As filed with the Securities and Exchange Commission on September 23, 2004
                                    An Exhibit List can be found on page II-[ ].
                                                           Registration No. 333-


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                          ----------------------------

                                    FORM SB-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                          -----------------------------

                           TORRENT ENERGY CORPORATION
                 (Name of small business issuer in its charter)

     Colorado                            5500                     84-0503749
(State or other Jurisdiction   (Primary Standard Industrial    (I.R.S. Employer
of Incorporation or             Classification Code Number)  Identification No.)
Organization)

                             3400-666 Burrard Street
                          Vancouver, BC V6C 2X8, Canada
                                 (604) 639-3118
        (Address and telephone number of principal executive offices and
                          principal place of business)

                            Mark Gustafson, President
                           TORRENT ENERGY CORPORATION
                             3400-666 Burrard Street
                          Vancouver, BC V6C 2X8, Canada
                                 (604) 639-3118
            (Name, address and telephone number of agent for service)

                                   Copies to:
                             Gregory Sichenzia, Esq.
                       Sichenzia Ross Friedman Ference LLP
                     1065 Avenue of the Americas, 21st Flr.
                            New York, New York 10018
                                 (212) 930-9700
                              (212) 930-9725 (fax)

                APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
     From time to time after this Registration Statement becomes effective.


If any securities  being  registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than   securities   offered  only  in  connection   with  dividend  or  interest
reinvestment plans, check the following box: [X]



If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration statement for the same offering. ________

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. _________

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. _________

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. _________




                                       2




                         CALCULATION OF REGISTRATION FEE

------------------------------- -------------------- ---------------- ------------------ --------------------
Title of each class of              Amount to be        Proposed          Proposed           Amount of
   securities to be                 registered (1)      maximum           maximum         registration fee
      registered                                        offering          aggregate
                                                        price per       offering price
                                                        share (2)
------------------------------- -------------------- ---------------- ------------------ --------------------
                                                                                   
      Common stock, $.001 par          5,000,000 (3)        $.75            $3,750,000          $475.13
          value issuable upon
       conversion of Series B
  Convertible Preferred Stock
------------------------------- -------------------- ---------------- ------------------ --------------------
Common stock, $.001 par value          3,602,930            $.75         $2,702,197.50          $342.37
------------------------------- -------------------- ---------------- ------------------ --------------------
      Common stock, $.001 par          1,942,930            $.75         $1,457,197.50          $184.63
 value issuable upon exercise
                  of warrants
------------------------------- -------------------- ---------------- ------------------ --------------------
      Common stock, $.001 par            200,000           $1.00              $200,000           $25.34
 value issuable upon exercise
                   of options
------------------------------- -------------------- ---------------- ------------------ --------------------
      Common stock, $.001 par            200,000           $2.00              $400,000           $50.68
 value issuable upon exercise
                   of options
------------------------------- -------------------- ---------------- ------------------ --------------------
                        Total         10,945,860                            $8,509,395        $1,077.15
------------------------------- -------------------- ---------------- ------------------ --------------------


(1) Includes shares of our common stock,  par value $0.001 per share,  which may
be offered pursuant to this  registration  statement,  which shares are issuable
upon  conversion  of  Series  B  Convertible  Preferred  Stock  by  the  selling
stockholders. In addition to the shares set forth in the table, the amount to be
registered  includes an indeterminate  number of shares issuable upon conversion
of the Series B Convertible  Preferred Stock as such number may be adjusted as a
result of stock splits,  stock dividends and similar  transactions in accordance
with Rule 416.  The  number of  shares  of  common  stock  registered  hereunder
represents  a good faith  estimate by us of the number of shares of common stock
issuable  upon  conversion  of the Series B  Convertible  Preferred  Stock.  For
purposes of  estimating  the number of shares of common  stock to be included in
this registration  statement,  we calculated a good faith estimate of the number
of shares of our common stock that we believe will be issuable  upon  conversion
of the Series B Convertible  Preferred Stock to account for market fluctuations,
and  antidilution  and price protection  adjustments,  respectively.  Should the
conversion ratio result in our having insufficient shares, we will not rely upon
Rule 416, but will file a new registration statement to cover the resale of such
additional shares should that become necessary.  In addition,  should a decrease
in the  exercise  price as a result of an issuance  or sale of shares  below the
then current market price, result in our having insufficient shares, we will not
rely upon Rule 416,  but will  file a new  registration  statement  to cover the
resale of such additional shares should that become necessary.

(2)  Estimated  solely for  purposes  of  calculating  the  registration  fee in
accordance  with Rule 457(c) and Rule 457(g) under the  Securities  Act of 1933,
using the average of the high and low price as reported on the  Over-The-Counter
Bulletin Board on September 20, 2004, which was $.75 per share.

(3) Includes a good faith estimate of the shares underlying Series B Convertible
Preferred Stock to account for market fluctuations.

     The registrant  hereby amends this  registration  statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further  amendment  which  specifically  states  that  this  registration
statement shall  thereafter  become effective in accordance with Section 8(a) of
the  Securities  Act of 1933 or until the  registration  statement  shall become
effective  on such  date  as the  Securities  and  Exchange  Commission,  acting
pursuant to said Section 8(a), may determine.


                                       3

     PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 2004


                           TORRENT ENERGY CORPORATION
                              10,945,860 SHARES OF
                                  COMMON STOCK

     This prospectus relates to the resale by the selling  stockholders of up to
10,945,860  shares of our common  stock,  including  3,602,930  shares of common
stock, up to 1,942,930 shares  underlying  warrants,  400,000 shares  underlying
options  and  up to  5,000,000  shares  of  common  stock  underlying  Series  B
Convertible  Preferred  Stock.  The  Series  B  Convertible  Preferred  Stock is
convertible into our common stock, subject to a maximum cap of $250,000 worth of
Series B Convertible  Preferred  Stock in any 30 day calendar  period,  into the
number of our  shares of common  stock  equal to the sum of (i) the  liquidation
amount of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but
unpaid dividends,  which is then divided by the conversion price then in effect.
The liquidation  amount of the Series B Convertible  Preferred Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for the 10 trading  days  before but not  including  the  conversion  date.  The
selling  stockholders  may sell common stock from time to time in the  principal
market  on which  the  stock is  traded  at the  prevailing  market  price or in
negotiated transactions.  The selling stockholders may be deemed underwriters of
the shares of common stock which they are offering.  We will pay the expenses of
registering these shares.

