SurgePays - 10-Q quarterly report FY

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

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

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 17,375,539 shares of common stock outstanding as of November 30, 2010.

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission ("Commission"). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, contained in North American Energy Resources, Inc.’s Form 10-K dated April 30, 2010.

The Company previously sold its gas pursuant to a contract with a gathering system principally owned by a related party.  The Company received a price equal to 70% of the posted price, which is the same rate charged to third parties.  The related party retained the other 30% of the posted price for gathering fees and marketing fees.  The gathering system has been shut-in due to low gas prices since February 2009.  The Company sold all of its interest in these gas wells effective October 1, 2010.

Convertible notes payable includes convertible notes payable to shareholders and others in the total amount of $527,976 and $510,476 at October 31, 2010 and April 30, 2010, respectively.  One note with a balance of $384,428 at October 31, 2010 and April 30, 2010 was due May 1, 2010 and remains past due.  This note is convertible into the Company's common stock at a price of $1.50 per share.  The remaining notes in the total amount of $143,548 are due, $126,048 in March and April 2011 and $17,500 in September 2011, including interest at 12% and are convertible into the Company's common stock at a price ranging from $0.03 to $1.00 per share.

The Company has 100,000,000 shares of its $0.001 par value preferred stock authorized.  At October 31, 2010 and April 30, 2010, the Company had no shares issued and outstanding.

The Company has 100,000,000 shares of its $0.001 par value common stock authorized.  At October 31, 2010 and April 30, 2010 the Company has 17,375,539 shares issued and outstanding.

At a special meeting of shareholders held on April 23, 2009, 63% of our shareholders, either in person or by proxy, voted to approve a 1:50 reverse split of the Company's common stock.  This amendment to the Company's Articles of Incorporation was filed with the Nevada Secretary of State and became effective on April 27, 2009.  Accordingly, all references to shares of our common stock included herein have been retroactively restated to give effect to the reverse split.

On July 28, 2008, the Company acquired 100% of the outstanding stock of NAE for 420,000 shares of our common stock pursuant to a Stock Purchase Agreement ("SPA").  Completion of the SPA resulted in the shareholders of NAE having control of NAEY.

The SPA provided that NAEY was to have $1,500,000 in cash and no liabilities at closing.  At July 28, 2008, the closing date, NAEY had $150,000 of the required cash and on August 28, 2008, the parties to the SPA entered into a Modification Agreement ("MA") which provided an extension until January 27, 2009 for the additional cash to be contributed to the Company.  At January 27, 2009, the Company had received an additional $50,000 and was still short $1,300,000 of the agreed amount.  The MA provided that the Buyer would make contingent issuances of shares to the Seller equal to 95% of all the outstanding stock after issuance.  Accordingly, effective April 30, 2009, an additional 13,250,381 shares were issued to the Sellers.

The North American Energy Resources, Inc. 2008 Stock Option Plan ("Plan") was filed on September 11, 2008 and reserves 2,500,000 shares for awards under the Plan.  The Company's Board of Directors is designated to administer the Plan and may form a Compensation Committee for this purpose.  The Plan terminates on July 23, 2013.

Options granted under the Plan may be either "incentive stock options" intended to qualify as such under the Internal Revenue Code, or "non-qualified stock options."  Options outstanding under the Plan have a maximum term of up to ten years, as designated in the option agreements.  No options are outstanding at October 31, 2010.  At October 31, 2010, there are 1,242,333 shares available for grant.

The Company recorded prepaid expenses from the issue of its common stock for consulting services.  The cost, based on the trading price of the stock at the time of the transaction, is amortized to expense over the term of the contracts.  The unamortized balances at October 31, 2010 and April 30, 2010 are as follows:

This statement contains forward-looking statements within the meaning of the Securities Act.  Discussions containing such forward-looking statements may be found throughout this statement.  Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including the matters set forth in this statement.

Our plan of operation for the next twelve months is to obtain funding from private placements of our common stock and acquire additional leases.

