UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

[X]      Annual Report under Section 13 or 15(d) of the Securities  Exchange Act
         of 1934

         For the fiscal year ended:  DECEMBER 31, 2004

[ ]      Transition Report Under Section 13 or 15 (D) of the Securities Exchange
         Act of 1934

         For the transition period from ___________ to ____________

                        Commission file number: 000-28025

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

          NEVADA                                           86-0951473
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

 #1305 - 1090 WEST GEORGIA STREET, VANCOUVER, BRITISH COLUMBIA, CANADA, V6E 3V7
               (Address of principal executive offices) (Zip code)

                                 (604) 685-9316
                (Issuer's telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act:

                  COMMON STOCK WITH $0.001 PAR VALUE PER SHARE
                                (Title of 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. Yes [ X ] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B 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:    $57,616

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  prices of such common  equity,  as of a
specified date within the past 60 days:       $NIL

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

             4,650,000 SHARES OF COMMON STOCK, AS OF MARCH 18, 2005

Documents incorporated by reference: NONE

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

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                               GLOBAL ENERGY INC.
                          ANNUAL REPORT ON FORM 10-KSB
                                TABLE OF CONTENTS


PART I.........................................................................3
         Item 1.  Description of Business......................................6
         Item 2.  Description of Property.....................................13
         Item 3.  Legal Proceedings...........................................17
         Item 4.  Submission of Matters to a Vote of Securityholders..........17

PART II.......................................................................17
         Item 5.   Market for Common Equity, Related Stockholder
                   Matters and Small Business Issuer Purchases
                   of Equity Securities.......................................17
         Item 6.   Management's Discussion and Analysis or Plan
                   of Operation...............................................18
         Item 7.   Financial Statements.......................................23
         Item 8.   Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure........................23
         Item 8A.  Controls and Procedures....................................23
         Item 8B.  Other Information..........................................24

PART III......................................................................24
         Item 9.   Directors and Executive Officers of the Registrant.........24
         Item 10.  Executive Compensation.....................................26
         Item 11.  Security Ownership of Certain Beneficial Owners
                   and Management and Related Stockholder Matters.............27
         Item 12.  Certain Relationships and Related Transactions.............28
         Item 13.  Exhibits...................................................28
         Item 14.  Principal Accountant Fees and Services.....................29

SIGNATURES....................................................................30





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                                     PART I


This report includes  "forward-looking  statements."  All statements  other than
statements of historical  facts  included or  incorporated  by reference in this
report, including, without limitation, statements regarding the Company's future
financial position,  business strategy,  budgets,  projected costs and plans and
objectives of management for future operations, are forward-looking  statements.
In addition,  forward-looking  statements generally can be identified by the use
of  forward-looking  terminology  such as  "may,"  "will,"  "expect,"  "intend,"
"project,"  "estimate,"  "anticipate,"  "believe," or "continue" or the negative
thereof  or  variations  thereon  or similar  terminology.  Although  management
believes that the expectations reflected in such forward-looking  statements are
reasonable,  the Company cannot give any assurance that such  expectations  will
prove to have been correct. Important factors that could cause actual results to
differ  materially  from the Company's  expectations  ("Cautionary  Statements")
include,  but are not limited to,  assumptions about energy markets,  production
levels, reserve levels, operating results,  competitive conditions,  technology,
the availability of capital  resources,  capital  expenditure  obligations,  the
supply and demand for oil and natural  gas,  the price of oil and  natural  gas,
currency exchange rates, the weather,  inflation,  the availability of goods and
services,  drilling risks,  future processing  volumes and pipeline  throughput,
general  economic  conditions  (either  internationally  or nationally or in the
jurisdictions in which the Company is doing business), legislative or regulatory
changes (including changes in environmental regulation,  environmental risks and
liability under federal,  state and foreign environmental laws and regulations),
the  securities or capital  markets and other factors  disclosed  under "Item 6.
Management's Discussion and Analysis or Plan of Operation," "Item 2. Description
of  Property"  and  elsewhere in this report.  All  subsequent  written and oral
forward-looking statements attributable to the Company, or persons acting on its
behalf, are expressly qualified in their entirety by the Cautionary  Statements.
The Company assumes no duty to update or revise its  forward-looking  statements
based on changes in internal estimates or expectations or otherwise.

                                    GLOSSARY


CLASTIC                             Fragments of pre-existing sedimentary rocks.


CRUDE OIL                           Mixture of  hydrocarbons  that exists in the
                                    liquid   phase   in   natural    underground
                                    reservoirs and remains liquid at atmospheric
                                    pressure  after  passing   through   surface
                                    separating facilities.

EOCENE                              Early   sub-division   time  period  of  the
                                    Tertiary age in geological time.

FLUVIAL                             River-like sediments.

INTER-DELTAIC                       Connections  of alluvial  areas at the mouth
                                    of the river.

LAMINATED                           Saturated in the deposits.

MCF                                 One thousand cubic feet.

MIOCENE                             Late subdivision time period of the Tertiary
                                    age in geological time.

MMCF                                One million cubic feet.

NATURAL GAS                         Mixture   of   hydrocarbons    and   varying
                                    quantities of  non-hydrocarbons  that exists
                                    either in the  gaseous  phase or in solution
                                    in   crude   oil  in   natural   underground
                                    reservoirs.

NATURAL GAS LIQUIDS                 Hydrocarbon components of reservoir gas that
                                    are   liquefied  at  the  surface  in  lease
                                    separators,   field   facilities,   or   gas
                                    processing plants.  NGLs include but are not
                                    limited   to   ethane,   propane,   butanes,
                                    pentanes   plus,   natural   gasoline,   and
                                    condensate.

NERITIC                            Around  the  region of  shallow  seas near a
                                    coastline.


                                       -3-

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PROVED RESERVES                     Proved  reserves of crude oil,  natural gas,
                                    or  natural  gas   liquids   are   estimated
                                    quantities  that  geological and engineering
                                    data demonstrate  with reasonable  certainty
                                    to be recoverable in future years from known
                                    reservoirs   under  existing   economic  and
                                    operating conditions, i.e., prices and costs
                                    as of the date the estimate is made.  Prices
                                    include consideration of changes in existing
                                    prices    provided   only   by   contractual
                                    arrangements,  but not on escalations  based
                                    upon future conditions.

                                    Reservoirs are considered proved if economic
                                    producibility  is supported by either actual
                                    production or conclusive  formation tests or
                                    if core analysis  and/or log  interpretation
                                    demonstrates  economic   producibility  with
                                    reasonable   certainty.   The   area   of  a
                                    reservoir  considered  proved  includes  (1)
                                    that  portion  delineated  by  drilling  and
                                    defined by fluid  contacts,  if any, and (2)
                                    the immediately  adjoining  portions not yet
                                    drilled  that can be  reasonably  judged  as
                                    economically  productive  on  the  basis  of
                                    available  geological and engineering  data.
                                    In the  absence  of data on fluid  contacts,
                                    the lowest known  structural  occurrence  of
                                    hydrocarbons controls the lower proved limit
                                    of  the  reservoir.   Proved   reserves  are
                                    estimates  of  hydrocarbons  to be recovered
                                    from a given data forward. They are expected
                                    to be revised as  hydrocarbons  are produced
                                    and additional data become available.

                                    Reserves  that  can  produced   economically
                                    through  the   application   of  established
                                    improved recovery techniques are included in
                                    the   proved   classification   when   these
                                    qualifications   are  met:  (1)   successful
                                    testing by a pilot project, or the operation
                                    of an installed  program in that  reservoir,
                                    provides   support   for   the   engineering
                                    analysis on which the project or program was
                                    based, and (2) it is reasonably  certain the
                                    project  will  proceed.  Estimates of proved
                                    reserves do not  include  the  following:(1)
                                    oil that may  become  available  from  known
                                    reservoirs  but is classified  separately as
                                    indicated  additional  reserves;  (2)  crude
                                    oil,  natural  gas, and natural gas liquids,
                                    the   recovery   of  which  is   subject  to
                                    reasonable  doubt because of  uncertainty as
                                    to geology,  reservoir  characteristics,  or
                                    economic  factors;  (3) crude  oil,  natural
                                    gas, and natural gas liquids, that may occur
                                    in undrilled  prospects;  and (4) crude oil,
                                    natural gas,  and natural gas liquids,  that
                                    may be  recovered  from  oil  shales,  coal,
                                    gilsonite  and other  such  sources.  PROVED
                                    DEVELOPED  RESERVES A subcategory  of proved
                                    reserves.  They are those  reserves that can
                                    be expected to be recovered through existing
                                    wells with existing  equipment and operating
                                    methods.  Additional oil and gas expected to
                                    be  obtained  through  application  of fluid
                                    injection   or   other   improved   recovery
                                    techniques  for  supplementing  the  natural
                                    forces and  mechanisms  of primary  recovery
                                    are considered  developed only after testing
                                    by a pilot project or after the operation of
                                    an installed  program has confirmed  through
                                    production  response that increased recovery
                                    will   be   achieved.

PROVED UNDEVELOPED RESERVES         A subcategory of proved  reserves.  They are
                                    reserves  that are  expected to be recovered
                                    from new wells on undrilled acreage, or from
                                    existing  wells  where  a  relatively  major
                                    expenditure  is required  for  recompletion.
                                    Reserves on undrilled acreage are limited to
                                    those drilling units  offsetting  productive
                                    units   that  are   reasonably   certain  of
                                    production when drilled. Proved reserves for
                                    other undrilled units are claimed only where
                                    it can be  demonstrated  with certainty that
                                    there is continuity  of production  from the
                                    existing productive formation. Estimates for
                                    proved   undeveloped    reserves   are   not
                                    attributable  to any  acreage  for  which an
                                    application  of  fluid  injection  or  other
                                    improved recovery technique is contemplated,
                                    unless  such  techniques  have  been  proved
                                    effective by actual tests in the area and in
                                    the same reservoir.


                                       -4-

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ROYALTY BURDEN                      Payment to the  mineral  rights  owners from
                                    the sales of the  produced  hydrocarbons  as
                                    defined  in  the  oil  and  gas   assignment
                                    agreement.

TERRIGENOUS                         Deposits  formed  in the sea  from  material
                                    derived from erosion.


YEGUA                               Hydrocarbon  bearing sandstone  formation in
                                    the Eocene time found in South Texas.



                                       -5-

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ITEM 1.           DESCRIPTION OF BUSINESS

SUMMARY

GLOBAL ENERGY INC. (the "Company") was incorporated  under the laws of Nevada on
February  16, 1999,  as Global  Smartcards  Inc. On April 28, 2003,  the Company
changed its name from Global  Smartcards Inc. to Global Energy Inc. The original
Articles  of the  Company  authorized  the  issuance  of  twenty-  five  million
(25,000,000) common shares, par value $0.001 per share.

In connection with its formation,  a total of 2,000,000  shares of the Company's
common stock was purchased by the three  founders of the Company on February 18,
1999, for $2,000 in cash, or $0.001 per share.

Between  February 23 and February 28, 1999, the Company sold 1,000,000 shares of
its common stock at a price of $0.025 per share to approximately 25 unaffiliated
subscribers.  The offering was  conducted  pursuant to Rule 504 of Regulation D,
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The Company filed an original Form D with the Securities and Exchange Commission
on or about February 25, 1999.

On August 26, 1999,  the Company  completed a subsequent  offering,  in reliance
upon the exemption from  registration  afforded by Sections 4(2) and 3(b) of the
Securities  Act and  Regulation  D,  promulgated  thereunder.  The Company  sold
1,000,000 shares of Common Stock to 6 additional  unaffiliated  subscribers at a
price of $0.05 per  share.  The total  gross  proceeds  from the  offering  were
$50,000.

On February 4, 2003, the Company sold 600,000  shares of common stock,  to three
unaffiliated  subscribers,  at a price of  $0.05  per  share,  for  total  gross
proceeds of $30,000.  The offering was conducted pursuant to Section 4(2) of the
Securities Act.

In June 2003, the Company issued 50,000 shares of common stock to  Euro-American
Capital Corp.,  at a price of $0.05 per share, as partial  consideration  on the
purchase of certain  working  interests in producing  petroleum  and natural gas
leases. See "Item 2 - Description of Property."

As of March 18, 2005 the Company had four million six hundred and fifty thousand
(4,650,000)  shares of its  $0.001  par value  common  voting  stock  issued and
outstanding which are held by thirty-eight (38) shareholders of record.

The  Company   originally   planned  to  market   plastic  cards  with  embedded
microprocessors  ("Smart  Cards").  However,  the Company was unable to complete
negotiations  to market  Smart  Cards.  On June 5, 2003,  the Company  purchased
petroleum  and natural  gas  producing  properties,  as  described  in "Item 2 -
Description  of Property",  and commenced  operations as an  independent  energy
company  engaged in the  acquisition  of crude oil and natural gas properties in
the United States.  Prior to this date, the Company was considered a development
stage  enterprise  as defined by  Statement of  Financial  Accounting  Standards
("SFAS") No. 7.

While the Company  continues to explore the  feasibility of acquiring  other oil
and gas projects, management believes it is in the best interests of the Company
and its shareholders to consider other business opportunities. As of the date of
this report,  management  is focusing its efforts on  identifying  and reviewing
other business opportunities. As of the date of this report, the Company has not
entered into any agreements relating to the acquisition of another business.

The Company  does not intend to restrict  its search to any  specific  business,
industry,  or geographical location and it may participate in a business venture
of any kind or nature. The Company may seek business opportunities with entities
that have  recently  commenced  operations,  or that wish to utilize  the public
marketplace in order to raise additional  capital to expand into new products or
markets,  to develop a new product or service,  or for other corporate purposes.
The  Company may  acquire  assets and  establish  wholly-owned  subsidiaries  in
various  businesses or acquire existing  businesses as subsidiaries.  Therefore,
the  Company has  virtually  unlimited  discretion  to search for and enter into
negotiations with potential business opportunities.  It is impossible to predict
at this time the status of any business in which the Company may become engaged,
in that such business may need to seek  additional  capital,  may desire to have
its shares publicly  traded,  or may seek other perceived  advantages  which the
Company offers.

Management  anticipates  that the  Company  may be able to  participate  in only
limited  potential  business ventures because the Company has nominal assets and
limited financial resources. The Company's lack of diversification should be


                                       -6-

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considered a substantial risk to its shareholders  because it may not permit the
Company to offset potential losses from one venture against gains from another.

The  Company  does not intend to seek  capital to finance the  operation  of any
acquired  business  opportunity  until such time as the Company has successfully
consummated a merger or  acquisition.  It is  anticipated  that the Company will
incur expenses in connection with its review of other business opportunities.

