<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                   FORM 10-KSB
(MARK ONE)

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                       OR

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

         FOR THE TRANSITION PERIOD FROM         TO

                         COMMISSION FILE NUMBER 0-24269
                             ----------------------

                            SURGE GLOBAL ENERGY, INC.
                 (Name of small business issuer in its charter)
                             ----------------------

              DELAWARE                                        34-1454529
   (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                         Identification No.)


                        122220 EL CAMINO REAL, SUITE 410
                           SAN DIEGO, CALIFORNIA 92130
               (Address of principal executive offices) (Zip Code)

                                  858-704-5010
                           (Issuer's telephone number)

       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                                  COMMON STOCK

                              (TITLE OF EACH CLASS)

         Check whether the issuer (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

         Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year: $0.

         At March 31, 2005, the aggregate market value of the voting and
non-voting common equity held by non-affiliates computed by reference to the
average bid and asked price of such common equity, was $40,252,422.

         The number of shares outstanding of our Company's common stock at March
31, 2005 was 23,467,097.

         Transitional Small Business Disclosure Format (check one):
[ ] Yes [X] No

================================================================================





<PAGE>


<TABLE>
<S>     <C>
                                               INDEX
                                               -----
                                                                                                  Page
                                                                                                Number
                                                                                                ------
   PART I

   Item 1.         Description of Business                                                         3

   Item 2.         Description of Property                                                        14

   Item 3.         Legal Proceedings                                                              15

   Item 4.         Submission of Matters to a Vote of Security Holders                            15

   PART II

   Item 5.         Market for Common Equity and Related Stockholder Matters                       15

   Item 6.         Management's Discussion and Analysis or Plan of Operation                      16

   Item 7.         Financial Statements                                                           24

   Item 8.         Changes In and Disagreements With Accountants on Accounting
                   and Financial Disclosure                                                       24

   Item 8A.        Controls and Procedures                                                        24

   Item 8B.        Other Information                                                              25

   PART III

   Item 9.         Directors, Executive Officers, Promoters and Control Persons;
                   Compliance with Section 16(a) of the Exchange Act                              26

   Item 10.        Executive Compensation                                                         30

    Item 11.       Security Ownership of Certain Beneficial Owners
                   and Management                                                                 34

   Item 12.        Certain Relationships and Related Transactions                                 36

   Item 13.        Exhibits                                                                       36

   Item 14.        Principal Accounting Fees and Services                                         37


                                                        2
</TABLE>



<PAGE>

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

THIS ANNUAL REPORT ON FORM 10-KSB, INCLUDING EXHIBITS THERETO, CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THESE FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY THE
WORDS "ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FORECASTS", "PLANS",
"FUTURE", "STRATEGY", OR WORDS OF SIMILAR MEANING. VARIOUS FACTORS COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING
STATEMENTS, INCLUDING THOSE DESCRIBED IN "RISK FACTORS" IN THIS FORM 10-KSB. THE
COMPANY ASSUMES NO OBLIGATIONS TO UPDATE THESE FORWARD-LOOKING STATEMENTS TO
REFLECT ACTUAL RESULTS, CHANGES IN ASSUMPTIONS, OR CHANGES IN OTHER FACTORS,
EXCEPT AS REQUIRED BY LAW.

PART I
------

         As used in this annual report on Form 10-KSB, "we," "us," "our,"
"Surge" and "our Company" refer to Surge Global Energy, Inc. and our
subsidiaries, unless the context otherwise requires.

ITEM 1.           DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

         Surge Global Energy Inc. is a Delaware corporation traded on the
Bulletin Board under the symbol SRGG.OB. Surge maintains its corporate office at
12220 El Camino Real, Suite 410, San Diego, CA 92130. Surge's Common Stock is
registered with the SEC pursuant to Section 12(g) of the Securities and Exchange
Act of 1934 and Surge is subject to the reporting requirements of the Exchange
Act. Surge intends to develop oil and gas properties and explore for oil and gas
on a world-wide basis, focusing mainly in Canada, Argentina and the United
States.

         Surge holds the right to purchase interests in several domestic and
foreign oil and gas prospects.

CHANGE IN CORPORATE NAME

         On October 13, 2004, Surge's name was changed from The Havana Group,
Inc. to Surge Global Energy, Inc. and the symbol was changed to SRGG.OB.

COMPANY BACKGROUND

         Surge was incorporated on November 25, 1997 under the laws of the state
of Delaware. Surge completed its initial public offering on May 14, 1998
concurrent with an SEC Form SB-2A filing and promptly commenced trading on the
OTC Bulletin Board.

CORPORATE HISTORY

         On July 29, 2002, Surge acquired 100% of the common stock of Bible
Resources, Inc. in exchange for 10.9 million shares of Surge's restricted common
stock. Bible, at the time, was a newly formed Nevada corporation organized for
the purpose of exploring, developing and/or investing in oil and gas resources
on a worldwide basis. Bibles' primary asset was an agreement to purchase an
effective 50% investment interest in the Santa Rosa Dome Concession oil and gas
property in Argentina from Cynthia Holdings Ltd. a subsidiary of Oromin
Exploration Ltd. The remaining 50% interest in the Santa Rosa Project will be
owned by Oromin Exploration Ltd. with whom Surge will partner with in developing
the prospect.


                                       3



<PAGE>

         In January 2003, Management received the authority to proceed with the
plan of disposal of its previously unrelated pipe and tobacco business. Surge
continued operating its original business in conjunction with its current
business before completing a spin-off wherein, its inventory was liquidated and
its tangible and intangible assets were sold off. The spin-off was recorded as
of December 31, 2003.

         On July 23, 2003, Surge engaged Mr. E. Jamie Schloss as Special
Consultant to the Board of Directors and entered into an agreement with Castle
Rock Resources, Inc. The agreement entitles Surge to a first right of refusal to
acquire all of Castle Rock's domestic oil and gas drilling and exploration
prospects until July 21, 2006.

         In October, of 2004 E. Jamie Schloss was appointed to the board of
Directors.

         On October 13, 2004 that it has entered into an agreement with Dynamo
Energy Corporation of Calgary, Alberta to obtain a right of first refusal on all
its prospects for a period of five years until October 12, 2009. The purpose of
this agreement is that Surge plans to ultimately acquire and fund one or more
oil and gas development/exploration prospects in North America as a result of
this agreement.

         On November 4, of 2004 David Perez and Gary Vandergrift were appointed
to the board of Directors.

         On November 20, of 2004 David Perez was appointed to Chairman of the
Board and Chief Operating Officer.

         In November, of 2004 William Miller, former Chief Executive Officer
resigned and Fred W. Kelly was appointed Chief Executive Officer and Director.

         On November 30, of 2004 the company entered into an employment
agreement with David Perez, Chief Operating officer.

         In December of 2004, Surge completed the restructuring of its balance
sheet and the cancellation of its outstanding Preferred A and Preferred B shares
and indebtedness related to the discontinued tobacco and pipe business.

         In December of 2004, Surge converted $600,000 previously paid to Oromin
in order to exercise its right for a 17.52% interest in Cynthia Holdings
(Oromin) for the Santa Rosa Argentina Exploration project.

         In December of 2004, Surge converted all notes payables
and interest to common stock. In addition Surge completed a private placement
for $184,000 for its common shares.

         In December of 2004, Surge acquired insurance coverage for $5 million
of Directors & Officers Liability Insurance.

         In December of 2004, Surge sold tobacco assets and associated
liabilities to former Chief Executive Officer William Miller and recognized a
gain of $773,422 from disposal of discontinued operations.

         On February 4, 2005, Surge announced it had signed a letter of intent
with Deep Well Oil & Gas, Inc. and Northern Alberta Oil, Ltd. to form a Joint
Development and Operating Agreement whereby Surge will obtain a 40 percent
working interest in 63 square miles in the Sawn Lake area of Alberta, Canada.
Surge said it will pay $10 million in cash and approximately issue one-third of
its in its common stock on a fully diluted basis in stages following signing of
a formal agreement due to be completed within 30 days.

         On February 18, 2005, Surge announced it had entered into a revised
letter of intent with Deep Well Oil & Gas, Inc. and Northern Alberta Oil, Ltd.
to enter into a Farmout and Joint Operating Agreement whereby Surge will obtain
an undivided 40 percent working interest in 63 square miles in the Sawn Lake
area of Alberta, Canada. Surge said it will pay $2 million in cash and
approximately issue one-third of its common stock on a fully diluted basis in
stages following signing of a formal agreement.

         On February 25, 2005, Surge and its newly formed subsidiary, Surge
Global Energy (Canada), Ltd., entered into a Farmout Agreement with Deep Well
Oil & Gas, Inc. and Northern Alberta Oil Ltd. in connection with a very large
leasehold area in the Sawn Lake area of Alberta, Canada. Pursuant to the Farmout
Agreement, Surge will drill a test well, at its expense, within a 150 day period
from the date of the Farmout Agreement. By drilling the first well, Surge will
earn 50% of Deep Well's and Northern's working interest in the square mile of
land on which the test well is located plus Surge can choose five additional
square miles of leasehold. Surge also has the option to drill a second well
within 60 days after the rig release of the first test well in exchange for 50%
of Deep Well's and Northern's working interest in the square mile of lease on
which the second well, also called the first option well, is located. In
addition, Surge can select five additional square miles of leasehold to drill
additional wells. For a period of two years (the "Earning Period"), Surge will
have the option to drill additional wells and each well will earn 50% of Deep
Well's and Northern's working interest in six square miles of Surges' choosing
until its has earned a 40% undivided working interest in the 63 square miles of
leasehold in the Sawn Lake area.

         Surge also has the right to participate equally in the acquisition of
other areas of mutual interest in the Sawn Lake area and other oil sands areas
After the Earning Period, if Surge has chosen not to drill and earn all of the
63 square mile leasehold area Surge may be required to reconvey beneficial
interests in lands that it has not earned an interest in by the end of the
Earning Period.


                                       4

<PAGE>

         Pursuant to the Farmout Agreement, Surge is required to pay a prospect
fee in the amount of $2 million payable as follows:

         o        $1 million (reduced for certain expenses related to financing)
                  within seven calendar days of the execution of the Farmout
                  Agreement; and
         o        $1 million (reduced for certain expenses related to our
                  financing) upon completion or abandonment of a second test
                  well.

         On March 3, 2005, Deep Well Oil & Gas, Inc. and Northern Alberta
Oil, LTD. granted Surge an extension of 15 business days from the date of the
Farmout Agreement for the first $1 million payment. Also, an amount of Surge's
common stock equal to one-third of its outstanding shares of common stock, on a
fully diluted basis, as of February 17, 2005 (approximately 7,822,366 shares,
before the exercise of stock options and anti-dilution clauses) will be placed
in escrow for the benefit of Deep Well and Northern. The shares would be
released from escrow when a mutually acceptable third party engineering firm has
estimated that the acreage includes a specified amount of proved and producing
reserves.

INTERNATIONAL OIL AND GAS DRILLING AND EXPLORATION PROGRAMS

         Surge is evaluating a major investment opportunity in the heavy oil
sand deposits located in the Northern half of the Province of Alberta, Canada.
Oil-In-Place in the entire oil sands area is estimated at 1.7 Trillion barrels
by the Alberta Energy Utilities Board (EUB) of which 176 Billion barrels are
considered by the EUB as recoverable by mining and Steam Assisted Gravity
Drainage (SAGD).

         Through its agreement with Oromin Exploration Ltd., Surge had the right
to purchase a 50% working interest in the Santa Rosa Dome Concession in
Argentina. The Concession is located in the eastern half of the Cuyana basin in
the Province of Mendoza, in central Argentina. The Concession occupies 7,694
square kilometers, comprising exploring block #CCyB-9. In May, 2004 Surge paid
US$600,000 of its commitment through the Private Placement of Securities, and in
December, 2004 issued 1,000,000 shares to perfect a 17.52% interest in the Santa
Rosa Dome Oil & Gas exploration project in Argentina. At that time, Surge Global
Energy Inc. waived it's right with Oromin Explorations, Ltd. to acquire an
additional 32.48% interest in the Santa Rosa Dome Oil & Gas exploration project.

DOMESTIC OIL AND GAS DRILLING AND DEVELOPMENT PROGRAMS

         In July of 2004, Surge acquired a 50% interest in the Mirasol prospect
in Ward County, Texas. In the first quarter of 2005, Surge has obtained an
option on acquiring two existing, producing gas wells, each of which has a
second offset location on the existing leases held by production. In that
regard, Surge currently has an option to acquire a 75% working interest in each
of these two wells located in Southeast Texas. The first is the Mossy Grove #1
well which is producing about 300 MCF per day located in Colorado County, and
the Kerlick # 1 well producing about 250 MCF per day located in Colorado County.
Both wells also produce some condensate. Both have been producing continuously
since 1992 and projected production is expected to continue for more than 10
years. Each offset well would be drilled on the same leases now held by
production. The cost of acquiring these two wells is approximately 36 months of
production, of which 30 months would be paid in cash and the remainder in stock.
With respect to the offset wells, it is estimated that each new well could have
natural gas reserves of at least 5 BCF each, with a possibility of additional
reserves from several zones ultimately in excess of 7.5 BCF per well. These two
prospects, in addition to the Mirasol #1 well which is under lease and planned
to be drilled in 2005 creates a relatively low risk/high return drilling program
for 2005. The above properties are owned or controlled by Castle Rock Resources,
Inc. whose sole shareholder is E. Jamie Schloss, a Director and Chief Financial
Officer of Surge.

SALES AND MARKETING

         As we remain in the development stage, we have not yet generated any
revenues, nor do we have any customers at this time.


                                       5

<PAGE>

         The principal target customers for our crude oil production are
expected to be refiners, remarketers and other companies, some of which are
expected to have pipeline facilities near the producing properties we acquire.
In the event pipeline facilities are not conveniently available, we intend to
truck oil and/or natural gas to storage, refining or pipeline facilities.

         We intend to sell our oil production under both short-term (less than
one year) and long-term (one year or more) agreements at prices negotiated with
third parties. Under both short-term and long-term contracts, typically either
the entire contract (in the case of short-term contracts) or the price
provisions of the contract (in the case of long-term contracts) are renegotiated
from intervals ranging in frequency from daily to annual.

         We have not yet adopted any specific sales and marketing plans.
However, as production levels increase, the need to hire sales and marketing
personnel will be addressed.

COMPETITION

         The oil business is highly competitive. We will compete with private,
public and state-owned companies in all facets of the oil business, including
suppliers of energy and fuel to industrial, commercial and individual customers.
Numerous independent oil and gas companies, oil and gas syndicates and major oil
and gas companies actively seek out and bid for oil and gas prospects and
properties as well as for the services of third-party providers, such as
drilling companies, upon which we rely. Many of these companies not only explore
for, produce and market oil and natural gas, but also carry out refining
operations and market the resultant products on a worldwide basis. A substantial
number of our competitors have longer operating histories and substantially
greater financial and personnel resources than we do.

         Competitive conditions may be substantially affected by various forms
of energy legislation and/or regulation considered from time to time by the
government of the United States and other countries, as well as factors that we
cannot control, including international political conditions, overall levels of
supply and demand for oil and gas, and the markets for synthetic fuels and
alternative energy sources.

GOVERNMENT AND ENVIRONMENTAL REGULATION

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

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


                                       6


<PAGE>

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

NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL-TIME EMPLOYEES

         As we remain in the development stage, our staffing remains limited. At
December 31, 2004, we had four (4) full-time employees, all of whom are
administrative and executive personnel. There is no collective bargaining
agreement in place.


                                       7


<PAGE>

                                  RISK FACTORS

                    RISKS RELATED TO OUR BUSINESS AND COMPANY

         The following factors could cause actual results to differ materially
from those contained in forward-looking statements in this annual report.

OUR FUTURE PERFORMANCE IS DEPENDENT UPON OUR ABILITY TO IDENTIFY, ACQUIRE AND
DEVELOP OIL PROPERTIES.

         Our future performance depends upon our ability to find, develop and
acquire oil and gas reserves that are economically recoverable. Without
successful exploration, exploitation or acquisition activities, we will not be
able to develop reserves or generate revenues. No assurance can be given that we
will be able to find and develop or acquire reserves on acceptable terms, or
that commercial quantities of oil and gas deposits will be discovered sufficient
to enable us to recover our exploration and development costs or sustain our
business.

         The successful acquisition and development of oil and gas properties
requires an assessment of recoverable reserves, future oil prices and operating
costs, potential environmental and other liabilities and other factors. Such
assessments are necessarily inexact and their accuracy inherently uncertain. In
addition, no assurances can be given that our exploitation and development
activities will result in the discovery of any reserves. Our operations may be
curtailed, delayed or canceled as a result of lack of adequate capital and other
factors, such as title problems, weather, compliance with governmental
regulations or price controls, mechanical difficulties, or unusual or unexpected
formations, pressures and/or work interruptions. In addition, the costs of
exploitation and development may materially exceed initial estimates.

