restated the financial statements to reflect the correction of these errors.
 
 
/s/ Child, Van Wagoner & Bradshaw, PLLC
Salt Lake City, Utah
April 5, 2011, except for Note 10, as to which the date is April 10, 2012

 
 
11

 


  ENSURGE, INC
  (AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 2010 AND 2009

   
 (Restated)
       
   
2010
   
2009
 
ASSETS
           
Current Assets
           
   Cash
  $ 1,146,936     $ -  
                 
Total Current Assets
    1,146,936       -  
                 
   Investment in mining rights projects
    310,829       -  
                 
Total Other Assets
    310,829       -  
                 
Total Assets
  $ 1,457,765     $ -  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current Liabilities
               
   Trade accounts payable
  $ 215,451     $ 8,686  
   Accrued Liabilities
    -       14,738  
   Proceeds for common stock to be issued
    1,360,000       -  
   Warrants derivative liability
    12,167,402       -  
                 
Total Current Liabilities
    13,742,853       23,424  
                 
Stockholders' Deficit
               
Common stock - $0.001 par value; 100,000,000 shares authorized; 29,485,341 and 26,035,341 shares outstanding, respectively
    29,485       26,035  
Additional paid-in-capital
    26,088,412       23,266,514  
Accumulated deficit
    (23,315,973 )     (23,315,973 )
Exploration stage deficit
    (15,087,012 )     -  
                 
Total Stockholders' Deficit
    (12,285,088 )     (23,424 )
                 
Total Liabilities and Stockholders' Deficit
  $ 1,457,765     $ -  
 
The accompanying notes are an integral part of these financial statements.
 
 
12

 

ENSURGE, INC
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009


               
From Inception
 of
 
               
Exploration
 Stage
 
               
January 1, 2010
 
               
through
 
   
2010
   
2009
   
December 31,
2010
 
   
(Restated)
         
(Restated)
 
Sales
  $ -     $ -     $ -  
                         
Expenses
                       
General and administrative
    3,134,967       49,336       3,134,967  
                         
Total Expenses
    3,134,967       49,336       3,134,967  
                         
Operating Loss
    (3,134,967 )     (49,336 )     (3,134,967 )
                         
Other income (expense)
                       
                         
   Loss on derivative
    (9,591,573 )     -       (9,591,573 )
   Derivative day-one loss
    (2,362,308 )     -       (2,362,308 )
   Interest expense
    -       (7,067,097 )     -  
   Interest income
 
1,836
         
1,836
 
                         
Net Loss
  $ (15,087,012 )   $ (7,116,433 )   $ (15,087,012 )
                         
Basic and Diluted Earnings Gain (Loss) Per Common Share
  $ (0.54 )   $ (18.04 )        
                         
Basic and Diluted Weighted Average Common Shares Outstanding
    27,705,752       394,484          

The accompanying notes are an integral part of these financial statements.
 
 
13

 

ENSURGE, INC
(AN EXPLORATION STAGE COMPANY)
 STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FROM INCEPTION OF EXPLORATION STAGE
 JANUARY 1, 2010 THROUGH DECEMBER 31, 2010


               
(Restated)
   
(Restated)
   
(Restated)
 
   
Common Stock
   
Additional
         
Total
 
             
Paid-in
   
Accumulated
   
Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Deficit
 
                               
                               
Balance – January 1, 2010 Inception of Exploration Stage
    26,035,341       26,035       23,266,514       (23,315,973 )     (23,424 )
                                         
Stock sold for cash
    3,100,000       3,100       891,800       -       894,900  
Stock issued for services
    2,350,000       2,350       1,049,150       -       1,051,500  
Purchase and cancel
                                       
  treasury stock
    (2,000,000 )     (2,000 )     (58,000 )     -       (60,000 )
Option expense
    -       -       1,152,469       -       1,152,469  
Warrants
    -       -       (213,521 )     -       (213,521 )
Net (Loss)
    -       -       -       (15,087,012 )     (15,087,012 )
                                         
Balance - December 31, 2010 (Restated)
    29,485,341     $ 29,485     $ 26,088,412     $ (38,402,985 )   $ (12,285,088 )
 
The accompanying notes are an integral part of these financial statements.
 
 
14

 
 
ENSURGE, INC.
(AN EXPLORATION STAGE COMPANY)
 STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
 
               
From Inception of
 
               
Exploration Stage
 
               
January 1, 2010
 
               
Through
 
   
2010
   
2009
   
December 31, 2010
 
Cash Flows From Operating Activities
 
(Restated)
         
(Restated)
 
   Net loss
  $ (15,087,012 )   $ (7,116,433 )   $ (15,087,012 )
Adjustments to reconcile net gain to net cash used in operating activities:
                       
   Common stock issued for services
    2,203,969       6,997,299       2,203,969  
   Warrant derivative expense
    9,591,573       -       9,591,573  
   Derivative day-one loss
    2,362,308       -       2,362,308  
Changes in operating assets and liabilities:
                       
   Increase (decrease) in trade accounts payable
    206,765       (13,507 )     206,765  
   Increase (decrease) in accrued liabilities
    (14,738 )     119,794       (14,738 )
                         