Management  anticipates  that the search for an alternate  business  opportunity
will be complex and extremely risky. Due to general economic  conditions,  rapid
technological  advances being made in some industries and shortages of available
capital,  management  believes  there are numerous  firms  seeking the perceived
benefits of a publicly  registered  corporation.  Such  perceived  benefits  may
include,  among  other  things,  facilitating  or  improving  the terms on which
additional  equity  financing may be sought,  providing  liquidity for incentive
stock options or similar  benefits to key  employees,  and  providing  liquidity
(subject  to  restrictions  of  applicable   statutes)  for  all   shareholders.
Potentially,  available  business  opportunities  may  occur  in many  different
industries and at various stages of development, all of which will make the task
of  comparative  investigation  and  analysis  of  such  business  opportunities
extremely difficult and complex.

The Company  has,  and will  continue  to have,  limited  capital  with which to
provide the owners of business  opportunities with any significant cash or other
assets. However, management believes the Company will be able to offer owners of
acquisition  candidates  the  opportunity  to acquire an  interest in a publicly
registered  company  without  incurring the cost and time required to conduct an
initial public offering. The owners of the business opportunities will, however,
incur  significant legal and accounting costs in connection with our acquisition
of a business opportunity, including the costs of preparing annual (Form 10-K or
10-KSB),  quarterly  (Form 10-Q or  10-QSB)  and  current  reports  (Form  8-K),
agreements  and  related  documents.   The  Securities   Exchange  Act  of  1934
specifically  requires that any merger or acquisition  candidate comply with all
applicable  reporting  requirements,  which includes providing audited financial
statements  to be  included  within  the  numerous  filings  required  under the
Exchange Act. However,  the Company has not conducted market research and is not
aware of statistical data which would support the perceived benefits of a merger
or acquisition transaction for the owners of a business opportunity.

The Company's  officers and directors  will analyze new business  opportunities.
The  Company  intends to  concentrate  on  identifying  preliminary  prospective
business  opportunities  which may be brought to its attention  through  present
affiliations  and  relationships  of  its  officers  and  directors,  or by  its
shareholders. In analyzing prospective business opportunities,  the Company will
consider such matters as:

         -    available technical, financial and managerial resources;
         -    working capital and other financial requirements;
         -    history of operations, if any;
         -    prospects  for  the future, and the nature of present and expected
              competition;
         -    quality  and  experience  of  management  services  which  may  be
              available and the depth of that management;
         -    potential for further research, development, or exploration;
         -    potential for growth, expansion and profit; and
         -    perceived  public recognition of name identification, products and
              services.

The Company's  officers and/or directors may meet personally with management and
key  personnel  of the  business  opportunity  as part of their "due  diligence"
investigation.  To the extent  possible,  the Company intends to utilize written
reports and personal investigations to evaluate the above factors.

The Company will rely upon the efforts of its officers, directors and, to a much
lesser  extent,   the  efforts  of  its   shareholders,   in  implementing   its
identification  and review of other  business  opportunities.  During the fiscal
year ended December 31, 2004, the Company  incurred  consulting fees of $ 30,000
in  connection  with  the   identification  and  review  of  potential  business
acquisition candidates.

ACQUISITION STRUCTURE

In implementing a structure for a particular business  acquisition,  the Company
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing  agreement with another  corporation  or entity.  The Company may also
acquire  stock or assets  of an  existing  business.  On the  consummation  of a
transaction, it is probable that the

                                       -7-

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Company's  present  management and shareholders  will no longer be in control of
the Company.  In addition,  the Company's directors and officers may, as part of
the  terms  of  the  acquisition  transaction,  resign  and be  replaced  by new
directors and officers without a vote of the Company's shareholders.

It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon an exemption from registration  under applicable federal
and state  securities  laws.  In some  circumstances,  however,  as a negotiated
element of its  transaction,  the Company may agree to register all or a part of
such securities immediately after the transaction is consummated or at specified
times  thereafter.  If  such  registration  occurs,  of  which  there  can be no
assurance,  it will be undertaken by the surviving  entity after the Company has
successfully consummated a merger or acquisition. At this time, the Company does
not  anticipate   registering  any  additional  securities  until  a  merger  or
acquisition is consummated.

While the actual terms of a transaction cannot be predicted,  it may be expected
that the  parties  will  desire to avoid  the  creation  of a taxable  event and
structure the  acquisition in a so-called  "tax-free"  reorganization  under the
Internal Revenue Code. In order to obtain tax-free  treatment under the Internal
Revenue Code, it may be necessary for the owners of the acquired business to own
80% or more of the voting  stock of the  surviving  entity.  In such event,  the
Company's  shareholders  would retain 20% or less of the issued and  outstanding
shares of the surviving  entity,  which would result in significant  dilution in
the equity of the Company's shareholders.

The  Company  will  participate  in  a  business   opportunity  only  after  the
negotiation and execution of appropriate written agreements.  Although the terms
of such agreements cannot be predicted, generally such agreements:

         -    require some specific representations and warranties by all of the
              parties;
         -    specify certain events of default;
         -    detail  the  terms  of  closing  and  the  conditions that must be
              satisfied by each of the parties  prior to and after such closing;
         -    outline  the  manner  of bearing costs, including costs associated
              with the Company's attorneys and accountants;
         -    set forth remedies on default; and
         -    include miscellaneous other terms.

The Company does not intend to consider an  opportunity  where the entity cannot
provide independent  audited financial  statements within a reasonable period of
time after closing of the proposed transaction;  however,  there is no assurance
that such  statements  will, in fact, be provided within a reasonable time after
closing of any proposed transaction.

RISK FACTORS

The  Company's  search for a business  opportunity  is subject to numerous  risk
factors, including the following:

NO REVENUE AND MINIMAL ASSETS. The Company does not have significant  operations
or revenues. The Company has minimal assets and financial resources. The Company
will,  in all  likelihood,  continue to incur  operating  expenses  until it can
acquire another business opportunity. There is no assurance that the Company can
identify such a business  opportunity  and consummate  such a combination.  As a
result,  the  Company  may  continue  to incur net  operating  losses  that will
increase continuously.

SPECULATIVE  NATURE OF OUR  OPERATIONS.  In the event the  Company  completes  a
business  combination,  the success of the Company's operations may be dependent
upon management of the successor firm or venture partner firm and numerous other
factors beyond the Company's control.

SCARCITY OF AND COMPETITION FOR BUSINESS  OPPORTUNITIES  AND  COMBINATIONS.  The
Company  will  continue to be an  insignificant  participant  in the business of
seeking mergers with,  joint ventures with and acquisitions of small private and
public  entities.  A large number of  established  and  well-financed  entities,
including  venture  capital  firms,  are active in mergers and  acquisitions  of
companies that may be desirable  target  candidates for the Company.  Nearly all
such  entities  have  significantly   greater  financial  resources,   technical
expertise and managerial  capabilities than the Company and,  consequently,  the
Company will be at a competitive  disadvantage in identifying  possible business
opportunities and successfully completing a business combination.  Moreover, the
Company  will also  compete in seeking  merger or  acquisition  candidates  with
numerous other small public companies.


                                       -8-

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NO AGREEMENT FOR BUSINESS  COMBINATION OR OTHER TRANSACTION.  The Company has no
arrangement,  agreement  or  understanding  with respect to engaging in a merger
with,  joint venture with or acquisition  of, a private or public entity.  There
can be no  assurance  that the Company will be  successful  in  identifying  and
evaluating   suitable  business   opportunities  or  in  concluding  a  business
combination.  Management has not identified any particular  industry or specific
business  within an industry for  evaluation by the Company . The Company cannot
make any assurances that it will be able to negotiate a business  combination on
terms favorable to the Company.

NO  STANDARDS  FOR  BUSINESS  COMBINATION.  The  Company has not  established  a
specific length of operating  history or a specified level of earnings,  assets,
net worth or other criteria which it will require a target business  opportunity
to have achieved. Accordingly, the Company may enter into a business combination
with a business opportunity having:

         -  no significant  operating history;
         -  losses;  limited or no potential for earnings;
         -  limited assets;
         -  negative net worth; or
         -  other characteristics  that  are  indicative  of  development  stage
            companies.

CONTINUED  MANAGEMENT  CONTROL,  LIMITED  TIME  AVAILABILITY.  While  seeking  a
business combination,  management  anticipates devoting up to 20 hours per month
to  the  Company's  business.  The  Company  has  not  entered  into  employment
agreements with any of its current  officers and its is not expected to do so in
the foreseeable  future.  The Company has not obtained key man life insurance on
any  of  its  officers  or  directors.   Notwithstanding  the  combined  limited
experience  and time  commitment of  management,  loss of the services of any of
these individuals would adversely affect  development of the Company's  business
and its likelihood of continuing operations.

CONFLICTS  OF  INTEREST  -  GENERAL.   The  Company's   officers  and  directors
participate in business  ventures which could be deemed to compete directly with
us. Additional  conflicts of interest and non-arm's length transactions may also
arise in the event the  Company's  officers  or  directors  are  involved in the
management of any firm with which the Company transacts business.

REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION.  Sections 13 and 15(d)
of the Securities  Exchange Act require  reporting  companies to provide certain
information   about  significant   acquisitions,   including  audited  financial
statements  for the  company  acquired,  covering  one,  two,  or  three  years,
depending on the relative size of the acquisition. The time and additional costs
that may be incurred by some target  entities  to prepare  such  statements  may
significantly  delay or essentially  preclude the Company from  consummating  an
otherwise desirable  acquisition.  Acquisition prospects that do not have or are
unable to obtain  the  required  audited  statements  may be  inappropriate  for
acquisition so long as the reporting requirements of the Securities Exchange Act
are applicable.

LACK OF MARKET  RESEARCH  OR  MARKETING  ORGANIZATION.  The  Company has neither
conducted,  nor have others made  available  to the  Company,  results of market
research  indicating that market demand exists for the  transactions the Company
is  contemplating.  Moreover,  the Company  does not have,  and does not plan to
establish, a marketing organization.  Even in the event demand is identified for
a merger or acquisition contemplated by the Company, the Company cannot make any
assurances it will be successful in completing any such business combination.

LACK OF DIVERSIFICATION.  The Company's operations,  even if successful, will in
all likelihood  result in the Company  engaging in a business  combination  with
another entity.  Consequently,  the Company's activities may be limited to those
engaged  in by any  entity  with  which it merges  or  acquires.  The  Company's
inability to  diversify  its  activities  into a number of areas may subject the
Company to economic  fluctuations  within a particular business or industry and,
therefore, increase the risks associated with the Company's operations.

GOVERNMENT  REGULATION.  Although the Company  will be subject to the  reporting
requirements under the Securities  Exchange Act, management believes the Company
will not be subject to regulation  under the Investment  Company Act, insofar as
the  Company  will not be engaged in the  business  of  investing  or trading in
securities.  In the event the  Company  engages in business  combinations  which
result  in the  Company  holding  passive  investment  interests  in a number of
entities,  the  Company  could be subject  to  regulation  under the  Investment
Company  Act.  In such event,  the  Company  would be required to register as an
investment  company and could be expected to incur significant  registration and
compliance costs. The Company has not obtained a formal  determination  from the
Securities and Exchange

                                       -9-

<PAGE>



Commission as to its status under the Investment Company Act and,  consequently,
violation of the  Investment  Company Act could subject the Company to civil and
criminal penalties and could cause the Company to cease operations.

PROBABLE CHANGE IN CONTROL AND MANAGEMENT.  A business combination involving the
issuance of the  Company's  common  stock  will,  in all  likelihood,  result in
shareholders  of a private  company  obtaining  a  controlling  interest  in the
Company.  Any such business  combination  may require the  Company's  management
and/or  affiliates to sell or transfer all or a portion of the Company's  common
stock  held by them  and/or to  resign  as  members  of the  Company's  board of
directors.  The  resulting  change in control  of the  Company  could  result in
removal of one or more of the  Company's  present  officers and  directors and a
corresponding  reduction  in  or  elimination  of  their  participation  in  the
Company's future affairs.

REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING A BUSINESS COMBINATION. If the
Company  engages  in a  business  combination  with  a  private  entity,  in all
likelihood, such a combination would result in the Company issuing securities to
the owners of such  private  entity.  The issuance of the  Company's  previously
authorized  and  unissued  common  stock  would  result  in a  reduction  in the
percentage of shares owned by the Company's present and prospective shareholders
and may result in a change in control or management of the Company.

"PENNY" STOCK REGULATION OF BROKER-DEALER  SALES OF OUR SECURITIES.  The SEC has
adopted  rules  that  regulate  broker-  dealer  practices  in  connection  with
transactions in "penny stocks".  Generally,  penny stocks are equity  securities
with a price of less than $5.00  (other than  securities  registered  on certain
national  securities  exchanges  or  quoted  on the  NASDAQ  system).  Since the
Company's  shares  are  traded  for less than  $5.00 per  share,  the shares are
subject to the SEC's penny stock rules until such time as (1) the  Company's net
tangible  assets exceed  $5,000,000  during the  Company's  first three years of
continuous  operations  or $2,000,000  after the Company's  first three years of
continuous  operations;  or (2) the Company has had average  revenue of at least
$6,000,000 for three years. The penny stock rules require a broker-dealer, prior
to a  transaction  in a penny  stock not  otherwise  exempt  from the rules,  to
deliver a  standardized  risk  disclosure  document  prescribed  by the SEC that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer must obtain a written  acknowledgment from
the  purchaser  that the  purchaser has received the  disclosure  document.  The
broker-dealer  also  must  provide  the  customer  with  current  bid and  offer
quotations for the penny stock,  the compensation of the  broker-dealer  and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. In addition, the penny
stock rules require that prior to a  transaction  in a penny stock not otherwise
exempt  from  those  rules,  the  broker-dealer  must  make  a  special  written
determination  that the penny stock is a suitable  investment  for the purchaser
and  receive  the  purchaser's  written  agreement  to  the  transaction.  These
requirements  may have the effect of reducing  the level of trading  activity in
the secondary  market for a stock that becomes subject to the penny stock rules.
Such rules and  regulations may make it difficult for holders to sell the common
stock of the Company, and they may be forced to hold it indefinitely.

TAXATION.  Federal and state tax consequences will, in all likelihood,  be major
considerations in any business combination the Company may undertake. Currently,
such  transactions  may be structured  so as to result in tax-free  treatment to
both  companies,  pursuant  to various  federal  and state tax  provisions.  The
Company  intends to  structure  any business  combination  so as to minimize the
federal and state tax  consequences  to both the Company and the target  entity;
however,  there can be no assurance that such business combination will meet the
statutory  requirements  of a tax-free  reorganization  or that the parties will
obtain the intended  tax-free  treatment  upon a transfer of stock or assets.  A
non-qualifying reorganization could result in the imposition of both federal and
state taxes which may have an adverse effect on both parties to the transaction.