     Our  common  stock is  registered  under  Section  12(g) of the  Securities
Exchange Act of 1934 and is listed on the Over-The-Counter  Bulletin Board under
the symbol  "TREN".  The last reported sales price per share of our common stock
as reported by the  Over-The-Counter  Bulletin  Board on September 20, 2004, was
$.75.

     Investing  in  these  securities  involves  significant  risks.  See  "Risk
Factors" beginning on page 4.

     Neither the  Securities and Exchange  Commission  nor any state  securities
commission has approved or disapproved of these securities or determined if this
Prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

               The date of this prospectus is September 23, 2004.

     The information in this Prospectus is not complete and may be changed. This
Prospectus is included in the  Registration  Statement that was filed by Torrent
Energy  Corporation  with the  Securities and Exchange  Commission.  The selling
stockholders  may not sell these  securities  until the  registration  statement
becomes effective.  This Prospectus is not an offer to sell these securities and
is not  soliciting an offer to buy these  securities in any state where the sale
is not permitted.


                                       4


                               PROSPECTUS SUMMARY

     The following summary  highlights  selected  information  contained in this
prospectus.  This  summary  does not  contain  all the  information  you  should
consider  before  investing  in the  securities.  Before  making  an  investment
decision,  you should read the entire prospectus carefully,  including the "risk
factors" section,  the financial statements and the secured convertible notes to
the financial statements.

                           TORRENT ENERGY CORPORATION

     We are an exploration  stage company  engaged in the exploration of coalbed
methane in the Coos Bay region of Oregon.  Through our wholly-owned  subsidiary,
Methane  Energy  Corp.,  we  hold  leases  to  approximately   60,000  acres  of
prospective  coalbed  methane  lands  in the  Coos Bay  region.  Methane  Energy
operates  the  exploration  project in the Coos Bay region.  We changed our name
from  Scarab  Systems,  Inc.  to Torrent  Energy on July 13, 2004 to reflect the
change in our business  operations  towards  coalbed  methane  exploration.  The
change in our business  operations  occurred as a result of our entering  into a
Lease Purchase and Sale Agreement, through Methane Energy, on April 30, 2004. We
were previously a web design and internet application developer.

     For the three months ended June 30, 2004, we generated no revenue and a net
loss of $675,319.  In addition,  for the year ended March 31, 2004, we generated
no revenue  and a net loss of  $374,606.  As a result of  recurring  losses from
operations and working capital deficiency,  our auditors,  in their report dated
April 7, 2004, have expressed substantial doubt about our ability to continue as
going concern.

     Our principal  offices are located at 3400-666  Burrard Street,  Vancouver,
British Columbia V6C 2X8, Canada, and our telephone number is (604) 639-3118. We
are a Colorado corporation.

The Offering



                                                                     
Common stock offered by selling stockholders......................Up to 10,945,860 shares, including the following:

                                                                  -    up to 5,000,000 shares of common stock  underlying  Series B
                                                                       Convertible  Preferred Stock (includes a good faith estimate
                                                                       of the  shares  underlying  Series B  Convertible  Preferred
                                                                       Stock to account for market  fluctuations  antidilution  and
                                                                       price protection adjustments, respectively);

                                                                  -    3,602,930 shares of common stock;

                                                                  -    1,942,930 shares underlying stock purchase warrants; and

                                                                  -    400,000 shares underlying options.



                                                                       This number represents 47.59% of our current outstanding
                                                                       stock.

Common stock to be outstanding after the offering.................Up to 22,999,179 shares

Use  of   proceeds................................................We will not receive any proceeds from the sale of the common
                                                                  stock. However, we will receive the sale price of any common
                                                                  stock we sell to the selling  stockholder  upon  exercise of
                                                                  the  warrants  and  options.  We expect to use the  proceeds


                                       5

                                                                  received  from the  exercise of the warrants and options for
                                                                  general  working  capital  purposes.  We have received gross
                                                                  proceeds  of  $1,100,000  from  the  sale  of the  Series  B
                                                                  Convertible  Preferred Stock and the investors are obligated
                                                                  to provide us with an additional $1,100,000; $550,000 within
                                                                  five  days   following  the  filing  of  this   registration
                                                                  statement and $550,000  within five days of this  prospectus
                                                                  being  declared  effective.  The proceeds  received from the
                                                                  sale of the  Series B  Convertible  Preferred  Stock will be
                                                                  used for lease  acquisitions,  core drilling,  marketing and
                                                                  public relations, working capital needs and payment of legal
                                                                  and professional fees.

Over-The-Counter Bulletin Board Symbol........................... TREN



     The above  information  regarding common stock to be outstanding  after the
offering  is based on  15,656,249  shares  of  common  stock  outstanding  as of
September 10, 2004 and assumes the subsequent  conversion of our issued Series B
Convertible Preferred Stock and the exercise of the warrants and options.

     To obtain funding for our ongoing operations, we entered into an Investment
Agreement with one accredited  investor on August 27, 2004 for the sale of 2,200
shares of Series B Convertible Preferred Stock for $2,200,000.

     This prospectus  relates to the resale of the common stock  underlying this
Series B Convertible  Preferred  Stock.  The investor is obligated to provide us
with an aggregate of $2,200,000 as follows:

     o    $1,100,000 was disbursed on August 27, 2004;

     o    $550,000  will be  disbursed  within  five days of the  filing of this
          registration statement; and

     o    $550,000 will be disbursed  within five days of the  effectiveness  of
          this prospectus.

     Accordingly,  we  have  received  a total  of  $1,100,000  pursuant  to the
Investment Agreement.

     The  Series  B  Convertible  Preferred  Stock  is  entitled  to  cumulative
dividends  of 5% per annum and are  convertible  into our common  stock,  at the
selling  stockholders'  option and subject to a maximum cap of $250,000 worth of
Series B Convertible  Preferred  Stock in any 30 day calendar  period,  into the
number of our  shares of common  stock  equal to the sum of (i) the  liquidation
amount of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but
unpaid dividends,  which is then divided by the conversion price then in effect.
The liquidation  amount of the Series B Convertible  Preferred Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for  the  10  trading  days  before  but  not  including  the  conversion  date.
Accordingly,  there is in fact no limit on the  number of shares  into which the
Series B Convertible Preferred Stock may be converted. As of September 21, 2004,
the volume weighted  average price of the common stock on a principal market for
the 10 trading days as reported on the Over-The-Counter Bulletin Board was $.758
and,  therefore,  the  conversion  price for the Series B Convertible  Preferred
Stock was $.6064.  Based on this conversion  price, the 2,200 shares of Series B
Convertible  Preferred  Stock,   excluding  dividends,   were  convertible  into
3,627,969 shares of our common stock.