Net Cash Used in Operating Activities
    (737,135 )     (12,847 )     (737,135 )
                         
Cash Flows From Investing Activities
                       
   Investment in mining rights project
    (310,829 )     -       (310,829 )
                         
Net Cash Provided (Used) by Financing Activities
    (310,829 )     -       (310,829 )
                         
Cash Flows From Financing Activities
                       
   Proceeds from notes payable
    -       32,327       -  
   Repayments from notes payable
    -       (19,480 )     -  
   Proceeds from exercise of warrants
                       
      for common stock to be issued
    1,360,000       -       1,360,000  
   Purchase treasury stock
    (60,000 )     -       (60,000 )
   Proceeds from issuance of common stock
    894,900       -       894,900  
                         
Net Cash Provided (Used) by Financing Activities
    2,194,900       12,847       2,194,900  
                         
Net Increase (decrease) in Cash
    1,146,936       -       1,146,936  
                         
Cash at Beginning of Period
    -       -       -  
                         
Cash at End of Period
  $ 1,146,936       -     $ 1,146,936  
                         
Non-Cash Investing and Financing Activities:
                       
Conversion of notes payable and accrued interest to   common stock
    -       1,971,480       -  
 
The accompanying notes are an integral part of these financial statements.
 
 
15

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009


NOTE 1–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Liquidation – On October 16, 2000, iShopper.com, Inc. changed its name to Ensurge, Inc. Ensurge, Inc. is referred to herein as the Company.  On January 1, 2002, the Company began liquidation of its assets.  During 2009 the Company started a new phase of operations with the mining industry; accordingly, the accompanying financial statements are presented on a GAAP basis of accounting, rather than on a liquidation basis.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Presentation – Going Concern
 
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern.  However, the Company has insufficient working capital and is sustaining losses, and therefore may be forced to discontinue operations. This fact raises substantial doubt about the Company’s ability to continue as a going concern.  Management plans to raise additional capital to complete its business plan.
 

Business Condition – The Company has suffered losses from operations, has had negative cash flows from operating activities for all periods since inception and has a working capital deficiency of $3,033,545 at December 31, 2010. The Company has issued a private placement memorandum to obtain investors.  During 2010, the Company sold an aggregate of 3,100,000 shares of common stock to investors for an aggregate purchase price of $1,025,000 in a private placement.  The Company received $1,360,000 in exchange for warrants exercisable for the right to purchase 5,600,000 shares of the Company’s common stock in a private placement.  The proceeds of the financing will be used to help the Company maintain operations and to fund the exploration of acquisition of gold tailings in Brazil.

Stock-Based Compensation – Effective January 1, 2006, the Company adopted, “Share-Based Payment” (ASC Topic 718) requiring that compensation cost relating to share-based payment awards made to employees and directors be recognized in the financial statements. There were 5,300,000 options granted during the year ended December 31, 2010 and none for 2009.  As part of the granting of these options, there was recorded a cost of $874,185 as payroll expense, which is stock-based compensation resulting from the application of ASC Topic 718 included in Statements of Operations. The cost of these and future awards will be measured at the grant date based on the calculated fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) in the Company's Statements of Operations.

Prior to January 1, 2006, the Company accounted for its stock options issued to directors, officers and employees under ASC Topic 835 and related interpretations. Under ASC Topic 835, compensation expense is recognized if an option’s exercise price on the measurement date is below the fair value of the Company’s common stock. The Company also accounted for options and warrants issued to non- employees in accordance with ASC Topic 718 which required these options and warrants to be accounted for at their fair value.

 
16

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009

Basic and Diluted Earnings Per Share – Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to potentially issuable common shares which include stock options and stock warrants except during loss periods when those potentially issuable common shares would decrease loss per share. During 2010 the Company issued 3,450,000 common shares and 5,600,000 warrants as part of a private placement funding.  On December 31, 2009, the Company issued 25,524,085 common shares as part of debt restructuring.

Income Taxes – The Company recognizes an asset or liability for the deferred tax consequences of all temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the asset or liabilities are recovered or settled and for operating loss carry forwards. These deferred tax assets and liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse and the carry forwards are expected to be realized. Deferred tax assets are reviewed periodically for recoverability and a valuation allowance is provided as necessary.

Recently Enacted Accounting Standards – In June 2009 the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”).  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants.  Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements.  The ASC does change the way the guidance is organized and presented.

Statement of Financial Accounting Standards (“SFAS”) SFAS No. 166 (ASC Topic 810), “Accounting for Transfers of Financial Assets—an Amendment of FASB Statement No. 140”, SFAS No. 167 (ASC Topic 810), “Amendments to FASB Interpretation No. 46(R)”, and SFAS No. 168 (ASC Topic 105), “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162” were recently issued.  SFAS No. 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant.

Accounting Standards Update (“ASU”) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures – Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements,  ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU’s No. 2009-2 through ASU No. 2011-01 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued.  These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

 
17

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
 
NOTE 2 – INVESTMENT IN MINING RIGHTS

During 2010 the Company capitalized $310,829 of engineering mining costs.  It is the Company’s policy to capitalize engineering costs and amortize it over the life of the project.  The Company will complete an impairment analysis at the end of each year.  For 2010 the Company completed its analysis and determined no impairment was needed.