REQUIREMENT   OF  AUDITED   FINANCIAL   STATEMENTS   MAY   DISQUALIFY   BUSINESS
OPPORTUNITIES.  Management believes that any potential business opportunity must
provide  audited  financial  statements  for  review for the  protection  of all
parties  to  the  business   combination.   One  or  more  attractive   business
opportunities  may choose to forego the  possibility  of a business  combination
with the  Company,  rather than incur the  expenses  associated  with  preparing
audited financial statements.



                                      -10-

<PAGE>



OIL AND GAS OPERATIONS

SALES AND REVENUE DISTRIBUTION

The Company holds working  interests in two oil and gas leases located in Texas.
See  "Item 2 -  Description  of  Property."  The  Company  sells  its  share  of
petroleum,  natural gas and natural  gas  liquids  produced  from its wells to a
variety of purchasers at the wellhead in the United States. All of its sales are
conducted with unaffiliated  customers.  These purchasers provide a ready market
for all of the Company's  production  and pay the local market price,  which can
fluctuate  based  upon  prevailing  market  conditions.  Due  to the  number  of
purchasers in each area,  management  does not believe that the loss of one or a
number of  purchasers  would pose a  significant  risk to the  continuity of the
Company's operations.  The Company does not maintain significant  inventories of
petroleum or natural gas liquids.

Total revenues reported for fiscal 2004 and 2003, were as follows:

                                                     YEARS ENDED DECEMBER 31,
                                                  -----------------------------
                                                      2004             2003
                                                        $                $
        Petroleum and Natural Gas Sales
             - United States                            57,616           72,563
                                                        57,616           72,563
                                                  ------------     ------------
        Interest and Other Income
             - United States                                 -                -
             - Canada                                        -                -
                                                  ------------     ------------
                                                             -                -
        Total Revenue                                   57,616           72,563
                                                  ============     ============

COMPETITION

The  Company  competes  with a number of other  companies,  including  major oil
companies and other  independent  operators which are more experienced and which
have  greater  financial  resources.  The  Company  does not hold a  significant
competitive position in the oil and gas industry.

The  Company  will  remain an  insignificant  participant  among the firms which
engage in the acquisition of business opportunities.  There are many established
venture  capital  and  financial  concerns  which  have  significantly   greater
financial and personnel  resources and technical  expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management  availability,  the  Company  will  continue  to be at a  significant
competitive disadvantage compared to its competitors.

COMPLIANCE WITH GOVERNMENTAL REGULATIONS

In the United  States,  legislation  affecting the oil and gas industry has been
pervasive and is under constant  review for amendment or expansion.  Pursuant to
such  legislation,  numerous  federal,  state and local departments and agencies
have issued extensive rules and regulations  binding on the oil and gas industry
and its  individual  members,  some of which  carry  substantial  penalties  for
failure to comply.  Such laws and regulations  have a significant  impact on oil
and gas drilling, gas processing plants and production activities,  increase the
cost of doing business and, consequently, affect profitability.  Inasmuch as new
legislation  affecting the oil and gas industry is commonplace and existing laws
and regulations are frequently  amended or reinterpreted,  the Company is unable
to  predict  the  future  cost  or  impact  of  complying  with  such  laws  and
regulations.

The Company  considers  the cost of  environmental  protection  a necessary  and
manageable part of its business. Management believes the Company will be able to
plan  for and  comply  with new  environmental  initiatives  without  materially
altering the Company's operating strategies.



                                      -11-

<PAGE>



EXPLORATION AND PRODUCTION.  The Company's United States  operations are or will
be  subject to  various  types of  regulation  at the  federal,  state and local
levels.  Such regulation  includes  requiring permits for the drilling of wells;
maintaining   bonding   requirements   in  order  to  drill  or  operate  wells;
implementing  spill  prevention  plans;  submitting  notification  and receiving
permits  relating  to  the  presence,  use  and  release  of  certain  materials
incidental to oil and gas operations;  and regulating the location of wells, the
method of  drilling  and casing  wells,  the use,  transportation,  storage  and
disposal of fluids and materials used in connection with drilling and production
activities,  surface usage and the  restoration  of properties  upon which wells
have been drilled,  the plugging and abandoning of wells and the transporting of
production.  The  Company's  operations  are or will be also  subject to various
conservation  matters,  including  the  regulation  of the size of drilling  and
spacing units or proration  units, the number of wells which may be drilled in a
unit, and the unitization or pooling of oil and gas properties.  In this regard,
some states  allow the forced  pooling or  integration  of tracts to  facilitate
exploration  while other states rely on  voluntary  pooling of lands and leases,
which may make it more difficult to develop oil and gas properties. In addition,
state  conservation  laws establish maximum rates of production from oil and gas
wells,  generally  limit the  venting  or flaring  of gas,  and  impose  certain
requirements  regarding the ratable purchase of production.  The effect of these
regulations  is to limit the  amounts of oil and gas the  Company may be able to
produce  from its  wells and to limit the  number of wells or the  locations  at
which the Company may be able to drill.

ENVIRONMENTAL  AND OCCUPATIONAL  REGULATIONS.  Various federal,  state and local
laws and regulations  concerning the discharge of incidental  materials into the
environment,   the   generation,   storage,   transportation   and  disposal  of
contaminants or otherwise  relating to the protection of public health,  natural
resources,   wildlife  and  the  environment,   affect  the  Company's  existing
production   operations  and  the  costs  attendant  thereto.   These  laws  and
regulations  increase the Company's overall operating expenses.  As of March 18,
2005,  the Company does not maintain any  insurance for its  operations.  In the
future,  the Company may obtain insurance,  customary in the industry,  to limit
its  financial  exposure  in the  event  of a  substantial  environmental  claim
resulting  from sudden,  unanticipated  and  accidental  discharges of oil, salt
water or other substances. However, the Company does not intend to maintain 100%
coverage concerning any environmental  claim, and it does not intend to maintain
any  coverage  with  respect to any  penalty or fine  required to be paid by the
Company because of its violation of any federal, state or local law. The Company
is committed to meeting its responsibilities to protect the environment wherever
its operates and anticipates making increased expenditures of both a capital and
expense  nature as a result of the  increasingly  stringent laws relating to the
protection of the  environment.  The Company  cannot predict with any reasonable
degree of certainty its future  exposure  concerning  such matters.  The Company
considers the cost of  environmental  protection a necessary and manageable part
of its  business.  Management  believes the Company will be able to plan for and
comply  with new  environmental  initiatives  without  materially  altering  the
Company's operating strategies.

The  Company is also  subject to laws and  regulations  concerning  occupational
safety and health.  Due to the continued  changes in these laws and regulations,
and the judicial construction of same, the Company is unable to predict with any
reasonable degree of certainty its future costs of complying with these laws and
regulations.  The Company considers the cost of occupational safety and health a
necessary and manageable part of its business.  Management  believes the Company
will be able to plan for and  comply  with new  occupational  safety  and health
initiatives without materially altering its operating strategies.

INVESTMENT  COMPANY  ACT OF  1940.  Although  the  Company  will be  subject  to
regulation under the Securities Act of 1933, and the Securities  Exchange Act of
1934,  management  believes the Company will not be subject to regulation  under
the  Investment  Company  Act of 1940.  In the event the  Company  engages  in a
business  combination which results in the Company holding a passive  investment
interest in a number of  entities,  the Company  could be subject to  regulation
under the Investment  Company Act. In such event,  the Company would be required
to register as an investment  company and could be expected to incur significant
registration   and  compliance   costs.  The  Company  has  obtained  no  formal
determination from the Securities and Exchange Commission as to its status under
the Investment Company Act. Consequently,  a violation of the Investment Company
Act could  subject the Company to civil and criminal  penalties  and could cause
the Company to cease operations.

INVESTMENT  ADVISERS ACT OF 1940. Under the Investment  Advisers Act of 1940, an
"investment  adviser"  means any person who,  for  compensation,  engages in the
business  of  advising  others,  either  directly  or  through  publications  or
writings,  as to the value of securities or as to the  advisability of investing
in, purchasing, or selling securities, or who, for compensation and as part of a
regular  business,   issues  or  promulgates   analyses  or  reports  concerning
securities.  The  Company  will  only  seek  to  locate  a  suitable  merger  or
acquisition candidate, and does not intend to engage in the business of advising
others in investment matters for a fee or otherwise.

                                      -12-

<PAGE>



EMPLOYEES

The Company has no full time  employees.  Mr. DeMare,  a director of the Company
and the Company's Chief Executive  Officer,  President,  Secretary and Treasurer
has  agreed to  allocate  a portion of his time to our  activities.  Mr.  DeMare
anticipates that the Company's  business plan can be implemented by his devoting
an  aggregate  of 20 hours  per month to the  Company's  business  affairs  and,
consequently,  conflicts  of interest may arise with respect to the limited time
commitment by Mr. DeMare. The Company does not expect any significant changes in
the number of employees, until it completes the acquisition of another business.

The  Company's  officers and  directors  are or may become  involved  with other
companies who have a business  purpose  similar to the  Company's.  As a result,
potential conflicts of interest may arise in the future. If such a conflict does
arise and one of the Company's  officers or directors is presented with business
opportunities  under  circumstances where there may be a doubt as to whether the
opportunity  should belong to the Company or another company they are affiliated
with, they will disclose the opportunity to all such companies.


ITEM 2.           DESCRIPTION OF PROPERTY

Currently  the  Company's  business  consists of the  acquisition  of  leasehold
interests in petroleum and natural gas rights.  All of the Company's  properties
are located in the continental United States. The Company is a minority interest
owner in its  petroleum  and natural gas interests and is not an operator of any
of these  properties,  as such,  the  Company  does  not have  control  over the
operation or drilling activities on the properties. Management of the Company is
also  reviewing  other  business  opportunities  for the  Company.  See "Item 1.
Description of Business."

AGREEMENT

On June 5, 2003, the Company finalized an agreement with  Euro-American  Capital
Corp.,  a  private  arm's  length  British  Columbia  company  ("ECC"),  for the
acquisition  of a 6.5%  working  interest  in an oil and gas  lease  in  Wharton
County, Texas (the "Henderson Miocene Field") and a 12.5% working interest in an
oil and gas lease in Live Oak County,  Texas (the "Jackson  Ranch  Field").  The
Henderson  Miocene  Field covers 974.33 acres and the Jackson Ranch Field covers
444.6 acres.  Pursuant to the agreement the Company paid $12,500 cash and issued
50,000 common shares,  at an ascribed  value of $0.05 per share,  to ECC and ECC
transferred to the Company the interests in the Henderson  Miocene Field and the
Jackson Ranch Field together with the same interests in the wells drilled on the
properties.  The Company  also  incurred  $2,492 for costs  associated  with the
property acquisition. The effective date of the acquisition is January 1, 2003.

PROPERTY DESCRIPTION

The  following   property   descriptions   are  excerpted  from  an  independent
engineering  evaluation,   dated  February  25,  2005,  completed  by  Petrotech
Engineering Ltd. ("Petrotech"), an independent petroleum consulting firm.

1.       Henderson Miocene Field, Wharton County, Texas

         GEOLOGY

         Wharton  County is located in  District 3 and is defined as Texas Upper
         Gulf Coast by the Texas Railroad Commission.  The subject production is
         from the shallow gas of the Miocene  group.  Miocene  depth varies from
         2,000  feet to 7,000  feet  within  this  district  and is  mostly  gas
         productive.  In this region, the Miocene is quite thick and is composed
         of  terrigenous  clastic  sediments and was  inter-deltaic  area during
         Miocene time. The thickest  section is composed of fine grained neritic
         deposits much of which was brought  there by long- shore  currents from
         the  large  deltas  farther  east;   there  is  rapid  transition  from
         all-marine   deposits;   and  there  are   relatively   few   important
         fluctuations of the shore line.

         EVALUATION

         The  Company has  acquired a 6.25%  working  interest  of the  Florence
         Henderson #1 well in the  Henderson  Miocene  Field in Wharton  County,
         Texas as of January 1, 2003.  The total royalty  burden is 23.04%.  The
         lease description is 974.33 acres of land, more or less, in the LP Stem
         Survey, A-326, Gulf Colorado and Sante Fe

                                      -13-

<PAGE>



         Railroad Co.,  Survey,  A-730,  and the Homer Cryer Survey,  A-760,  in
         Wharton County.  The Florence  Henderson #1 well was drilled to a total
         depth of 5,512 feet on September  23, 1981.  The well was  completed in
         the Miocene  section  between  2,529 and 2,532  feet.  This is the only
         single gas well in the area. The cumulative production from 1981 to the
         end of  December  2004  was  over  1,240,230  Mcf of gas.  The  current
         operator is Hyquest Energy Inc. of Midland, Texas.

2.       Jackson Ranch Field, Live Oak County, Texas

         GEOLOGY

         Live Oak County is located in  District 2 and is defined as South Texas
         by the Texas Railroad  Commission.  The subject  production is from the
         Yegua gas of the Eocene sands.

         The Eocene trend extends  southwestward  from the end of the Yegua belt
         in the  Texas  Upper  Gulf  district  to Zapata  County on the  Mexican
         border.  Reservoirs  in  the  Midway  (Poth  sand),  Wilcox  (Carrizo),
         Claiborne  (Yegua),  and Jackson are productive in this belt. Of these,
         the Wilcox is the greatest source of hydrocarbons.

         PROGRADING COMPLEXES OR LOW-STAND DELTAS

         Prograding  complexes  are formed by  deposition of sand and mud at the
         mouth of river  systems  during low stands of relative sea level.  They
         occur in water of shallow to moderate  depth.  In general,  they result
         from point source deltas or fan deltas,  although very strike  elongate
         barrier-bar/strand-plain  sandstones also occur. Substantial amounts of
         slumping  into deeper water are also common.  Most of the larger fields
         to date in the  Expanded  Yegua trend  produce from  sandstones  in the
         prograding complex.

         Rivers make valleys during periods of low sea level.  These valleys are
         the sites of complex  deposition during the ensuring rise in sea level.
         One or more levels of fluvial channel sand are frequently estuarine bay
         head delta,  bay muds,  and barrier bars and spits are also part of the
         bay fill  sequence.  Many  substantial  fields have been found in these
         incised   channel   deposits   and   despite   the   ease  of   seismic
         identification,   more  incised   channel   reservoirs   remain  to  be
         discovered.