         We can provide no assurance that oil will be discovered in commercial
quantities in any of the properties we currently hold interests in or properties
in which we may acquire interests in the future. Our success will depend upon
our ability to acquire working and revenue interests in properties upon which
oil reserves are ultimately discovered in commercial quantities. Although our
new management team has significant industry experience, we do not have an
established history of locating and developing properties that have oil
reserves.

THE SUCCESSFUL IMPLEMENTATION OF OUR BUSINESS PLAN IS SUBJECT TO RISKS INHERENT
IN THE OIL BUSINESS.

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

EXPANSION OF OUR OPERATIONS WILL REQUIRE SIGNIFICANT CAPITAL EXPENDITURES FOR
WHICH WE MAY BE UNABLE TO PROVIDE SUFFICIENT FINANCING.

         Although we believe our existing capital resources are sufficient to
sustain our current level of operations, our business model contemplates
expansion of our business by identifying and acquiring additional oil
properties. We intend to rely on external sources of financing to meet the
capital requirements associated with the expansion of our oil operations. We
plan to obtain the future funding that we will need through debt and equity
markets, but we cannot assure that we will be able to obtain additional funding
when it is required or that it will be available to us on commercially
acceptable terms.

         We also intend to make offers to acquire oil properties in the ordinary
course of our business. If these offers are accepted, our capital needs will
increase substantially. If we fail to obtain the funding that we need when it is
required, we may have to forego or delay potentially valuable opportunities to
acquire new oil and gas properties or default on existing funding commitments to
third parties and forfeit or dilute our rights in existing oil property
interests.


                                       8

<PAGE>

WE EXPECT OUR OPERATING EXPENSES TO INCREASE SUBSTANTIALLY IN THE FUTURE AND MAY
NEED TO RAISE ADDITIONAL FUNDS.

         We have a history of net losses and expect that our operating expenses
will increase substantially over the next 12 months as we continue to implement
our business plan. In addition, we may experience a material decrease in
liquidity due to unforeseen capital calls or other events and uncertainties. As
a result, we may need to raise additional funds, and such funds may not be
available on favorable terms, if at all. If we cannot raise funds on acceptable
terms, we may not be able to execute on our business plan, take advantage of
future opportunities or respond to competitive pressures or unanticipated
requirements. This may seriously harm our business, financial condition and
results of operations.

WE ARE A DEVELOPMENT STAGE COMPANY IMPLEMENTING A NEW BUSINESS PLAN.

         We are a development stage company with only a limited operating
history upon which to base an evaluation of our current business and future
prospects, and we have just begun to implement our business plan. Since our
inception, we have suffered recurring losses from operations and have been
dependent on new investment to sustain our operations. During the years ended
December 31, 2004 and 2003, we reported losses of $3,047,196 and $814,547,
respectively. In addition, our consolidated financial statements for the year
ended December 31, 2004, contained a going concern qualification and we cannot
give any assurances that we can achieve profits from operations.

WE RELY HEAVILY UPON RESERVE ESTIMATES WHEN DETERMINING WHETHER OR NOT TO INVEST
IN A PARTICULAR OIL PROPERTY.

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

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

         In addition, the 10% discount factor, which is required by the
Securities and Exchange Commission to be used to calculate discounted future net
cash flows for reporting purposes, is not necessarily the most appropriate
discount factor based on interests rates in effect from time to time and risks
associated with us or the oil and gas industry in general.


                                       9





<PAGE>

OUR ABILITY TO PRODUCE SUFFICIENT QUANTITIES OF OIL FROM OUR PROPERTIES MAY BE
ADVERSELY AFFECTED BY A NUMBER OF FACTORS OUTSIDE OF OUR CONTROL.

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

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

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

MARKET FLUCTUATIONS IN THE PRICES OF OIL COULD ADVERSELY AFFECT OUR BUSINESS.

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

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

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

COMPLYING WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS COULD BE COSTLY
AND COULD NEGATIVELY IMPACT OUR PRODUCTION.


                                       10





<PAGE>

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

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

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

THE OIL INDUSTRY IS HIGHLY COMPETITIVE.

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


                           RISKS RELATED TO OUR STOCK

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.

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

          Some of our outstanding restricted shares of common stock are either
eligible for sale pursuant to Rule 144 or have been registered under the
Securities Act for resale by the holders. We are unable to estimate the amount,
timing, or nature of future sales of outstanding common stock. Sales of
substantial amounts of our common stock in the public market may cause the
stock's market price to decline. See "Description of Securities."


                                       11





<PAGE>

OUR STOCK PRICE CAN BE EXTREMELY VOLATILE.

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

WE DO NOT EXPECT TO PAY DIVIDENDS.

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

IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN
THE SECONDARY MARKET.

         Companies trading on the OTC Bulletin Board, such as us, must be
reporting issuers under Section 12 of the Securities Exchange Act of 1934, as
amended, and must be current in their reports under Section 13, in order to
maintain price quotation privileges on the OTC Bulletin Board. If we fail to
remain current on our reporting requirements, we could be removed from the OTC
Bulletin Board. As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market.

OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE
TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

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

         o        that a broker or dealer approve a person's account for
                  transactions in penny stocks; and
         o        the broker or dealer receive from the investor a written
                  agreement to the transaction, setting forth the identity and
                  quantity of the penny stock to be purchased.

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

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

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

         o        sets forth the basis on which the broker or dealer made the
                  suitability determination; and
         o        that the broker or dealer received a signed, written agreement
                  from the investor prior to the transaction.


                                       12





<PAGE>

         Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more difficult
for investors to dispose of our common stock and cause a decline in the market
value of our stock.

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


                                       13





<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

         Our principal executive offices are located at 122220 El Camino Real,
Suite 410 San Diego, California 92130. We have subleased an office and
administration space on a month to month basis for $1,800 per month.

         Our company's original business was in tobacco. We decided to
transition to the oil and gas business in December 31, 2003. While we commenced
our operations in December 31, 2003, we did not begin drilling operations until
March 2005. Accordingly, (1) we did not engage in any production activities
during the fiscal years ended December 31, 2004 and 2003, nor did we have any
proved reserves at the end of such periods, and thus, were not required to
provide any of the production data required by Statement of Financial Accounting
Standards No. 69 ("SFAS 69"), and (2) we did not engage in any drilling
activities during the fiscal years ended December 31, 2004 and 2003.

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

         Our oil properties consist primarily of oil wells and our ownership in
leasehold acreage, both developed and undeveloped. The following table
summarizes our gross and net developed and undeveloped oil and natural gas
acreage under lease or option as of March 31, 2005.

                                                      GROSS               NET
                                                     -------            -------
Developed Acreage
None

Total
                                                     =======            =======
Undeveloped Acreage
Sawn Lake, Canada                                   39,836             15,934
West Texas, U.S.                                        190                 85

                                                     -------            -------

Total                                                40,026             16,019
                                                     =======            =======

         A developed acre is considered to mean those acres spaced or assignable
to productive wells, a gross acre is an acre in which a working interest is
owned, and a net acre is the result that is obtained when fractional ownership
working interest is multiplied by gross acres. The number of net acres is the
sum of the factional working interests owned in gross acres expressed as whole
numbers and fractions thereof.

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


                                       14





<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There was no matter submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.

                                     PART II
                                     -------

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

         Our common stock is quoted on the OTC Bulletin Board under the symbol
"SRGG.OB".

         The following quotations obtained from www.nasdaq.com reflect the high
and low bids for our common stock based on inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. The
high and low bid prices of our common stock for the periods indicated below are
as follows:

         ----------------------------------------------------------------------
           QUARTER ENDED                      HIGH                        LOW
         ----------------------------------------------------------------------
         December 31, 2004                   $3.050                      $0.740
         ----------------------------------------------------------------------
         September 30, 2004                  $1.010                      $0.590
         ----------------------------------------------------------------------
           June 30, 2004                     $1.290                      $0.400
         ----------------------------------------------------------------------
           March 31, 2004                    $1.350                      $0.300
         ----------------------------------------------------------------------

         ----------------------------------------------------------------------
         December 31, 2003                   $0.490                      $0.210
         ----------------------------------------------------------------------
         September 30, 2003                  $0.580                      $0.120
         ----------------------------------------------------------------------
           June 30, 2003                     $0.290                      $0.120
         ----------------------------------------------------------------------
           March 31, 2003                    $0.350                      $0.100
         ----------------------------------------------------------------------

         Our common shares are issued in registered form. American Stock
Transfer (38 Maiden Lane, New York, NY 10038) is the registrar and transfer
agent for our common shares.

         As of March 29, 2005, we had 23,467,097 shares of common stock
outstanding and approximately 250 stockholders of record.

DIVIDEND POLICY

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


                                       15





<PAGE>

RECENT UNREGISTERED SALES OF SECURITIES

         In the fourth quarter of 2004, the Company issued a total of 1,832,123
shares. One million shares were issued to Oromin Exploration, Inc, to perfect
an interest in the Santa Rosa property. An aggregate of 391,208 shares were
issued to convert notes and obligations of the company at a price of from $1.35
per share to $1.50 per share. The Company also issued an aggregate of 434,815
shares in exchange for $377,000 of proceeds, net of costs and fees. And an
aggregate of 6,100 shares were issued to Bill Miller in exchange for
cancellation of preferred stock pursuant to Asset Purchase Agreement the Company
entered into in December 2004. The Company relied on Rule 506 of Regulation D
and/or Section 4(2) of the Securities Act of 1933 to effect this issuance.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

         The following discussion contains forward-looking statements that are
subject to significant risks and uncertainties about us, our current and planned
products, our current and proposed marketing and sales, and our projected
results of operations. There are several important factors that could cause
actual results to differ materially from historical results and percentages and
results anticipated by the forward-looking statements. Surge has sought to
identify the most significant risks to its business, but cannot predict whether
or to what extent any of such risks may be realized, nor there be any assurance
that Surge has identified all possible risks that might arise. Investors should
carefully consider all of such risks before making an investment decision with
respect to Surge's stock. In particular, investors should refer to the section
entitled, Risk Factors that May Affect Future Results and Market Price of Stock.

         The following discussion and analysis should be read in conjunction
with our financial statements and summary of selected financial data for Surge,
especially our quarterly reports, as they have been filed with the SEC. This
discussion should not be construed to imply that the results discussed herein
will necessarily continue into the future, or that any conclusion reached herein
will necessarily be indicative of actual operating results in the future. Such
discussion represents only the best present assessment from our Management.

         Our consolidated financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

         Our consolidated financial statements and accompanying notes are
prepared in accordance with generally accepted accounting principles in the
United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financials.

Stock-Based Compensation

         In December 2002, the FASB issued SFAS No. 148 - Accounting for
Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS
No. 123 - Accounting for Stock-Based Compensation, providing alternative methods
of voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of


                                       16





<PAGE>

the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2003.

         We elected to continue to account for stock-based compensation plans
using the intrinsic value-based method of accounting prescribed by APB No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for the difference between the fair value of the stock and the exercise price.

         The Company has incurred significant costs in connection with the
issuance of equity- based compensation, which is comprised primarily of our
common stock and warrants to acquire our common stock, to non-employees. The
Company anticipates continuing to incur such costs in order to conserve its
limited financial resources. The determination of the volatility, expected term
and other assumptions used to determine the fair value of equity based
compensation issued to non-employees under SFAS 123 involves subjective judgment
and the consideration of a variety of factors, including our historical stock
price, option exercise activity to date and the review of assumptions used by
comparable enterprises.

         We account for equity based compensation, issued to non-employees in
exchange for goods or services , in accordance with the provisions of SFAS No.
123 and EITF No. 96-18, "Accounting for Equity Instruments That are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services".

RESULTS OF OPERATIONS

         As noted previously, we discontinued operations of our tobacco and
related business effective December, 16, 2004 As a result, the majority of our
previous revenues and expenses are no longer included in continuing operations
and now disclosed as discontinued operations. Our remaining operations now
consist solely of our oil and gas exploration efforts.

         The Company had no revenues in the twelve months ended December 31,
2004 or 2003. Total operating expenses as well as loss from continuing
operations for the twelve months ended December 31, 2004 compared to 2003
increased by $3.100 million to $3.749 million from $649,281 in the prior period.

         Included within the $3.100 million increase compared to the twelve
months ended December 31, 2003 is $2.168 million of vested stock options and
$30,248 in expensed anti-dilution shares related to employee compensation
agreements for the year ended December 31, 2004. The Company also charged to
operations $778,500 of mineral exploration expenses related to the Santa Rosa
property for the year ended December 31, 2004. The remaining $124,000 was due to
higher payroll, fund raising and related legal expenses.

          Interest expense, net for the twelve months ended December 31, 2004
decreased to $21,004 from $48,108. The Company converted all continuing
operations outstanding debt to common stock to lower interest expense compared
to the same period of 2003.

     Loss from discontinued operations for the twelve months ended December 31,
2004 declined to a loss of $71,298 from a loss of $165,266 in the same period of
2003. Following the decision to discontinue the tobacco and related business in
January 2003, the Company significantly reduced expenditures. For the period
ended December 31, 2004, in completing the sale of the tobacco and related
business, the Company realized a one time $773,422 gain on disposal due largely
to debt forgiveness by the previous Chief Executive Officer.


                                       17





<PAGE>

         Total loss for both continuing and discontinued operations increased by
$2,232,649 to $3,047,196 for the twelve months ended December 31, 2004 to
$814,547 in the same period of 2003 as a combination of the factors described
above.

LIQUIDITY AND CAPITAL RESOURCES

CURRENT POSITION

         As of December 31, 2004, we had a deficiency in working capital of
$363,248. For the year ended December 31, 2004, we generated a net cash flow
deficit from operating activities of ($1,201,700), consisting primarily of year
to date losses of ($3,749,320) from continuing operations, a combined net profit
of $702,124 from discontinued operations loss of ($71,298) and gain on disposal
as well as net increases in discontinued assets and liabilities of ($773,322).
Also included was $2,168,720 of deferred compensation related to employee stock
options, 271,598 in increased current liabilities and other and $178,500 in
common stock issued in exchange for mineral exploration costs. Offsetting the
$1,201,700 operating activity deficit was $1,352,500 in proceeds from the sales
of common stock and stock subscriptions consisting of $1,327,500 and $25,000 in
proceeds from notes payable.

FUTURE OPERATIONS:

         In February and March, 2005, the Company raised a total of $1,710,000
through the issuance of Promissory Notes convertible into common stock. Under
the terms of the Farmout Agreement with Deep Well Oil & Gas, Inc, an initial
payment of $1,000,000 is due for the acquisition of Sawn Lake property rights.
In addition, the Company is obligated to issue 1/3 of it's common stock on a
fully diluted basis to complete the purchase, plus a second payment of
$1,000,000 after the second test well is drilled. The Farmout agreement covers
63 square miles (sections, or a total of 40,320 acres. The Company's 40% working
interest therefore will be 16,128 net acres. Under the Farmout agreement, the
Company is obligated to pay 80% of the costs of the first ten wells drilled on
the leases. Two non-affiliated third parties each own a 10% working interest.
Using an average of four wells per section, the Company could be able to drill
over 250 wells on the property. Additional financing through debt or common
stock issuance will be necessary for the Company to be able to complete the
entire drilling program.

         By adjusting its operations and development to the level of
capitalization, management believes it has sufficient capital resources to meet
projected cash flow deficits. However, if during that period or thereafter, we
are not successful in generating sufficient liquidity from operations or in
raising sufficient capital resources, on terms acceptable to us, this could have
a material adverse effect on our business, results of operations liquidity and
financial condition.

         The independent auditor's report on the Company's December 31, 2004
financial statements included in this Annual Report states that the Company's
recurring losses raise substantial doubts about the Company's ability to
continue as a going concern.


                                       18





<PAGE>

REVENUE RECOGNITION

         For revenue from product sales, the Company recognizes revenue in
accordance with Staff Accounting Bulletin No. 104, REVENUE RECOGNITION
("SAB104"), which superceded Staff Accounting Bulletin No. 101, REVENUE
RECOGNITION IN FINANCIAL STATEMENTS ("SAB101").

         SAB 101 requires that four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4) are
based on management's judgments regarding the fixed nature of the selling prices
of the products delivered and the collectibility of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or no refund will
be required.

         SAB 104 incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21 on
the Company's consolidated financial position and results of operations was not
significant.