     The  selling  stockholders  have  contractually  agreed to  restrict  their
ability to convert their Series B Convertible Preferred Stock and receive shares
of our common  stock such that the number of shares of common stock held by them
and their  affiliates  after such  conversion  does not exceed 4.99% of the then
issued and outstanding shares of common stock.



                                       6

     See the "Selling  Stockholders"  and "Risk Factors" sections for a complete
description of the Series B Convertible Preferred Stock.

                                       7



                                  RISK FACTORS

     This  investment  has a high  degree of risk.  Before you invest you should
carefully  consider the risks and  uncertainties  described  below and the other
information in this  prospectus.  If any of the following  risks actually occur,
our business,  operating results and financial condition could be harmed and the
value of our stock  could go down.  This  means you could  lose all or a part of
your investment.

Risks Relating to Our Business:

We Have a History Of Losses Which May Continue,  Which May Negatively Impact Our
Ability to Achieve Our Business Objectives.

     We incurred  net losses of  $374,606  for the year ended March 31, 2004 and
$396,277 for the year ended March 31, 2003.  For the three months ended June 30,
2004,  we  incurred  a net loss of  $675,319.  We cannot  assure you that we can
achieve or sustain  profitability  on a quarterly or annual basis in the future.
Our  operations  are  subject  to the  risks  and  competition  inherent  in the
establishment  of a business  enterprise.  There can be no assurance that future
operations  will be profitable.  Revenues and profits,  if any, will depend upon
various factors,  including whether we will be able to continue expansion of our
revenue.  We may not achieve our business  objectives and the failure to achieve
such goals would have an adverse impact on us.

If We Are Unable to Obtain  Additional  Funding Our Business  Operations Will be
Harmed and If We Do Obtain Additional  Financing Our Then Existing  Shareholders
May Suffer Substantial Dilution.

     We will  require  additional  funds to  sustain  and expand our oil and gas
exploration  activities.  We anticipate that we will require up to approximately
$2,500,000  to fund  our  continued  operations  for  the  next  twelve  months,
depending on revenue  from  operations.  Additional  capital will be required to
effectively  support  the  operations  and to  otherwise  implement  our overall
business strategy. There can be no assurance that financing will be available in
amounts  or on terms  acceptable  to us,  if at all.  The  inability  to  obtain
additional  capital will restrict our ability to grow and may reduce our ability
to  continue  to  conduct  business  operations.  If we  are  unable  to  obtain
additional  financing,  we will likely be required to curtail our  marketing and
exploration  plans and possibly  cease our  operations.  Any  additional  equity
financing may involve substantial dilution to our then existing shareholders.

Our Independent  Auditors Have Expressed  Substantial Doubt About Our Ability to
Continue  As a Going  Concern,  Which May  Hinder Our  Ability to Obtain  Future
Financing.

     In their report dated April 7, 2004, our  independent  auditors stated that
our  financial  statements  for the year  ended  March 31,  2004  were  prepared
assuming that we would continue as a going concern. Our ability to continue as a
going concern is an issue raised as a result of recurring losses from operations
and working capital deficiency.  We continue to experience net operating losses.
Our ability to continue as a going concern is subject to our ability to generate
a profit  and/or  obtain  necessary  funding  from  outside  sources,  including
obtaining  additional funding from the sale of our securities,  increasing sales
or  obtaining  loans  and  grants  from  various  financial  institutions  where
possible. Our continued net operating losses increases the difficulty in meeting
such  goals  and  there  can be no  assurances  that  such  methods  will  prove
successful.

We Have a Limited  Operating  History and if We are not Successful in Continuing
to Grow Our  Business,  Then We may have to Scale Back or Even Cease Our Ongoing
Business Operations.

     We have no history of  revenues  from  operations  and have no  significant
tangible assets.  We have yet to generate  positive earnings and there can be no
assurance  that we will  ever  operate  profitably.  Our  company  has a limited
operating  history and must be considered in the development  stage. Our success
is significantly dependent on a successful acquisition, drilling, completion and
production program.  Our operations will be subject to all the risks inherent in
the establishment of a developing  enterprise and the uncertainties arising from
the  absence  of a  significant  operating  history.  We may be unable to locate
recoverable reserves or operate on a profitable basis. We are in the development
stage  and  potential  investors  should be aware of the  difficulties  normally
encountered by enterprises in the development stage. If our business plan is not
successful,  and we are not able to operate profitably,  investors may lose some
or all of their investment in our company.

                                       8

If We Are Unable to Retain the Services of Mr.  Gustafson or If We Are Unable to
Successfully  Recruit Qualified Managerial and Field Personnel Having Experience
in Oil and Gas Exploration, We May Not Be Able to Continue Our Operations.

     Our success depends to a significant  extent upon the continued  service of
Mr. Mark Gustafson, our President,  Chief Financial Officer and a director. Loss
of the services of Mr.  Gustafson  could have a material  adverse  effect on our
growth, revenues, and prospective business. We do not maintain key-man insurance
on the life of Mr. Gustafson.  In addition,  in order to successfully  implement
and manage our business  plan,  we will be dependent  upon,  among other things,
successfully   recruiting   qualified  managerial  and  field  personnel  having
experience in the oil and gas  exploration  business.  Competition for qualified
individuals is intense.  There can be no assurance that we will be able to find,
attract and retain existing  employees or that we will be able to find,  attract
and retain qualified personnel on acceptable terms.

As Our Properties are in the Exploration and Development  Stage, There Can be no
Assurance That We Will Establish Commercial Discoveries on Our Properties.

     Exploration for economic  reserves of oil and gas is subject to a number of
risk factors.  Few properties  that are explored are  ultimately  developed into
producing  oil and/or gas  wells.  Our  properties  are in the  exploration  and
development  stage only and are without  proven  reserves of oil and gas. We may
not establish commercial discoveries on any of our properties.