NOTE 3 – PROCEEDS FOR COMMON STOCK TO BE ISSUED

During July 2010, the Company sold 4,000,000 warrants for $100 for the right to purchase 4,000,000 shares of common stock at $0.14 per share or $560,000.  $560,100 was received in July for the warrants and the exercise of the warrants.  In December 2010, the Company received $800,000 in exchange for warrants exercisable for the right to purchase 1,600,000 shares of the Company’s common stock in a private placement.  The cash has been received, however the warrants have not been exercised thus the common stock has not been issued to the purchaser.  The nature of this warrant requires the Company to record a Warrant Derivative Liability.  The valuation of the derivative is based on using the Black Sholes model for SEC reporting purposes.

NOTE 4 – WARRANT DERIVATIVE LIABILITY
 
As part of the warrants to be issued for common stock in Note 3, the nature of the warrant requires the Company to record a Warrant Derivative Liability in the amount of $12,167,402.  The valuation of the derivative is based on using the lattice model for SEC reporting purposes.
 
 

 
NOTE 5 – ISSUANCE OF STOCK

During the month of July 2010, the Company issued 1,500,000 shares of common stock at a value of $0.14 to its Officers for a total value of $210,000 for services rendered.  During the month of August, the Company issued 3,000,000 options at a price of $0.14 to its Officers for a total value of $688,417 for services rendered, which was charged to expense.  In November 2010 the Company issued 2,250,000 options at a price of $0.14 to its Officers and an employee for a total value of $315,000.  $7,324 was charged to expense in 2010.  These valuations are based on the Black Sholes model for SEC reporting purposes; however the exercise price was based on fair market value.

NOTE 6 – EQUITY TRANSACTIONS

Effective February 5, 2010, the Company accepted private placement funds from an institutional investor.  A total of $525,000 was received in exchange, for which the Company issued two million (2,100,000) shares of the Company’s common stock.  The Company believes the sale is exempt from registration, pursuant to Section 4(2) of the Securities Act of 1933 (as amended), as a private transaction not involving a public offering.

Effective July 27, 2010, the Company accepted private placement funds from an institutional investor.  A total of $560,000 was received in exchange for warrants exercisable for the right to purchase four million (4,000,000) shares of the Company’s common stock.  No additional consideration is required to exercise the warrants.  The Company believes the conversions are exempt from registration, pursuant to Section 4(2) of the Securities Act of 1933 (as amended), as a private transaction not involving a public offering.

 
18

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009

Effective December 9, 2010, the Company accepted private placement funds from accredited investors.  A total of $500,000 was received in exchange for units consisting of one million (1,000,000) shares of the Company’s common stock, plus five hundred thousand (500,000) warrants with an exercise price of $1.00.  The warrants are exercisable over a term of five years. All investors were “accredited investors.”  The Company believes the sale of the units are exempt from registration, pursuant to Section 4(2) of the Securities Act of 1933 (as amended), as a private transaction not involving a public offering as well as Regulation D, Rule 506.

Effective December 30, 2010, the Company accepted private placement funds from an institutional investor.  A total of $800,000 was received in exchange for warrants exercisable for the right to purchase one million six hundred thousand (1,600,000) shares of the Company’s common stock. No additional consideration is required to exercise the warrants.  The Company believes the conversions are exempt from registration, pursuant to Section 4(2) of the Securities Act of 1933 (as amended), as a private transaction not involving a public offering.


NOTE 7 – NOTES PAYABLE

On December 31, 2009, the Company issued 25,524,085 shares of the Company’s common stock in settlement of $1,971,480 of notes payable and accrued interest, which equates to a per share price of $0.07724.


NOTE 8 – PROVISION FOR INCOME TAXES

The Company has operating loss carry forwards of approximately $8,461,000 at December 31, 2010. The operating loss carry forwards expire from 2019 through 2030. Substantially all of the operating loss carry forwards are limited in the availability for use by the Company. The net deferred tax asset consisted of the following at December 31, 2010 and 2009:

   
2010
   
2009
 
Deferred Tax Assets
           
Operating loss carry forwards
 
$
2,876,740
   
$
2,584,000
 
Depreciation
   
-
     
-
 
Total Deferred Tax Assets
   
2,876,740
     
2,584,000
 
Valuation Allowance
   
(2,876,740
)
   
(2,584,000
)
Net Deferred Tax Asset
 
$
   
$
 

During 2010 and 2009, the valuation allowance increased by $292,740 and $249,589, respectively, principally due to the utilization of operating losses.