OTHER ASSETS

         In June 2004, the Company entered into an "Assignment of Oil and Gas
Leases" ("Assignment") with Castle Rock Resources, Inc. ("Assignor"), an entity
controlled by the Company's Acting Chief Financial Officer and Director.
Pursuant to the Assignment, the Assignor sold, conveyed and delivered to the
Company all right, title, and interest in a 50% working interest ownership, and
37.5% net revenue interest in the oil and gas leases, in exchange for cash
consideration paid by the Company in the amount of $25,000. Assignor shall have
the right to recoup the first $400,000 from income derived from the gas well. As
of December 31, 2004, no drilling on a new well has commenced yet and no
revenues or expenses generated from the lease. The fair value of the Company's
investment in Oil and Gas Leases remained at $25,000 as of December 31, 2004.

RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2003, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 149, Amendment of Statement No. 133 on Derivative
Instruments and Hedging Activities. SFAS 149 amends SFAS No. 133 to provide
clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis. The provisions of SFAS
149 are effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The adoption of
SFAS 149 did not have a material impact on the Company's results of operations
or financial position.


                                       19


<PAGE>

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS
150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS 150 are effective for financial instruments entered into or
modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The adoption of SFAS 150 did not have a material impact on the
Company's results of operations or financial position.

         In December 2003, the FASB issued a revision of SFAS No. 132,
"Employers' Disclosures About Pensions And Other Postretirement Benefits." This
pronouncement, SFAS No. 132-R, expands employers' disclosures about pension
plans and other post-retirement benefits, but does not change the measurement or
recognition of such plans required by SFAS No. 87, No. 88, and No. 106. SFAS No.
132-R retains the existing disclosure requirements of SFAS No. 132, and requires
certain additional disclosures about defined benefit post-retirement plans.
Except as described in the following sentence, SFAS No. 132-R is effective for
foreign plans for fiscal years ending after June 15, 2004; after the effective
date, restatement for some of the new disclosures is required for earlier annual
periods. Some of the interim-period disclosures mandated by SFAS No. 132-R (such
as the components of net periodic benefit cost, and certain key assumptions) are
effective for foreign plans for quarters beginning after December 15, 2003;
other interim-period disclosures will not be required for the Company until the
first quarter of 2005. Since the Company does not have any defined benefit
post-retirement plans, the adoption of this pronouncement did not have any
impact on the Company's results of operations or financial condition.

         In November 2004, the Financial Accounting Standards Board (FASB)
issued SFAS 151, Inventory Costs-- an amendment of ARB No. 43, Chapter 4. This
Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter
4, previously stated that "... under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal as to require treatment as current period charges..." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This Statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not believe the
adoption of this Statement will have any immediate material impact on the
Company. In December 2004, the FASB issued SFAS No. 152, "Accounting for Real
Estate Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67"
("SFAS 152) The amendments made by Statement 152. This Statement amends FASB
Statement No. 66, Accounting for Sales of Real Estate, to reference the
financial accounting and reporting guidance for real estate time-sharing
transactions that is provided in AICPA Statement of Position (SOP) 04-2,
Accounting for Real Estate Time-Sharing Transactions. This Statement also amends
FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of
Real Estate Projects, to state that the guidance for (a) incidental operations
and (b) costs incurred to sell real estate projects does not apply to real
estate time-sharing transactions. The accounting for those operations and costs
is subject to the guidance in SOP 04-2. This Statement is effective for
financial statements for fiscal years beginning after June 15, 2005. with
earlier application encouraged. The Company does not anticipate that the
implementation of this standard will have a material impact on its financial
position, results of operations or cash flows. On December 16, 2004, the
Financial Accounting Standards Board ("FASB") published Statement of Financial
Accounting Standards No. 123 (Revised 2004), Share-Based Payment ("SFAS 123R").


                                       20





<PAGE>

         SFAS 123R requires that compensation cost related to share-based
payment transactions be recognized in the financial statements. Share-based
payment transactions within the scope of SFAS 123R include stock options,
restricted stock plans, performance-based awards, stock appreciation rights, and
employee share purchase plans. The provisions of SFAS 123R are effective as of
the first interim period that begins after June 15, 2005. Accordingly, the
Company will implement the revised standard in the third quarter of fiscal year
2005. Currently, the Company accounts for its share-based payment transactions
under the provisions of APB 25, which does not necessarily require the
recognition of compensation cost in the financial statements. Management is
assessing the implications of this revised standard, which may materially impact
the Company's results of operations in the third quarter of fiscal year 2005 and
thereafter. On December 16, 2004, FASB issued Statement of Financial Accounting
Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29, Accounting for Nonmonetary Transactions (" SFAS 153"). This statement
amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. Under SFAS 153, if
a nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for nonmonetary transactions in fiscal periods that begin after June
15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.

INFLATION

         In the opinion of management, inflation will not have an impact on
Surge's financial condition and results of its operations.

OFF-BALANCE SHEET ARRANGEMENTS

         Surge does not maintain off-balance sheet arrangements nor does it
participate in non-exchange traded contracts requiring fair value accounting
treatment.

TRENDS, RISKS AND UNCERTAINTIES

         We have sought to identify what we believe to be the most significant
risks to our business, but we cannot predict whether, or to what extent, any of
such risks may be realized nor can we guarantee that we have identified all
possible risks that might arise. Investors should carefully consider all of such
risk factors before making an investment decision with respect to our Common
Stock.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

         We provide the following cautionary discussion of risks, uncertainties
and possible inaccurate assumptions relevant to our business and our products.
These are factors that we think could cause our actual results to differ
materially from expected results. Other factors besides those listed here could
adversely affect us.

POTENTIAL FLUCTUATIONS IN ANNUAL OPERATING RESULTS

         Our annual operating results may fluctuate significantly in the future
as a result of a variety of factors, most of which are outside our control,
including: the demand for our products; seasonal trends in purchasing, the
amount and timing of capital expenditures and other costs relating to the
development of our properties; price competition or pricing changes in the
market; technical difficulties or system downtime; general economic conditions
and economic conditions specific to the oil and gas industry.


                                       21



<PAGE>

         Our annual results may also be significantly impacted by the impact of
the accounting treatment of acquisitions, financing transactions or other
matters. Particularly at our early stage of development, such accounting
treatment can have a material impact on the results for any quarter. Due to the
foregoing factors, among others, it is likely that our operating results may
fall below our expectations or those of investors in some future quarter.

DEPENDENCE UPON MANAGEMENT

         Our future performance and success is dependant upon the efforts and
abilities of our Management. To a very significant degree, we are dependent upon
the continued services of Fred Kelly, our Chief Executive Officer and member of
our Board of Directors and David Perez, our Chief Operating Officer and Chairman
of the Board of Directors. If we lost the services of either Mr. Kelly or Mr.
Perez, or other key employees before we could get qualified replacements, that
loss could materially adversely affect our business. We do not maintain key man
life insurance on any of our Management.

LACK OF INDEPENDENT DIRECTORS

         We cannot guarantee that our Board of Directors will have a majority of
independent directors in the future. In the absence of a majority of independent
directors, our executive officers, who are also principal stockholders and
directors, could establish policies and enter into transactions without
independent review and approval thereof. This could present the potential for a
conflict of interest between Surge and its stockholders generally and the
controlling officers, stockholders or directors.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

         Our officers and directors are required to exercise good faith and high
integrity in our Management affairs. Our Articles of Incorporation provide,
however, that our officers and directors shall have no liability to our
shareholders for losses sustained or liabilities incurred which arise from any
transaction in their respective managerial capacities unless they violated their
duty of loyalty, did not act in good faith, engaged in intentional misconduct or
knowingly violated the law, approved an improper dividend or stock repurchase,
or derived an improper benefit from the transaction. Our Articles and By-Laws
also provide for the indemnification by us of the officers and directors against
any losses or liabilities they may incur as a result of the manner in which they
operate our business or conduct the internal affairs, provided that in
connection with these activities they act in good faith and in a manner that
they reasonably believe to be in, or not opposed to, the best interests of
Surge, and their conduct does not constitute gross negligence, misconduct or
breach of fiduciary obligations. To further implement the permitted
indemnification, we have entered into Indemnity Agreements with our officers and
directors.

CONTINUED CONTROL BY CURRENT OFFICERS AND DIRECTORS

         The present officers and directors own approximately 37.0% of the
outstanding shares of Common Stock, and therefore are in a position to elect all
of our Directors and otherwise control Surge, including, without limitation,
authorizing the sale of equity or debt securities of Surge, the appointment of
officers, and the determination of officers' salaries. Shareholders have no
cumulative voting rights. (See Security Ownership of Certain Beneficial Owners
and Management)


                                       22


<PAGE>

MANAGEMENT OF GROWTH

         We may experience growth, which will place a strain on our managerial,
operational and financial systems resources. To accommodate our current size and
manage growth if it occurs, we must devote management attention and resources to
improve our financial strength and our operational systems. Further, we will
need to expand, train and manage our sales and distribution base. There is no
guarantee that we will be able to effectively manage our existing operations or
the growth of our operations, or that our facilities, systems, procedures or
controls will be adequate to support any future growth. Our ability to manage
our operations and any future growth will have a material effect on our
stockholders.


                                       23





<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

         Our consolidated financial statements are included beginning
immediately following the signature page to this report. See Item 13 for a list
of the financial statements and financial statement schedules included.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

ITEM 8A. CONTROLS AND PROCEDURES

         As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act). Based upon this evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms. There was no change in our internal controls or in other
factors that could affect these controls during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.


                                       24





<PAGE>

ITEM 8B. OTHER INFORMATION

DECEMBER 31, 2004 PRO FORMA

         Subsequent to December 31, 2004, the Company entered into a Farmout
Agreement and obtained $1.710 million in convertible notes and $25,000 from the
exercise of stock options. The pro forma table below assumes these transactions
occurred at the presented balance sheet date of December 31, 2004. See the
Subsequent Event, footnote N, in the Financial Statements for additional
information for these two transactions.

<TABLE>
                            Pro forma Balance Sheet
                            -----------------------
                                                     Deep Well
                                                     Oil & Gas,
                                  Balance Sheet      Inc. and         Convertible
                                   as Presented      Northern           Notes &
                                   December 31,     Alberta Oil,        Option
                                       2004            Ltd.            Exercise          Pro forma
                                 -------------     -------------     -------------     -------------
<S>                              <C>               <C>               <C>               <C>
Assets:
-------
 - Cash                          $    159,935      $ (1,000,000)     $  1,735,000      $    894,935
 - Other Assets                        25,000        24,467,098                --        24,492,098
                                 -------------     -------------     -------------     -------------
Total Assets                     $    184,935      $ 23,367,098      $  1,735,000      $ 25,287,033
                                 =============     =============     =============     =============

Liabilities & Equity:
---------------------
- Liabilities                         523,183                --                --           523,183
Equity
- Common Stock                         23,367             7,822               860            32,049
- Deferred Compensation            (7,020,985)                                           (7,020,985)
- Additional Paid in Capital       18,996,881        23,359,276         1,838,473        44,194,630
- Retained Earnings               (12,337,511)                           (104,333)      (12,441,844)
                                 -------------     -------------     -------------     -------------

Total Equity                         (338,248)       23,367,098         1,735,000        24,738,850

Total Liabilities & Equity            184,935        23,367,098         1,735,000        25,287,033
                                 =============     =============     =============     =============

Shares Outstanding                 23,367,097         7,822,366           860,000        32,049,463
Warrants Outstanding                       --                --           855,000           855,000
</TABLE>

DECEMBER 31, 2004 PRO FORMA ASSUMPTIONS

Outstanding Shares
------------------

         Subsequent to December 31, 2004, an ex-director exercised 100,000
options for $25,000 to increase outstanding shares to 23,467,097.

Deep Well Oil & Gas, Inc. and Northern Alberta Oil, Ltd. Transaction
--------------------------------------------------------------------

         In February, the Company entered into a Farmout Agreement with Deep
Well Oil & Gas, Inc. and Northern Alberta Oil, Ltd. The Deep Well and Northern
transaction terms were $1 million in cash and common stock equal to one third of
outstanding shares of 23,467,097 or an estimated 7,822,366 shares before the
exercise of options and anti-dilution provisions. The assumed share price was
85% of the average market price of $3.53 or $3.00 net. The Company anticipates
capitalizing this consideration as an Investment within Other Assets on the
balance sheet.

Convertible Notes Transaction
-----------------------------


                                       25





<PAGE>

         In March, the Company obtained $1.710 million 6% promissory notes from
private parties convertible in common stock at $2.25 per share. In addition, the
convertible notes include 855,000 warrants exercisable at $4.00 that expire in
five years. The Convertible Notes transaction above assumes all notes convert to
stock. The $2.25 per share conversion price equals an anticipated 760,000
shares.


                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         The following table sets forth the names, ages and positions held with
respect to each Director and Executive Officer of our Company during fiscal
2004.

<TABLE>
<S>     <C>

---------------------------------------------------------------------------------------------
NAME                       POSITION HELD WITH OUR COMPANY      AGE           DATE FIRST
                                                                        ELECTED OR APPOINTED
---------------------------------------------------------------------------------------------
                                             DIRECTORS
---------------------------------------------------------------------------------------------
Fred W. Kelly          Chief Executive Officer & Director       68        November 26, 2004
---------------------------------------------------------------------------------------------
David Perez            Chief Operating Officer & Chairman of    41        November 20, 2004
                       the Board & Director
---------------------------------------------------------------------------------------------
E. Jamie Schloss       Chief Financial Officer & Director       62        October 8, 2004
---------------------------------------------------------------------------------------------
Frederick C. Berndt    Vice President & Director                30        September 23, 2002
---------------------------------------------------------------------------------------------
Chet Idziszek          Director                                 57        August 5, 2002
---------------------------------------------------------------------------------------------
Gary Vandergrift       Director                                 52        November 4, 2004
---------------------------------------------------------------------------------------------
Richard Manning        Director                                 81        August 20,2002
---------------------------------------------------------------------------------------------

</TABLE>



         The directors of our Company are elected at each annual general meeting
and hold office until the next annual general meeting or until their successors
are appointed.

BUSINESS EXPERIENCE

         The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee, indicating the principal occupation during that
period, and the name and principal business of the organization in which such
occupation and employment were carried out.

MR. FRED KELLY BSC, CHIEF EXECUTIVE OFFICER AND DIRECTOR

         Mr. Kelly has 45 years of experience in the oil and gas business. From
1959 to 1965, he was a production and drilling engineer for Richfield Oil
Corporation, and after its merger with Atlantic Refining Company in 1966, a
drilling engineer for Atlantic Richfield Oil Corporation (ARCO). From 1966 to
1967, he performed sales and log interpretation for the then newly-introduced
open-hole logging services of Perforating Guns of Canada. From 1967 to 1970, he
served as a senior engineer in drilling operations and in gas supply for Esso
Libya. From 1970 to 1983, he held various positions with Samedan Oil of Canada,
including Division Manager for the Canadian division. In 1983, he transferred to
Samedan Oil Corporation's Oklahoma office, where he became Vice President of
Operations. In such position, he oversaw North American onshore and Gulf of
Mexico offshore, and non-operated properties in North Africa, Indonesia,
Southeast Asia and Equatorial Guinea in Africa. From 1990 to 2002, Mr. Kelly was
Vice President of Operations for NAL Resources, where he was actively engaged in
the acquisition and exploitation of oil and gas properties in Alberta,
Saskatchewan, and Lake Erie in Ontario. Since his retirement from NAL Resources
in 2002, he has been an independent oil and gas consultant.


                                       26




<PAGE>

MR. DAVID PEREZ, CHIEF OPERATING OFFICER AND CHAIRMAN OF THE BOARD

         Mr. Perez has over 23 years of entrepreneurial and executive management
experience. In 1986, Mr. Perez as the President and cofounder of Cellular
Solutions Ltd., a wireless software development company. In 1990, Cellular
Solutions Ltd. was sold to TeleSciences Inc., and Mr. Perez remained President
of Cellular Solutions. From 1990 to 1992 Mr. Perez ran the TeleSciences wireless
billing and operation support systems group. From 1992 to 1995, Mr. Perez
provided consulting services for business development, customer acquisition and
operational support systems for TeleSciences and other large telephone and cable
TV operators. In 1994, Mr. Perez founded and became CEO of COM2001 Corporation,
also known as Alexis Communications, Inc., a developer of unified communications
software for Application Service Providers (ASPs) and small- to large-scale
enterprises. He continued in various executive positions at COM2001/alexis
communications until 2001. Since 2001, Mr. Perez has been providing business
development and private equity consulting services to venture capital groups and
investment banks. Since October 2003, Mr. Perez has also been providing
consulting services to companies engaged in mining, oil and gas exploration.