Property Defects

We have not obtained  title  reports with respect to our oil and gas  properties
but believe our interests are valid and  enforceable;  however,  our information
does not guarantee  title against all possible  claims.  The  properties  may be
subject to prior unregistered agreements,  native land claims or transfers which
have not been recorded or detected through title research. We have not conducted
thorough  title  searches and there may be claims to our  properties  that would
have been evident if we had conducted  title  searches.  Additionally,  the land
upon which we hold oil and gas leases may not have been surveyed; therefore, the
precise area and location of such interests may be subject to challenge.

Conflicts of Interest

In addition to their interest in our company,  our management currently engages,
and intends to engage in the future,  in the oil and gas business  independently
of our company. As a result,  conflicts of interest between us and management of
our company might arise.


The Potential Profitability of Oil and Gas Ventures Depends Upon Factors Beyond
the Control of Our Company.

     The potential  profitability  of oil and gas  properties is dependent  upon
many factors beyond our control. For instance,  world prices and markets for oil
and gas are unpredictable,  highly volatile, potentially subject to governmental
fixing,  pegging,  controls,  or any combination of these and other factors, and
respond to changes in domestic,  international,  political, social, and economic
environments.   Additionally,   due  to  worldwide  economic  uncertainty,   the
availability  and cost of funds for  production  and other  expenses have become
increasingly difficult, if not impossible,  to project. These changes and events
may materially affect our financial performance.

     Adverse  weather  conditions  can  also  hinder  drilling   operations.   A
productive  well may become  uneconomic in the event water or other  deleterious
substances are encountered  which impair or prevent the production of oil and/or
gas from the well. In addition,  production from any well may be unmarketable if
it is impregnated with water or other deleterious substances.  The marketability
of oil and gas which may be acquired or discovered  will be affected by numerous
factors beyond our control.  These factors include the proximity and capacity of
oil and gas pipelines and processing  equipment,  market fluctuations of prices,
taxes,   royalties,   land  tenure,   allowable   production  and  environmental
protection.  These factors cannot be accurately predicted and the combination of


                                       9

these  factors  may result in our company not  receiving  an adequate  return on
invested capital.

Competition In The Oil And Gas Industry Is Highly Competitive And There Is No
Assurance That We Will Be Successful In Acquiring The Leases.

     The oil and gas industry is intensely competitive. We compete with numerous
individuals  and companies,  including  many major oil and gas companies,  which
have substantially  greater technical,  financial and operational  resources and
staffs. Accordingly, there is a high degree of competition for desirable oil and
gas leases,  suitable  properties for drilling operations and necessary drilling
equipment,  as well as for access to funds.  We cannot  predict if the necessary
funds can be raised or that any  projected  work will be  completed.  Our budget
anticipates  our acquisition of additional  acreage in the Coos Bay basin.  This
acreage may not become available or if it is available for leasing,  that we may
not be successful in acquiring the leases. There are other competitors that have
operations  in the Coos Bay basin and the  presence of these  competitors  could
adversely affect our ability to acquire additional leases.

The  Marketability  of Natural  Resources  Will be Affected by Numerous  Factors
Beyond Our Control  Which May Result in Us not  Receiving an Adequate  Return on
Invested Capital to be Profitable or Viable.

     The  marketability of natural resources which may be acquired or discovered
by us will be affected by numerous  factors  beyond our control.  These  factors
include market fluctuations in oil and gas pricing and demand, the proximity and
capacity of natural  resource  markets and  processing  equipment,  governmental
regulations,  land tenure,  land use,  regulation  concerning  the importing and
exporting of oil and gas and  environmental  protection  regulations.  The exact
effect of these factors cannot be accurately  predicted,  but the combination of
these  factors may result in us not  receiving  an  adequate  return on invested
capital to be profitable or viable.

Oil and Gas Operations are Subject to  Comprehensive  Regulation Which May Cause
Substantial  Delays or Require  Capital  Outlays in Excess of Those  Anticipated
Causing an Adverse Effect on Our Company.

     Oil and gas  operations  are  subject  to  federal,  state,  and local laws
relating to the protection of the environment, including laws regulating removal
of natural  resources  from the ground and the  discharge of materials  into the
environment.  Oil and gas  operations  are also subject to federal,  state,  and
local laws and regulations which seek to maintain health and safety standards by
regulating the design and use of drilling methods and equipment. Various permits
from government bodies are required for drilling operations to be conducted;  no
assurance  can be  given  that  such  permits  will be  received.  Environmental
standards  imposed by federal,  provincial,  or local authorities may be changed
and any such  changes  may have  material  adverse  effects  on our  activities.
Moreover,  compliance  with such laws may cause  substantial  delays or  require
capital outlays in excess of those  anticipated,  thus causing an adverse effect
on us.  Additionally,  we may be subject to  liability  for  pollution  or other
environmental  damages  which  it  may  elect  not  to  insure  against  due  to
prohibitive  premium costs and other reasons.  To date we have not been required
to spend any  material  amount on  compliance  with  environmental  regulations.
However,  we may be  required to do so in future and this may affect our ability
to expand or maintain our operations.

Exploration  and  Production  Activities  are  Subject to Certain  Environmental
Regulations  Which May Prevent or Delay the  Commencement  or Continuance of Our
Operations.

     In  general,  our  exploration  and  production  activities  are subject to
certain federal,  state and local laws and regulations relating to environmental
quality and pollution control.  Such laws and regulations  increase the costs of
these  activities and may prevent or delay the  commencement or continuance of a
given  operation.  Compliance  with  these  laws and  regulations  has not had a
material effect on our operations or financial condition to date.  Specifically,
we are subject to legislation  regarding  emissions into the environment,  water
discharges  and  storage and  disposition  of  hazardous  wastes.  In  addition,
legislation  has been  enacted  which  requires  well and  facility  sites to be
abandoned and reclaimed to the satisfaction of state authorities.  However, such
laws and  regulations  are  frequently  changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear
to affect us any  differently  or to any  greater  or lesser  extent  than other
companies in the industry.

     We believe that our operations comply, in all material  respects,  with all
applicable environmental regulations.

                                       10

     Our  operating  partners  maintain  insurance  coverage  customary  to  the
industry;  however, we are not fully insured against all possible  environmental
risks.

Exploratory  Drilling Involves Many Risks and We May Become Liable for Pollution
or Other Liabilities Which May Have an Adverse Effect on Our Financial Position.