 
19

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009


The following is a reconciliation of the amount of tax benefit that would result from applying the federal statutory rate to pretax loss from continuing operations with the benefit from income taxes attributable to continuing operations:

   
2010
   
2009
 
             
Income tax (benefit) at statutory rate (34%)
 
$
(5,129,584)
   
$
(2,420,000)
 
Benefit of operating loss carry-forwards
   
0
     
0
 
Expenses not currently deductible
   
4,836,844
     
2,170,411
 
Change in valuation allowance
   
292,740
     
249,589
 
State tax (benefit), net of federal tax effect
   
0
     
0
 
                 
Net Benefit (Expense) From Income Taxes
 
$
   
$
 

The change in business activities will also limit the amount of NOL that can be utilized.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

None

NOTE 10 – RESTATEMENT OF DECEMBER 31, 2010 FINANCIAL STATEMENTS

Subsequent to the issuance of the December 2010 financial statements, the auditors and management determined that warrant derivatives were not recorded properly due to the cash received as part of the July 2010 issuance of stock for warrants.  The financial statements have been revised to accurately record the transactions.  Accordingly, the balance sheet as of December 31, 2010 and the statement of operations, and statement of cash flows for the year ended December 31, 2010 have been revised as follows:
 
 
20

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009


 
Ensurge, Inc.
(An Exploration Stage Company)
BALANCE SHEET
DECEMBER 31, 2010
   
Restated
 2010
   
Original
  2010
   
 
 Effect of
 Changes
   
                     
 
Assets
 
 
   
 
   
 
   
 
Current Assets
                   
 
     Cash
  $ 1.146,936     $ 1,146,936     $ -    
 
          Total Current Assets
     1,146,936        1,146,936        -    
 
     Investment in mining rights project
     310,829         310,829        -    
 
          Total Other Assets
     310,829         310,829        -    
 
Total Assets
    1,457,765       1,457,765     $      
                           
Liabilities and Stockholders’ Equity (Deficit)
                         
 
Current Liabilities
                         
 
     Trade accounts payable
  $ 215,451     $ 215,451     $ -    
 
     Proceeds for common stock to be issued
     1,360,000        1,360,000        -    
 
     Warrants derivative liability
     12,167,402        2,605,030        9,562,372     (1)
 
          Total Liabilities
     13,742,853        4,180,481        9,562,372     (1)
                           
 
Stockholders’ Equity (Deficit)
                         
 
Common stock - $0.001 par value;  100,000,000 shares authorized; 29,485,341 and
                         
 
    26,035,341 shares issued and outstanding
     29,485        29,485        -    
 
    Additional paid-in capital
     26,088,412        24,054,450        2,033,962     (1)
 
    Accumulated deficit
    (23,315,973 )     (23,315,973 )      -    
 
    Exploration stage deficit
    (15,087,012 )     (3,490,678 )     (11,596,334 )  (1)
 
          Total Stockholders’ Equity (Deficit)
    (12,285,088 )     (2,722,716 )     (9,562,372 )  (1)
 
Total Liabilities and Stockholders’ Equity (Deficit)
  $ 1,457,765     $ 1,457,765     $ -    
 
 
21

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009




Ensurge, Inc.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2010
 
   
 
Restated
 2010
   
 
Original
 2010
   
 
 Effect of
Change
     
 
Sales
  $ -     $ -     $ -      
 
Cost of Sales
     -        -        -      
 
Gross Profit
     -        -        -      
 
Expenses
                           
 
     General and Administrative expenses
      3,134,967         1,955,739        1,179,228    (1)  
 
        Total Expenses
     3,134,967        1,955,739         1,179,228     (1)  
 
Operating Loss
    (3,134,967 )      (1,955,739 )      (1,179,228 )   (1)  
 
Other Income (Expense)
                           
 
     Loss on derivatives
    (9,591,573 )     (1,536,775 )     (8,054,798 )   (1)  
 
     Derivatives day-one loss
    (2,362,308 )     -       (2,362,308 )   (1)  
 
     Interest income
     1,836        1,836        -      
 
Net Loss
  $ (15,087,012 )   $ (3,490,678 )   $ (11,596,334 )   (1)  
 
 
22

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009


Ensurge, Inc.
(An Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2010
 
 
   
Common Stock
   
Additional
         
Total
 
               
Paid-in
   
Accumulated
   
Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Deficit
 
Original
 
Original
   
Original
   
Original
   
Original
   
Original
 
Balance - December 31, 2008
    111,256     $ 111     $ 14,259,009     $ (16,199,540 )   $ (1,940,420 )
                                         
   Issuance of Common Stock
    25,924,085       25,924       9,007,505       -       9,033,429  
Net (Loss)
    -       -       -       (7,116,433 )     (7,116,433 )
                                         
Balance - December 31, 2009
    26,035,341       26,035       23,266,514       (23,315,973 )     (23,424 )
                                         
  Stock sold for cash
    3,100,000       3,100       891,800       -       894,900  
  Stock issued for services
    2,350,000       2,350       326,650       -       329,000  
  Purchase and cancel treasury stock
    (2,000,000 )     (2,000 )     (58,000 )     -       (60,000 )
  Option expense
    -       -       695,741       -       695,741  
  Warrants
    -       -       (1,068,255 )     -       (1,068,255 )
Net (Loss)
    -       -       -       (3,490,678 )     (3,490,678 )
                                         
Balance - December 31, 2010
    29,485,341     $ 29,485     $ 24,054,450     $ (26,806,651 )   $ (2,722,716 )



   
Common Stock
   
Additional
         
Total
     
               
Paid-in
   
Accumulated
   
Stockholders’
     