MR. E. JAMIE SCHLOSS, CHIEF FINANCIAL OFFICER & DIRECTOR

         Mr. Schloss is the founder of Castle Rock Resources, Inc. and holds a
Juris Doctor and was a Certified Public Accountant in California and New Jersey
from 1966-1990. Mr. Schloss was also an executive and officer of several
entertainment industry firms including MCA, Inc., Warner Bros. Television
Distribution, Western-World Television, and Hal Roach Studios. Mr. Schloss was
an investor in oil & gas drilling ventures for 10 years from 1980 to 1990 and
the founder, President and CFO of Castle Rock Resources, Inc., an oil & gas
exploration and drilling company. Castle Rock participated in the drilling of
more than 25 wells in Texas, New Mexico, and Louisiana from 1990 to 1995 through
joint venture partnerships. In June, 1995, Castle Rock and partners sold seven
wells in the Townsend (Sublime) Field in south Texas to Weeks Exploration
Company for $16,000,000 in total. Mr. Schloss was Controller and Treasurer of
The Polly Bergen Company a public company from 1970 to 1972. Mr. Schloss was
Controller of Hal Roach Studies, Inc. , a public company from 1985 to 1986.

MR. FREDERICK C. BERNDT, DIRECTOR AND EXECUTIVE VICE PRESIDENT

         Mr. Berndt, director, has an extensive background in banking, having
studied Finance and Economics at Geneva College in Pennsylvania. Mr. Berndt
began his career in Commercial Banking in 1995. In 1997, he became licensed as a
Series 7 and 63, for Rise securities and became a partner/Vice President of
Berndt & Associates Investment Management, a full service money management firm
that was formed in the early 1970's. In 1999, Mr. Berndt passed his Securities
Principal's license and became the principal and compliance officer for Rise
Securities, Inc. In 2001, Mr. Berndt left Berndt & Associates to pursue a
consulting career in investment banking. He consulted for EWRX Internet
solutions, an anti-virus software company and ALS.

MR. CHET IDZISZEK (BSC MSC FGS), DIRECTOR

         Mr. Idziszek, President and Chairman, Oromin Explorations, Inc., which
holds the mineral rights to the Santa Rosa Dome Concession in Argentina. Mr.
Idziszek is a geologist and business executive with extensive experience in the
mining and precious metals businesses. During his distinguished career, Mr.
Idziszek has also served as President of Prime Explorations Ltd., the
exploration arm for the Prime Group of Companies, and as Vice President and
Exploration Manager for New Jersey Zinc Exploration Co. (Canada) Ltd. In 1990,
he received the "Mining Man of the Year" award in recognition of his vital role
in the discovery and development of the Eskay Creek gold deposit in Canada, and
in 1994 he received the prestigious "Prospector of the Year" award in
recognition for the major role he played in the Eskay Creek project as well as
for his leadership of Adrian Resources, Ltd. during the exploration and
development of the Petaquilla copper-gold-silver-moly deposits in the Republic
of Panama.


                                       27



<PAGE>

MR. GARY W. VANDERGRIFT (P ENG.), DIRECTOR

         Mr. Vandergrift has over thirty years of experience in oil and gas
exploration, development, technology, and engineering. Mr. Vandergrift has held
supervisory engineering positions at Kloepfer Coles Nikiforuk Pennell Associates
as well as Placer Development, Ltd. Mr. Vandergrift has held executive positions
at Northridge Exploration, Trophy Petroleum, and Dynamo Energy. Mr. Vandergrift
has experience both domestically and internationally. Mr. Vandergrift has
provided international property evaluations, development plans, exploration
support, and bids for oil and gas concessions in Argentina, Azerbaijan,
Cameroon, Indonesia, and Malaysia. In Azerbaijan, Mr. Vandergrift managed
several oil properties. Through his developmental plans and drilling expertise,
reserves and production were doubled. Mr. Vandergrift has also been recognized
by the Azerbaijan government for having a role in the 'Sustainable Development
Program,' which implemented strict safety and environmental standards in field
operations. Mr. Vandergrift is a member of: The Society of Petroleum Engineers
of AIME, The association of professional engineers of British Columbia, The
Canadian Institute of Mining and Metallurgy, and the Alberta Association of
professional engineers, geologists and geophysicists.

FAMILY RELATIONSHIPS There are no family relationships between any of our
Company's directors or executive officers.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

         None of our directors, executive officers, promoters or control persons
have been involved in any of the following events during the past five years:

         1.       any bankruptcy petition filed by or against any business of
                  which such person was a general partner or executive officer
                  either at the time of the bankruptcy or within two years prior
                  to that time;

         2.       any conviction in a criminal proceeding or being subject to a
                  pending criminal proceeding (excluding traffic violations and
                  other minor offences);

         3.       being subject to any order, judgment, or decree, not
                  subsequently reversed, suspended or vacated, of any court of
                  competent jurisdiction, permanently or temporarily enjoining,
                  barring, suspending or otherwise limiting his involvement in
                  any type of business, securities or banking activities; or

         4.       being found by a court of competent jurisdiction (in a civil
                  action), the Commission or the Commodity Futures Trading
                  Commission to have violated a federal or state securities or
                  commodities law, and the judgment has not been reversed,
                  suspended, or vacated.

SECTION 16(a) REPORTING

         To our knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that during the year ended December
31, 2004, its officers, directors and 10% shareholders complied with all Section
16(a) filing requirements.

BOARD COMMITTEES

         We have are in the process of forming our audit, compensation and
nominating committees.


                                       28


<PAGE>

CODE OF ETHICS

         Effective March 31, 2005, our Company's board of directors adopted a
Code of Business Conduct and Ethics and Compliance Program that applies to,
among other persons, our Company's President and Chief Executive Officer (being
our principal executive officer), our Company's Chief Financial Officer (being
our principal financial and accounting officer and controller), as well as
persons performing similar functions. As adopted, our Code of Business Conduct
and Ethics sets forth written standards that are designed to deter wrongdoing
and to promote:

         (1)      honest and ethical conduct, including the ethical handling of
                  actual or apparent conflicts of interest between personal and
                  professional relationships;
         (2)      full, fair, accurate, timely, and understandable disclosure in
                  reports and documents that we file with, or submit to, the
                  Securities and Exchange Commission and in other public
                  communications made by us;
         (3)      compliance with applicable governmental laws, rules and
                  regulations;
         (4)      the prompt internal reporting of violations of the Code of
                  Business Conduct and Ethics to an appropriate person or
                  persons identified in the Code of Business Conduct and Ethics;
                  and
         (5)      accountability for adherence to the Code of Business Conduct
                  and Ethics.

         Our Code of Business Conduct and Ethics requires, among other things,
that all of our Company's personnel shall be accorded full access to our Chief
Financial Officer with respect to any matter which may arise relating to the
Code of Business Conduct and Ethics. Further, all of our Company's personnel are
to be accorded full access to our Company's Audit Committee if any such matter
involves an alleged breach of the Code of Business Conduct and Ethics by the
Chief Financial Officer or by any person who would be considered an "insider"
for the purposes of our Company's Insider Trading Compliance Policy by virtue of
such person's relationship to the Chief Financial Officer.

         In addition, our Code of Business Conduct and Ethics emphasizes that
all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our Company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our Company's Chief Financial
Officer. If the incident involves an alleged breach of the Code of Business
Conduct and Ethics by the Chief Financial Officer, the incident must be reported
to any member of our Company's Audit Committee. Any failure to report such
inappropriate or irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our Company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
Company's Code of Business Conduct and Ethics by another.


                                       29





<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         Particulars of compensation awarded to, earned by or paid to:

         (a)      our Company's chief executive officer (the "CEO");

         (b)      each of our Company's four most highly compensated executive
                  officers who were serving as executive officers at the end of
                  the most recently completed fiscal year and whose total salary
                  and bonus exceeds $100,000 per year; and

         (c)      any additional individuals for whom disclosure would have been
                  provided under (b) but for the fact that the individual was
                  not serving as an executive officer of our Company at the end
                  of the most recently completed fiscal year;

(all such persons are referred to as the "Named Executive Officers") are set out
in the summary compensation table below.


<TABLE>
====================================================================================================================================
                                                     SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
                                   ANNUAL COMPENSATION                        LONG TERM COMPENSATION
------------------------------------------------------------------------------------------------------------------------------------
                                                                              AWARDS                     PAYOUTS
------------------------------------------------------------------------------------------------------------------------------------
                                                                              Securities
                                                                              Underlying    Restricted
                                                              Other           Options/      Shares or
                                                              Annual          SARs          Restricted
Name and Principal                                            Compen-         Granted       Share        LTIP        All Other
Position                 Year     Salary          Bonus       sation(1)        (#)          Units        Payouts     Compensation
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>     <C>             <C>             <C>            <C>           <C>          <C>         <C>
Fred W. Kelly            2004    $  10,142       $25,000         0              700,000       0            0           0
Chief Executive Officer, & Director                                         shares
------------------------------------------------------------------------------------------------------------------------------------
David Perez              2004    $ 25,433        0               $1,000         4,026,406     0            0           0
Chief Operating Officer, Chairman of the Board shares
------------------------------------------------------------------------------------------------------------------------------------
Frederick C. Berndt      2004    $ 65,000        0               0              0             0            0           0
Vice President &
Director&
------------------------------------------------------------------------------------------------------------------------------------
William Miller           2004    $ 89,998        0               0              0             0            0           0
Former CEO & Director
------------------------------------------------------------------------------------------------------------------------------------
E. Jamie Schloss         2004    0               0               0              400,000       0            0           0
Chief Financial Officer                                                        shares
& Director*
------------------------------------------------------------------------------------------------------------------------------------
E. Jamie Schloss         2003    0               0               0              400,000       0            0           0
Chief Financial Officer                                                        shares
& Director*
====================================================================================================================================
</TABLE>

         The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted to them during fiscal 2004.
Our Company has never issued stock appreciation rights. Our Company grants
options that generally vest immediately at an exercise price equal to the fair
market value of a share of common stock as determined by its closing price on
the OTC Bulletin Board or below market value as additional compensation. The
term of each option granted is generally ten years from the date of grant.
Options may terminate before their expiration dates if the optionee's status as
an employee is terminated or upon the optionee's death or disability.


                                       30





<PAGE>

OPTION/SAR GRANTS IN THE LAST FISCAL YEAR

===============================================================================
                        NUMBER OF     % OF TOTAL
                        SECURITIES    OPTIONS/
                        UNDERLYING    SARS GRANTED
                        OPTIONS/      TO EMPLOYEES   EXERCISE
                        SARS          IN FISCAL      PRICE           EXPIRATION
NAME                    GRANTED (#)   YEAR           ($/SHARE)       DATE
===============================================================================
Fred W. Kelly            700,000        100%          $  .65         11/30/2014
-------------------------------------------------------------------------------

David Perez            4,000,000         100%         $  .65         11/30/2014
                          19,279         100%         $ 1.35         11/30/2014
                           7,127         100%         $ 1.50         11/30/2014
-------------------------------------------------------------------------------

E. Jamie Schloss         400,000         100%         $  .65       12/09/2014 &
                         400,000           0%     and $  .25         07/21/2006
-------------------------------------------------------------------------------

Gary Vandergrift         400,000         100%         $   65          11/4/2014
-------------------------------------------------------------------------------

Total                  5,926,406
===============================================================================

         The following table sets forth for each Named Executive Officer certain
information concerning the number of shares subject to both exercisable and
unexercisable stock options as of December 31, 2004. The values for
"in-the-money" options are calculated by determining the difference between the
fair market value of the securities underlying the options as of December 31,
2004 and the exercise price of the individual's options. No Named Executive
Officer exercised options during fiscal 2004.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>

=====================================================================================================================
NAME                    SHARES          AGGREGATE     NUMBER OF SECURITIES UNDERLYING    VALUE OF UNEXERCISED
                        ACQUIRED ON     VALUE         UNEXERCISED OPTIONS/SARS AT        IN-THE-MONEY OPTIONS/SARS AT
                        EXERCISE (#)    REALIZED ($)  FY-END (#)                         FY-END ($)

                                                      EXERCISABLE / UNEXERCISABLE        EXERCISABLE / UNEXERCISABLE
---------------------------------------------------------------------------------------------------------------------
                                                      EXERCISABLE    UNEXERCISABLE       EXERCISABLE    UNEXERCISABLE
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>             <C>              <C>            <C>             <C>              <C>
Fred Kelly              0               0                19,444         680,556         $     35,000     $  1,225,000

David Perez             0               0             1,401,406       2,625,000         $  2,502,978     $  4,725,000

E. Jamie Schloss        0               0               400,000         400,000         $    880,000     $    720,000

Gary Vandergrift        0               0                11,111         388,889         $     20,000     $    700,000

Chet Idziszek           0               0               400,000               0         $    880,000     $          0

Richard Manning         0               0               400,000               0         $    880,000     $          0

 Total                  0               0             2,631,961       4,094,445         $  5,197,978     $  7,370,000
=====================================================================================================================
</TABLE>


                                                      31



<PAGE>

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

FRED KELLY, CHIEF EXECUTIVE OFFICER

         We have entered into an employment letter with Mr. Kelly pursuant to
which he will be employed as Chief Executive Officer. Under the terms of the
employment letter, Mr. Kelly will receive a starting salary of $100,000 per
year, subject to review after 90 days, and he will be eligible to participate in
bonus and benefits programs established by our company. He also received on
November 30, 2004, a stock option to purchase 700,000 shares of common stock at
an exercise price of $0.65 per share, vesting monthly over three years. The
option has a term of ten years, subject to continuing service with our company.
Mr. Kelly will also receive a signing bonus of $25,000 payable 90 days after his
start date.

DAVID PEREZ, CHAIRMAN OF THE BOARD AND CHIEF OPERATING OFFICER

         On November 30, 2004, we entered into an employment agreement with Mr.
Perez. The agreement is for a term of five years, and the term will
automatically extend to ten years if during any of the first three fiscal years
ending on or after January 1, 2005, our net income before income taxes, as
adjusted, exceeds $1,500,000. Mr. Perez's base compensation will be $250,000 per
year, subject to increases in the discretion of the board or the compensation
committee. Mr. Perez will also be entitled to a performance bonus equal to 5% of
our net income before income taxes, as adjusted, in excess of $500,000 for each
fiscal year. Mr. Perez is also entitled to an automobile allowance, term life
insurance on his behalf, reimbursement of legal expenses incurred in connection
with his service as an officer and director of our company, and other benefits.

         Mr. Perez also became entitled to, and was granted on November 30,
2004, an option to purchase 3,000,000 shares of common stock at an exercise
price of $.65 per share. The option has a life of ten years, subject to
continuing service with our company. The option vested as to 1,000,000 of such
shares immediately, and the balance will vest monthly over two years. Mr. Perez
is also entitled to receive additional options for a number of shares equal to
14.3% of any additional equity we issue, subject to exceptions for stock
dividends, stock splits, shares issued to employees, directors and consultants
pursuant to board-approved compensation plans, shares issued in a public
offering, shares issued for business combinations and up to 200,000 shares
issued to certain vendors. The additional options will have an exercise price
equal to the price the issued securities are sold or deemed sold, will be
immediately vested, and will have a life of ten years, subject to continuing
service with our company.

           In the event we terminate the employment of Mr. Perez without cause,
or Mr. Perez terminates his employment for certain defined reasons including our
default under the employment agreement or a reduction in his duties or
responsibilities, Mr. Perez will be entitled to receive a pro-rated bonus, plus,
if such termination is within the first year of the term, a severance payment
equal to $500,000 minus base compensation paid to the date of termination, or if
such termination is after the first year of the term, a severance payment equal
to four times his base compensation. Mr. Perez will also in such cases be
entitled to an acceleration of vesting on all stock options he holds, and such
options will remain exercisable for their full term. Should the compensation or
benefits Mr. Perez receives under this agreement or his stock options be deemed
to constitute a "parachute payment" under Section 280G of the Internal Revenue
Code, we have agreed to pay Mr. Perez an additional payment to cover the excise
taxes imposed by federal and state law on such parachute payment, and additional
"gross-up" payments to cover further income taxes on such additional payments.

         If Mr. Perez offers to continue his employment at the end of the term
and we do not accept such offer, it will be treated as a termination without
cause. Mr. Perez will not be entitled to the foregoing severance benefits if he
resigns due to non-payment of accrued base compensation before such time as we
have raised at least $2 million in financing following the date of the
agreement.


                                       32





<PAGE>

         On November 30, 2004, we also issued to Mr. Perez an option to purchase
600,000 shares of common stock at an exercise price of $0.65 per share. The
option has a life of ten years, subject to continuing service with our company.
The option vests monthly over three years. . In connection with his appointment
to the Company's Board of Directors on November 4, 2004, the executive was
granted a five-year option to purchase 400,000 shares of common stock at an
exercise price of $0.65 per share with 275,000 shares vesting immediately and
the remaining 125,000 shares vesting on November 4, 2005. Mr. Perez currently
holds options to purchase an aggregate of 4,000,000 shares of common stock,
1,275,000 of which are currently exercisable.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

         Directors and executive officers receive, on an annual basis, incentive
stock options to purchase shares of our common stock as awarded by our Board of
Directors in consultation with the compensation committee.