     Drilling  operations  generally involve a high degree of risk. Hazards such
as  unusual  or  unexpected   geological   formations,   power  outages,   labor
disruptions,  blow-outs, sour gas leakage, fire, inability to obtain suitable or
adequate  machinery,  equipment or labor,  and other risks are involved.  We may
become  subject to liability  for  pollution or hazards  against which it cannot
adequately  insure  or which it may  elect  not to  insure.  Incurring  any such
liability  may have a material  adverse  effect on our  financial  position  and
operations.

Any Change to Government Regulation/Administrative Practices May Have a Negative
Impact on Our Ability to Operate and Our Profitability.

     The laws, regulations,  policies or current administrative practices of any
government body,  organization or regulatory  agency in the United States or any
other  jurisdiction,  may be changed,  applied or  interpreted in a manner which
will fundamentally alter the ability of our company to carry on our business.

     The actions, policies or regulations, or changes thereto, of any government
body or  regulatory  agency,  or  other  special  interest  groups,  may  have a
detrimental  effect on us.  Any or all of these  situations  may have a negative
impact on our ability to operate and/or our profitably.

Risks Relating to Our Current Financing Arrangement:

There Are a Large Number of Shares Underlying Our Series B Convertible Preferred
Stock That May be  Available  for Future  Sale and the Sale of These  Shares May
Depress the Market Price of Our Common Stock.

     As of September 10, 2004, we had  15,656,249  shares of common stock issued
and outstanding and Series B Convertible Preferred Stock outstanding that may be
converted into an estimated  1,928,472  shares of common stock at current market
prices.  Additionally,  we  have an  obligation  to sell  Series  B  Convertible
Preferred  Stock that may be  converted  into an estimated  1,928,472  shares of
common  stock at current  market  prices in the near future.  In  addition,  the
number of shares of common stock  issuable upon  conversion  of the  outstanding
Series B  Convertible  Preferred  Stock may  increase if the market price of our
stock  declines.  All of the shares,  including all of the shares  issuable upon
conversion  of the  Series B  Convertible  Preferred  Stock may be sold  without
restriction.  The sale of these shares may adversely  affect the market price of
our common stock.

The Continuously Adjustable Conversion Price Feature of Our Series B Convertible
Preferred  Stock Could  Require Us to Issue a  Substantially  Greater  Number of
Shares, Which Will Cause Dilution to Our Existing Stockholders.

     Our obligation to issue shares upon  conversion of our Series B Convertible
Preferred  Stock is  essentially  limitless.  The following is an example of the
amount of shares of our common stock that are issuable,  upon  conversion of our
Series B Convertible  Preferred Stock (excluding  accrued  dividends),  based on
market prices 25%, 50% and 75% below the market price,  as of September 15, 2004
of $0.75.

                                                       Number            % of
% Below          Price Per        With Discount      of Shares       Outstanding
Market              Share           at 20%           Issuable           Stock
------              -----           ------           --------           -----

25%                $.5625           $.45             4,888,889          23.80%
50%                $ .375           $.30             7,333,334          31.90%
75%                $.1875           $.15            14,666,667          48.37%

     As  illustrated,  the  number  of  shares of  common  stock  issuable  upon
conversion  of our Series B  Convertible  Preferred  Stock will  increase if the
market price of our stock  declines,  which will cause  dilution to our existing

                                       11

stockholders.

The Continuously Adjustable Conversion Price feature of our Series B Convertible
Preferred Stock May Encourage Investors to Make Short Sales in Our Common Stock,
Which Could Have a Depressive Effect on the Price of Our Common Stock.

     The Series B Convertible  Preferred Stock is convertible into shares of our
common stock at a 20% discount to the trading price of the common stock prior to
the  conversion.  The significant  downward  pressure on the price of the common
stock as the selling  stockholder  converts and sells material amounts of common
stock  could  encourage  short  sales by  investors.  This could  place  further
downward  pressure on the price of the common  stock.  The  selling  stockholder
could sell common  stock into the market in  anticipation  of covering the short
sale by  converting  their  securities,  which could cause the further  downward
pressure on the stock  price.  In addition,  not only the sale of shares  issued
upon  conversion of preferred  stock,  but also the mere  perception  that these
sales could occur, may adversely affect the market price of the common stock.

The Issuance of Shares Upon  Conversion  of the Series B  Convertible  Preferred
Stock May Cause Immediate and Substantial Dilution to Our Existing Stockholders.

     The  issuance  of  shares  upon  conversion  of the  Series  B  Convertible
Preferred  Stock may result in  substantial  dilution to the  interests of other
stockholders since the selling  stockholders may ultimately convert and sell the
full amount issuable on conversion.  Although the selling  stockholders  may not
convert  their Series B Convertible  Preferred  Stock if such  conversion  would
cause  them to own  more  than  4.99%  of our  outstanding  common  stock,  this
restriction  does not prevent the selling  stockholders  from converting some of
their holdings and then converting the rest of their holdings.  In this way, the
selling  stockholders  could sell more than this limit while never  holding more
than this  limit.  There is no upper  limit on the number of shares  that may be
issued which will have the effect of further diluting the  proportionate  equity
interest and voting power of holders of our common stock, including investors in
this offering.

In The Event That Our Stock Price Declines, The Shares Of Common Stock Allocated
For  Conversion  Of The  Series B  Convertible  Preferred  Stock and  Registered
Pursuant To This Prospectus May Not Be Adequate And We May Be Required to File A
Subsequent  Registration  Statement Covering Additional Shares. If The Shares We
Have Allocated And Are Registering Herewith Are Not Adequate And We Are Required
To File An Additional  Registration Statement, We May Incur Substantial Costs In
Connection Therewith.

     Based on our current market price and the potential  decrease in our market
price as a result of the  issuance  of shares  upon  conversion  of the Series B
Convertible Preferred Stock, we have made a good faith estimate as to the amount
of shares of common  stock that we are  required to register  and  allocate  for
conversion of the Series B Convertible  Preferred  Stock.  Accordingly,  we have
allocated and registered  5,000,000 shares to cover the conversion of the Series
B Convertible Preferred Stock. In the event that our stock price decreases,  the
shares  of  common  stock  we have  allocated  for  conversion  of the  Series B
Convertible  Preferred Stock and are registering  hereunder may not be adequate.
If the shares we have allocated to the  registration  statement are not adequate
and we are required to file an additional  registration  statement, we may incur
substantial  costs  in  connection  with  the  preparation  and  filing  of such
registration statement.