   
Shares
   
Amount
   
Capital
   
Deficit
   
Deficit
     
Restated
             
Restated
   
Restated
   
Restated
     
Balance - January 1, 2010, Inception of Exploration Stage
    26,035,341     $ 26,035     $ 23,266,514     $ (23,315,973 )   $ (23,424 )    
                                             
  Stock sold for cash
    3,100,000       3,100       891,800       -       894,900      
  Stock issued for services
    2,350,000       2,350       1,049,150       -       1,051,500    (1 )
  Purchase and cancel treasury stock
    (2,000,000 )     (2,000 )     (58,000 )     -       (60,000 )    
  Option expense
    -       -       1,152,469       -       1,152,469     (1 )
  Warrants
    -       -       (213,521 )     -       (213,521 )   (1 )
Net (Loss)
    -       -       -       (15,087,012 )     (15,087,012 )   (1 )
                                             
Balance - December 31, 2010, (restated)
    29,485,341     $ 29,485     $ 26,088,412     $ (38,402,985 )   $ (12,285,088 )   (1 )
 
 
23

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009



Ensurge, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010
 
 
 
 
 
Cash Flows from Operating Activities:
 
2010 
(Restated)
   
 
 
2010
(Original)
   
 
Effect of
Change
     
 
   Net (Loss)
  $ (15,087,012 )   $ (3,490,678 )   $ (11,596,334 )  (1 )
 
Adjustments to Reconcile Net (Loss) to Net Cash used by Operating Activities:
                           
 
Common stock issued for services
    2,203,969       1,024,741       1,179,228    (1 )
 
Warrant derivative expense
    9,591,573       1,536,775       8,054,798   (1 )
 
Derivative day-one loss
    2,362,308       -       2,362,308   (1 )
 
Changes in Operating Assets and Liabilities:
                           
 
Increase (decrease) in trade accounts payable
    206,765       206,765       -      
   
Increase (decrease) in accrued liabilities
    (14,738 )     (14,738 )     -      
 
Net Cash (Used) by Operating Activities
    (737,135 )     (737,135 )      -      
                             
 
Cash Flows from Investing Activities:
                           
                             
 
Investment in mining rights project
    (310,829 )     (310,829 )     -      
 
Net Cash (Used) by Investing Activities:
    (310,829 )     (310,829 )      -      
 
Cash Flows from Financing Activities:
                           
 
Proceeds from notes payable
    -       -       -      
 
Repayment from note payable
    -       -       -      
 
Proceeds from exercise of warrants for common stock to be issued
    1,360,000       1,360,000       -      
 
Purchase treasury stock
    (60,000 )     (60,000 )     -      
 
Proceeds from issuance of common stock
     894,900        894,900        -      
 
Net Cash Provided by Financing Activities:
    2,194,900        2,194,900        -      
 
Net Increase in Cash
     1,146,936        1,146,936       -      
 
Cash, Beginning of Period
     -        -        -      
 
Cash, End of Period
  $ 1,146,936     $ 1,146,936     $ -      

Note (1)
As of December 31, 2010, the derivative has increased by $9,562,372 for a total derivative liability of $12,167,402.  These changes affected warrant derivative liability, additional paid-in-capital, and other income.

 
24

 
ENSURGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
 
NOTE 11 – SUBSEQUENT EVENTS

In January 2011 the Company entered into a consulting agreement with Cameron Associates, Inc., for investor relations.  As part of this agreement the Company issued 150,000 shares of common stock.

The Company has reviewed subsequent events from the balance sheet date through the date of financial statements were issued, and have determined there were no other events to disclose.

 
25

 

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

None


ITEM 9A.
CONTROLS AND PROCEDURES
 
(a)        Evaluation of Disclosure Controls and Procedures.  The Company’s chief executive officer and chief financial officer (principal financial officer), after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, Rules 13a-14(c) and 15-d-14(c)) as of December 31, 2010, have concluded that, as of the evaluation date, the Company’s disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its subsidiaries would be made known to them by others within those entities.

(b)        Changes in Internal Controls.  There were no significant changes in the Company’s internal controls, or, to the Company’s knowledge, in other factors that could significantly affect these controls subsequent to the evaluation date.
 
Management’s Annual Report on Internal Control Over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
 
Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Tread way Commission (COSO) as set forth in Internal Control - Integrated Framework. During the course of this assessment, management identified a material weakness relating primarily to recording complex financial transactions.
 
The Company has a lack of staffing within its accounting department, in terms of the small number of employees performing its financial and accounting functions, which does not provide the necessary separation of duties.  Management believes the lack of accounting and financial personnel amounts to a material weakness in its internal control over financial reporting and, as a result, at December 31, 2010 and on the date of this Report, its internal control over financial reporting is not effective.  The Company will continue to evaluate the employees involved and the hiring of additional accounting staff.  However, the Company will be unable to remedy this material weakness in its internal controls until the Company has the financial resources that allow the Company to hire additional qualified employees.

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 SEC that permit the Company to provide only management's report in this annual report.
 