         Most of the  production  in the  expanded  Yegua  trend  has been  from
         shallow  marine  deltaic  and  marine  bar   sandstones.   All  of  the
         significant  production has been found within the expansion fault trend
         at the Yegua  shelf  margin.  A series of  highly  productive  normally
         pressured to  over-pressured  gas  reservoirs  have been found with the
         "mid dip"  Yegua.  These  reservoirs  occur in  fluvial  and  estuarine
         sandstones  within the incised valleys that funneled the sand down dip.
         They are  located  either  miles back on the shelf or just updip of the
         expanded  trend.  The fields have added some 200 to 300  billion  cubic
         feet  ("Bcf")  to Yegua gas  reserves,  mostly  in the  Wharton-Jackson
         county fairway, but also some in Goliad County.  Productive  sandstones
         in the established trends range from 40 to 800 feet in thickness.  They
         are mostly of very high quality,  even when they are highly  laminated.
         Permeabilities  range from 100 to 1,000 millidarcies with porosities at
         over 25%. Gas recovery may be higher than 1,100 Mcf per acre-foot.  The
         gas is also condensate rich.

         YEGUA TREND

         The Yegua trend in this area occurs as  discreet  sandbars  paralleling
         the  present  Gulf of Mexico  coastline.  The trend is  interrupted  by
         significant down to coast faulting.

         EVALUATION

         The Company has acquired a 12.5% working  interest in the Parker #1 and
         #2 wells in the Jackson Ranch Yegua Field in Live Oak County,  Texas as
         of  January  1,  2003.  The total  royalty  burden is 23.0%.  The lease
         description is a tract of land containing a total of 444.6 acres,  more
         or less, out of the 4,152.04 acres "old R. J. Dobie Ranch", situated in
         the  Dinero-Lagarto  Area, Live Oak County,  Texas.  The mineral rights
         only extend to a depth of 6,200 feet below the surface.

         When the  current  operator,  BXP Ltd.,  of  Dallas,  Texas,  took over
         operation  in the  beginning  of 2003,  they re-  arranged  the  piping
         connections  and  instrumentation  in both the  Parker #1 and Parker #2
         wells. As a result,

                                      -14-

<PAGE>



         the gas  production  in the  Parker #2 well  increased.  This  increase
         caused the pressure of the gas gathering  system to increase.  With the
         increase in pressure of the gas gathering system, Parker #1 well cannot
         deliver  sufficient  pressure,  resulting in a decrease in  production.
         Because the increased gas production in Parker #2 well is a much larger
         amount,  it was  worthwhile  to cut back on the gas  production  in the
         Parker #1 well.

         PARKER #1 WELL

         The  Parker  #1 well was  drilled  to a total  depth  of 5,971  feet on
         November 27,  1982.  The well was  perforated  from 5,275 feet to 5,284
         feet in the Jackson  Ranch Yegua  (5300)  formation  on April 12, 1983.
         This is a single gas well in this formation.  The cumulative production
         from 1983 to the end of December 2004 was over 661,310 Mcf of gas.

         PARKER #2 WELL

         The  Parker  #2 well was  drilled  to a total  depth  of 5,973  feet on
         October 16, 1984. The well was perforated from 5,294 feet to 5,303 feet
         and from 5,333 feet to 5,343 feet in the  Jackson  Ranch  Yegua  (5400)
         formation.  This well  initially  produced oil and was classified as an
         oil well.  On  October  1996,  it was  reclassified  as a gas well with
         perforations  from 5,333 feet to 5,343 feet.  This is also a single gas
         well in this formation.  The cumulative production from 1988 to the end
         of  December  2004 was over  269,229  Mcf of gas and 6,222  barrels  of
         condensate.

OIL AND GAS RESERVES

The  Company  has not filed with or  included  in  reports to any other  federal
authority or agency since January 1, 2004,  any  estimates of total,  proved net
oil or gas reserves.

The following  tables set forth  information  regarding the Company's  shares of
estimated  proven oil and gas reserve  quantities,  reserve value and discounted
future net revenues. The reserve related information as at December 31, 2004 and
2003, was determined through independent  engineering  evaluations  completed by
Petrotech.

There are numerous  uncertainties  inherent in  estimating  quantities of proved
reserves and  projecting  future rates of production  and timing of  development
expenditures.  The  following  reserve  information  represents  estimates as at
December 31, 2004 and 2003 only and should not be construed as being exact:
<TABLE>
<CAPTION>

                                                                                 PRESENT VALUE OF
                                                                                 ESTIMATED FUTURE
                                    NET RESERVES TO THE COMPANY      ESTIMATED   NET REVENUES
                                    ---------------------------     FUTURE NET   BEFORE INCOME TAXES
                                        GAS          CONDENSATE      REVENUES    DISCOUNTED AT 10%
                                       (MCFS)           (BBLS)          ($)             ($)
<S>                                <C>              <C>            <C>             <C>

Proved developed reserves:

     December 31, 2004                 51,623             549         177,959          117,196
                                       ======           =====         =======          =======
     December 31, 2003                 63,682           1,264         101,276           68,299
                                       ======           =====         =======          =======
</TABLE>

The constant  prices at December 31, 2004,  were $7.10 (2003 - $5.18) per Mcf of
gas and $41.77 (2003 - $30.71) per barrel of condensate.  The net reserve is the
Company's share of production after deduction of royalties.

The  estimated  cash flow  values do not  represent  a fair  market  value.  The
abandonment costs of these wells have not been included as the salvage values of
the wellhead, tubing, and facilities are estimated to be the same.

In reviewing  the reserves  estimates  provided  above,  it should be noted that
there  are  inherent  uncertainties  and  limitations  with  both  the  database
available for analysis and the interpretation of such engineering and geological
data.  The judgements  used in assessing the reserves are considered  reasonable
given the  knowledge of the property  reviewed.  Pertinent  information  such as
extent and  character of ownership  and all factual data obtained by the Company
are believed to be true. A field  inspection of the properties was not conducted
due to the available data.



                                      -15-

<PAGE>



ACREAGE

As of December 31, 2004,  the Company  holds  1,418.93  gross acres  (116.47 net
acres)  of  condensate  and  gas  developed  acreage  in  Texas.  There  are  no
undeveloped leases.

VOLUMES, PRICES AND PRODUCTION COSTS

The following  table sets forth  certain  information  regarding the  production
volumes,  average prices received and average  production  costs associated with
the Company's sale of oil and gas for the periods:

                                               YEAR ENDED DECEMBER 31
                                              ------------------------
                                                2004              2003
                                              ------            ------
        Net production:
             Condensate (bbls)                   156               233
             Gas (Mcf)                         9,008            13,006

        Average sales price:
            Condensate (per bbl)               $36.40           $27.60
            Gas (per Mcf)                       $5.77            $5.08

        Average production cost (Mcf)           $2.42            $1.02

DRILLING ACTIVITY

During  fiscal  2004,  the Company did not  participate  in the  drilling of any
wells.

CURRENT ACTIVITIES

There are no wells currently  being drilled or contemplated  for drilling on any
of the Company's lease interests.

PRODUCTIVE OIL AND GAS WELLS/ACRES

The  following  table sets forth  certain  information  regarding  the Company's
ownership as of March 18, 2005, of productive oil and gas wells and acres in the
areas indicated.

               GROSS             NET            GROSS           NET
               WELLS            WELLS           ACRES          ACRES
             ----------      ----------      ----------      ----------
Gas              3             0.3125          1418.9          116.47
             ==========      ==========      ==========      ==========

UNDEVELOPED ACREAGE

As of March 18, 2005, the Company does not own any undeveloped acreage.

DELIVERY COMMITMENTS

As of March 18,  2005,  the  Company  does not have any  existing  contracts  or
agreements pursuant to which it is obligated to provide a fixed and determinable
quantity of oil or gas in the future.

PRINCIPAL OFFICES

The Company's offices are provided by Chase as part of the Company's arrangement
with Chase. See "Item 12. Certain Relationships And Related Transactions." It is
anticipated  that this  arrangement  will remain  until such time as the Company
successfully  consummates  a merger or  acquisition.  Management  believes  this
arrangement will meet the Company's needs for the foreseeable future.



                                      -16-

<PAGE>



ITEM 3.           LEGAL PROCEEDINGS

There are no legal  proceedings  to which the Company is a party nor to the best
of the knowledge of management, are any material legal proceedings contemplated.


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

No matters were  submitted to a vote by  shareholders  of the Company during the
fourth quarter of the fiscal year ended December 31, 2004.



                                     PART II


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

MARKET INFORMATION

The  Company's  common  stock has been listed on the  over-the-counter  bulletin
board ("OTCBB") since November 19, 2004, under the symbol "GEYI"; however, based
upon information received from the OTCBB, as of February 28, 2005, no trades had
taken place and no bid or ask quotations had been entered. On March 16, 2005, no
bid price was posted for the common stock on the OTC Bulletin Board.

DIVIDENDS

The Company  has not paid any cash  dividends  on its common  stock and does not
anticipate  paying any cash  dividends in the  foreseeable  future.  The Company
currently intends to retain future earnings, if any, to fund the development and
growth of its business.  Any future  determination to pay cash dividends will be
at the  discretion  of the board of  directors  and will be  dependent  upon the
Company's  financial  condition,   operating  results,   capital   requirements,
applicable contractual  restrictions and other factors as the board of directors
deems relevant.

STOCK OPTIONS AND SHARE PURCHASE WARRANTS

There are no outstanding  stock options or share  purchase  warrants to purchase
securities of the Company.

OUTSTANDING SHARES AND SHAREHOLDERS OF RECORD

As of March 18,  2005,  the  Company  had four  million  six  hundred  and fifty
thousand  (4,650,000)  shares of its $0.001 par value common voting stock issued
and outstanding which are held by thirty-eight (38) shareholders of record.

RECENT SALES OF UNREGISTERED SECURITIES

The Company did not issue any  securities  during the fiscal year ended December
31, 2004.

PURCHASES OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED PURCHASERS

No purchases of shares or other units of any class of the Company's common stock
was made by or on behalf of the Company or any "affiliated purchaser" during the
period from  October 1, 2004 through  December  31,  2004.  For purposes of this
paragraph "affiliated purchaser" means:

1.       A person acting,  directly or  indirectly,  in concert with the Company
         for the purpose of acquiring the Company's securities; or


                                      -17-

<PAGE>



2.       An  affiliate  who,  directly or  indirectly,  controls  the  Company's
         purchases of such  securities,  whose  purchases are  controlled by the
         Company,  or whose purchases are under common control with those of the
         Company;  Provided,  however,  that  "affiliated  purchaser"  shall not
         include  a broker,  dealer,  or other  person  solely by reason of such
         broker,  dealer, or other person effecting  purchases under Rule 10b-18
         under the  Securities  Exchange Act of 1934 on behalf of the Company or
         for its  account,  and shall not  include an officer or director of the
         Company solely by reason of that officer or director's participation in
         the decision to authorize Rule 10b-18  purchases by or on behalf of the
         Company.


ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

Global Energy Inc. (the "Company") was organized on February 16, 1999, under the
laws of the State of Nevada, U.S.A. as Global Smartcards Inc. On April 28, 2003,
the Company changed its name to Global Energy Inc.

The  Company   originally   planned  to  market   plastic  cards  with  embedded
microprocessors.  However,  the Company was unable to complete  negotiations  to
market  Smart  Cards.  By agreement  dated June 5, 2003,  the Company  purchased
petroleum and natural gas producing  properties  and commenced  operations as an
independent  energy company  engaged in the acquisition of crude oil and natural
gas  properties  in the United  States.  Prior to this  date,  the  Company  was
considered a development  stage  enterprise as defined by Statement of Financial
Accounting Standards ("SFAS") No. 7.

Substantially  all of the  Company's  oil and  gas  exploration  activities  are
conducted jointly with others. Because the Company owns an undivided interest in
each asset and is  proportionately  liable for its share of each liability,  the
consolidated financial information reflects the Company's proportionate interest
in such  activities.  The Company  sells all of its oil and gas  production on a
spot basis and does not utilize forward sales  contracts.  The Company is not an
operator  of any of its oil and gas  properties.  See  "Item 2.  Description  of
Property."

GOING CONCERN

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which contemplate  continuation of the Company as a going concern. The
Company  incurred a net loss for the year ended December 31, 2004 of $47,444 and
at December  31,  2004,  had an  accumulated  deficit of $108,428  and a working
capital  deficit of $11,644.  These  consolidated  financial  statements  do not
include any adjustments that might result from the outcome of this  uncertainty.
These consolidated  financial statements do not include any adjustments relating
to the recoverability  and classification of recorded asset amounts,  or amounts
and  classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates and assumptions.

The oil and gas industry is subject, by its nature, to environmental hazards and
clean-up  costs.  At this time,  management  knows of no substantial  costs from
environmental accidents or events for which the Company may be currently liable.
In addition,  the Company's oil and gas business  makes it vulnerable to changes
in wellhead  prices of crude oil and natural gas. Such prices have been volatile
in the past and can be expected to be volatile in the future.

CASH EQUIVALENTS

Cash equivalents  comprise of certain highly liquid  instruments with a maturity
of three months or less when purchased.  As of December 31, 2004 and 2003, there
were no cash equivalents.

                                      -18-

<PAGE>



CONCENTRATION OF CREDIT RISK

The  Company  places  its cash and cash  equivalents  with high  credit  quality
financial  institutions.  As of December  31, 2004 and 2003,  the Company has no
funds placed in a bank beyond insured limits.

REVENUE RECOGNITION

The Company recognizes  petroleum and natural gas revenues from its interests in
producing  wells as  petroleum  and natural gas is produced  and sold from these
wells.  The Company has no gas balancing  arrangements  in place.  Petroleum and
natural  gas sold is not  significantly  different  from the  Company's  product
entitlement.

PETROLEUM AND NATURAL GAS INTERESTS

The Company follows the full cost method of accounting for petroleum and natural
gas  operations.  Under this method all costs related to the exploration for and
development  of  petroleum  and  natural  gas  reserves  are  capitalized  on  a
country-by-country  basis. Costs include lease acquisition costs, geological and
geophysical  expenses,  overhead directly related to exploration and development
activities  and costs of drilling  both  productive  and  non-productive  wells.
Proceeds  from the sale of properties  are applied  against  capitalized  costs,
without  any  gain  or  loss  being   recognized,   unless  such  a  sale  would
significantly alter the rate of depletion and depreciation.

Depletion of exploration  and development  costs and  depreciation of production
equipment is provided using the unit-of-  production method based upon estimated
proven petroleum and natural gas reserves. The costs of significant  unevaluated
properties  are excluded  from costs  subject to  depletion.  For  depletion and
depreciation purposes,  relative volumes of petroleum and natural gas production
and reserves are converted  into  equivalent  units based upon  relative  energy
content.

In applying  the full cost method,  the Company  performs a ceiling test whereby
the  carrying  value of  petroleum  and natural  gas  interests  and  production
equipment, net of deferred income taxes, is compared periodically to an estimate
of future net cash flow from the production of proven reserves. Net cash flow is
estimated  using period end prices,  less estimated  future  expenditures  to be
incurred in  developing  and  producing  the proved  reserves and income  taxes.
Should this comparison  indicate an excess carrying value, the excess is charged
against earnings.