         Our Board of Directors may award special remuneration to any director
undertaking any special services on our behalf other than services ordinarily
required of a director. Other than indicated herein, no director received and/or
accrued any compensation for his services as a director, including committee
participation and/or special assignments.

         There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers.

         To date, we have granted to directors, officers, employees and
consultants incentive stock options to purchase shares of our common stock
subject to and in accordance with the prevailing policies of the stock exchange
on which our shares were then listed. Options are granted based on the
assessment by our Board of Directors and/or compensation committee of the
optionee's past and present contribution to the success of our company. These
options are not transferable and are exercisable from the date granted until the
earliest of (i) such number of years (up to ten years) from the date of the
grant, or (ii) such number of days following the death of the optionee as is
specified in each optionee's option agreement.

         Other than the management agreements, the advisory agreements and the
stock incentive plans discussed herein, we presently have no material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to our directors or executive officers.


                                       33





<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

         The authorized capital of our Company consists of: 75,000,000 shares of
Common stock. As of December 31, 2004 and 2003, the Company has 23,367,097 and
18,421,667 shares of common stock issued and outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

         The following table sets forth, as of March 31, 2005, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated.
<TABLE>
<S>     <C>

-----------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner              Amount and Nature of            Percentage
                                                  Beneficial Ownership            of Class(7)
-----------------------------------------------------------------------------------------------

David Perez                                          1,701,406 (1)                   6.8%
12220 El Camino Real, Suite 410
San Diego, CA  92130

-----------------------------------------------------------------------------------------------

Fred Kelly *                                           77,776 (2)                    0.3%
144 4th Avenue, Suite 1800
Calgary, Alberta  Canada  T2P 3N4
-----------------------------------------------------------------------------------------------

E. Jamie Schloss                                    2,733,333 (3)                    11.4%
3800 Bryan Station Road
Lexington, KY  40516
-----------------------------------------------------------------------------------------------

Frederick C. Berndt                                 3,466,174                        14.8%
7090 Whipple Avenue, NW
North Canton, OH  44720
-----------------------------------------------------------------------------------------------

Chet Idziszek                                       1,637,600 (4)                    6.9%
1055 West Hastings Street
Vancouver, British Columbia Canada V6E2E9
-----------------------------------------------------------------------------------------------


                                             34
</TABLE>





<PAGE>
<TABLE>
<S>     <C>

-----------------------------------------------------------------------------------------------
Gary Vandergrift *                                    44,445 (5)                     0.2%
Box 20332 Stock Exchange RPO
Calgary, Alberta  Canada T2P4J4
-----------------------------------------------------------------------------------------------

Total shares held by Officers and Directors         9,660,734 (6)                   37.0%
(6 persons)
-----------------------------------------------------------------------------------------------

Steven Heard                                        4,000,000                       17.0%
9638 104th Avenue N
Largo, FL  33771
-----------------------------------------------------------------------------------------------
</TABLE>

         * Represents less than 1% of our Company's outstanding stock

         (1)      Includes 1,701,406 shares underlying currently exercisable
                  options.
         (2)      Includes 77,776 shares underlying currently exercisable
                  options.
         (3)      Includes 433,333 shares underlying currently exercisable
                  options.
         (4)      Includes 400,000 shares underlying currently exercisable
                  options, plus 1,000,000 shares owned by an affiliated company
                  controlled by Mr. Idziszek.
         (5)      Includes 44,445 shares underlying currently exercisable
                  options.
         (6)      Includes 2,656,960 shares underlying currently exercisable
                  options.
         (7)      Based on 26,124,057 shares of common stock issued and
                  outstanding as well as currently exercisable options as of
                  March 31, 2005. Beneficial ownership is determined in
                  accordance with the rules of the Securities and Exchange
                  Commission and generally includes voting or investment power
                  with respect to securities. Except as otherwise indicated, we
                  believe that the beneficial owners of the common stock listed
                  above, based on information furnished by such owners, have
                  sole investment and voting power with respect to such shares,
                  subject to community property laws where applicable.

CHANGES IN CONTROL

         We are unaware of any contract or other arrangement the operation of
which may at a subsequent date result in a change of control of Surge , other
than the conversion of our outstanding convertible debentures in certain
circumstances.

EQUITY COMPENSATION PLAN INFORMATION

  NONE
<TABLE>

------------------------------------------------------------------------------------------------------
Plan Category           Number of securities to be       Weighted average         Number of securities
                        issued upon exercise of          exercise price of        remaining available
                        outstanding options, warrants    outstanding options,     for future issuance
                        and rights                       warrants and rights
------------------------------------------------------------------------------------------------------
<S>                                   <C>                        <C>                      <C>
Equity compensation                   0                          0                        0
plans approved by
stockholders
------------------------------------------------------------------------------------------------------
Equity compensation                   0                          0                        0
plans not approved by
stockholders (1)
------------------------------------------------------------------------------------------------------
Total                                 0                          0                        0
------------------------------------------------------------------------------------------------------
</TABLE>


                                                35





<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Other than as listed below, we have not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $60,000, and in which, to our knowledge, any of our directors,
officers, five percent beneficial security holders, or any member of the
immediate family of the foregoing persons has had or will have a direct or
indirect material interest.

         In June 2004, the Company entered into an "Assignment of Oil and Gas
Leases" ("Assignment") with Castle Rock Resources, Inc. ("Assignor"), an entity
controlled by the Company's Acting Chief Financial Officer. Pursuant to the
Assignment, the Assignor sold, conveyed and delivered to the Company all right,
title, and interest in a 50% working interest ownership, and 37.5% net revenue
interest in the oil and gas leases, in exchange for cash consideration paid by
the Company in the amount of $25,000.

         The Company has entered into a letter agreement dated February 5, 2003,
as amended by letter agreements dated March 31, 2003 and April 30, 2003
(collectively the "Agreement") with Cynthia Holdings Limited ("Cynthia"), an
entity controlled by a member of the Company's Board of Directors Chet Idziszek,
whereby Cynthia has agreed to sell to the Company an effective 50% interest in
certain oil and gas rights in the Cuyana Basin of central Argentina which is
owned by Cynthia's wholly-owned Argentine subsidiary Exploraciones Oromin, S.A.
Pursuant to the Agreement, the Company remitted to Cynthia and Irie Isle Limited
a total of $600,000 in cash and 1,000,000 shares of its common stock in
connection with fulfilling the terms of the Agreement and reduced it's interest
in the Santa Rosa property to 17.52%.

         The Company Entered into an agreement with Dynamo Energy Corporation of
Calgary, Alberta "), an entity controlled by a member of the Company's Board of
Directors Gary Vandergrift, to obtain a right of first refusal on all its
prospects for a period of five years until October 12, 2009. The purpose of this
agreement and the Registrant's plans is to ultimately acquire and fund one or
more oil and gas development/exploration prospects in North America as a result
of this agreement. Dynamo Energy Corporation will provide the Havana Group with
opportunities to acquire various Oil and Gas Companies and Oil and Gas Projects.
The Parties agree to cooperate and pursue this business opportunity. Dynamo
Energy Corporation has identified Oil in Place of Ten Billion Barrels of Heavy
Oil and Gas Leases to be purchased and developed in Alberta Canada. Dynamo will
offer Surge Global Energy Inc. the right of first refusal to participate in up
to 100% of the above mentioned project as well as any additional projects for a
period of five years from the date of this agreement. Surge agrees to pay Dynamo
Energy Corporation a 2 1/2% finder's fee on the total value of all
acquisitions, to be paid in stock or cash immediately upon closing of any
transaction and a 5% GORR (Gross Over Riding Royalty) on all the Petroleum and
Natural Gas rights acquired in all transactions and all lands at the time of the
acquisition and subsequently acquired by the company for the development of
these projects.

            Pursuant to the Asset Purchase Agreement in December 2004, the
Company's former Chief Executive Officer, William Miller legally released the
Company from obligations of the notes payable in an aggregate amount of $200,000
related to the discontinued tobacco business. The Company has no outstanding
notes payable due to the Company's former Chief Executive Officer at December
31, 2004.

            During the year ended December 31, 2004, the Company issued 37,600
shares of its common stock to the Company's Director Chet Idziszek in exchange
for $50,000 of note payable and accrued interest of $6,400. The note had an
original principal amount of $50,000, accrued interest at 6% per annum. The
Company has pad in full the notes payable due to Company's Director at December
31, 2004 .

         The promoters of our Company are our directors and officers.

ITEM 13. EXHIBITS

(a) The following documents are filed as part of this report:


                                       36



<PAGE>

Exhibit
Number   Description
------   -----------
3.1      Certificate of Incorporation*
3.2      Form of Amendment to Certificate of Incorporation approved by
         stockholders on October 28, 2002*
3.3      Designation of Rights of Series A and Series B Preferred Stock
3.4      By-Laws*
3.5      Form of Certificate of Amendment Correcting Designation of Rights of
         Series A and Series B Preferred Stock*
10.1     Agreement and Plan of Reorganization dated September 23, 2002 to
         acquire Bible Resources, Inc.*
10.2     Agreement with Frederick Berndt*
10.3     Employment Agreement with David Perez*
10.4     Employment Agreement with Fred Kelly*
10.5     Employment Agreement with Frederick C. Berndt*
10.6     Farmout Agreement with Deep Well Oil & Gas*
10.7     Convertible Note with Mark Fritz Convertible Note with Irving Plaksen
         and Victor Mellul*
14.1     Code of Ethics*
21.0     Subsidiaries of Registrant*
31.1     Certification by Chief Executive Officer, required by Rule 13a-14(a) or
         Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302
         of the Sarbanes-Oxley Act of 2002.
31.2     Certification by Chief Financial Officer, required by Rule 13a-14(a) or
         Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302
         of the Sarbanes-Oxley Act of 2002.
32.1     Certification by Chief Executive Officer, required by Rule 13a-14(b) or
         Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of
         Title 18 of the United States Code, promulgated pursuant to Section 906
         of the Sarbanes-Oxley Act of 2002.
32.2     Certification by Chief Financial Officer, required by Rule 13a-14(b) or
         Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of
         Title 18 of the United States Code, promulgated pursuant to Section 906
         of the Sarbanes-Oxley Act of 2002.

-----------

*        Previously filed with the Securities and Exchange Commission and is
         incorporated by reference into this Form 10-KSB.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table sets forth fees billed to us by our auditors during
the fiscal years ended December 31, 2004 and 2003 for: (i) services rendered for
the audit of our annual financial statements and the review of our quarterly
financial statements, (ii) services by our auditor that are reasonably related
to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.

--------------------------------------------------------------------------
                                   December 31 2004      December 31, 2003
--------------------------------------------------------------------------
(i)    Audit Fees                        $  62,500             $  46,592
--------------------------------------------------------------------------
(ii)   Audit Related Fees                        -                     -
--------------------------------------------------------------------------
(iii)  Tax Fees                                  -                     -
--------------------------------------------------------------------------
(v)    All Other Fees                            -                     -
--------------------------------------------------------------------------
Total fees                                $ 62,500             $  46,592
                                          =========            ==========
--------------------------------------------------------------------------

--------------------------------------------------------------------------


                                       37




<PAGE>

         AUDIT FEES. Consists of fees billed for professional services rendered
for the audit of Surge Global Energy Inc.'s consolidated financial statements
and review of the interim consolidated financial statements included in
quarterly reports and services that are normally provided by Russell Bedford
Stefanou Mirchandani LLP in connection with statutory and regulatory filings or
engagements.

         AUDIT-RELATED FEES. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of Global Energy Inc.'s consolidated financial statements and are not reported
under "Audit Fees." There were no Audit-Related services provided in fiscal 2004
or 2003.

         TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning.

         ALL OTHER FEES. Consists of fees for products and services other than
the services reported above. There were no management consulting services
provided in fiscal 2004 or 2003.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS

         The Company currently does not have a designated Audit Committee, and
accordingly, the Company's Board of Directors' policy is to pre-approve all
audit and permissible non-audit services provided by the independent auditors.
These services may include audit services, audit-related services, tax services
and other services. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of
services and is generally subject to a specific budget. The independent auditors
and management are required to periodically report to the Company's Board of
Directors regarding the extent of services provided by the independent auditors
in accordance with this pre-approval, and the fees for the services performed to
date. The Board of Directors may also pre-approve particular services on a
case-by-case basis.


                                       38



<PAGE>

SIGNATURES

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

                                              SURGE GLOBAL ENERGY, INC.


    Dated:   March 31, 2005                   By: /s/ Fred W. Kelly
                                                  ------------------------------
                                                  Fred W. Kelly
                                                  Chief Executive Officer
                                                  (Principal Executive Officer)


    Dated:   March 31, 2005                   By: /s/ E. Jamie Schloss
                                                  ------------------------------
                                                  E. Jamie Schloss
                                                  Chief Financial Officer and
                                                  (Principal Accounting Officer)

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.


      SIGNATURE                    TITLE                          DATE
      ---------                    -----                          ----

      /s/ David Perez              Chairman of the Board          March 31, 2005
      -----------------------
      David Perez


      /s/ Fred W. Kelly            Director                       March 31, 2005
      -----------------------
      Fred W. Kelly


      /s/ E. Jamie Schloss         Director                       March 31, 2005
      -----------------------
      E. Jamie Schloss


      /s/ Frederick C. Berndt      Director                       March 31, 2005
      -----------------------
      Frederick C. Berndt


      /s/ Chet Idziszek            Director                       March 31, 2005
      -----------------------
      Chet Idziszek


      /s/ Gary Vandergrift         Director                       March 31, 2005
      -----------------------
      Gary Vandergrift


                                       39





<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                 CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                           DECEMBER 31, 2004 AND 2003


                         FORMING A PART OF ANNUAL REPORT
                 PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934


                            SURGE GLOBAL ENERGY, INC.
                         (FOMERLY THE HAVANA GROUP INC.)







<PAGE>

<TABLE>
                                                   SURGE GLOBAL ENERGY, INC.
                                                 INDEX TO FINANCIAL INFORMATION

                                                                                                                  Page No
                                                                                                                  -------

<S>                                                                                                                   <C>
Report of Independent Registered Certified Public Accountants                                                       F-3
Consolidated Balance Sheet at December 31, 2004                                                                     F-4
Consolidated Statements of Losses for the Years Ended December 31, 2004 and 2003                                    F-5
Consolidated Statements of Deficiency in Stockholders' Equity for the Years ended December 31, 2004 and 2003        F-6 ~ F-9
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004 and 2003                                F-10 ~ F-11
Notes to Consolidated Financial statements                                                                          F-12 ~ F-25


                                                              F-2


</TABLE>





<PAGE>


                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS


          REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTANTS
          -------------------------------------------------------------


To the Board of Directors
Surge Global Energy, Inc.
San Diego, California


         We have audited the accompanying consolidated balance sheet of Surge
Global Energy, Inc. (formerly The Havana Group Inc.) and its wholly-owned
subsidiaries (the "Company"), as of December 31, 2004 and the related
consolidated statements of losses, deficiency in stockholders' equity, and cash
flows for the two years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.

         We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States of America). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2004, and the results of its operations and its
cash flows for the two years then ended, in conformity with accounting
principles generally accepted in the United States of America.