Risks Relating to Our Common Stock:

If We Fail to Remain Current in Our Reporting Requirements,  We Could be Removed
From the OTC Bulletin Board Which Would Limit the Ability of  Broker-Dealers  to
Sell Our Securities and the Ability of Stockholders to Sell Their  Securities in
the Secondary Market.

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

                                       12

the ability of stockholders to sell their securities in the secondary market.

Our  Common  Stock is  Subject  to the  "Penny  Stock"  Rules of the SEC and the
Trading Market in Our  Securities is Limited,  Which Makes  Transactions  in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

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

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

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

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

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

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

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

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



                                       13

                                 USE OF PROCEEDS

     This  prospectus  relates to shares of our common stock that may be offered
and sold from time to time by the selling stockholders.  We will not receive any
proceeds  from the sale of  shares  of common  stock in this  offering.  We have
received gross proceeds of $1,100,000  from the sale of the Series B Convertible
Preferred Stock and the investors are obligated to provide us with an additional
$1,100,000;  $550,000  within  five  days of the  filing  of  this  registration
statement,  and  $550,000  within five days of this  prospectus  being  declared
effective.  The  proceeds  received  from the sale of the  Series B  Convertible
Preferred Stock will be used for lease  acquisitions,  core drilling,  marketing
and  public   relations,   working  capital  needs  and  payment  of  legal  and
professional fees.

            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our  common  stock is quoted on the OTC  Bulletin  Board  under the  symbol
"TREN".  Prior to July 30,  2004,  our common  stock was quoted under the symbol
"SBSY."  Prior to March 24,  2003,  our common stock was quoted under the symbol
"IRVV."

     For the periods indicated,  the following table sets forth the high and low
bid  prices  per share of common  stock.  These  prices  represent  inter-dealer
quotations  without  retail  markup,   markdown,   or  commission  and  may  not
necessarily represent actual transactions.



                                    High($)            Low ($)
                                    ------            ------

  2003
  First Quarter (1)                 $ 1.70             0.60
  Second Quarter                      0.90             0.10
  Third Quarter                       0.40             0.20
  Fourth Quarter                      0.30             0.10

  2004
  First Quarter                       0.20             0.10
  Second Quarter                      0.20             0.10
  Third Quarter                       0.20             0.10
  Fourth Quarter                      0.51             0.05

  2005
  First Quarter                       1.29             0.38
  Second Quarter (2)                  1.18             0.65

(1) All  prices  per share  before  January  20,  2004,  take into  account  the
one-for-ten  share  consolidation  which  has  the  effect  of  multiplying  the
pre-consolidated  price per share by a factor of ten.  (2) As of  September  10,
2004.

HOLDERS

     As of September  10, 2004, we had  approximately  181 holders of our common
stock.  The number of record  holders  was  determined  from the  records of our
transfer  agent and does not  include  beneficial  owners of common  stock whose
shares  are  held  in the  names  of  various  security  brokers,  dealers,  and
registered  clearing  agencies.  The  transfer  agent  of our  common  stock  is
Computershare  Trust Company,  Inc., 350 Indiana Street,  Suite 800, Golden,  CO
80401.

     We have never declared or paid any cash  dividends on our common stock.  We
do not anticipate  paying any cash dividends to  stockholders in the foreseeable
future. In addition,  any future  determination to pay cash dividends will be at

                                       14

the  discretion  of the  Board  of  Directors  and  will be  dependent  upon our
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deem relevant.

Equity Compensation Plan Information

2004 Non-Qualified Stock Option Plan

     In February 2004, the Board of Directors  authorized the 2004 Non-Qualified
Stock  Option Plan for our  executive,  employees  and outside  consultants  and
advisors. Under the 2004 Non-Qualified Stock Option Plan, executives,  employees
and outside  consultants and advisors may receive awards of non-qualified  stock
options.  A maximum of  1,800,000  shares of our common stock are subject to the
2004 Non-Qualified Stock Option Plan. As of September 15, 2004,  1,800,000 stock
options have been granted to  consultants  under the Plan to purchase  1,800,000
shares of our common stock. The purpose of the 2004  Non-Qualified  Stock Option
Plan is to  provide  executives,  employees  and  non-employee  consultants  and
advisors with an increased incentive to make contributions to our company. As of
September 15, 2004,  there were 200,000 options to purchase shares of our common
stock outstanding.


     The following table sets forth certain information  concerning the granting
of incentive stock options during the last completed  fiscal year to each of the
named executive officers and the terms of such options:


 Option/SAR Grants in the Last Fiscal Year


Individual Grants




                           Number of        % of Total
                           Securities       Options/SARs
                           Underlying       Granted to
                           Options/SARs     Employees in      Exercise or Base    Expiration
     Name                  Granted (#)      Fiscal Year       Price ($/Share)        Date
     ----------------      -----------      -------------     ----------------    ----------
                                                                         
     Thomas E. Mills       0                n/a               n/a                 n/a


     The following table sets forth certain information  concerning the exercise
of incentive stock options during the last completed  fiscal year by each of the
named executive officers and the fiscal year-end value of unexercised options on
an aggregated basis:

Aggregated  Option/SAR  Exercises  in Last  Fiscal  Year  and  Fiscal  Year  End
                                Option/SAR Values







                                                                          Value of
                                                      Number of           Unexercised
                                                      Unexercised         In-the-Money
                                                      Options/SARs        Options/SAR
                      Shares           Value          at FY-End(#)        at FY-End($)(2)
                     Acquired       Realized(1)       Exercisable/        Exercisable/
    Name          on Exercise(#)        ($)           Unexercisable       Unexercisable
---------------   --------------    -----------       -------------     -----------------
                                                                   
Thomas E. Mills        -0-             -0-                 0/0                 0/0


     (1)  Value Realized is determined by calculating the difference between the
          aggregate  exercise price of the options and the aggregate fair market
          value of the Common Stock on the date the options are exercised.

     (2)  The value of  unexercised  options is  determined by  calculating  the
          difference between the fair market value of the securities  underlying
          the options at fiscal year end and the exercise price of the options.


                                       15


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND PLAN OF OPERATIONS

     Some  of  the  information  in  this  Form  SB-2  contains  forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may,"  "will,"  "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:

     o    discuss our future expectations;
     o    contain  projections  of our future  results of  operations  or of our
          financial condition; and
     o    state other "forward-looking" information.