ITEM 9B.
OTHER INFORMATION

None


 
26

 

PART III
 
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
 
The following sets forth certain information regarding the Company’s executive officers and directors as of March 31, 2011:
 
Name
 
 
Age
Director
Since
Position
Jordan M. Estra
 
 
64
 
2010
 
Chief Executive Officer, President, Director
Jeff A. Hanks
 
 
 
45
 
 
2002
 
 
Chief Financial Officer, Secretary, Director
 

The biographies of each of the directors and executive officers below contains information regarding the person’s service, business experience, positions held currently or at any time during the last five years, and for each director or any nominee for director the particular experiences, qualifications, attributes or skills that caused the Board of Directors to determine that such person should serve as a director for the Company in 2011, and the names of other any other publicly-held companies of which such person served as a director in the past five years.

Jordan M. Estra, Chief Executive Officer, President, and Director:
 
Mr. Estra has had the following employment opportunities; Managing Director in the Private Equity group at Sutter Securities Incorporated, since May 2009, Managing Director at Jesup & Lamont Securities, Inc., from April 2007 to April 2009, Senior Vice President for Dawson James Securities, Inc., from September 2006 to March 2007 and Managing Director at Stanford Financial Group, from June 2003 to September 2006.  He has focused on raising capital for emerging natural resource companies.  Mr. Estra has been a leading research analyst and global metals/mining team leader for a number of major investment banks, including SG Warburg (now UBS), Merrill Lynch and BT Alex Brown (now Deutsche Bank) He began his career in the resources industry, at AMAX Inc., a global natural resources leader with interests in precious metals, copper, lead, zinc, coal, oil & gas, molybdenum, tungsten and iron ore.  Mr. Estra held a number of positions in finance, marketing and strategic business development.
 
 
Mr. Estra graduated with high distinction from Babson College with a degree in International Economics and with honors from Columbia University’s Graduate School of Business.   Mr. Estra served in the United States Army and has been a member of the American Institute of Mining, Metallurgical and Petroleum Engineers, the Foreign Policy Association, the New York Society of Security Analysts and the Stock & Bond Club of South Florida.

 
27

 
 
The Company believes Mr. Estra’s qualifications to sit on its Board of Directors include his experience in the natural resource industry, his background as a research analyst and his advanced education in management.
 
Other Directorships: Mr. Estra is a Director of Searchlight Minerals, Inc., and is Director and Non-Executive Chairman of Starcore International Mines, LTD, and is a member of the Advisory Board of RX Exploration, all publicly owned gold mining companies.
 
Jeff A. Hanks, CPA, Chief Financial Officer and Director:

Mr. Hanks has served as a member of the Board of Directors of the Company and as the Chief Financial Officer of the Company, since 2002.  During this time the Company focused on several Mergers and Acquisitions.  From 2002, until December, 2009, Mr. Hanks also served as the President of the Company.  Prior to joining the Company in 2000, Mr. Hanks worked as a Controller and Chief Financial Officer for several mid-size growing companies.  Mr. Hanks has also worked as a consultant and auditor for Deloitte & Touche, one the Big Four international accounting firms where he obtained his CPA license.  He graduated from the University of Utah with a degree in Accounting.  He is currently a member of the AICPA.

The Company believes Mr. Hanks’ qualifications to sit on its Board of Directors include his extensive audit and SEC experience, CPA license and his over 20 years of experience in finance and accounting and his senior executive experience with several companies, including eleven years with the Company.

Other Directorships: From March 2010 to Sept 2010, Mr. Hanks served as the Chief Financial Officer and a director for SMSA El Paso II Acquisition Corp., a development stage company in the oil, gas and mineral industry.  He also serves as a Director and Treasurer for NAMI of Utah.

Term of Office

All directors serve until the next annual stockholders meeting or until their successors are duly elected and qualified.  All officers serve at the discretion of the Board of Directors.

There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors during the period covered by this report.

Family Relationships

There are no family relationships between or among any of the Company's directors or executive officers.

Code of Ethics

The Company has not yet adopted a code of ethics.  The Company intends to adopt a code of ethics in the near future.

 
28

 

Involvement in Certain Legal Proceedings

To the best of its knowledge, the Company’s directors and executive officers were not involved in any legal proceedings during the last 10 years as described in Item 401(f) of Regulation S-K.

Compliance with Section 16(a) Beneficial Ownership Reporting.

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers and persons who own more than five percent of a registered class of the Company’s equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of its common stock. Officers, directors and ten-percent or more beneficial owners of the Company’s common stock are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file and provide written representation that no Form 5 is required.

Jordan Estra and Jeff Hanks, the Chief Executive Officer and Chief Financial Officer of the Company, respectively, both of whom are also directors of the Company, have represented to the Company that all filings of their Initial Statements of Beneficial Ownership on Form 3 have been filed.  The Form 3 for each executive has been filed as of the date of this annual report on Form 10-K.
 

ITEM 11.
EXECUTIVE COMPENSATION
 
Michael B. Campbell was appointed President and Chief Executive Officer during the month of December 2009 and served through June 1, 2010, when he resigned.  He received compensation of $75,000 during this time period.

Jordan M. Estra was appointed President and Chief Executive Officer on July 1, 2010.  He received compensation of $93,750, common stock and options valued at $487,463 for the year ended December 31, 2010.

Jeff A. Hanks served as President of the Company until December 2009 and is currently the Chief Financial Officer.  During 2010 he received compensation of $87,000, common stock and options valued at $417,463 for that time period.  He did receive 400,000 shares of common stock in June 2009 in exchange for accrued compensation.