              The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in
Note M to the consolidated financial statements, the Company is experiencing
difficulty in generating sufficient cash flow to meet it obligations and sustain
its operations, which raises substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note M. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                --------------------------------------------
                                Russell Bedford Stefanou Mirchandani LLP
                                Certified Public Accountants



March 14, 2005, except for the third paragraph
of Note N, as to which date is March 24, 2005


                                       F-3






<PAGE>
<TABLE>
                                  SURGE GLOBAL ENERGY, INC.
                                 CONSOLIDATED BALANCE SHEET
                                      DECEMBER 31, 2004


<S>                                                                         <C>
ASSETS
Current assets:
Cash and cash equivalents                                                   $       159,935
                                                                            ----------------
Total current assets                                                                159,935

Other assets (Note C)                                                                25,000

Total Assets                                                                $       184,935
                                                                            ================

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities (Note D)                           $       523,183
                                                                            ----------------
Total current liabilities                                                           523,183

Deficiency in stockholders' equity:
Preferred stock, par value $.001 per share; 10,000,000 shares
  authorized:
Series A - none issued and outstanding at December 31, 2004 (Note F)                     --
Series B - none issued and outstanding at December 31, 2004 (Note F)                     --
Common stock, par value $.001 per share; 75,000,000 shares
  authorized; 23,367,097 shares issued and outstanding at December
  31, 2004 (Note F)                                                                  23,367
Deferred compensation expense (Note G)                                           (7,020,985)
Additional paid-in capital                                                       18,996,881
Accumulated deficit                                                             (12,337,511)
                                                                            ----------------
Total deficiency in stockholders' equity                                           (338,248)
                                                                            ----------------
Total liabilities and deficiency in stockholders' equity                    $       184,935
                                                                            ================


               See accompanying footnotes to consolidated financial statements


                                             F-4
</TABLE>





<PAGE>
<TABLE>
                                  SURGE GLOBAL ENERGY, INC.
                              CONSOLIDATED STATEMENTS OF LOSSES
                       FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                  2004             2003
                                                             -------------     -------------
<S>                                                          <C>               <C>
Operating expenses:
Selling, general and administrative expenses                 $  1,559,596      $    596,559
Amortization of deferred compensation (Note G)                  2,168,720                --
Depreciation and amortization                                          --             4,614
                                                             -------------     -------------
Total operating expense                                         3,728,316           601,173

Loss from operation                                            (3,728,316)         (601,173)

Interest expense                                                  (21,004)          (48,108)

Loss from continuing operations, before income taxes
  and discontinued operations                                  (3,749,320)         (649,281)

Provision for income taxes                                             --                --
                                                             -------------     -------------
Loss from continuing operations, before discontinued
  operations                                                   (3,749,320)         (649,281)

(Loss) from discontinued operations (Note B)                      (71,298)         (165,266)
Gain on disposal of discontinued operations (Note B)              773,422                --
                                                             -------------     -------------

Net (loss)                                                   $ (3,047,196)     $   (814,547)
                                                             =============     =============

Preferred stock dividends requirements (Note F)                        --          (110,000)

Loss available to common stockholders                        $ (3,047,196)     $   (924,547)

Loss per common share (basic and assuming dilution)
  (Note I)                                                   $      (0.14)     $      (0.05)
                                                             =============     =============
Continuing operations                                        $      (0.17)     $      (0.04)
                                                             =============     =============
Discontinued operations                                      $       0.03      $      (0.01)
                                                             =============     =============

Weighted average shares outstanding                            21,081,556        17,581,996
                                                             =============     =============


               See accompanying footnotes to consolidated financial statements


                                             F-5

</TABLE>





<PAGE>
<TABLE>
                                               SURGE GLOBAL ENERGY, INC.
                             CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
                                    FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                       Preferred                           Common         Additional
                                                       ---------                           ------         ----------
                                     Preferred           Stock            Common            Stock          Paid-in
                                   -------------     -------------     -------------    -------------    -------------
                                   Stock Shares         Amount         Stock Shares         Amount          Capital
                                   -------------     -------------     -------------    -------------    -------------
<S>                                   <C>            <C>                 <C>            <C>              <C>
BALANCE AT DECEMBER 31, 2002          6,100,000      $      6,100        16,815,000     $     16,815     $  7,683,922
                                   -------------     -------------     -------------    -------------    -------------
Issuance of common stock in
exchange for stock options
exercised at $0.10 per share                 --                --           240,000              240           23,760
Shares issued in exchange for
cash; valued at $.15 per
share, net of costs and fees                 --                --         1,366,667            1,367          203,633
Proceeds from common stock
subscription                                 --                --                --               --               --
Write-off of un-collectible
stock subscription                           --                --                --               --               --
Debt discount - securities
attached to notes payable
(Note E)                                     --                --                --               --           34,491
Stock options granted to
consultants in non-employees
in exchange for services
rendered (Note G)                            --                --                --               --           89,600

Net loss                                     --                --                --               --               --
                                   -------------     -------------     -------------    -------------    -------------

BALANCE AT DECEMBER 31, 2003          6,100,000      $      6,100        18,421,667     $     18,422     $  8,035,406
                                   =============     =============     =============    =============    =============


                            See accompanying footnotes to consolidated financial statements


                                                         F-6
</TABLE>





<PAGE>

<TABLE>
                                  SURGE GLOBAL ENERGY, INC.
          CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (CONTINUED)
                       FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                   Common Stock        Deferred        Accumulated
                                   -------------     -------------     -------------
                                   Subscription      Compensation        Deficit             Total
                                   -------------     -------------     -------------     -------------
<S>                                <C>               <C>               <C>               <C>
BALANCE AT DECEMBER 31, 2002       $         --      $         --      $ (8,475,768)     $   (768,931)
                                   -------------     -------------     -------------     -------------
Issuance of common stock in
exchange for stock options
exercised at $0.10 per share            (24,000)               --                --                --
Shares issued in exchange for
cash; valued at $.15 per
share, net of costs and fees                 --                --                --           205,000
Proceeds from common stock
subscription                             50,000                --                --            50,000
Write-off of un-collectible
stock subscription                       24,000                --                --            24,000
Debt discount - securities
attached to notes payable
(Note E)                                     --                --                --            34,491
Stock options granted to
consultants in non-employees
in exchange for services
rendered (Note G)                            --                --                --            89,600

Net loss                                     --                --          (814,547)         (814,547)
                                   -------------     -------------     -------------     -------------

BALANCE AT DECEMBER 31, 2003       $     50,000      $         --      $ (9,290,315)     $ (1,180,387)
                                   =============     =============     =============     =============


                    See accompanying footnotes to consolidated financial statements


                                               F-7
</TABLE>





<PAGE>

<TABLE>
                                               SURGE GLOBAL ENERGY, INC.
                       CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (CONTINUED)
                                    FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                       Preferred                           Common         Additional
                                                       ---------                           ------         ----------
                                     Preferred           Stock            Common            Stock          Paid-in
                                   -------------     -------------     -------------    -------------    -------------
                                   Stock Shares         Amount         Stock Shares         Amount          Capital
                                   -------------     -------------     -------------    -------------    -------------
<S>                                   <C>            <C>                 <C>            <C>              <C>
BALANCE FORWARD                       6,100,000      $      6,100        18,421,667     $     18,422     $  8,035,406
Issuance of common stock in
exchange for common stock
subscribed in December 2003                  --                --           500,000              500           49,500
Shares issued in exchange for
cash, net of costs and fees                  --                --         2,885,422            2,885        1,324,615
Issuance of common stock to
note holders pursuant to note
agreements entered into in
June and July 2003                           --                --           162,700              163             (163)
Issuance of common stock in
exchange for previously
incurred debt                                --                --           391,208              391          183,941
Issuance of common stock in
exchange for mineral
exploration costs (Note K)                   --                --         1,000,000            1,000          177,500
Issuance of common stock in
exchange for previously issued
preferred stock                      (6,100,000)           (6,100)            6,100                6            6,094
Stock options granted to
employees in exchange for
services rendered, at exercise
price below fair value of
common stock (Note G)                        --                --                --               --        9,189,705
Amortization of deferred
compensation (Note G)                        --                --                --               --               --
Other stock options awards
granted to Company COO
pursuant to employment
agreement (Note G)                           --                --                --               --           30,283

Net loss                                     --                --                --               --               --
                                   -------------     -------------     -------------    -------------    -------------

BALANCE AT DECEMBER 31, 2004                 --      $         --        23,367,097     $     23,367     $ 18,996,881
                                   =============     =============     =============    =============    =============


                            See accompanying footnotes to consolidated financial statements


                                                         F-8
</TABLE>





<PAGE>
<TABLE>
                                  SURGE GLOBAL ENERGY, INC.
          CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (CONTINUED)
                       FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                   Common Stock        Deferred        Accumulated
                                   -------------     -------------     -------------
                                   Subscription      Compensation        Deficit             Total
                                   -------------     -------------     -------------     -------------
<S>                                <C>               <C>               <C>               <C>
BALANCE FORWARD                    $     50,000      $         --      $ (9,290,315)     $ (1,180,387)
Issuance of common stock in
exchange for common stock
subscribed in December 2003             (50,000)               --                --                --
Shares issued in exchange for
cash, net of costs and fees                  --                --                --         1,327,500
Issuance of common stock to
note holders pursuant to note
agreements entered into in
June and July 2003                           --                --                --                --
Issuance of common stock in
exchange for previously
incurred debt                                --                --                --           184,332
Issuance of common stock in
exchange for mineral
exploration costs (Note K)                   --                --                --           178,500
Issuance of common stock in
exchange for previously issued
preferred stock                              --                --                --                --
Stock options granted to
employees in exchange for
services rendered, at exercise
price below fair value of
common stock (Note G)                        --        (9,189,705)               --                --
Amortization of deferred
compensation (Note G)                        --         2,168,720                --         2,168,720
Other stock options awards
granted to Company COO
pursuant to employment
agreement (Note G)                           --                --                --            30,283

Net loss                                     --                --        (3,047,196)       (3,047,196)
                                   -------------     -------------     -------------     -------------

BALANCE AT DECEMBER 31, 2004       $         --      $ (7,020,985)     $(12,337,511)     $   (338,248)
                                   =============     =============     =============     =============


                      See accompanying footnotes to consolidated financial statements


                                                 F-9
</TABLE>





<PAGE>
<TABLE>
                                SURGE GLOBAL ENERGY, INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                               2004             2003
                                                           ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                        <C>              <C>
Net (loss) from continuing operations                      $(3,749,320)     $  (649,281)
Net (loss) from discontinued operations (Note B)               (71,298)        (165,266)
Gain on disposal of discontinued operations (Note B)           773,422               --
Adjustments to reconcile net loss to net cash
  (used in) operating activities:
Depreciation and amortization - discontinued
  operations                                                        --           91,187
Expenses paid by affiliates on behalf of the Company                --          275,042
Common stock issued in exchange for mineral
  exploration costs (Note F and K)                             178,500               --
Amortization of debt discount (Note E)                           5,050           29,441
Stock options granted to consultants in exchange
  for services rendered (Note G)                                    --           89,600
Stock options granted to Company COO pursuant to
  employment agreement (Note G)                                 30,284               --
Amortization of deferred compensation costs (Note G)         2,168,720               --
Write off of stock subscription receivable (Note F)                 --           24,000
Extinguishment of debt - discontinued operations                    --          (91,919)
Accrued liabilities assumed by Zenvesco in
  connection with disposal of discontinued
  operations (Note B)                                         (804,217)              --
Assets transferred to Zenvesco in connection with
  disposal of discontinued operations (Note B)                  30,895               --
  (Increase) decrease in:
Restricted cash                                                     --           (4,200)
Other assets (Note C)                                          (25,000)              --
Assets of discontinued operations                                   --            9,867
Increase (decrease) in:
Accounts payable and accrued liabilities                       261,264          143,481
Liabilities of discontinued operations                              --          (97,749)
Deferred Revenue                                                    --               --
                                                           ------------     ------------
NET CASH (USED IN) OPERATING ACTIVITIES                     (1,201,700)        (345,797)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and stock
  subscription, net of costs and fees (Note F)               1,327,500          255,000
Proceeds from notes payable, net of repayments                  25,000           81,000
                                                           ------------     ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                    1,352,500          336,000

Net increase (decrease) in cash and cash equivalents           150,800           (9,797)
Cash and cash equivalents at the beginning of the year           9,135           18,932
                                                           ------------     ------------
Cash and cash equivalents at the end the year              $   159,935      $     9,135
                                                           ============     ============


             See accompanying footnotes to consolidated financial statements


                                          F-10
</TABLE>





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                       2004             2003
                                                   ------------     ------------
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for interest             $        --      $        --

Cash paid during the year for taxes                         --               --

Supplemental Disclosures of Non-Cash
Transactions:
Debt discount - securities attached to notes
  payable (Note E)                                          --           34,491

Amortization of debt discount (Note E)                   5,050           29,441
Common stock issued in exchange for mineral
  exploration costs                                    178,500               --
Stock options granted to consultants in
  exchange for services rendered                            --           89,600
Stock options granted to Company COO pursuant
  to employment agreement                               30,283               --
Stock options issued in exchange for deferred
  compensation costs (Note G)                       (9,189,705)
Amortization of deferred compensation costs
  (Note G)                                           2,168,720               --
Write off of stock subscription receivable
  (Note F)                                                  --           24,000
Extinguishment of debt - discontinued
  operations                                                --          (91,919)
Common stock issued in exchange for notes
  payable (Note F)                                     146,000               --
Common stock issued in exchange for notes
  payable (Note F)                                      14,071               --
Common stock issued in exchange for notes
  payable (Note F)                                      24,261               --
Disposal of Discontinued Operations: (Note B)

  Assets disposed of                                   (30,895)              --

  Debts assumed by Zenvesco                            804,217               --

  Net gain on disposal of segment                     (773,422)              --
                                                   ------------     ------------
  Cash consideration received                      $       100      $        --
                                                   ============     ============


         See accompanying footnotes to consolidated financial statements


                                      F-11





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES

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

Business and Basis of Presentation
----------------------------------

The condensed consolidated financial statements include the accounts of Surge
Global Energy, Inc. (formerly The Havana Group, Inc.) and its wholly owned
subsidiaries, Monarch Pipe Company and Bible Resources Inc. (collectively the
"Company"). All significant inter company accounts and transactions have been
eliminated in consolidation.

In January 2003, the management received the authority to proceed with the plan
of disposal of its tobacco and related business, which includes the Monarch Pipe
Company. The tobacco and related business segment was accounted for as a
discontinued operation, and accordingly, amounts in the financial statements,
and related notes reflect discontinued operations accounting. In December 2004,
the Company entered into an Asset Purchase Agreement (the "Agreement") by and
among the Company, the Company's former Chief Executive Officer, Zenvesco, Inc.,
Highland Pipe Co. doing business as Monarch Pipe Company, Camden Structure, Inc.
and PK Ventures, Inc., and consummated the disposition of the discontinued
operations. Summarized results of the discontinued business are further
described in Note B.

The Company currently owns one subsidiary, Bible Resources, Inc., and is seeking
to explore the acquisition and development of oil and gas properties in the
United States and Argentina

Cash Equivalents
----------------

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.

Inventories
-----------

Inventories are stated at the lower of cost or market with cost being determined
by the first-in, first-out (FIFO) method. The Company has no inventories at
December 31, 2004 and 2003.

Property and Equipment
----------------------

Property and equipment are stated at cost. When retired or otherwise disposed,
the related carrying value and accumulated depreciation are removed from the
respective accounts and the net difference less any amount realized from
disposition, is reflected in earnings. For financial statement purposes,
property and equipment are depreciated using the straight-line method over their
estimated useful lives of the assets. Depreciation expenses from continuing
operations amounted $0 and $4,614 for the years ended December 31, 2004 and
2003, respectively. Maintenance, repairs, and minor renewals are charged against
earnings when incurred. Additions and major renewals are capitalized.

Impairment of Long-Lived Assets
-------------------------------

The Company has adopted Statement of Financial Accounting Standards No. 144
("SFAS 144"). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undercounted cash flows. Should an impairment in value be indicated,
the carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. SFAS No. 144 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.


                                      F-12





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Income Taxes
------------

Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under this method deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be removed or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statements
of operations in the period that includes the enactment date.

Earnings (Loss) Per Share
-------------------------

The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings (loss) per share
has been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrants will be excluded as common stock
equivalents in the diluted earnings per share because they are either anti
dilutive, or their effect is not material. The weighted average number of common
shares outstanding used in the computation of earnings (loss) per share was
21,081,556 and 17,581,996 for the year ended December 31, 2004 and 2003
respectively.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

Revenue Recognition
-------------------

For revenue from product sales, the Company recognizes revenue in accordance
with Staff Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which
superceded Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL
STATEMENTS ("SAB101").

SAB 101 requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4) are
based on management's judgments regarding the fixed nature of the selling prices
of the products delivered and the collectibility of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or no refund will
be required.

SAB 104 incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21 on
the Company's consolidated financial position and results of operations was not
significant.

Advertising
-----------

The Company follows the policy of charging the costs of advertising to expenses
incurred. For the years ended December 31, 2004 and 2003, the Company incurred
no advertising costs from continuing operations.


                                      F-13





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Research and Development
------------------------

The Company accounts for research and development costs in accordance with the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs.
Under SFAS 2, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as
incurred. Third-party research and developments costs are expensed when the
contracted work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. The Company incurred no
research and product development costs for the year ended December 31, 2004 and
2003.

Concentrations of Credit Risk
-----------------------------

Financial instruments and related items which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess of
the FDIC insurance limit. The Company periodically reviews its trade receivables
in determining its allowance for doubtful accounts. The Company had no allowance
for doubtful accounts at December 31, 2004 and 2003.

Fair Value of Financial Instruments
-----------------------------------

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments. The carrying value of cash and cash equivalents,
accounts receivable, accounts payable and short-term borrowings, as reflected in
the balance sheets, approximate fair value because of the short-term maturity of
these instruments.

Stock Based Compensation
------------------------

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended December 31, 2004 and 2003
and will adopt the interim disclosure provisions for its financial reports for
the subsequent periods.

