UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
Exhibit
99.2
UNAUDITED
PRO FORMA CONDENSED FINANCIAL INFORMATION
On
November 30, 2006, the Company and its shareholders entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement") with Cold Flow Energy ULC,
a
corporation incorporated under the laws of Alberta, Canada (“Cold Flow”). Cold
Flow is a wholly owned subsidiary of Surge Global Energy, Inc. (“Surge”), a
United States based public company. Pursuant to the terms of the Stock Purchase
Agreement, the parties agreed that Cold Flow would purchase all of the issued
and outstanding shares of the capital stock of the Company (the “Acquisition”)
for a total purchase price of CDN$16,350,000, which consists of CDN$6,350,000
in
cash and an aggregate of 8,965,390 exchangeable shares of preferred stock of
Cold Flow (the “Exchangeable Shares”). On December 4, 2006, Cold Flow delivered
an initial deposit of CDN$150,000, which deposit and any interest earned thereon
was deducted from the cash portion of the purchase price.
Since
completion of the Acquisition was extended beyond January 18, 2007, Cold Flow
made an additional deposit of CDN$450,000 into escrow prior to January 18,
2007,
which additional deposit and any interest earned thereon was deducted from
the
cash portion of the purchase price. On March 2, 2007, Surge completed its
acquisition of the Company. In connection with the closing of the Acquisition,
the parties amended the Stock Purchase Agreement on March 2, 2007 to modify
the
payment of the purchase price such that CDN$5,600,000 of the cash portion of
the
purchase price is now payable in promissory notes issued by Cold Flow in favor
of 1304146 Alberta Ltd., which is an entity formed by the shareholders of the
Company, and the remaining CDN$750,000 of the cash portion was paid in cash.
In
addition, through its indirectly-owned Canadian subsidiary, Cold Flow, Surge
loaned CDN$250,000 to the Company for retirement of its shareholder
loans and paid CDN$20,000 of its legal fees incurred with this transaction.
As a
result of the Acquisition, the Company became a wholly owned subsidiary of
Cold
Flow.
The
Stock
Purchase Agreement provides that Surge, Cold Flow, and Olympia Trust Company
will enter into a Voting and Exchange Trust Agreement on the closing date and
that Surge and Cold Flow will enter into a Support Agreement on the closing
date
(collectively with the Stock Purchase Agreement, the “Acquisition Agreements”).
The Acquisition Agreements provide that each Exchangeable Share is exchangeable
into two shares of Surge’s common stock at any time from the closing until five
years after the closing. In addition, Surge may redeem all of the then
outstanding Exchangeable Shares at any time on or after the third anniversary
of
the closing date at a redemption price equal to the sum of the market price
of
two shares of Surge’s common stock plus all declared but unpaid dividends
payable to the Exchangeable Shares. Should Surge be unable to fulfill its
remaining secured note payable obligations of approximately CDN$4 million due
by
August 30, 2007, all cash monies advanced to the Company through that date
will
be forfeited and all shares and warrants shall be returned to
Surge.
The
Pro
forma Unaudited Financial Statements have been prepared by management of Surge
in order to present consolidated financial position and results of operations
of
Surge as if the acquisition had occurred as of December 31, 2006 for the pro
forma condensed balance sheet. The pro forma condensed consolidated statement
of
losses presents twelve months (year ending December 31, 2006 for Surge compared
to the year ending September 30, 2006 for the Company), the three months ended
December 31, 2006 as well as the period from January 1, 2005 (date of inception
for Surge) through December 31, 2006. The pro forma weighted outstanding shares
assumes conversion of the 8,965,390 Cold Flow ULC preferred shares into
17,930,780 Surge common shares.
The
pro
forma information is based on historical financial statements giving effect
to
the loss of control event using the equity method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma financial
statements. The unaudited pro forma financial information is not necessarily
indicative of the actual results of operations or the financial position which
would have been attained had the acquisitions been consummated at either of
the
foregoing dates or which may be attained in the future. The pro forma financial
information should be read in conjunction the Surge’s previously filed Current
Report on Form 8-K, dated March 8, 2007, and the previously filed Annual Report
on Form 10-KSB, and the historical financial statements and accompanying notes
of the Company included in this Current Report on Form 8-K/A.
F-1
|
SURGE
GLOBAL ENERGY INC.