No other officer of the company was compensated in excess of $100,000.


SUMMARY COMPENSATION TABLE

The following table sets forth certain summary information concerning the compensation paid or accrued for each of the Company’s last two completed fiscal years to the Company’s Chief Executive Officer and each of its other executive officers that received compensation in excess of $100,000 during such period (as determined at December 31, 2010 and 2009):


 
29

 
 
Summary Compensation Table
 
  Annual compensation     Awards     Payouts                    
                                                   
Name and Principal Position
Year
 
 
Salary
($)
   
Bonus
($)
   
Stock
Awards
($) (3)
   
Option
Awards
($) (3)
   
Non-Equity
 Incentive Plan
 Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings ($)
   
All Other
Compensation
($)
   
Total
($)
 
                                                   
Jordan  Estra, CEO/
President (1)
 
2010
    93,750       -0-       140,000       347,463       -0-       -0-       -0-       581,213  
                                                                   
Michael Campbell,
CEO/President (2)
 
2010
    75,000       -0-       -0-       -0-       -0-       -0-       -0-       75,000  
                                                                   
Jeff Hanks,CFO
 
2010
    87,000       -0-       70,000       347,463       -0-       -0-       -0-       504,463  
                                                                   
Jeff Hanks, President
 
2009
    -0-       -0-       1,000       -0-       -0-       -0-       -0-       1,000  
 
(1) Mr. Estra was appointed as President and Chief Executive Officer in July 2010.
(2) Mr. Campbell was appointed as a member of the Board of Directors of the Company and as its President and Chief Executive Officer in December 2009; he resigned June 30, 2010.  Mr. Hanks resigned as President of the Company in December 2009 but continued as its Chief Financial Officer.
(3) This column represents the aggregate grant date fair value of the awards granted in 2010 and 2009, respectively. Therefore, the values shown here are not representative of the amounts that may eventually be realized by an executive. Pursuant to the rules of the Securities and Exchange Commission, we have provided a grant date fair value for option awards in accordance with the provisions of FASB ASC 718 Share-based Payments. For option awards, the fair value is estimated as of the date of grant using the Black-Scholes option pricing model, which requires the use of certain assumptions, including the risk-free interest rate, dividend yield, volatility, forfeitures and expected term.  Expected term is determined using an average of the contractual term and vesting period of the award.  Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of similar industry indices, which are publicly traded, over the expected term of the award.  Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards and forfeitures are based on the history of cancellations of awards granted by the Company and   management's analysis of potential forfeitures
 
Salaries for Mr. Hanks for 2007 and 2008 were earned and accrued and paid with common stock in 2009.

In July 2010 the Company obtained financing at $0.14, which we determined to be the current market value of the Company’s common stock.  During July of 2010 the Company issued 1,000,000 shares of common stock to Jordan Estra and 500,000 shares of common stock to Jeff Hanks at the current market price of $0.14, for a total of $140,000 and $70,000 respectively and a total of $210,000.  During August and November the Company issued 1,600,000 options to both Jordan Estra and Jeff Hanks at the current market price of $0.14, which equals $224,000 respectively.  We used this value of $224,000 as the current market value of the options and used this for our Black Sholes model, which determined an accounting expense of $347,463, respectively, to be charged on the financials as an expense.  Thus, this higher amount was used in the table so as to tie to the financial statements.

 
30

 
 
Michael B. Campbell’s Consulting Agreement
 
On February 1, 2010, the Company entered into a one-year non-exclusive consulting agreement (the “Campbell Consulting Agreement”) with Michael Campbell, Chairman of the Board of Directors of the Company. Pursuant to the Campbell Consulting Agreement, Mr. Campbell will serve as the President and Chief Executive Officer of the Company and Mr. Campbell will receive a monthly consulting fee of $15,000, in addition to reimbursement of his reasonable and necessary business expenses.  This consulting agreement was terminated when Michael Campbell resigned on June 30, 2010.
 
Jeff A. Hanks’s Consulting Agreement
 
On February 1, 2010, the Company also entered into a one-year non-exclusive consulting agreement (the “Hanks Consulting Agreement” and collectively with the Campbell Consulting Agreement, the “Consulting Agreements”) with Jeff A. Hanks, a member of the Board of Directors of the Company. Pursuant to the Hanks Consulting Agreement, Mr. Hanks will serve as the Chief Financial Officer of the Company and Mr. Hanks will receive a monthly base consulting fee of $2,000, plus a $1,000 preparation fee for each Annual Report on Form 10-K or Quarterly Report on Form 10-Q he prepares for the Company.  This agreement was terminated when Mr. Hanks accepted a full time position with the Company.

Employment Contracts and Termination of Employment and Change in Control Arrangement

We have entered into two contracts with our management.  The employment agreements are for a term of three years but automatically renew on the anniversary date for an additional one year period until terminated on thirty days written notice form Ensurge or the employee.  Our CEO will receive an annual salary of $225,000 and our CFO will receive an annual salary of $150,000 both subject to yearly adjustment by the board or compensation committee.  The contracts also allow for yearly bonuses and stock options at the discretion of the board or compensation committee.  If there is a change of control and the CEO or CFO is terminated within the twelve months following such change of control, the CEO or CFO, as the case may be, will receive twenty four months of his salary from the date of such termination. Unless terminated for cause, the CEO or CFO will receive twenty four months of his annualized salary.  Cause is defined as gross negligence, felony conviction fraud, embezzlement or willful and material violations of Ensurge policy which is not corrected.
 