Substantially  all  of  the  Company's  petroleum  and  natural  gas  production
activities  are  conducted  jointly with others and,  accordingly,  the accounts
reflect the Company's proportionate interest in such activities.

IMPAIRMENT

The Company has adopted SFAS 144,  "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED  ASSETS" which requires that long-lived assets to be held and used be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that  the  carrying  amount  of an  asset  may  not  be  recoverable.  SFAS  144
established a single accounting model for long-lived assets to be disposed of by
sale.  Oil and gas  properties  accounted  for  using  the full  cost  method of
accounting, a method adopted by the Company, are excluded from this requirement,
but will continue to be subject to the ceiling test limitations.

ASSET RETIREMENT OBLIGATIONS

The Company recognizes a liability for future retirement  obligations associated
with the  Company's  capital  assets.  The  estimated  fair  value of the  asset
retirement  obligation  is based on the current  cost  escalated at an inflation
rate and discounted at a credit  adjusted rate. This liability is capitalized as
part of the cost of the related asset and amortized  over its  productive  life.
The liability accretes until the Company settles the obligation.  As of December
31, 2004 and 2003, the Company had no significant asset retirement obligations.

FOREIGN CURRENCY TRANSLATION

The Company maintains its accounting records in U.S. dollars.


                                      -19-

<PAGE>



At  the  transaction  date,  each  asset,  liability,  revenue  and  expense  is
translated  into U.S.  dollars by the use of the exchange rate in effect at that
date. At the period end,  monetary  assets and  liabilities  are translated into
U.S.  dollars by using the exchange  rate in effect at that date.  The resulting
foreign exchange gains and losses are included in operations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value  estimates of financial  instruments  are made at a specific point in
time,  based on  relevant  information  about  financial  markets  and  specific
financial  instruments.  As these estimates are subjective in nature,  involving
uncertainties  and matters of significant  judgement,  they cannot be determined
with precision.  Changes in assumptions can significantly  affect estimated fair
values.

Fair value  approximates the amounts  reflected in the financial  statements for
cash, amounts receivable and accounts payable. Management is of the opinion that
the Company is not exposed to  significant  interest,  credit or currency  risks
arising from these financial instruments.

INCOME TAXES

The Company has adopted SFAS 109,  "ACCOUNTING FOR INCOME TAXES", which requires
the Company to recognize  deferred tax  liabilities  and assets for the expected
future tax  consequences  of events that have been  recognized  in the Company's
financial  statements  or tax returns  using the  liability  method.  Under this
method,  deferred  tax  liabilities  and  assets  are  determined  based  on the
temporary  differences  between the financial  statement and tax bases of assets
and  liabilities  using  enacted  tax  rates in effect in the years in which the
differences are expected to reverse.

EARNINGS (LOSS) PER SHARE

Net earnings (loss) per share is provided in accordance with SFAS 128, "EARNINGS
PER SHARE".  Basic  earnings  (loss) per share is  computed  by dividing  losses
available to common stockholders by the weighted average number of common shares
outstanding  during the period.  Diluted  earnings (loss) per share reflects per
share amounts that would have resulted if dilutive common stock  equivalents had
been  converted to common stock.  As of December 31, 2004 and 2003,  the Company
has no dilutive common stock equivalents such as stock options.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS 123(R), "SHARE-BASED PAYMENT", which is a
revision of SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION". SFAS 123(R)
is effective for public companies for interim or annual periods  beginning after
December 15, 2005,  supersedes APB Opinion 25,  "ACCOUNTING  FOR STOCK ISSUED TO
EMPLOYEES", and amends SFAS 95, "Statement of Cash Flows".

SFAS 123(R) requires all share-based payments to employees,  including grants of
employee stock options,  to be recognized in the income statement based on their
fair values. Pro-forma disclosure is no longer an alternative.  The new standard
will be effective for the Company, beginning December 31, 2005. The new standard
will be effective for the Company, beginning December 31, 2005. The Company does
not  believe the  adoption  of SFAS  123(R)  will have a material  impact on the
Company's financial statements.

In November 2004, the FASB issued SFAS 151, "INVENTORY COSTS", which revised ARB
43, relating to inventory costs.  This revision is to clarify the accounting for
abnormal amounts of idle facility  expense,  freight,  handling costs and wasted
material (spoilage). This Statement requires that these items be recognized as a
current period charge regardless of whether they meet the criterion specified in
ARB 43. In addition,  this Statement requires the allocation of fixed production
overheads  to the  costs  of  conversion  be  based on  normal  capacity  of the
production facilities. SFAS 151 is effective for inventory costs incurred during
fiscal years  beginning  after June 15,  2005.  The Company does not believe the
adoption  of SFAS 151 will have a  material  impact on the  Company's  financial
statements.

In December 2004, the FASB issued SFAS 153,  "EXCHANGES OF NONMONETARY  ASSETS",
which  changes  the  guidance in APB Opinion  29,  "ACCOUNTING  FOR  NONMONETARY
TRANSACTIONS".  This Statement  amends 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.  A nonmonetary  exchange has commercial  substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. SFAS 153 is

                                      -20-

<PAGE>



effective  during fiscal years  beginning  after June 15, 2005. The Company does
not  believe  the  adoption  of SFAS  153 will  have a  material  impact  on the
Company's financial statements.

INTANGIBLE ASSETS

The Company has adopted SFAS 142, "GOODWILL AND OTHER INTANGIBLE ASSETS",  which
requires  that  goodwill  and  intangible  assets with  indefinite  life are not
amortized but rather tested at least annually for impairment.  Intangible assets
with a definite  life are  required to be  amortized  over their  useful life or
estimated useful life.

The Company has not had any goodwill nor  intangible  assets with  indefinite or
definite life since the Company's inception.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company has adopted SFAS 133,  "ACCOUNTING  FOR DERIVATIVE  INSTRUMENTS  AND
HEDGING  ACTIVITIES",  which  requires  companies to recognize  all  derivatives
contracts as either  assets or  liabilities  in the balance sheet and to measure
them at  fair  value.  If  certain  conditions  are  met,  a  derivative  may be
specifically  designated  as a hedge,  the  objective  of which is to match  the
timing  of  gain  or  loss  recognition  on  the  hedging  derivative  with  the
recognition  of (i) the  changes  in the  fair  value  of the  hedged  asset  or
liability that are  attributable  to the hedged risk or (ii) the earnings effect
of the hedged  forecasted  transaction.  For a derivative  not  designated  as a
hedging  instrument,  the gain or loss is  recognized in income in the period of
change.

The Company has not entered into derivative  contracts  either to hedge existing
risks or for speculative purposes.

ADVERTISING EXPENSES

The Company expenses  advertising  costs as incurred.  There were no advertising
expenses incurred by the Company for the years ended December 31, 2004 and 2003.

OPERATIONS

The  following  discussion  of the results of  operations of the Company for the
fiscal  years  ended  December  31,  2004,  2003,  and  2002  should  be read in
conjunction  with the  financial  statements  of the Company  and related  notes
included therein.

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

During  fiscal  2004,  the  Company  recorded  $57,616 of  revenues  compared to
revenues of $72,563 recorded in fiscal 2003, reflecting a decrease in production
in both natural gas and  condensate.  During  fiscal 2004 the Company sold 9,008
mcf of gas,  compared  to 13,006 mcf of gas in fiscal  2003,  and 156 barrels of
condensate in fiscal 2004, compared to 233 barrels of condensate in fiscal 2003.
The decrease in production was partially  offset by increased prices received in
fiscal  2004,  in which the Company  received an average of $5.77 (2003 - $5.08)
per mcf gas and $36.40 (2003 - $27.60) per barrel of condensate.  Total sales in
fiscal 2004 were  $51,938  (2003 - $66,133)  from natural gas and $5,678 (2003 -
$6,430) from condensate sales. Production costs of $24,110 (2003 - $14,682) were
incurred and depletion of $2,255 (2003 - $2,521) was recorded.

During fiscal 2004, the Company incurred $78,695 for general and  administrative
expenses, an increase of $45,900 from $32,795 reported for fiscal 2003. Expenses
incurred in 2004  consisted  of $8,062 (2003 -  $2,000)for  audit fees;  $17,138
(2003 - $12,007) for legal expenses,  primarily for preparation of the Company's
year end and  regulatory  filings;  $14,955 (2003 - $5,656) for  accounting  and
administration  fees  paid  to  Chase  Management  Ltd.  ("Chase"),   a  company
controlled by the President of the Company (see "Item 12. Certain  Relationships
and Related Transactions"); $2,970 for office and miscellaneous expenses; $1,410
for  a  technical   engineering   report;  and  $30,000  (2003  -  $10,000)  for
professional and consulting  services provided in reviewing  potential financing
and asset acquisition opportunities. The increased expenses in 2004 reflects the
increase in  corporate  activities  due to the  petroleum  assets  acquired  and
ongoing reviews of potential business and asset acquisitions.


                                      -21-

<PAGE>



YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

With the  acquisition  of the  petroleum  and  natural gas  properties,  with an
effective  purchase  date of January 1, 2003,  the Company  recorded  $72,563 of
revenues  during  fiscal 2003.  This was  comprised  of $66,133  (13,006 mcf) of
natural gas sales and $6,430 (233 barrels) of condensate sales. Production costs
of $14,682 were incurred and depletion of $2,521 was recorded for 2003.

During the year ended  December  31,  2003,  the  Company  incurred  $32,795 for
general  and  administrative  expenses,  an  increase  of  $27,377,  from $5,418
reported  for the  comparable  period in 2002.  The  increase is  attributed  to
increased legal,  regulatory filing and transfer agent costs incurred to prepare
documents for the Company's common stock financing and name change.  The Company
also paid $10,000 for consulting services.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2004, the Company had a working capital deficiency of $11,644
and an accumulated deficit of $108,428 and for the year ended December 31, 2004,
had incurred a net loss of $47,444.  At this stage of its business,  the Company
is not generating  sufficient  positive cash flow to fund its ongoing  overhead.
Certain of the Company's overhead may be reduced without negatively impacting on
the Company's  current operating cash flow. The Company currently has no planned
capital  expenditures.  However, the Company intends to continue to identify and
review other business and investment opportunities.  This may entail significant
funding requirements.  Effective, November 19, 2004, the Company's common shares
were approved for quotation on the OTCBB.  Management believes having the shares
quoted on the OTC-BB will assist the Company with fund raising  activities.  The
Company  may be  required  to seek to raise  additional  capital  via a  private
placement  offering  pursuant  to  Regulation  "D" Rule 505 or 506 or a  private
placement.  If the Company needs to raise additional funds, any additional funds
raised  through the  issuance of equity or  convertible  debt  securities,  will
result in the dilution of the percentage  ownership of the  stockholders  of the
Company and such securities may have rights, preferences or privileges senior to
those of the  Company's  common stock.  The Company does not currently  have any
contractual  restrictions  on its  ability to incur debt and,  accordingly,  the
Company  could  incur  significant   amounts  of  indebtedness  to  finance  its
operations.  Any such indebtedness  could contain covenants which would restrict
the Company's  operations.  There can be no assurance that additional  financing
will be  available on terms  favorable  to the  Company,  or at all. If adequate
funds are not available or are not available on  acceptable  terms,  the Company
may not be able take  advantage  of  acquisition  opportunities,  or  respond to
competitive  pressures.  The Company does not have any preliminary agreements or
understandings between the Company and its  stockholders/officers  and directors
with respect to loans or financing to operate the Company.

The Company  maintains its cash and cash equivalents  primarily in Untied States
dollars.  A small amount is retained in Canadian currency to pay  administrative
costs.

PLAN OF OPERATIONS

At the present time,  the  Company's  producing oil and gas assets are providing
sufficient  cash  flow to fund all  current  oil and gas  operating  activities.
However, given the limited revenue generated by the Company's current activities
and limited financial resources available to the Company, management believes it
is in the best  interest  of the  Company  and its  shareholders  to seek  other
business  opportunities.  See "Item 1. Description of Business." During the year
ended  December 31, 2004,  the Company  incurred  significant  professional  and
consulting  costs  in  seeking  and  reviewing  other  business  and  investment
opportunities.  Management  believes  that the Company will  require  additional
funds in the next 12 months to maintain its current level of operations. At this
time, there are no exploration  programs  required on the Company's  properties.
The Company  plans to  continue to review  other  businesses  opportunities  and
properties  for  possible  acquisition.  Financing  may include the  issuance of
additional common stock. However,  there are no assurances that the Company will
be able to identify  any other  properties  for  acquisition  or will be able to
complete  any such  acquisition.  The  Company  does not expect any  significant
changes in the number of employees;  however,  if the Company  acquires  another
business  opportunity  or  property,  the  Company  may  increase  the number of
employees.

Management  feels  having the shares  quoted on the OTC-BB will give the Company
better  access  to the  capital  markets  to raise  additional  funding  for the
Companies activities.


                                      -22-

<PAGE>



The Company  currently does not expect to purchase or sell any of its equipment,
since it owns no equipment; however, if the Company acquires another business or
property,  the Company may acquire equipment in connection with such acquisition
and/or may dispose of its current property interests.

The Company has, and will continue to have limited capital with which to finance
its activities.  The Company has incurred,  and will continue to incur, expenses
relating to its operations.  Specifically, as long as the Company is required to
file  reports  under the  Securities  Exchange  Act,  it will  continue to incur
accounting  and legal fees  relating  to its  filings.  The  Company  enjoys the
non-exclusive  use of  office,  telecommunication  and  incidental  supplies  of
stationery,  provided by Mr. DeMare and Chase (a company indirectly owned by Mr.
DeMare). See "Item 12. Certain Relationships And Related Transactions."

During the  twelve  months  following  the filing of this  report,  the  Company
intends  to review and  possibly  acquire  another  business  opportunity.  Such
acquisition may be in exchange for the Company's securities. The Company has not
identified a particular acquisition target and has not entered into any material
negotiations regarding such an acquisition.  As of the date of this report, none
of the Company's officers, directors, promoters or affiliates has engaged in any
material  contact or discussions  with any  representative  of any other company
regarding the  possibility  of an  acquisition or merger between the Company and
such other company.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any material off balance sheet  arrangements that have
or are  reasonably  likely to have a current or future  effect on the  Company's
financial  condition,  changes in  financial  condition,  revenues or  expenses,
results of operations, liquidity, capital expenditures or capital resources.


ITEM 7.           FINANCIAL STATEMENTS


                               GLOBAL ENERGY INC.
       FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                Table of Contents
                                                                            PAGE
                                                                             NO.