Had compensation costs for the Company's stock options been determined based on
the fair value at the grant dates for the awards, the Company's net loss and
losses per share would have been as follows (transactions involving stock
options issued to employees and Black-Scholes model assumptions are presented in
Note G):

<TABLE>
                                                                                      2004                        2003
                                                                                  -------------               -------------
<S>                                                                               <C>                          <C>
Net loss - as reported                                                            $ (3,047,196)                $  (814,547)
Add:  Total stock based  employee  compensation  expense as reported  under
intrinsic value method (APB. No. 25)                                                        --                          --
Deduct:  Total stock based employee  compensation expense as reported under
fair value based method (SFAS No. 123)                                                (405,225)                    (87,525)
                                                                                  -------------               -------------
Net loss - Pro Forma                                                              $ (3,452,421)                $  (902,072)
Net loss attributable to common stockholders - Pro forma                          $ (3,452,421)                $(1,012,072)
Basic (and assuming dilution) loss per share - as reported                        $      (0.14)                $     (0.05)
Basic (and assuming dilution) loss per share - Pro forma                          $      (0.16)                $     (0.06)


                                                           F-14
</TABLE>





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Liquidity
---------

As shown in the accompanying consolidated financial statements, the Company
incurred net loss from continuing operating of $3,749,320 and $649,281 for the
year ended December 31, 2004 and 2003, respectively. Net loss from continuing
operations for the year ended December 31, 2004 included $2,168,720 of non-cash
compensation to employees in connection with stock options granted during the
year ended December 31, 2004 (Note G). The Company's current liabilities
exceeded its current assets by $363,248 as of December 31, 2004. Management's
plans of resolving the liquidity issues are discussed in Note M and N.

Comprehensive Income
--------------------

Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income," establishes standards for reporting and displaying of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company does not have any items of comprehensive
income in any of the periods presented.

Segment Information
-------------------

Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision-making group, in making decisions
how to allocate resources and assess performance. The information disclosed
herein materially represents all of the financial information related to the
Company's principal operating segment.

Reclassifications
-----------------

Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.

New Accounting Pronouncements
-----------------------------

In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
151, INVENTORY COSTS-- AN AMENDMENT OF ARB NO. 43, CHAPTER 4. This Statement
amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
previously stated that "... under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal as to require treatment as current period charges...." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This Statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not believe the
adoption of this Statement will have any immediate material impact on the
Company.


In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments made by Statement 152 This Statement amends FASB Statement
No. 66, Accounting for Sales of Real Estate, to reference the financial
accounting and reporting guidance for real estate time-sharing transactions that
is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
Estate Time-Sharing Transactions. This Statement also amends FASB Statement No.
67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental operations and (b) costs incurred
to sell real estate projects does not apply to real estate time-sharing
transactions. The accounting for those operations and costs is subject to the
guidance in SOP 04-2. This Statement is effective for financial statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged.
The Company does not anticipate that the implementation of this standard will
have a material impact on its financial position, results of operations or cash
flows.


                                      F-15





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements (Continued)
-----------------------------------------

On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised 2004),
SHARE-BASED PAYMENT ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective as of the first interim period that begins after June 15,
2005. Accordingly, the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial statements.
Management is assessing the implications of this revised standard, which may
materially impact the Company's results of operations in the third quarter of
fiscal year 2005 and thereafter.

On December 16, 2004, FASB issued Statement of Financial Accounting Standards
No. 153, EXCHANGES OF NONMONETARY ASSETS, AN AMENDMENT OF APB OPINION NO. 29,
ACCOUNTING FOR NONMONETARY TRANSACTIONS (" SFAS 153"). This statement amends APB
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Under SFAS 153, if a
nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for nonmonetary transactions in fiscal periods that begin after June
15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.

NOTE B - DIVESTITURES AND DISCONTINUED OPERATIONS

In January 2003, the management received the authority to proceed with the plan
of disposal of its tobacco and related business, which includes the Monarch Pipe
Company. The Company accounted for the segment as a discontinued operation, and
accordingly, the amounts in the financial statements and related notes reflect
discontinued operations accounting. In December 2004, the Company entered into
an Asset Purchase Agreement (the "Agreement") by and among the Company, the
Company's former Chief Executive Officer, Zenvesco, Inc. ("Zenvesco"), Highland
Pipe Co. doing business as Monarch Pipe Company, Camden Structure, Inc. and PK
Ventures, Inc., and consummated the disposition of the discontinued operations.
Pursuant to the Agreement, the Company agreed to transfer to Zenvesco, an entity
controlled by the Company's former Chief Executive Officer, all of the Company's
assets related to its discontinued tobacco business. In consideration for the
transfer of assets, Zenvesco agreed to pay $100 and to assume all of the
Company's liabilities related to the discontinued tobacco business. Certain
liabilities were legally released by the Company's former Chief Executive
Officer and affiliated entities of Zenvesco.

As a result of the sale of the tobacco related business segment, the Company
accounted for the segment as a discontinued operation, and the following
summarizes the disposition of the tobacco related business segment:

         Cash consideration received                             $     100
         Debts assumed or forgiven                                 804,217
         Net assets disposed of                                    (30,895)
                                                                 ----------
         Net gain on disposal of discontinued operations         $ 773,422
                                                                 ==========

The financial statements reflect the operating results and balance sheet items
of the discontinued operations separately from continuing operations. Operating
results for the discontinued operations for the year ended December 31, 2004 and
2003 were:


                                      F-16





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE B - DIVESTITURES AND DISCONTINUED OPERATIONS (CONTINUED)

                                                         2004            2003
                                                      ----------      ----------
Revenues                                              $ 334,318       $ 541,666
Expenses                                               (405,616)       (706,932)
                                                      ----------      ----------
Net loss before tax                                     (71,298)       (165,266)
Income tax provision (benefit)                               --              --
                                                      ----------      ----------
Net loss                                                (71,298)       (165,266)

Net gain on sale of discontinued operations,
  before tax                                            773,422              --
Income tax provision (benefit)                               --              --
                                                      ----------      ----------
Gain on sale, net of tax                                773,422              --
                                                      ----------      ----------
Gain (loss) on discontinued operations, net
  of tax                                              $ 702,124       $(165,266)
                                                      ==========      ==========

NOTE C - OTHER ASSETS

In June 2004, the Company entered into an "Assignment of Oil and Gas Leases"
("Assignment") with Castle Rock Resources, Inc. ("Assignor"), an entity
controlled by the Company's Acting Chief Financial Officer and Director.
Pursuant to the Assignment, the Assignor sold, conveyed and delivered to the
Company all right, title, and interest in a 50% working interest ownership, and
37.5% net revenue interest in the oil and gas leases, in exchange for cash
consideration paid by the Company in the amount of $25,000. Assignor shall have
the right to recoup the first $400,000 from income derived from the gas well. As
of December 31, 2004, no drilling on a new well has commenced yet and no
revenues or expenses generated from the lease. The fair value of the Company's
investment in Oil and Gas Leases remained at $25,000 as of December 31, 2004.

NOTE D - ACCOUNTS PAYABLE AND ACCURED LAIBILITIES

Accounts payable and accrued liabilities at December 31, 2004 are as follows:

Accrued expenses                                           $ 190,510
Accrued payroll, payroll expenses and taxes                   82,773
Due to the Company's former Chief Executive Officer          249,900
                                                           ----------
Total                                                      $ 523,183
                                                           ==========

Pursuant to the Asset Purchase Agreement (Note B), the Company's former Chief
Executive Officer agreed to guarantee Zenvesco's payment of the assumed
liabilities, and the Company agreed to pay to the Company's formerly Chief
Executive Officer a total of $250,000 on the later of 90 days from the execution
date of the Agreement or the date the Company has raised at least $500,000 in
equity capital after the date of the Agreement. Total cash consideration the
Company was to receive from Zenvesco, an entity controlled by the Company's
former Chief Executive Officer pursuant to the Agreement was $100. Accordingly,
the Company accounted total due to the Company's former Executive Officer in the
amount of $249,900 at December 31, 2004.

NOTE E - NOTES PAYABLE

Notes Payable to Related Parties
--------------------------------

Pursuant to the Asset Purchase Agreement (Note B) in December 2004, the
Company's former Chief Executive Officer legally released the Company from
obligations of the following notes payable related to the discontinued tobacco
business. The Company has no outstanding notes payable due to Company's former
Chief Executive Officer at December 31, 2004.

         o        Original principal amount of $150,000, 5% note payable to
                  Company's former Chief Executive Officer (Note H), principal
                  and accrued interest payable on or before December 2002;
                  secured by Company assets. The Company was in default under
                  the terms of the note. The Company has included the
                  forgiveness of debt and all unpaid accrued interest in the
                  gain from disposal of discontinued operations for the year
                  ended December 31, 2004.


                                      F-17

<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE E - NOTES PAYABLE (CONTINUED)

Notes Payable to Related Parties (Continued)
--------------------------------------------

         o        Original principal amount of $50,000, 6% note payable to
                  Company's former Chief Executive Officer (Note H), principal
                  and accrued interest payable on or before October 2002;
                  unsecured. The Company was in default under the terms of the
                  note. The Company has included the forgiveness of debt and all
                  unpaid accrued inertest in the gain from disposal of
                  discontinued operations for the year ended December 31, 2004.

During the year ended December 31, 2004, the Company issued 37,600 shares of its
common stock to the one of the Company's Directors in exchange for $50,000 of
note payable and accrued interest of $6,400 (Note F). After the issuance of
common stock, the notes payable due to the Company's Director was deemed paid in
full at December 31, 2004.

Notes Payable to Third Parties
------------------------------

During the year ended December 31, 2004, the Company issued its common stock to
certain noteholders in exchange for the following notes payable and accrued
interest.

         o        Issuance of 287,594 shares of common stock in exchange for
                  note payable in principal amount of $25,000 and accrued
                  interest of $3,913 (Note F).

         o        Issuance of 21,706 shares of common stock in exchange for note
                  payable with non-detachable securities in principal amount of
                  $30,000 and accrue interest of $2,558. Pursuant to the note
                  agreement, the Company distributed 120,000 shares of its
                  common stock to the noteholder during the year ended December
                  31, 2004 (Note F).

         o        Issuance of 28,134 shares of common stock in exchange for note
                  payable in principal amounts of $25,000 and note payable with
                  non-detachable securities in principal amount of $16,000, and
                  aggregate accrued interest of $1,200. Pursuant to the note
                  agreement with non-detachable securities, the Company
                  distributed 42,700 shares of its common stock to the
                  noteholder during the year ended December 31, 2004 (Note F).

Additionally, the Company entered into settlement agreements with two
noteholders in exchange for an aggregate of $10,000 of notes payable and accrued
interest of $1,398. The Company has included the $11,398 of settlement to be
paid to the noteholders in its accrued liabilities at December 31, 2004. The
Company has no notes payable to third parties outstanding at December 31, 2004.

The Company accounted for the notes payable with non-detachable securities and
common stock purchase rights in accordance with APB No. 14, "Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants" ("APB 14").
Proceeds from the issuance of notes payable with equity securities are allocated
between the debt and the securities based on their relative fair values. During
the year ended December 31, 2003, the Company recognized the portion of the
proceeds allocated to the securities in the amount of $34,491 to additional
paid-in capital and a discount against the notes payable. The debt discount
attributed to the value of the securities to be issued is amortized over the
notes payable's maturity period as interest expense. The Company amortized the
debt discount attributed to the securities to be issued and recorded non-cash
interest expense of $5,050 and $29,441 for the years ended December 31, 2004 and
2003, respectively.


NOTE F - CAPITAL STOCK

Series A and Series B Preferred Stock
-------------------------------------

The Company is authorized to issue up to 10,000,000 shares of Preferred Stock in
one or more series and to fix the rights, preferences, privileges, and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidating preferences, and the number of shares
constituting any series or the designation of such series. Duncan Hill, Inc.,
the former parent of the Company owned 5,000,000 shares of Series A Preferred
Stock (Series A) $.001 par value. The holders of the Series A stock are entitled
to one vote for each share held of record on all matters submitted to a vote of
the stockholders. The Series A stock is not subject to redemption and has no
conversion rights or rights to participate in dividend payments. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, each share of Series A stock has a liquidation
preference of $.001 per share.


                                      F-18





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE F - CAPITAL STOCK (CONTINUED)

Series A and Series B Preferred Stock (Continued)
-------------------------------------------------

The Company has issued 1,100,000 shares of its Series B Convertible Preferred
Stock (Series B) $.001 par value to Duncan Hill, Inc. The Series B stock has the
same voting privileges as the Common Stock. Each share of Series B stock is
convertible into one share of the Company's Common stock at the option of either
the holder or the Company upon the Company's net pre-tax profit reaching
$500,000 in any given calendar year. The Series B stock is not subject to
redemption. In the event of a voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, each share of Series B stock has a
liquidation preference of $.001 plus dividends in arrears, which is subordinated
to the liquidation preference of the Series A stock. The holder of each share of
Series B Preferred Stock will be entitled to receive, when, as, and if declared
by the Board of Directors of the Company, out of funds legally available
therefore, cumulative quarterly cash dividends at the rate of $.025 per share,
quarterly on March 31, June 30, September 30, and December 31 commencing with
March 31, 1998 before any dividend shall be declared, set apart for, or paid
upon the Common Stock for such year, and the remainder of the surplus or net
earnings applicable to the payment of dividends shall be distributed as
dividends among the holders of Common Stock as and when the Board of Directors
determines. There were no dividends declared or paid during 2004 or 2003 on the
Series B Preferred Stock. Dividends in arrears on the Series B preferred stock
amount to $.675 per share or $742,500 in the aggregate at September 30, 2004.

In connection with the Asset Purchase Agreement (Note B), Duncan Hill, Inc., an
entity controlled by the Company's former Chief Executive Officer agreed to
convey to the Company for cancellation of 5,000,000 shares of Series A Preferred
Stock and 1,100,000 shares of Series B Preferred Stock, and to release the
Company from all obligations for accumulated dividends thereon, in exchange for
6,100 shares of the Company's Common Stock. The Company has no preferred stock
issued and outstanding at December 31, 2004.

Common Stock
------------

The Company has authorized to issue 75,000,000 shares of common stock with a par
value at $0.001 per share. As of December 31, 2004 and 2003, the Company has
23,367,097 and 18,421,667 shares of common stock issued and outstanding.

The Company is not currently subject to any contractual arrangements, which
restrict its ability to pay cash dividends. The Company's Certificate of
Incorporation prohibits the payment of cash dividends on the Company's Common
Stock in excess of $.05 per share per year so long as any Serial Preferred Stock
remains outstanding unless all accrued and unpaid dividends on Serial Preferred
Stock has been set apart and there are no arrearages with respect to the
redemption of any Serial Preferred Stock.

During the year ended December 31, 2003, the Company issued an aggregate of
240,000 shares of common stock in exchange for an aggregate purchase price of
$24,000 for employee stock options exercised at $0.10 per share. The Company has
determined that the $24,000 of stock subscription receivable is not collectible
and has charged to operations the write-off of stock subscription receivable at
December 31, 2003. The Company issued an aggregate of $1,366,667 shares of
common stock to sophisticated investors in exchange for $205,000 of cash, net of
costs and fees. In December 2003, the Company received $50,000 from an investor
for 500,000 shares of common stock subscribed at $.10 per share. The Company
accounted for the $50,000 of proceeds received as stock subscription payable at
December 31, 2003.

In January 2004, the Company issued to an investor the 500,000 shares of common
stock subscribed in December 2003. During the year ended December 31, 2004, the
Company issued an aggregate of 2,885,422 shares of common stock to sophisticated
investors in exchange for $1,327,500 of cash, net of costs and fees. The Company
also issued an aggregate of 162,700 shares of its common stock to two of its
noteholders pursuant to the terms of the note agreements (Note E). The Company
accounted the fair value of the 162,700 shares of common stock as debt discount
attributed to non-detachable securities at the time the note agreements were
entered into, and the debt discount was amortized and charged to operations as
interest expense over the maturity period of the notes. The Company issued an
aggregate of 391,208 shares of its common stock to its noteholders and creditors
in exchange for $146,000 of notes payable (Note E), $14,071 of accrued interest
(Note E), and $24,261 of previously incurred debt. Additionally, the Company
issued 1,000,000 shares of its common stock, valued at $178,500, to Irie Isle
Limited pursuant to a letter agreement dated February 5, 2003, as amended by
letter agreements dated March 31, 2003 and April 30, 2003 (collectively the
"Agreement") with Cynthia Holdings Limited (Note K). The Company has charged to
operations mineral exploration costs in the amount of $178,500 during the year
ended December 31, 2004.