     We believe it is important to communicate our expectations.  However, there
may be events in the future that we are not able to  accurately  predict or over
which we have no control.  Our actual  results and the timing of certain  events
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."

 Overview

     Until June 22, 2004,  when we closed on the purchase of certain oil and gas
leases in the Coos Bay  region,  our  business  was to provide  services  to the
e-commerce  industry.  Historically,  these  services  have  been  comprised  of
marketing,  e-commerce  development and the sale and distribution of transaction
processing and payment services. Since none of these services were sufficient to
provide us with a sustainable  foundation,  we commenced reviewing opportunities
in the resource sector in late fiscal 2004. Accordingly,  the accumulated losses
of $883,317 to March 31, 2004 reflect our past  activities that have been either
discontinued  or abandoned.  In addition,  the results of  operations  discussed
herein reflect our previous  operations and not the financial results of our new
business model.

     Our restructuring  accelerated in the final quarter of fiscal 2004 (January
1 to March 31,  2004) and was  finalized  in the first  quarter  of fiscal  2005
(April 1 to June 30,  2004).  We decided to  investigate  and pursue a number of
conventional  oil and gas  opportunities  as well as a number of  unconventional
(coalbed  methane)  acquisition  candidates.  Due diligence on a coalbed methane
opportunity  was  completed  in April and May of 2004,  resulting  in the May 20
announcement  of the purchase of certain  Oregon-based  oil and gas lease assets
from an independent company. Two private placements in this first quarter (April
1 to June 30,  2004)  allowed  us to  complete  the  lease  acquisitions  and to
commence  leasing  additional  mineral  rights  under the land  surrounding  the
existing oil and gas leases. We now have a coalbed methane exploration  prospect
in Oregon to focus on  developing.  Additional  financings  will be  required to
support further leasing activities and related drilling programs.

Results of Operations

For the Year Ended March 31, 2004 Compared to the Year Ended March 31, 2003

Operating Expenses from Continued Operations

     Operating   expenses   consisted  of  consulting  fees,   management  fees,
professional   fees,  stock  based  compensation  and  other  general  corporate
expenses.  Operating  expenses  were $411,651 for the year ended March 31, 2004,
compared  with  $347,045 for the year ended March 31,  2003.  The increase was a
result of us recording  $195,740 in stock based  compensation  for stock options
granted to  consultants  during the year ended March 31, 2004,  compared with no
such  expense  for the year ended  March 31,  2003.  Excluding  the stock  based
compensation charge of $195,740,  the operating costs decreased by $131,134,  or
38%, due to the  curtailing of  substantially  all of our  operating  activities
during the current year.  Consulting fees were $169,059 for the year ended March
31, 2004,  compared with $170,469 for the year ended March 31, 2003.  During the
current period,  we recorded  $100,000 in consulting  services for restructuring
efforts  and the  balance of $69,059  was  related to  consulting  services  for
managing our  operations  and  reporting  requirements.  During the  comparative
period in 2003, consultants were engaged to manage our operations.  Professional
fees were $65,780 for the year ended

                                       16

March 31,  2003,  compared  with no such fees for the year ended March 31, 2004.
Professional fees incurred in fiscal year 2003 consisted of financial consulting
fees for the negotiation of debt financing for our  operations.  Audit and legal
fees were $14,924 for the year ended March 31, 2004  compared to $20,181 for the
year  ended  March 31,  2003.  Legal and  accounting  fees  related to the costs
associated  with our audited  statements  and  periodic  reporting  obligations.
General office expenses were $21,501 for the year ended March 31, 2004, compared
with $30,756 for the year ended March 31, 2003 when we were operating.  Interest
costs were $8,948 for the year ended March 31, 2004 compared with $7,621 for the
year ended March 31, 2003.

Gain on Settlement of Debt

     We recorded a gain on the  settlement of debt of $37,045 for the year ended
March 31, 2004  compared  to no such gain during the year ended March 31,  2003.
The gains were from  negotiated  settlements  with creditors to our benefit.  We
also  recorded  gains on the  settlement  of related party debt in the amount of
$110,527  for the year ended March 31,  2004.  However,  debt  settlements  with
related  parties  are  treated as  contributed  surpluses  in the  statement  of
stockholders' deficit instead of the statement of operations.

Net Income from Discontinued Operations

     We ceased  substantially all of our operating  businesses during the fiscal
year ended March 31, 2003 and, as a result,  combined all operating revenues and
expenses  related to the previous  business under  discontinued  operations.  We
recorded no net income from discontinued operations for the year ended March 31,
2004, compared with a net income of $21,082 for the year ended March 31, 2003.

Net Loss for the Period

     We  recorded  a net loss of  $374,606  for the year ended  March 31,  2004,
compared with a net loss of $396,277 for the year ended March 31, 2003.

For the Three Months Ended June 30, 2004 Compared to the Three Months Ended June
30, 2003

Operating Expenses

     Operating  expenses  rose  considerably  between  the  periods  due  to our
increased activity.  During the three months ended June 30, 2004, we concluded a
financing  and closed an agreement  to acquire  certain oil and gas lease assets
for the Coos Bay Basin  exploration  prospect  located  onshore  in the Coos Bay
Basin of Oregon.  Operating  expenses  consisted of  consulting  fees,  investor
relation's  expenses,  accounting and legal fees,  stock based  compensation and
other general corporate expenses.

     Operating  expenses were $675,319 for the three months ended June 30, 2004,
compared  with $28,590 for the three  months ended June 30, 2003. A  significant
portion of the increase was  attributable  to the recording of $375,710 in stock
based compensation during the three months ended June 30, 2004, compared with no
such  expense  for the  three  months  ended  June 30,  2003.  The  stock  based
compensation  expense consisted of a charge of $213,710 relating to the issuance
of 540,000 stock options to  consultants  during the current period and a charge
of $162,000  relating  to the  issuance  of 300,000  shares of our common  stock
pursuant to an investor  relations  agreement  to provide an investor  awareness
program for a period of one year.