Oil revenues included 32 net barrels sold in 2010 and in 2009.  Due to low prices, the Company shut-in its gas production during January 2009.  The Company's oil prices per barrel averaged $66.84 during 2010 and $61.69 during 2009.

The Company recorded asset impairment charges in 2010 and 2009.  The charge in 2010 was as a result of the sale of its remaining shut-in gas properties and its producing oil properties in Washington County, Oklahoma during October 2010.  The 2009 impairment was a result of an acquisition made with common stock being higher than the value of the discounted reserves at the time of the acquisition.

Non-cash compensation in 2010 and 2009 represents the current period charge for stock which has been issued for consulting contracts.

Other general and administrative expense, net of operator's overhead fee declined from $59,716 to $4,918.  The majority of the decline is due to lower legal costs of $34,161 and lower accounting and auditing costs.

The interest bearing debt increased during the 2010 period as compared to the 2009 period.

Oil revenues included 64 net barrels sold in 2010 and 66 net barrels sold in 2009.  Due to low prices, the Company shut-in its gas production during January 2009.  The Company's oil prices per barrel averaged $63.19 during 2010 and $54.36 during 2009.  The Company sold this production effective October 1, 2010.

The Company recorded asset impairment charges in 2010 and 2009.  The charge in 2010 was as a result of the sale of its remaining shut-in gas properties and its producing oil properties in Washington County, Oklahoma during October 2010.  The 2009 impairment was a result of an acquisition made with common stock being higher than the value of the discounted reserves at the time of the acquisition.

Non-cash compensation in 2010 and 2009 represents the current period charge for stock which has been issued for consulting contracts.

Other general and administrative expense, net of operator's overhead fee declined from $86,486 to $28,085.  The majority of the decline is due to lower legal costs of $34,161 and lower accounting and auditing costs.

The interest bearing debt increased during the 2010 period as compared to the 2009 period.

At October 31, 2010, we had $1,993 in cash and a working capital deficit of $608,762.  Comparatively, we had cash of $3,026 and a working capital deficit of $344,785 at April 30, 2010.  The principal element of the change in working capital was a decrease in prepaid consulting contracts of $205,233 and other losses incurred during the period which caused higher current liabilities.

We estimate that our total planned cash expenditures over the next twelve months will be approximately $36,000 for basic corporate overhead, assuming no increased operations.  We expect to utilize excess funds, when available, to acquire additional acreage for future drilling operations and plan to issue our common stock for certain services when possible.  The Company's note payable to a shareholder with a balance of $384,428 at October 31, 2010, was due May 1, 2010 and remains unpaid.  The Company expects to extend the note or convert it to common stock.

The Company will plan to meet its capital requirements for the next year with private placements of its common stock or advances from related parties.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Cash used in operating activities was $13,640 for the six-month period ended October 31, 2010 and cash used in operations was $21,790 for the comparable 2009 period.  There has been only nominal activity with a significant portion of the operating loss being paid with common stock.

We incurred capital costs of $4,893 and $95 in the six months ended October 31, 2010 and 2009, respectively.

Received loan proceeds of $17,500 during the three months ended October 31, 2010 and had no activity during the six months ended October 31, 2009.

We have not attained profitable operations and are dependent upon obtaining a replacement for the shareholder contributions to pursue our business plan.  For these reasons, there is substantial doubt we will be able to continue as a going concern, since we are dependent upon an as yet unknown source to provide sufficient funds to finance future operations until our revenues are adequate to fund our cost of operations.

None.

Not applicable.

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of October 31, 2010.  Based on that review and evaluation, which included inquiries made to certain other consultants of the Company, the CEO and CFO concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are not effective, due to a lack of segregation of duties, in ensuring that information relating to the Company required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including insuring that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described above, including any corrective actions with regard to significant deficiencies and material weaknesses.

None

Not applicable.

None during the quarter ended October 31, 2010.

None

None

None

Pursuant to the requirements 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.