                                      F-19





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - WARRANTS AND STOCK OPTIONS

Class A Warrants
----------------

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

                                                                       Weighted
                                                                       Average
                                                    Number             Price Per
                                                   of Shares             Share
                                                  ----------           ---------
         Outstanding at January 1, 2003            3,358,000           $   4.53
            Granted                                       --                 --
            Exercised                                     --                 --
            Canceled or expired                   (2,658,000)              5.25
                                                  ----------           ---------
         Outstanding at December 31, 2003            700,000           $   1.79
                                                  ==========           =========
            Granted                                       --                 --
            Exercised                                     --                 --
            Canceled or expired                     (700,000)              1.79
                                                  ----------           ---------
         Outstanding at December 31, 2004                 --           $     --
                                                  ==========           =========

Stock Options

The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at December 31, 2004.

<TABLE>
                              Options Outstanding                                            Options Exercisable
                              -------------------                                            -------------------
                                            Weighted Average
                           Number        Remaining Contractual     Weighed Average          Number          Weighted Average
    Exercise Prices     Outstanding           Life (Years)          Exercise Price        Exercisable         Exercise Price
    ---------------     -----------           ------------          --------------        -----------         --------------
<S>    <C>              <C>                      <C>                  <C>                  <C>                    <C>
       $   0.25         1,200,000                2.27                 $   0.25             1,200,000              $  0.25
         0.4044            60,000                0.26                   0.4044                60,000               0.4044
           0.65         5,500,000                8.89                     0.65             1,405,555                 0.65
           1.35            19,279                9.93                     1.35                19,279                 1.35
           1.50             7,127               10.00                     1.50                 7,127                 1.50
           3.50            80,000                3.94                     3.50                80,000                 3.50
                        -----------           ------------          --------------        -----------         --------------
                        6,866,406                7.61                 $   0.61             2,771,961              $  0.56
                        ===========           ============          ==============        ===========         ==============
</TABLE>

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

                                                                       Weighted
                                                                       Average
                                                    Number             Price Per
                                                   of Shares             Share
                                                  ----------           ---------
         Outstanding at January 1, 2003            1,780,000           $   0.40
            Granted                                  400,000               0.25
            Exercised (Note F)                      (240,000)              0.10
            Canceled or expired                           --                 --
                                                  ----------           ---------
         Outstanding at December 31, 2003          1,940,000           $   0.41
                                                  ==========           =========
            Granted                                5,526,406               0.65
            Exercised                                     --                 --
            Canceled or expired                     (600,000)              0.30
                                                  ----------           ---------
         Outstanding at December 31, 2004          6,866,406           $   0.61
                                                  ==========           =========

The weighted-average fair value of stock options and warrants granted to
shareholders during the years ended December 31, 2004 and 2003 and the
weighted-average significant assumptions used to determine those fair values,
using a Black-Scholes option pricing model are as follows:


                                      F-20





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - WARRANTS AND STOCK OPTIONS (CONTINUED)

Stock Options (Continued)
-------------------------

                                                             2004           2003
                                                             ----           ----
       Significant assumptions (weighted-average):
           Risk-free interest rate at grant date             1.35%         2.25%

           Expected stock price volatility                    171%          169%
           Expected dividend payout                            --            --
           Expected option life-years (*)                      10       3 to 10
         (*)The expected option life is based on contractual expiration dates.

a) Employee Stock Option Plan
-----------------------------

The Company did not grant any stock options to employees during the year ended
December 31, 2003. The estimated value of the stock options vested during the
year ended December 31, 2003 was determined using the Black-Scholes option
pricing model. If the Company recognized compensation cost for the stock options
and warrants for the non-qualified employee stock option plan in accordance with
SFAS No. 123, the Company's pro forma net loss attributable to common
shareholders and net loss per share would have been $(1,012,072) and $(0.06) for
the year ended December 31, 2003, respectively.

The estimated value of the stock options vested during the year ended December
31, 2004 for options granted in prior years was determined using the
Black-Scholes option pricing model. If the Company recognized compensation cost
for the stock options and warrants for the non-qualified employee stock option
plan in accordance with SFAS No. 123, the Company's pro forma net loss
attributable to common shareholders and net loss per share would have been
$(3,452,421) and $(0.16) for the year ended December 31, 2003, respectively.

During the year ended December 31, 2004, the Company granted an aggregate of
5,500,000 stock options to employees. The exercise prices of the stock options
granted were below the fair value of the Company's common stock at the grant
date. The Company has accounted the intrinsic value of the stock options as
deferred compensation costs in the amount of $9,189,705 and as a reduction of
stockholders' equity. The deferred compensation costs are amortized over the
vesting period of the options. Compensation expense of $2,168,720 was charged to
operations during the year ended December 31, 2004.

b) Non-employee Stock Options
-----------------------------

The estimated value of the 400,000 options granted to consultants during the
year ended December 31, 2003 was determined using the Black-Scholes option
pricing model and the amount of the expense charged to operations in connection
with granting the options was $89,600 during the year ended December 31, 2003.

The Company issued an aggregate of 26,406 stock options to its Chief Operating
Officer as compensation for certain equity the Company issued during the year
ended December 31, 2004 (Note L). The estimated value of the 26,406 options
granted was determined using the Black-Scholes option pricing model and the
Company has charged to operations compensation expense of $30,283 in connection
with granting the options during the year ended December 31, 2004.

NOTE H - RELATED PARTY TRANSACTIONS

In June 2004, the Company entered into an "Assignment of Oil and Gas Leases"
("Assignment") with Castle Rock Resources, Inc. ("Assignor"), an entity
controlled by the Company's Acting Chief Financial Officer. Pursuant to the
Assignment, the Assignor sold, conveyed and delivered to the Company all right,
title, and interest in a 50% working interest ownership, and 37.5% net revenue
interest in the oil and gas leases, in exchange for cash consideration paid by
the Company in the amount of $25,000 (see Note C).


                                      F-21





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE H - RELATED PARTY TRANSACTIONS (CONTINUED)

The Company has entered into a letter agreement dated February 5, 2003, as
amended by letter agreements dated March 31, 2003 and April 30, 2003
(collectively the "Agreement") with Cynthia Holdings Limited ("Cynthia") , an
entity controlled by a member of the Company's Board of Directors, whereby
Cynthia has agreed to sell to the Company an effective 50% interest in certain
oil and gas rights in the Cuyana Basin of central Argentina which is owned by
Cynthia's wholly-owned Argentine subsidiary Exploraciones Oromin, S.A. Pursuant
to the Agreement, the Company remitted to Cynthia and Irie Isle Limited a total
of $600,000 in cash and 1,000,000 shares of its common stock in connection with
fulfilling the terms of the Agreement (see Note K).

Pursuant to the Asset Purchase Agreement (Note B) in December 2004, the
Company's former Chief Executive Officer legally released the Company from
obligations of the notes payable in an aggregate amount of $200,000 related to
the discontinued tobacco business. The Company has no outstanding notes payable
due to the Company's former Chief Executive Officer at December 31, 2004 (Note
E).

During the year ended December 31, 2004, the Company issued 37,600 shares of its
common stock to the Company's Director in exchange for $50,000 of note payable
and accrued interest of $6,400 (Note F). The note had an original principal
amount of $50,000, accrued interest at 6% per annum. The Company has pad in full
the notes payable due to Company's Director at December 31, 2004 (Note E).

NOTE I - EARNINGS (LOSS) PER SHARE

The following table presents the computation of basic and diluted losses per
share:

<TABLE>
                                                               2004            2003
                                                           ------------     ------------
<S>                                                        <C>              <C>
         Net loss available for common shareholders        $(3,047,196)     $  (924,547)
                                                           ============     ============
         Basic and fully diluted loss per share            $     (0.14)     $     (0.05)
                                                           ============     ============
         Continuing operations                             $     (0.17)     $     (0.04)
                                                           ============     ============
         Discontinued operations                           $      0.03      $     (0.01)
                                                           ============     ============
         Weighted average common shares outstanding
           (basic and assuming dilution)                    21,081,556       17,581,996
                                                           ============     ============
</TABLE>

NOTE J - INCOME TAXES

The Company has adopted Financial Accounting Standard number 109 which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.

For income tax reporting purposes, the Company's aggregate unused net operating
losses approximate $3,862,000, which expire through 2024 subject to limitations
of Section 382 of the Internal Revenue Code, as amended. . The deferred tax
asset related to the carry forward is approximately $1,313,000. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earning history of
the Company, it is more likely than not that the benefits will be realized.

Components of deferred tax assets as of December 31, 2004 are as follows:

        Non Current:
          Net operating loss carry forward                         $ 1,313,000
          Less: valuation allowance                                 (1,313,000)
                                                                   ------------
          Net deferred tax asset                                   $        --
                                                                   ============


                                      F-22





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE K - MINERAL EXPLORATION COSTS

The Company has entered into a letter agreement dated February 5, 2003, as
amended by letter agreements dated March 31, 2003 and April 30, 2003
(collectively the "Agreement") with Cynthia Holdings Limited ("Cynthia") , an
entity controlled by a member of the Company's Board of Directors, whereby
Cynthia has agreed to sell to the Company an effective 50% interest in certain
oil and gas rights in the Cuyana Basin of central Argentina which is owned by
Cynthia's wholly-owned Argentine subsidiary Exploraciones Oromin, S.A. Pursuant
to the Agreement, the Company agreed to pay to Cynthia a total of $1,500,000 in
cash and 1,000,000 shares of its restricted common stock in exchange for the
interest of the oil and gas rights. During the period ended December 31, 2004,
the Company remitted to Cynthia and Irie Isle Limited, which is wholly-owned by
Oromin Explorations, Ltd. ("Oromin") a total of $600,000 in cash and 1,000,000
shares of its common stock (Note F), valued at $178,500, in connection with
fulfilling the terms of the Agreement. As of December 31, 2004, no engineering
studies and reserve analysis have been conducted on the oil and gas property,
accordingly the Company has charged to operations mineral exploration costs of
$778,500 for the year ended December 31, 2004.

NOTE L - COMMITMENTS AND CONTINGENCIES

Operating Lease
---------------

During the year ended December 31, 2003, the Company leased office spaces in
Canton, Ohio under a one-year operating lease expired in December 2003. After
December 2003, the Company leased office space at the same location on a
month-to-month basis. Monthly rental under the lease was approximately $2,300.
Starting November 2004, the Company leases office space under a month-to-month
sub-lease agreement for office spaces in San Diego, California. Monthly rental
under the lease is $1,800. Total rent expense charged to continuing operations
were $4,165 for the year ended December 31, 2004. Total rent expenses of $17,412
and $27,961 were charged discontinued operations for the years ended December
31, 2004 and 2003, respectively.

Employment Agreement
--------------------

The Company has employment agreements with its Executives. In addition to salary
and benefit provisions, the agreement includes defined commitments should the
Executives terminate the employment with or without cause.

Chief Executive Officer: On November 26, 2004, the Company entered into an
employment agreement with its Chief Executive Officer ("CEO"). CEO will receive
a starting salary of $100,000 per year, subject to review after 90 days, and be
eligible to participate in bonus and benefits programs established by the
Company. CEO will also receive a stock option to purchase 700,000 shares of
common stock at an exercise price of $0.65 per share, vesting monthly over three
years (Note G). The option will have a term of ten years, subject to continuing
service with our company. CEO will also receive a signing bonus of $25,000
payable 90 days after his start November 26, 2004 date.

Chief Operating Officer: On November 30, 2004, the Company entered into a five
year employment agreement with our Chief Operating Officer ("COO"). The term
extends to ten years if net income before income taxes, as adjusted, exceeds
$1,500,000 during any of the first three fiscal years ending on or after January
1, 2005. Base compensation will be $250,000 per year, with increases subject to
the board or the compensation committee's discretion. The performance bonus is
equal to 5% of net income before income taxes, as adjusted, in excess of
$500,000 for each fiscal year. The COO also receives an automobile allowance,
term life insurance on his behalf, reimbursement of incurred legal expenses and
other benefits. The COO's stock options include 3,000,000 shares of common stock
at an exercise price of $.65 per share. The option has a life of ten years.
1,000,000 of these shares vested immediately with the balance vesting monthly
over two years. Other stock options include 600,000 shares of common stock at an
exercise price of $0.65 per share with a ten year life and vesting monthly over
three years. In connection with his appointment to the Company's board on
November 4, 2004, the executive was granted a five-year option to purchase
400,000 shares of common stock at an exercise price of $0.65 per share with
275,000 shares vesting immediately and the remaining 125,000 shares vesting on
November 4, 2005 (Note G). For any additional equity the Company issues, the COO
receives additional options for a number of shares equal to 14.3% of, subject to
exceptions for stock dividends, stock splits, shares issued to employees,
directors and consultants pursuant to board-approved compensation plans, shares
issued in a public offering, shares issued for business combinations and up to
200,000 shares issued to certain vendors. The additional options exercise price
is equal to the price the issued securities sold or deemed sold, immediately
vest and have a ten year life (Note G). All options are subject to continuing
service with the Company.


                                      F-23





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE L - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Employment Agreement (Continued)
--------------------------------

Chief Financial Officer: In July 2003, the Company entered into an agreement
with the acting Chief Financial Officer's affiliated Company to provide
consulting and related services to assist the Company in locating oil and gas
properties and provides the non-exclusive services the Chief Financial Officer.
The agreement provides the Company with a 30 day right of first refusal on each
prospect property. The affiliated company received options to purchase 400,000
shares at $.25 per share. For wells proposed by the affiliated company and
drilled by the Company, the affiliated company receives a management fee of
$5,000 per month. In addition, the affiliated company will oversee operations
and finances for such wells. For all cash raised by the affiliated company on
behalf of the Company, the affiliated company will receive a 10% finder's fee
and reimbursement of certain expenses. The finder's fee is payable in cash or
stock at the affiliated company's option. The affiliated company has a right in
certain circumstances to require registration under the Securities Act for the
resale of the shares which may be purchased upon exercise of its stock option.
The agreement expires on July 21, 2006. On December 9, 2004 the Company granted
the acting Chief Financial Officer a 10-year option to purchase 400,000 shares
at $.65 per share and vesting in 36 equal monthly installments (Note G). Any
other compensation between the Company and the acting Chief Financial Officer
will be mutually agreed upon in connection with his role as acting Chief
Financial Officer.

Consulting Agreements
---------------------

The Company has consulting agreements with outside contractors, certain of whom
are also Company shareholders. The Agreements are generally for a term of 12
months from inception and renewable automatically from year to year unless
either the Company or Consultant terminates such engagement by written notice.

Legal Proceedings and Claims
----------------------------

The Company is subject to other legal proceedings and claims, which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have material adverse effect on its financial position, results
of operations or liquidity.

NOTE M - GOING CONCERN MATTERS

The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial statements during the
years ended December 31, 2004 and 2003, the Company incurred losses from
continuing operations of $3,749,320 and $649,281, respectively. The Company's
current liabilities exceeded its current assets by $363,248 as of December 31,
2004. These factors among others may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time.

The Company's existence is dependent upon management's ability to develop
profitable operations and resolve it's liquidity problems. Management
anticipates the Company will attain profitable status and improve its liquidity
through the continued developing, marketing and selling of its products and
additional equity investment in the Company. The accompanying financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.

In order to improve the Company's liquidity, the Company is actively pursuing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.

If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.


                                      F-24





<PAGE>

                            SURGE GLOBAL ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE N - SUBSEQUENT EVENTS

On February 17, 2005, Richard Manning resigned as Director of the Company citing
no disagreements relating to the Company's operations, policies or practices and
no replacement director was named.

In February 2005, the Company incorporated a wholly-owned subsidiary, Surge
Global Energy (Canada), Ltd. On February 25, 2005, the Company and its
subsidiary Surge Global Energy (Canada), Ltd., entered into a Farmout Agreement
with Deep Well Oil & Gas, Inc. and Northern Alberta Oil Ltd. to drill a test
well, at Company expense, on or before 150 days from the date of the Farmout
Agreement. The Company will provide $1 million in cash, and one-third of the
Company's outstanding shares of common stock, on a fully diluted basis, (as of
February 17, 2005, approximately 7,822,366 shares). In return, the Company
retains a 40% working interest in the initial acreage with rights to expand into
63 total sections for an undivided 40% working interest over a two year period.

On March 24, 2005, the Company obtained a $1,710,000 in exchange for a 6%
convertible promissory note from private parties. The note converts into 760,000
shares at a price of $2.25 per share and includes 855,000 of attached warrants
exercisable at $4.00 expiring in five years. The exercise price of the warrants
will be adjusted in the event of any stock split or reverse stock split, stock
dividend, reclassification of common stock, recapitalization, merger or
consolidation. In addition, the exercise price of the warrants will be adjusted
in the event the Company spins off or otherwise divests itself of a material
part of its business or operations or disposes of all or a portion of its
assets.




                                      F-25