Index........................................................................F-2
Report of Independent Registered Public Accounting Firm,
     dated March 16, 2005 ...................................................F-3
Financial Statements:
     Balance Sheets as at December 31, 2004 and 2003.........................F-4
     Statements of Operations for the Years Ended
          December 31, 2004 and 2003.........................................F-5
     Statement of Stockholders' Equity for the Years Ended
          December 31, 2004 and 2003.........................................F-6
     Statements of Cash Flows for the Years Ended
          December 31, 2004 and 2003.........................................F-7
     Notes to Financial Statements for the Years Ended
          December 31, 2004 and 2003.........................................F-8


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

None.


ITEM 8A.          CONTROLS AND PROCEDURES

As required by SEC rules,  the Company has  evaluated the  effectiveness  of the
design and operation of its disclosure controls and procedures at the end of the
period  covered  by this  report.  This  evaluation  was  carried  out under the
supervision and with the  participation of the Company's  management,  including
Mr. DeMare the Company's  principal  executive  officer and principal  financial
officer. Based on this evaluation, Mr. DeMare has concluded that the design

                                      -23-

<PAGE>



and operation of the Company's disclosure controls and procedures are effective.
There were no changes in the Company's internal control over financial reporting
or in other factors that have materially  affected,  or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

Disclosure  controls  and  procedures  are  the  Company's  controls  and  other
procedures that are designed to ensure that information required to be disclosed
by the Company in the reports  that its files or submits  under the Exchange Act
is  recorded,  processed,  summarized  and  reported,  within  the time  periods
specified  in the SEC's  rules and forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed by the Company in the reports that it files
or  submits  under the  Exchange  Act is  accumulated  and  communicated  to the
Company's  management,  including its principal  executive officer and principal
financial officer, as appropriate,  to allow timely decisions regarding required
disclosure.


ITEM 8B.          OTHER INFORMATION

Not Applicable.



                                    PART III


ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


NAME               AGE         POSITION

Nick DeMare         50         President, Chief Executive Officer, Treasurer,
                               Secretary and director, since September 30, 2002.

Dean Rogers         52         Director since January 7, 2004.


NICK DEMARE (AGE 50), PRESIDENT, CEO, TREASURER, SECRETARY AND DIRECTOR

Mr.  DeMare holds a Bachelor of Commerce  degree from the  University of British
Columbia  and is a  member  in  good  standing  of the  Institute  of  Chartered
Accountants  of British  Columbia.  Since  May,  1991,  Mr.  DeMare has been the
President  of  Chase,  a  private  company  which  provides  a  broad  range  of
administrative,   management  and  financial  services  to  private  and  public
companies  engaged  in  mineral  exploration  and  development,  gold and silver
production,  oil and gas  exploration  and production and venture  capital.  Mr.
DeMare  indirectly owns 100% of Chase. Mr. DeMare currently serves as an officer
and director of the following other public reporting companies:

--------------------------------------------------------------------------------
NAMES OF REPORTING ISSUERS         POSITIONS HELD                      MARKET
--------------------------------------------------------------------------------

Aguila American Resources Ltd.     Director                                TSXV
Andean American Mining Corp.       Director & Secretary                    TSXV
Baradero Resources Limited         Director, President & CEO        TSXV & OTCBB
Dial Thru International Inc.       Director                               OTCBB
GGL Diamond Corp.                  Director                                TSXV
Golden Peaks Resources Ltd.        Director                                TSXV
Goldmarca Limited                  Director                                TSXV
Gold Point Exploration Ltd.        Director & President                    TSXV
Halo Resources Ltd.                Director, Chairman               TSXV & OTCBB
Hilton Resources Ltd.              Director, President & CEO        TSXV & OTCBB
Kookaburra Resources Ltd.          Director                                TSXV


                                      -24-

<PAGE>



--------------------------------------------------------------------------------
NAMES OF REPORTING ISSUERS         POSITIONS HELD                      MARKET
--------------------------------------------------------------------------------

Lariat Resources Ltd.              Director & President                     TSXV
Mawson Resources Limited           Director                                 TSXV
Medina International Corp.         Director, Secretary, Treasurer
                                   & CFO                                   OTCBB
Tinka Resources Limited            Director & Secretary                     TSXV
Tumi Resources Limited             Director                         TSXV & OTCBB
--------------------------------------------------------------------------------


DEAN ROGERS (AGE 52), DIRECTOR

Mr. Rogers holds a Bachelor of Science in Civil  Engineering from the University
of Wyoming.  Since 1992, Mr. Rogers has been an independent consultant to public
and private petroleum companies.  Mr. Rogers specializes in consulting primarily
in the Denver- Julesberg Basin of Colorado, as well as Wyoming,  Oklahoma, Texas
and  Alberta,  Canada.  Mr.  Rogers  does not  currently  serve as an officer or
director of any other public reporting companies.

FAMILY RELATIONSHIPS

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

LEGAL PROCEEDINGS

None  of the  Company's  officers  or  directors,  nor to the  knowledge  of the
Company, any of the Company's control persons, has:

         1.   had 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.   been convicted in a criminal proceeding or is subject to a pending
              criminal proceeding  (excluding traffic violations and other minor
              offenses);

         3.   been subject to any order,  judgement, 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.   been  found  by a  court  of  competent  jurisdiction  (in a civil
              action),  the Securities and Exchange  Commission or the Commodity
              Futures  Trading  Commission  to have  violated a federal or state
              securities  or  commodities  law,  where the judgment has not been
              reversed, suspended or vacated.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Mr.  DeMare became an officer and director of the Company on September 30, 2002.
As such,  he was  required  to file a Form 3 with the  Securities  and  Exchange
Commission  on or before  October 10, 2002.  Mr.  DeMare filed a Form 3 with the
Securities  and Exchange  Commission on April 29, 2004. At the time he became an
officer and director,  Mr. DeMare did not own any shares of the Company's common
stock.

COMMITTEES

The Company does not have any audit,  compensation,  and executive committees of
its  board of  directors.  The  entire  board of  directors  is  serving  as the
Company's audit  committee.  At this time, the board of directors has determined
that Mr. DeMare meets the requirements of an audit committee  financial  expert.
Mr. DeMare is not considered  "independent" as that term is defined in Rule 4200
of the NASD.


                                      -25-

<PAGE>



CONFLICTS OF INTEREST

Mr.  DeMare is  associated  with other  firms  involved  in a range of  business
activities.  Consequently, there are potential inherent conflicts of interest in
his acting as an officer and director of the Company.  Insofar as Mr.  DeMare is
engaged in other business activities,  management anticipates he will not devote
all of his time to the Company's affairs.

The  Company's  officers  and  directors  are now and may in the  future  become
shareholders,  officers or directors of other companies, which may be formed for
the  purpose  of  engaging  in  business  activities  similar  to  the  Company.
Accordingly,  additional  direct  conflicts  of interest may arise in the future
with  respect  to such  individuals  acting on behalf  of the  Company  or other
entities.  Moreover,  additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the performance
of their duties or  otherwise.  Currently,  the Company does not have a right of
first refusal  pertaining to opportunities  that come to management's  attention
and may relate to the Company's business operations.

The  Company's  officers  and  directors  are,  so long as they are  officers or
directors  of the Company,  subject to the  restriction  that all  opportunities
contemplated by the Company's plan of operation  which come to their  attention,
either  in the  performance  of their  duties or in any  other  manner,  will be
considered  opportunities  of,  and be made  available  to the  Company  and the
companies  that they are  affiliated  with on an equal  basis.  A breach of this
requirement will be a breach of the fiduciary duties of the officer or director.
If the  Company or the  companies  with which the  officers  and  directors  are
affiliated both desire to take advantage of an  opportunity,  then said officers
and directors would abstain from  negotiating  and voting upon the  opportunity.
However, all directors may still individually take advantage of opportunities if
the Company should decline to do so. Except as set forth above,  the Company has
not  adopted  any  other  conflict  of  interest  policy  with  respect  to such
transactions.

CODE OF ETHICS

The Company has not yet adopted a code of ethics that  applies to the  Company's
principal executive officers,  principal financial officer, principal accounting
officer  or  controller,  or persons  performing  similar  functions.  Given the
Company's  current  operations,  management does not believe a code of ethics is
necessary at this stage of the Company's development.


ITEM 10.          EXECUTIVE COMPENSATION

The  following  table sets  forth  certain  compensation  paid or accrued by the
Company to former and current  officers  during the fiscal years ended  December
31, 2004 and 2003.
<TABLE>
<CAPTION>

                                                                        -------------------------------
                                                                              LONG TERM COMPENSATION
                                            -------------------------   -------------------------------
                                               ANNUAL COMPENSATION              AWARDS          PAYOUTS
                                            -------------------------   ----------------------  -------
                                                                                    SECURITIES            ---------
                                                                OTHER   RESTRICTED  UNDERLYING               ALL
                                  ------                       ANNUAL      STOCK     OPTIONS/               OTHER
                                   YEAR                        COMPEN-    AWARDS       SARS       LTIP     COMPEN-
NAME AND PRINCIPAL POSITION       ENDING    SALARY    BONUS    SATION       ($)        (#)      PAYOUTS    SATION
                                  ------    -------------------------   ----------------------  -------   ---------
<S>                               <C>      <C>       <C>      <C>       <C>         <C>         <C>     <C>

Nick DeMare (1)                    2004      Nil       Nil       Nil        Nil        Nil        Nil     $14,955(2)
President, Chief Executive         2003      Nil       Nil       Nil        Nil        Nil        Nil      $5,656(2)
Officer, Secretary, Treasurer      2002      Nil       Nil       Nil        Nil        Nil        Nil      $2,569(2)
and Director


Georgios Polyhronopoulos (1)
(former President, Chief
Executive Officer and
Director)                          2002      Nil       Nil       Nil        Nil        Nil        Nil        Nil
                                  ------    -------------------------   ----------------------  -------   ---------
</TABLE>

                                      -26-

<PAGE>



(1)      On September 30, 2002, Mr. Polyhronopoulos resigned as President, Chief
         Executive  Officer  and  Director  of the  Company  and Mr.  DeMare was
         elected as  Director  of the Company  and  appointed  President,  Chief
         Executive Officer, Secretary and Treasurer of the Company.
(2)      Charged by Chase,  a  private company owned by Nick DeMare, for office,
         secretarial and accounting services performed.

OPTION GRANTS IN LAST FISCAL YEAR

Since its  inception,  the Company  has not  granted any stock  options or stock
appreciation rights.

COMPENSATION OF DIRECTORS

None  of  the  Directors  of the  Company  received  director's  fees  or  other
compensation  in fiscal 2004.  However,  Chase, a private  company owned by Nick
DeMare, provides office, secretarial and accounting services. During fiscal 2004
and 2003, the Company was charged $14,955 and $5,656, respectively, by Chase. As
at December 31, 2004, $3,635 remained unpaid.

EMPLOYMENT CONTRACTS

The  Company  does not  currently  have any  employment  agreements  in  effect.
However, Chase bills the Company for office, secretarial and accounting services
provided.  The  rates  charged  by  Chase to the  Company  are the same as those
charged by Chase to other arm's-length companies.


ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  AND RELATED STOCKHOLDERS MATTERS

The following table sets forth, as of March 18, 2005,  information  with respect
to the beneficial ownership by each person who is known to the Company to be the
beneficial  owner of more than 5% of the Company's  common shares and of Messrs.
DeMare and Rogers. All persons named below have sole voting and investment power
over their shares except as otherwise  noted.  the Company's common stock is the
only class of voting securities outstanding.

--------------------------------------------------------------------------------
                                              AMOUNT
                                           AND NATURE OF
                                            BENEFICIAL             PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER         OWNERSHIP              OF CLASS (1)
--------------------------------------------------------------------------------

Nick DeMare                                  1,712,500(2)             36.83%
#1305-1090 West Georgia Street
Vancouver, British Columbia,
Canada V6E 3V7
President, Chief Executive Officer,
Secretary, Treasurer and Director

Dean Rogers                                        Nil                  Nil
871 Greeley Avenue
Johnstown, Colorado 80534
Director

Officers and Directors,
as a group (2 persons)                       1,712,500(2)              36.83%
--------------------------------------------------------------------------------

(1)      Where persons listed on this table have the right to obtain  additional
         shares of common stock through the exercise of  outstanding  options or
         warrants  or through the  conversion  of  debentures  within 60 days of
         March 18, 2005,  these  additional  shares are deemed to be outstanding
         for the purpose of computing  the  percentage  of common stock owned by
         such persons,  but are not deemed to be outstanding  for the purpose of
         computing the percentage owned by any other person.  Based on 4,650,000
         shares of common stock outstanding as of March 18, 2005.
(2)      These shares are held by Mr. DeMare through  DNG Capital Corp. (USA), a
         company indirectly wholly owned by Mr. DeMare.


                                      -27-

<PAGE>



STOCK OPTION PLAN

As of the date of this report,  the Company does not have a stock option plan or
any other  compensation  plans or contracts under which equity securities of the
Company may be issued to its directors, officers or employees.

PENSION PLANS

The Company does not have a defined  benefit  pension plan that provides  annual
benefits to any Executive Officers.

CHANGE OF CONTROL

As of the date of this report,  there are no  arrangements  known to the Company
which may at a  subsequent  date  result in a change of control of the  Company;
however, a business  combination  involving the issuance of the Company's common
stock will,  in all  likelihood,  result in  shareholders  of a private  company
obtaining a controlling  interest in the Company.  Any such business combination
may require the  Company's  current  shareholders  to sell or transfer  all or a
portion of their  common stock  and/or  resign from their  positions as officers
and/or directors of the Company.  The resulting change in control of the Company
could result in removal of the current management, and a corresponding reduction
in or elimination of their participation in the Company's future affairs.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than as disclosed  below,  during the fiscal years ended December 31, 2004
and 2003, none of the Company's  present directors (or any nominees for election
as a  director),  officers  or  principal  shareholders  (as listed in "Item 11.
Security  Ownership  of Certain  Beneficial  Owners And  Management  and Related
Stockholders Matters"), nor any family member of the foregoing, nor, to the best
of the Company's  information and belief, any of the Company's former directors,
senior officers or principal shareholders,  nor any family member of such former
directors, officers or principal shareholders, has or had any material interest,
direct or indirect, in any transaction, or in any proposed transaction which has
materially affected or will materially affect the Company.

During the fiscal  years  ended  December  31,  2004 and 2003,  the  Company was
charged $14,955 and $5,656,  respectively,  by Chase, a private company owned by
Nick DeMare (the Company's  President,  Chief Executive  Officer,  Treasurer and
Secretary and a Director and principal shareholder of the Company),  for office,
secretarial and accounting services performed. The rates charged by Chase to the
Company are the same as those charged by Chase to other arm's- length companies.
At December 31, 2004,  $3,635  remained  unpaid by the Company for past fees and
disbursements  incurred  on behalf of the  Company  and is  included in accounts
payable.