 
31

 

Outstanding Equity Awards At Fiscal Year-End


   
Option awards
Stock awards
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 of
units of stock
that have not vested
($)
Equity
incentive
plan awards:
Number of
unearned
shares, units or
other rights that
have not vested
(#)
Equity
incentive
plan awards:
Market or payout
value of
unearned
shares, units or other rights that have not
vested
($)
(a)
 
(b)
   
(c)
 
(d)
 
(e)
 
(f)
(g)
(h)
(i)
(j)
Jordan Estra
    1,600,000       900,000  
None
  $ 0.14  
Nov 2020
None
None
None
None
Jeff Hanks
    1,600,000       900,000    
None.
  $ 0.14    
Nov 2020
 
None.
 
None.
 
None.
 
None.

Benefit Plans

On April 21, 2010, the Company adopted an Equity Incentive Plan.  The Company has not adopted any retirement, pension, or profit sharing for the benefit of its employees.


Director Compensation

The Company does not currently provide compensation to its directors for serving on its Board of Directors.  


ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information regarding the beneficial ownership of the Company's outstanding Common Stock as of March 31, 2011, by (i) each director of the Company, (ii) each named executive officer in the Summary Compensation Table, (iii) each person known or believed by the Company to own beneficially five percent or more of the Common Stock and (iv) all directors and executive officers as a group. Unless indicated otherwise, each person has sole voting and dispositive power with respect to such shares.

 
Name and Address
Of Beneficial Owner
 
Beneficial
Ownership (1)
   
Percent of
Class
 
             
 
Officers and Directors
As a Group (two)
    2,600,200       8.8 %
 
Jordan M. Estra
2825 East Cottonwood Parkway,
Suite 500
Salt Lake City, UT 84121
    1,700,000       5.8 %
 
Jeff A. Hanks
2825 East Cottonwood Parkway,
Suite 500
Salt Lake City, UT 84121
    900,200       3.0 %
                 
 
Beneficial Owners
Owning greater than 5%
   
Beneficial
Ownership
   
Percent
Of Class
 
 
Steve Heard
4003 West Tacon Street
Tampa, FL 33629
    3,850,000       13.0 %
 
Puremax, Inc.
4003 West Tacon Street
Tampa, FL 33629
    5,000,000       16.9 %
 
Barrington Capital Partners, Inc.
830 West  RT 22, Suite 153
Lake Zurich, IL 60047
    3,367,251       11.4 %
 
Wasatch Property Development, Inc.
35 W. Broadway, Suite #104
Salt Lake City, UT 84101
    3,032,155       10.2 %
 
Seaside 88,LP
750 Ocean Royale Way, Suite 805
Juno Beach, FL 33408
    2,813,555       9.5 %
 
   
(1)
Unless otherwise indicated, the Company has been advised that all individuals or entities listed have the sole power to vote and dispose of the number of shares set forth opposite their names. For purposes of computing the number and percentage of shares beneficially owned by a security holder, any shares which such person has the right to acquire within 60 days of March 31, 2011 are deemed to be outstanding, but those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other security holder.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
None.
 

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
Audit Fees: the aggregate audit and review fees billed for fiscal years ending 2010 and 2009 were respectively, $14,800 and $13,300.  These fees were for professional services rendered by Child, Van Wagoner & Bradshaw, PLLC CPA firm for the audit of the Company’s annual financial statements and review of financial statements.

Audit-Related Fees:  None.

Tax Fees: the aggregate tax fees billed for fiscal years ending 2010 and 2009 were respectively, $700 and $700.  These fees were for professional services rendered by Child, Van Wagoner & Bradshaw, PLLC, which were for the completion of the Company’s year end tax return.

All Other Fees:  None. 

ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
(a)(1)(2) Financial Statements.
 
The financial statements listed in the Index to Financial Statements are filed as part of this Annual Report on Form 10-K.

(a)(3) Exhibits.
 
The exhibits required by this item are set forth on the Exhibit Index attached hereto.
 
 
32

 

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

 
 
ENSURGE, INC.
     
     
April 13, 2012
By:
/s/ JORDAN M. ESTRA
   
Jordan M. Estra, Chief Executive Officer
(Principal Executive Officer)
 
 
 
By:
 
/s/ JEFF A. HANKS
   
Jeff A. Hanks, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



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


/s/ JORDAN M. ESTRA
 
April 13,  2012
Jordan M. Estra
President, Chief Executive Officer
 and Director
 
   


 
/s/ JEFF A. HANKS
 
April 13, 2012
Jeff A. Hanks
Chief Financial Officer
and Director
 
   
 
 
33

 
 
EXHIBIT INDEX

 
31.1
Certification of Jordan M. Estra pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
31.2
Certification of Jeff A. Hanks  pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
 
32
Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
34