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER
31, 2006
|
|
|
Surge
|
Peace
Oil
|
Pro
Forma Adjustments
|
|
Pro
Forma
|
|||||||||||
|
ASSETS
|
|
|
|
|
||||||||||||
|
Cash
|
$
|
1,527,073
|
$
|
685,659
|
$
|
(880,613
|
)
|
(2)
|
|
$
|
1,332,119
|
|||||
|
Other
current assets
|
26,043
|
-
|
-
|
26,043
|
||||||||||||
|
Total
Current Assets
|
1,553,116
|
685,659
|
(880,613
|
)
|
1,358,162
|
|||||||||||
|
|
||||||||||||||||
|
Property
and equipment, net
|
16,918
|
-
|
-
|
16,918
|
||||||||||||
|
Investment
in Signet
|
4,597,217
|
-
|
-
|
4,597,217
|
||||||||||||
|
Investment
in Peace Oil
|
133,449
|
-
|
14,261,123
|
(1)
|
|
14,467,694
|
||||||||||
|
73,122
|
(3)
|
|||||||||||||||
|
|
||||||||||||||||
|
Total
Assets
|
$ |
6,300,700
|
$ |
685,659
|
$ |
13,453,632
|
$ |
20,439,991
|
||||||||
|
|
||||||||||||||||
|
LIABILITIES
AND SHAREHOLDER EQUITY
|
||||||||||||||||
|
Accounts
Payable
|
$ |
603,540
|
$ |
15,766
|
$ |
73,122
|
(3)
|
|
$ |
692,428
|
||||||
|
Cash
Advances from Joint Venture Partner
|
629,323
|
-
|
629,323
|
|||||||||||||
|
Note
Payable
|
|
224,471
|
5,680,423
|
|
(1)
|
|
5,024,281
|
|||||||||
|
(880,613
|
) |
(2)
|
||||||||||||||
|
Redeemable
Preferred Shares
|
-
|
5,686,572
|
(5,686,572
|
)
|
(5)
|
|
-
|
|||||||||
|
Total
Current Liabilities
|
603,540
|
6,556,132
|
(813,640
|
)
|
6,346,032
|
|||||||||||
|
|
||||||||||||||||
|
Warrant
Liability
|
2,309,400
|
-
|
-
|
2,309,400
|
||||||||||||
|
Stockholders’
Equity
|
||||||||||||||||
|
Common
Stock
|
30,587
|
90
|
(90
|
)
|
(4)
|
|
30,587
|
|||||||||
|
Additional
paid-in capital
|
40,198,386
|
-
|
8,580,700
90
5,686,572
|
(1)
(4)
(5)
|
|
54,465,748
|
||||||||||
|
Accumulated
other comprehensive income(loss)
|
153,600
|
(9,957
|
)
|
-
|
143,643
|
|||||||||||
|
Accumulated
deficit
|
(12,337,511
|
)
|
-
|
(12,337,511
|
) | |||||||||||
|
Deficit
from inception of development stage
|
(24,657,302
|
)
|
(5,860,606
|
)
|
-
|
(30,517,908
|
) | |||||||||
|
Total
stockholders’ equity
|
3,387,760
|
(5,870,473
|
)
|
14,267,272
|
11,784,559
|
|||||||||||
|
Total
liabilities and stockholders’ equity
|
$ |
6,300,700
|
$ |
685,659
|
$ |
13,453,632
|
$ |
20,439,991
|
||||||||
F-2
|
(A
DEVELOPMENT STAGE COMPANY)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF
LOSSES
|
||||||||||
|
For
the year ended
|
|||||||||||||
|
Surge
December
31, 2006
|
Peace
Oil
September
30, 2006
|
Adjustments
|
Pro
Forma
|
||||||||||
|
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
|
Income
(loss) from operations
|
(14,451,688
|
)
|
(5,786,070
|
)
|
-
|
(20,237,758
|
)
|
||||||
|
Loss
from operations before income taxes and minority interest
|
(17,045,120
|
)
|
(5,786,070
|
)
|
-
|
(22,831,190
|
)
|
||||||
|
Loss
applicable to minority interest
|
1,119,027
|
-
|
-
|
1,119,027
|
|||||||||
|
Net
income (loss)
|
$
|
(15,926,093
|
)
|
$
|
(5,786,070
|
)
|
$
|
-
|
$
|
(21,712,163
|
)
|
||
|
Other
comprehensive income (loss):
foreign
currency translation
|
339,014
|
-
|
339,014
|
||||||||||
|
Loss
available to common stockholders
|
$
|
(15,587,079
|
)
|
$
|
(5,786,070
|
)
|
$
|
-
|
$
|
(21,373,149
|
)
|
||
|
|
|||||||||||||
|
Loss
per common share (basic and diluted)
|
$
|
(0.58
|
)
|
$
|
-
|
$
|
-
|
$
|
(0.48
|
)
|
|||
|
|
|||||||||||||
|
Weighted
average shares outstanding
|
27,360,878
|
-
|
-
|
45,291,658
|
|||||||||
F-3
|
(A
DEVELOPMENT STAGE COMPANY)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF
LOSSES
|
||||||||||
|
For
the three months ended December 31, 2006
|
|||||||||||||
|
Surge
|
Peace
Oil
|
Adjustments
|
Pro
Forma
|
||||||||||
|
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
|
Income
(loss) from operations
|
(8,322,567
|
)
|
(74,536
|
)
|
-
|
(8,397,106
|
)
|
||||||
|
Loss
from operations before income taxes and minority interest
|
(10,768,191
|
)
|
(74,536
|
)
|
-
|
(10,842,727
|
)
|
||||||
|
Loss
applicable to minority interest
|
-
|
-
|
-
|
-
|
|||||||||
|
Net
income (loss)
|
$
|
(10,768,191
|
)
|
$
|
(74,536
|
)
|
$
|
-
|
$
|
(10,842,727
|
)
|
||
|
|
|||||||||||||
|
Other
comprehensive income (loss):
Foreign
currency translation
|
1,462
|
(9,957
|
)
|
-
|
8,495
|
||||||||
|
Loss
available to common stockholders
|
$
|
(10,766,729
|
)
|
$
|
(84,493
|
)
|
$
|
$(10,851,223
|
)
|
||||
|
|
|||||||||||||
|
Loss
per common share (basic and diluted)
|
$
|
(0.38
|
)
|
$
|
-
|
$
|
-
|
$
|
(0.23
|
)
|
|||
|
|
|||||||||||||
|
Weighted
average shares outstanding
|
28,652,314
|
-
|
-
|
46,583,094
|
|||||||||
F-4
(A
DEVELOPMENT STAGE COMPANY)
.
NOTES
TO
CONDENSED PRO FORMA UNAUDITED FINANCIAL STATEMENTS
UNAUDITED
PRO FORMA CONDENSED FINANCIAL INFORMATION
The
Proforma Unaudited Condensed Financial Statements have been prepared in order
to
present consolidated financial position and results of operations of Surge
Global Energy, Inc. as if the acquisition had occurred as of December 31, 2006
for the pro forma condensed balance sheet. The pro forma condensed consolidated
statement of losses presents twelve months (year ending December 31, 2006 for
Surge compared to the year ending September 30, 2006 for Peace Oil), the three
months ended December 31, 2006 as well as the period from January 1, 2005 (date
of inception for Surge) through December 31, 2006.
The
following pro forma adjustments are incorporated into the pro forma condensed
consolidated balance sheet as of December 31, 2006 and the pro forma condensed
consolidated statement of operations for the year ended December 31,
2006.
|
(1)
|
|
|
|
|
|
Debit
Investment in Peace Oil
|
$
|
14,261,123
|
|
|
|
Credit
Notes Payable
|
$
|
5,680,423
|
||
|
Credit
Additional Paid-In Capital
|
$
|
8,580,700
|
As
disclosed in our March 8, 2007 8-K filing, to record the CDN$16.620 million
in
total consideration (initial CDN$16.350 million plus CDN$270,000 in shareholder
loans and legal fees), the CDN$6.620 million in notes payable and CDN$10 million
exchangeable preferred shares classified as additional paid-in capital to
acquire Peace Oil. Amounts in the above pro forma are presented in US
dollars.
|
(2)
|
|
|
|
|
|
Debit
Notes Payable
|
$
|
880,613
|
|
|
|
Credit
Cash
|
|
|
$
|
880,613
|
To
record
cash payments applied to the Peace Oil note payable.
|
(3)
|
|
|
|
|
|
Debit
Investment in Peace Oil
|
$
|
73,122
|
|
|
|
Credit
Accounts Payable
|
$
|
73,122
|
To
record
acquisition expenses paid by Surge.
|
(4)
|
|
|
|
|
|
Debit
Common Stock
|
$
|
90
|
|
|
|
Credit
Additional paid-in capital
|
|
|
$
|
90
|
To
reclass Peace Oil common stock to additional paid-in capital as a result of
the
acquisition.
|
(5)
|
|
|
|
|
|
Debit
Redeemable Preferred Shares
|
$
|
5,686,572
|
|
|
|
Credit
Additional paid-in capital
|
|
|
$
|
5,686,572
|
To
reclass Peace Oil redeemable preferred shares to additional paid-in capital
as a
result of the acquisition.
F-5