ITEM 13.          EXHIBITS


REGULATION      EXHIBIT
S-B NUMBER

    3.1         Articles of Incorporation, as amended(2)

    3.2         Bylaws(1)

   10.1         Assignment and Bill of Sale Agreement dated June 5, 2003(3)

   31.1         Rule 13a-14(a) Certification of  Principal Executive Officer and
                Principal  Financial  Officer

   32.1         Certification  of  Principal  Executive  Officer  and  Principal
                Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)      Incorporated by  reference to the  exhibits to the Company's Form 10-SB
         filed November 10, 1999, file number 000-28025.
(2)      Incorporated  by reference to the exhibits to the  Company's  quarterly
         report on Form 10-QSB/A Amendment No. 1 for the quarter ended March 31,
         2003, filed on April 14, 2004, file number 000-28025.

                                      -28-

<PAGE>



(3)      Incorporated  by  reference to the  exhibits to the  Company's  current
         report on Form 8-K dated June 5, 2003, filed June 19, 2003, file number
         000-28025.


ITEM 14.          PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

For the fiscal years ended December 31, 2004 and 2003,  the Company's  principal
accountant  billed  $1,819  and  $5,062,  respectively,  for  the  audit  of the
Company's  annual  financial  statements  and  review  of  financial  statements
included in the Company's Form 10-QSB filings.

AUDIT-RELATED FEES

For the fiscal years ended December 31, 2004 and 2003,  the Company's  principal
accountant  billed  $nil and  $nil,  respectively,  for  assurance  and  related
services that were reasonably  related to the performance of the audit or review
of the Company's  financial  statements  outside of those fees  disclosed  above
under "Audit Fees".

TAX FEES

For the fiscal years ended December 31, 2004 and 2003,  the Company's  principal
accountant billed $nil and $nil, respectively,  for tax compliance,  tax advice,
and tax planning services.

ALL OTHER FEES

For the fiscal years ended December 31, 2004 and 2003,  the Company's  principal
accountant billed $nil and $nil,  respectively,  for products and services other
than those described above.

PRE-APPROVAL POLICIES AND PROCEDURES

Prior to engaging the Company's accountants to perform a particular service, the
Company's  board  of  directors  obtains  an  estimate  for  the  service  to be
performed.  The  board of  directors,  in  accordance  with  procedures  for the
Company,  approved  all of the  services  described  above prior to the services
being performed.

PRINCIPAL ACCOUNTING FIRM HOURS

To the best of the Company's knowledge,  the percentage of hours expended on the
Company's  principal  accountant's  engagement to audit the Company's  financial
statements for the fiscal year ended December 31, 2004,  that were attributed to
work  performed  by persons  other than the  principal  accountant's  full-time,
permanent employees was less than or equal to 50%.

                                      -29-

<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.

                                   GLOBAL ENERGY INC.

                                   Per:
                                        /s/ NICK DEMARE
                                        ----------------------
                                        Nick DeMare
                                        President and Director

                                        Dated:  March 21, 2005


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.

                                   Signatures:

                                   /s/ NICK DEMARE
                                   ---------------
                                   Nick DeMare
                                   President  and  Director (Principal Executive
                                   Officer,  Principal  Financial  Officer,  and
                                   Principal Accounting Officer)

                                   Dated:  March 21, 2005


                                   /s/ DEAN ROGERS
                                   ---------------
                                   Dean Rogers
                                   Director

                                   Dated:  March 21, 2005



                                      -30-

<PAGE>





















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




                               GLOBAL ENERGY INC.

                              FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                           DECEMBER 31, 2004 AND 2003

                           (EXPRESSED IN U.S. DOLLARS)


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






                                       F-1

<PAGE>



                               GLOBAL ENERGY INC.



                                    I N D E X



Report of Independent Registered Public Accounting Firm                      F-3

Balance Sheets
     December 31, 2004 and 2003                                              F-4

Statements of Operations
     Years Ended December 31, 2004 and 2003                                  F-5

Statement of Stockholders' Equity
     Years Ended December 31, 2004 and 2003                                  F-6

Statements of Cash Flows
     Years Ended December 31, 2004 and 2003                                  F-7

Notes to Financial Statements                                        F-8 to F-14


                                       F-2

<PAGE>



MOORE STEPHENS
ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone:  (604) 737-8117 Facsimile:  (604) 714-5916
E-Mail:  generaldelivery@ellisfoster.com
Website:  www.ellisfoster.com

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




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

GLOBAL ENERGY INC.


We have audited the balance sheets of GLOBAL ENERGY INC.  ("the  Company") as at
December  31,  2004  and  2003  and  the  related   statements  of   operations,
stockholders'  equity,  and cash flows for the years ended December 31, 2004 and
2003.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  an audit to obtain  reasonable  assurance  whether  the  financial
statements are free of material misstatement.  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  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  these  financial  statements  present  fairly,  in all material
respects, the financial position of the Company as at December 31, 2004 and 2003
and the  results  of its  operations  and its cash  flows  for the  years  ended
December 31, 2004 and 2003 in  conformity  with  generally  accepted  accounting
principles in the United States of America.

The  accompanying  statements have been prepared  assuming that the Company will
continue as a going  concern.  As  discussed in Note 1, the Company has incurred
operating losses. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.  Management's  plans in regard
to these  matters  are  described  in Note 1. The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.



Vancouver, Canada                           "MOORE STEPHENS ELLIS FOSTER LTD."
March 16, 2005                                     Chartered Accountants


--------------------------------------------------------------------------------
MSEF a partnership of incorporated professionals
     An independently  owned and operated member of Moore Stephens International
     Limited - Mmembers in principal cities throughout the world

                                       F-3

<PAGE>



                               GLOBAL ENERGY INC.
                                 BALANCE SHEETS
                        AS AT DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)




                                                      2004             2003
                                                        $                $

                                     ASSETS

CURRENT ASSETS

Cash and cash equivalents                                2,060           26,459
Amounts receivable                                      16,312           16,861
                                                  ------------     ------------
TOTAL CURRENT ASSETS                                    18,372          43,320

PETROLEUM AND NATURAL GAS RESOURCE
     PROPERTIES (Note 3)                                12,716           14,971
                                                  ------------     ------------
TOTAL ASSETS                                            31,088           58,291
                                                  ============     ============

                       LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable                                        30,016            9,775
                                                  ------------     ------------
STOCKHOLDERS' EQUITY

Common stock, $0.001 par value;
     Authorized - 25,000,000 shares
     Issued and outstanding - 4,650,000 shares
         (2003 - 4,650,000 shares)                       4,650            4,650
Additional paid-in capital                             104,850          104,850
(Deficit)                                             (108,428)         (60,984)
                                                  ------------     ------------
TOTAL STOCKHOLDERS' EQUITY                               1,072           48,516
                                                  ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              31,088           58,291
                                                  ============     ============


NATURE OF OPERATIONS AND GOING CONCERN (Note 1)


              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                             FINANCIAL STATEMENTS.


                                       F-4

<PAGE>



                               GLOBAL ENERGY INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)




                                                      2004             2003
                                                        $                $
REVENUE

Oil and gas revenue                                     57,616           72,563
                                                  ------------     ------------
OPERATING EXPENSES

Production expenses                                     24,110           14,682
Depreciation and depletion                               2,255            2,521
General and administration                              78,695           32,795
                                                  ------------     ------------
                                                       105,060           49,998
                                                  ------------     ------------

NET (LOSS) INCOME BEFORE INCOME TAXES                  (47,444)          22,565

INCOME TAX EXPENSE                                           -            7,900

TAX BENEFIT OF NET OPERATING LOSS CARRY FORWARD
                                                             -           (7,900)
                                                  ------------     ------------
NET (LOSS) INCOME FOR THE YEAR                         (47,444)          22,565
                                                  ============     ============


NET (LOSS) INCOME PER COMMON SHARE
     - BASIC AND DILUTED                                (0.01)             0.01
                                                  ============     ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
     OUTSTANDING - BASIC AND DILUTED                 4,650,000        4,500,274
                                                  ============     ============





              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                             FINANCIAL STATEMENTS.


                                       F-5

<PAGE>



                               GLOBAL ENERGY INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)



<TABLE>
<CAPTION>

                                                                                                         TOTAL
                                            COMMON STOCK                                              STOCKHOLDER
                                   ------------------------------     ADDITIONAL      ACCUMULATED        EQUITY
                                      SHARES           AMOUNT      PAID-IN CAPITAL     (DEFICIT)      (DEFICIENCY)
                                   -------------   --------------   -------------    -------------   --------------
                                                         $                $                $               $
<S>                               <C>             <C>               <C>              <C>              <C>

Balance, December 31, 2002             4,000,000            4,000          73,000          (83,549)          (6,549)

March, 2003
Issued from private offering             600,000              600          29,400                -           30,000

June, 2003
Issued for property                       50,000               50           2,450                -            2,500

Net income for the year                        -                -               -           22,565           22,565
                                   -------------   --------------   -------------    -------------   --------------
Balance, December 31, 2003             4,650,000            4,650         104,850          (60,984)          48,516

Net (loss) for the year                                                                    (47,444)         (47,444)
                                   -------------   --------------   -------------    -------------   --------------
Balance, December 31, 2004             4,650,000            4,650         104,850         (108,428)           1,072
                                   =============   ==============   =============    =============   ==============

</TABLE>



              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                             FINANCIAL STATEMENTS.


                                       F-6

<PAGE>



                               GLOBAL ENERGY INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)





                                                      2004             2003
                                                        $                $

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

Net (loss) income for the year                         (47,444)          22,565
Item not involving cash
       Depreciation and depletion                        2,255            2,521
Changes in assets and liabilities
       Decrease (increase) in amounts receivable           549          (16,861)
       Increase in accounts payable                     20,241            2,391
                                                  ------------     ------------
Net cash (used in) provided by
       operating activities                            (24,399)          10,616
                                                  ------------     ------------

CASH FLOWS USED IN INVESTING ACTIVITY

Expenditures on petroleum and
       natural gas resource properties                       -          (14,992)
                                                  ------------     ------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITY

Proceeds from sale of common shares                          -           30,000
                                                  ------------     ------------
NET (DECREASE) INCREASE IN CASH
       AND CASH EQUIVALENTS                            (24,399)          25,624

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR           26,459              835
                                                  ------------     ------------
CASH AND CASH EQUIVALENTS - END OF YEAR                  2,060           26,459
                                                  ============     ============



SUPPLEMENTARY CASH FLOW INFORMATION

Non-Cash Transactions

During the year ended December 31, 2003, the Company issued 50,000 common shares
at $0.05 per share,  for the  acquisition of petroleum and natural gas resources
properties. See Note 3.


Interest expenses paid in cash                               -                -
                                                  ============     ============
Income taxes paid in cash                                    -                -
                                                  ============     ============



              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                             FINANCIAL STATEMENTS.


                                       F-7

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)


1.       NATURE OF BUSINESS AND GOING CONCERN

         Global Energy Inc. (the  "Company") was organized on February 16, 1999,
         under the laws of the State of Nevada,  U.S.A.  The Company  originally
         planned to market plastic cards with embedded  microprocessors  ("Smart
         Cards").  However,  the Company was unable to complete  negotiations to
         market  Smart  Cards.  By  agreement  dated June 5, 2003,  the  Company
         purchased petroleum and natural gas producing properties,  as described
         in Note 3, and commenced  operations as an  independent  energy company
         engaged in the  acquisition,  exploration  and development of crude oil
         and natural gas  properties in the United  States.  Prior to this date,
         the Company was considered a development stage enterprise as defined by
         Statement of Financial Accounting Standards ("SFAS") No. 7.

         As of December 31, 2004, the Company had a working  capital  deficiency
         of $11,644 and an  accumulated  deficit of $108,428  and,  for the year
         ended  December  31, 2004,  had  incurred a net loss of $47,444.  These
         financial  statements  have been prepared in accordance  with generally
         accepted  accounting  principles  applicable  to a going  concern which
         assumes  the  Company  will  realize  its  assets  and   discharge  its
         liabilities in the normal course of business.  Realizable values may be
         substantially different from the carrying values shown in the financial
         statements should the Company be unable to continue as a going concern.
         Management intends to raise additional equity financing to fund ongoing
         operations and settle its liabilities as they come due. However,  there
         are no assurances that such  financings  will be completed.  Failure to
         continue as a going  concern would  require  restatement  of assets and
         liabilities on a liquidation  basis, which could differ materially from
         the going concern basis.


2.       SIGNIFICANT ACCOUNTING POLICIES

         (a)      Accounting Estimates

                  The  preparation  of financial  statements in conformity  with
                  generally accepted  accounting  principles requires management
                  to make  estimates  and  assumptions  that affect the reported
                  amounts of assets and liabilities and disclosure of contingent
                  assets and liabilities at the date of the financial statements
                  and the reported  amounts of revenues and expenses  during the
                  reporting  period.  Actual  results  could  differ  from those
                  estimates and assumptions.

                  The  oil  and gas  industry  is  subject,  by its  nature,  to
                  environmental  hazards  and  clean-up  costs.  At  this  time,
                  management  knows of no substantial  costs from  environmental
                  accidents  or events for which the  Company  may be  currently
                  liable. In addition,  the Company's oil and gas business makes
                  it vulnerable  to changes in wellhead  prices of crude oil and
                  natural  gas.  Such prices have been  volatile in the past and
                  can be expected to be volatile in the future.

         (b)      Cash Equivalents

                  Cash equivalents comprise of certain highly liquid instruments
                  with a maturity of three months or less when purchased.  As of
                  December 31, 2004 and 2003, there were no cash equivalents.

         (c)      Concentration of Credit Risk

                  The  Company  places its cash and cash  equivalents  with high
                  credit quality financial institutions. As of December 31, 2004
                  and 2003,  the  Company  has no funds  placed in a bank beyond
                  insured limits.


                                       F-8

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         (d)      Revenue Recognition

                  The Company recognizes petroleum and natural gas revenues from
                  its interests in producing  wells as petroleum and natural gas
                  is produced and sold from these wells.  The Company has no gas
                  balancing  arrangements  in place.  Petroleum  and natural gas
                  sold is not significantly different from the Company's product
                  entitlement.

         (e)      Petroleum and Natural Gas Interests

                  The Company  follows the full cost  method of  accounting  for
                  petroleum  and natural gas  operations.  Under this method all
                  costs  related  to the  exploration  for  and  development  of
                  petroleum  and  natural  gas  reserves  are  capitalized  on a
                  country-by-country  basis.  Costs  include  lease  acquisition
                  costs, geological and geophysical expenses,  overhead directly
                  related to exploration and development activities and costs of
                  drilling both productive and  non-productive  wells.  Proceeds
                  from the sale of properties  are applied  against  capitalized
                  costs, without any gain or loss being recognized,  unless such
                  a sale would  significantly  alter the rate of  depletion  and
                  depreciation.

                  Depletion   of   exploration   and   development   costs   and
                  depreciation  of  production  equipment is provided  using the
                  unit-of-production   method   based  upon   estimated   proven
                  petroleum and natural gas reserves.  The costs of  significant
                  unevaluated  properties  are  excluded  from costs  subject to
                  depletion.  For depletion and depreciation purposes,  relative
                  volumes of petroleum and natural gas  production  and reserves
                  are converted into equivalent units based upon relative energy
                  content.

                  In  applying  the full cost  method,  the  Company  performs a
                  ceiling  test  whereby the  carrying  value of  petroleum  and
                  natural  gas  interests  and  production  equipment,   net  of
                  deferred income taxes, is compared periodically to an estimate
                  of  future  net  cash  flow  from  the  production  of  proven
                  reserves.  Net cash flow is estimated using period end prices,
                  less  estimated   future   expenditures   to  be  incurred  in
                  developing and producing the proved reserves and income taxes.
                  Should this comparison  indicate an excess carrying value, the
                  excess is charged against earnings.

                  Substantially  all of the Company's  petroleum and natural gas
                  exploration,   development   and  production   activities  are
                  conducted jointly with others and,  accordingly,  the accounts
                  reflect   the   Company's   proportionate   interest  in  such
                  activities.

         (f)      Impairment

                  The  Company  has  adopted  SFAS  144,   "ACCOUNTING  FOR  THE
                  IMPAIRMENT  OR DISPOSAL OF LONG-LIVED  ASSETS" which  requires
                  that  long-lived  assets to be held and used be  reviewed  for
                  impairment   whenever  events  or  changes  in   circumstances
                  indicate  that the  carrying  amount  of an  asset  may not be
                  recoverable.  SFAS 144 established a single  accounting  model
                  for  long-lived  assets to be disposed of by sale. Oil and gas
                  properties  accounted  for  using  the  full  cost  method  of
                  accounting, a method adopted by the Company, are excluded from
                  this  requirement,  but will  continue  to be  subject  to the
                  ceiling test limitations.



                                       F-9

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         (g)      Asset Retirement Obligations

                  The  Company  recognizes  a  liability  for future  retirement
                  obligations  associated with the Company's capital assets. The
                  estimated  fair value of the asset  retirement  obligation  is
                  based on the current cost  escalated at an inflation  rate and
                  discounted  at a  credit  adjusted  rate.  This  liability  is
                  capitalized  as part  of the  cost of the  related  asset  and
                  amortized  over its productive  life.  The liability  accretes
                  until the Company settles the  obligation.  As of December 31,
                  2004 and 2003, the Company had no significant asset retirement
                  obligations.

         (h)      Foreign Currency Translation

                  The Company maintains its accounting records in U.S. dollars.

                  At the transaction  date, each asset,  liability,  revenue and
                  expense  is  translated  into U.S.  dollars  by the use of the
                  exchange  rate in  effect at that  date.  At the  period  end,
                  monetary  assets  and  liabilities  are  translated  into U.S.
                  dollars by using the exchange rate in effect at that date. The
                  resulting  foreign  exchange  gains and losses are included in
                  operations.

         (i)      Fair Value of Financial Instruments

                  Fair value  estimates of financial  instruments  are made at a
                  specific point in time,  based on relevant  information  about
                  financial markets and specific financial instruments. As these
                  estimates are  subjective in nature,  involving  uncertainties
                  and  matters  of   significant   judgement,   they  cannot  be
                  determined   with   precision.   Changes  in  assumptions  can
                  significantly affect estimated fair values.

                  Fair value approximates the amounts reflected in the financial
                  statements for cash,  amounts receivable and accounts payable.
                  Management  is of the opinion  that the Company is not exposed
                  to significant interest, credit or currency risks arising from
                  these financial instruments.

         (j)      Income Taxes

                  The  Company  has  adopted  SFAS 109,  "ACCOUNTING  FOR INCOME
                  TAXES",  which requires the Company to recognize  deferred tax
                  liabilities   and   assets   for  the   expected   future  tax
                  consequences  of  events  that  have  been  recognized  in the
                  Company's  financial  statements  or  tax  returns  using  the
                  liability method. Under this method,  deferred tax liabilities
                  and assets are determined  based on the temporary  differences
                  between the  financial  statement  and tax bases of assets and
                  liabilities  using enacted tax rates in effect in the years in
                  which the differences are expected to reverse.

         (k)      Earnings (Loss) Per Share

                  Net earnings  (loss) per share is provided in accordance  with
                  SFAS 128,  "EARNINGS  PER SHARE".  Basic  earnings  (loss) per
                  share is  computed  by  dividing  losses  available  to common
                  stockholders  by the weighted  average number of common shares
                  outstanding  during the period.  Diluted  earnings  (loss) per
                  share  reflects per share  amounts that would have resulted if
                  dilutive common stock equivalents had been converted to common
                  stock.  As of December  31, 2004 and 2003,  the Company has no
                  dilutive common stock equivalents such as stock options.


                                      F-10

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         (l)      Recent Accounting Pronouncements

                  In December  2004,  the FASB issued SFAS 123(R),  "SHARE-BASED
                  PAYMENT", which is a revision of SFAS No. 123, "ACCOUNTING FOR
                  STOCK-BASED COMPENSATION". SFAS 123(R) is effective for public
                  companies  for  interim  or  annual  periods  beginning  after
                  December 15, 2005,  supersedes APB Opinion 25, "ACCOUNTING FOR
                  STOCK ISSUED TO EMPLOYEES",  and amends SFAS 95, "Statement of
                  Cash Flows".

                  SFAS 123(R)  requires all  share-based  payments to employees,
                  including  grants of employee stock options,  to be recognized
                  in the income statement based on their fair values.  Pro-forma
                  disclosure is no longer an alternative.  The new standard will
                  be effective for the Company, beginning December 31, 2005. The
                  Company does not believe the adoption of SFAS 123(R) will have
                  a material impact on the Company's financial statements.

                  In November 2004, the FASB issued SFAS 151, "INVENTORY COSTS",
                  which  revised  ARB 43,  relating  to  inventory  costs.  This
                  revision is to clarify the accounting for abnormal  amounts of
                  idle  facility  expense,  freight,  handling  costs and wasted
                  material (spoilage).  This Statement requires that these items
                  be recognized as a current period charge regardless of whether
                  they meet the criterion specified in ARB 43. In addition, this
                  Statement   requires  the   allocation  of  fixed   production
                  overheads  to the  costs of  conversion  to be based on normal
                  capacity of the production  facilities.  SFAS 151 is effective
                  for inventory  costs  incurred  during fiscal years  beginning
                  after June 15, 2005. The Company does not believe the adoption
                  of SFAS 151  will  have a  material  impact  on the  Company's
                  financial statements.

                  In December  2004,  the FASB issued  SFAS 153,  "EXCHANGES  OF
                  NONMONETARY ASSETS", which changes the guidance in APB Opinion
                  29, "ACCOUNTING FOR NONMONETARY TRANSACTIONS".  This Statement
                  amends  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.  A  nonmonetary  exchange has
                  commercial  substance  if the future  cash flows of the entity
                  are  expected  to  change  significantly  as a  result  of the
                  exchange.  SFAS 153 is effective during fiscal years beginning
                  after June 15, 2005. The Company does not believe the adoption
                  of SFAS 153  will  have a  material  impact  on the  Company's
                  financial statements.

         (m)      Intangible Assets

                  The  Company  has  adopted  SFAS  142,   "GOODWILL  AND  OTHER
                  INTANGIBLE   ASSETS",   which   requires   that  goodwill  and
                  intangible  assets with  indefinite life are not amortized but
                  rather  tested at least  annually for  impairment.  Intangible
                  assets with a definite life are required to be amortized  over
                  their useful life or estimated useful life.

                  The Company does not have any goodwill nor  intangible  assets
                  with indefinite or definite life since inception.



                                      F-11

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         (n)      Accounting for Derivative Instruments and Hedging Activities

                  The Company has adopted SFAS 133,  "ACCOUNTING  FOR DERIVATIVE
                  INSTRUMENTS AND HEDGING ACTIVITIES",  which requires companies
                  to recognize  all  derivatives  contracts as either  assets or
                  liabilities  in the balance  sheet and to measure them at fair
                  value.  If certain  conditions  are met, a  derivative  may be
                  specifically  designated as a hedge, the objective of which is
                  to match the timing of gain or loss recognition on the hedging
                  derivative with the recognition of (i) the changes in the fair
                  value of the hedged asset or liability  that are  attributable
                  to the hedged risk or (ii) the  earnings  effect of the hedged
                  forecasted  transaction.  For a derivative not designated as a
                  hedging  instrument,  the gain or loss is recognized in income
                  in the period of change.

                  The Company has not entered into derivative  contracts  either
                  to hedge existing risks or for speculative purposes.

         (o)      Advertising Expenses

                  The Company expenses advertising costs as incurred. There were
                  no advertising  expenses incurred by the Company for the years
                  ended December 31, 2004 and 2003.


3.       PETROLEUM AND NATURAL GAS RESOURCE PROPERTIES

                                                             2004        2003
                                                               $           $

         Acquisition cost, proved reserves                  17,492       17,492
         Less:  Accumulated depreciation and depletion      (4,776)      (2,521)
                                                          --------     --------
                                                            12,716       14,971
                                                          ========     ========

         On June 5, 2003 the Company completed a purchase and sale agreement and
         acquired various working  interests in producing  petroleum and natural
         gas leases  located in the Live Oak and Wharton  Counties,  Texas,  for
         $12,500 cash and the  issuance of 50,000  common  shares,  at $0.05 per
         share.  The Company also incurred $2,492 for costs  associated with the
         property acquisition.

         No write-down was required during the years ended December 31, 2004 and
         2003 from the ceiling tests performed  effective  December 31, 2004 and
         2003, respectively. The ceiling test is a cost-recovery test and is not
         intended to result in an estimate of fair market value.


4.       STOCKHOLDERS' EQUITY

         During the year ended  December  31,  2003,  the  Company  completed  a
         private  offering,  for the sale of 600,000 shares of its common stock,
         at a price of $0.05 per share, for $30,000 cash proceeds.

         See also Note 3.



                                      F-12

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)


5.       INCOME TAXES

         (a)      The  Company  has  estimated  net losses for tax  purposes  to
                  December 31, 2004, totalling approximately $108,000, which may
                  be  applied   against   future   taxable  income  until  2018.
                  Accordingly, there is no tax expense charged to operations for
                  the  years  ended  December  31,  2004 and 2003.  The  Company
                  evaluates its valuation  allowance  requirements  on an annual
                  basis based on projected future operations. When circumstances
                  change  and this  causes a change  in  management's  judgement
                  about the realizability of deferred tax assets,  the impact of
                  the change on the valuation  allowance is generally  reflected
                  in current income/loss.

         (b)      The tax effects of temporary differences that give rise to the
                  Company's deferred tax asset (liability) are as follows:

                                                      2004              2003
                                                        $                 $

                  Tax loss carryforwards                37,800           21,500
                  Valuation allowance                  (37,800)         (21,500)
                                                  ------------     ------------
                                                             -                -
                                                  ============     ============


6.       RELATED PARTY TRANSACTIONS

         During the year ended  December  31,  2004,  the  Company  was  charged
         $14,955 (2003 - $5,656) for  accounting  and  administration  fees by a
         company controlled by the president of the Company.  As of December 31,
         2004,  $3,635 (2003 - $2,614)  remained  unpaid by the Company for past
         fees  and  disbursements  incurred  on  behalf  of the  Company  and is
         included in accounts payable.


7.       SEGMENT REPORTING

         In June 1997, SFAS 131, "DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND
         RELATED INFORMATION", was issued. Operating segments, as defined in the
         pronouncement,  are  components of an enterprise  about which  separate
         financial  information is available and that are evaluated regularly by
         the Company in  deciding  how to allocate  resources  and in  assessing
         performance.  The financial  information  is required to be reported on
         the basis that is used  internally for evaluating  segment  performance
         and deciding how to allocate resources to segments.

         The Company has one reportable segment, the exploration and development
         of oil and gas properties. The Company has concentrated its oil and gas
         exploration and development activities in the western United States.


8.       COMMITMENTS AND CONTINGENCIES

         The Company may be subject to various possible  contingencies which are
         derived  primarily from  interpretations  of federal and state laws and
         regulations  affecting  the oil and gas industry.  Although  management
         believes it has  complied  with the various laws and  regulations,  new
         rulings  and  interpretations  may  require  the Company to make future
         adjustments.




                                      F-13

<PAGE>


                               GLOBAL ENERGY INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                           (EXPRESSED IN U.S. DOLLARS)

9.       SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)

         The determination of oil and gas reserve  quantities  involves numerous
         estimates which are highly complex and interpretive.  The estimates are
         subject to continuing  re-evaluation and reserve  quantities may change
         as additional information becomes available. Estimated values of proved
         reserves were computed  applying prices in effect at December 31, 2004.
         The  average  price  used was  $41.77  (2003 - $30.71)  per  barrel for
         condensate and $7.10 (2003 - $5.18) per Mcf for gas.  Estimated  future
         costs  were  calculated  assuming  continuation  of costs and  economic
         conditions at the reporting date.

         (a)      The  Company's  share of  estimated  proved  reserves  and the
                  changes therein are set forth below:


                                                      GAS           CONDENSATE
                                                     (MCF)            (BBLS)
         Proved reserves:

             Balance, at December 31, 2002                   -                -
                Acquired in 2003 (Note 3)               76,688            1,497
                Production                             (13,006)            (233)
                                                  ------------     ------------
             Balance, at December 31, 2003              63,682            1,264
                Production                              (9,008)            (156)
                Revisions of prior estimate             (3,051)            (559)
                                                  ------------     ------------
             Balance, at December 31, 2004              51,623              549
                                                  ============     ============

         Proved developed reserves:

             Balance, at December 31, 2003              63,682            1,264
                                                  ============     ============
             Balance, at December 31, 2004              51,623              549
                                                  ============     ============

         (b)      The standardized  measure of discounted future cash flows from
                  reserve is set forth below:

                                                      2004             2003
                                                       $                 $

         Future cash inflows                           383,802          368,709
         Future production and development costs      (177,303)        (212,900)
         Future ad valorem tax expenses                (28,540)         (54,533)
                                                  ------------     ------------
         Future net cash flows                         177,959          101,276
         10% discount factor                           (60,763)         (32,977)
                                                  ------------     ------------
         Standardized measure of discounted
             future net cash flows                     117,196           68,299
                                                  ============     ============


10.      COMPREHENSIVE INCOME

         There are no  adjustments  necessary  to the net (loss) as presented in
         the  accompanying  statements  of  operations  to derive  comprehensive
         income in accordance with SFAS 130, "Reporting Comprehensive Income".

                                      F-14

<PAGE>