     Consulting  fees were  $102,210  for the three  months ended June 30, 2004,
compared  with  $26,473 for the three  months  ended June 30,  2003.  During the
current  period,  we  recorded  $80,000  in  consulting  services  for the final
restructuring efforts and for purchase  investigation  services.  The balance of
the  consulting  fees  of  $22,210  related  to  technical  and   administrative
consulting  services for our Coos Bay project.  During the comparative period in
2003,  consultants  were  engaged to sustain our minimum  operations.  Insurance
expenses  were $46,569 for the three  months ended June 30, 2004  compared to no
such expense for the three months ended June 30, 2003.  We were required to have
pollution  liability  coverage  in  order to  secure  certain  leases.  Investor
relation's  expenses  were  $72,168 for the three months ended June 30, 2004 and
shareholder relation's expenses were $37,153 for the three months ended June 30,
2004.  Investor relations expenses consisted  predominantly of a $70,000 payment
to an investor relations firm for providing a shareholder  awareness program for
a  period  of  one  year.  Shareholder  relation  expenses  consisted  of  costs

                                       17

associated  with  disseminating  press  releases and the costs of designing  and
building  of our  website,  www.torrentenergy.com.  This  compares  with no such
investor relations or shareholder  relations expenses for the comparative period
when we were inactive.

Net Loss for the Period

     We  recorded a net loss of  $675,319  for the three  months  ended June 30,
2004,  compared  with a net loss of $28,590 for the three  months ended June 30,
2003.

Liquidity and Capital Resources

     Our cash on hand was  $88,985 as at June 30,  2004  compared  to $12,621 at
March 31,  2004.  Our working  capital  improved to $57,001 as at June 30, 2004,
compared to a working capital deficit of $15,261 as at March 31, 2004.

     Our improved cash position and working  capital was achieved though receipt
of gross  proceeds of $559,025  from the issuance of common stock and $40,000 in
gross proceeds from a share  subscription  agreement which closed  subsequent to
the quarter end. This  compares  with no such  proceeds  during the three months
ended June 30, 2003 when we were inactive.

     During the three months ended June 30, 2004,  we expended  cash of $227,154
on our Coos Bay project. This included $105,541 in acquisition costs,  including
the $100,000 cash payments to GHI, and $121,613 in lease costs to secure the oil
and gas  rights.  During  the  comparative  period  last  year,  we made no such
investments as we were inactive.

     We are not required to make any further lease payments  pursuant to our oil
and gas leases, until after our next year end of March 31, 2005.

     We will require  additional  financing in order to complete our stated plan
of  operations  for the next twelve  months.  We believe that we will require an
additional  $2,500,000  to sustain  minimum  operations  during the next  twelve
months.  There  can be no  assurance,  however,  that  such  financing  will  be
available  or,  if it is  available,  that we will  be  able to  structure  such
financing on terms  acceptable  to us and that it will be sufficient to fund our
cash  requirements  until we can  reach a level  of  profitable  operations  and
positive  cash  flows.  If we are unable to obtain the  financing  necessary  to
support our  operations,  we may be unable to continue  as a going  concern.  We
currently have no firm commitments for any additional capital.

     To obtain funding for our ongoing operations, we entered into an Investment
Agreement with one accredited  investor on August 27, 2004 for the sale of 2,200
shares of Series B Convertible  Preferred Stock for $2,200,000.  This prospectus
relates to the resale of the common stock  underlying  this Series B Convertible
Preferred  Stock. The investors are obligated to provide us with an aggregate of
$2,200,000 as follows:

     o    $1,100,000 was disbursed on August 27, 2004;

     o    $550,000  will be  disbursed  within  five days of the  filing of this
          registration statement; and

     o    $550,000 will be disbursed  within five days of the  effectiveness  of
          this prospectus.

     Accordingly,  we  have  received  a total  of  $1,100,000  pursuant  to the
Investment  Agreement.  The  funds  from  the sale of the  Series B  Convertible
Preferred  Stock  will be  used  for  business  development  purposes,  business
acquisitions,  working  capital  needs,  pre-payment  of  interest,  payment  of
consulting and legal fees and borrowing repayment.

     The  Series  B  Convertible  Preferred  Stock  is  entitled  to  cumulative
dividends  of 5% per annum and are  convertible  into our common  stock,  at the
selling  stockholders'  option and subject to a maximum cap of $250,000 worth of
Series B Convertible  Preferred  Stock in any 30 day calendar  period,  into the
number of our  shares of common  stock  equal to the sum of (i) the  liquidation
amount of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but

                                       18

unpaid dividends,  which is then divided by the conversion price then in effect.
The liquidation  amount of the Series B Convertible  Preferred Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for the 10 trading  days  before  but not  including  the  conversion  date.  In
addition,  the conversion price of the Series B Convertible Preferred Stock will
be adjusted in the event that we issue  common  stock at a price below the fixed
conversion  price,  below market  price,  with the  exception of any  securities
issued in connection with the Investment Agreement.  The conversion price of the
Series B Convertible  Preferred  Stock may be adjusted in certain  circumstances
such as if we pay a stock dividend,  subdivide or combine  outstanding shares of
common  stock  into a greater  or lesser  number of  shares,  or take such other
actions as would  otherwise  result in  dilution  of the  selling  stockholder's
position.  The selling  stockholders have contractually agreed to restrict their
ability to convert and receive  shares of our common  stock such that the number
of  shares  of  common  stock  held by them  and  their  affiliates  after  such
conversion  does not exceed 4.99% of the then issued and  outstanding  shares of
common stock. In addition,  we have granted the investors a security interest in
substantially  all of our  assets and  intellectual  property  and  registration
rights.

     Since the conversion price will be less than the market price of the common
stock  at the time  the  Series B  Convertible  Preferred  Stock is  issued,  we
anticipate recognizing a charge relating to the beneficial conversion feature of
the Series B  Convertible  Preferred  Stock during the quarter in which they are
issued,  including the second quarter of fiscal 2005 when $1,100,000 of Series B
Convertible Preferred Stock were issued.

We will still need  additional  investments  in order to continue  operations to
cash flow break even.  Additional  investments  are being sought,  but we cannot
guarantee  that  we  will  be  able  to  obtain  such   investments.   Financing
transactions  may include the issuance of equity or debt  securities,  obtaining
credit facilities, or other financing mechanisms.  However, the trading price of
our common stock and the downturn in the U.S.  stock and debt markets could make
it more  difficult  to obtain  financing  through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could  incur  unexpected  costs and  expenses,  fail to  collect  significant
amounts owed to us, or experience  unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities,  stockholders may experience  additional  dilution or the new equity
securities  may  have  rights,  preferences  or  privileges  senior  to those of
existing  holders of our common stock. If additional  financing is not available
or is not available on acceptable  terms, we will have to curtail our operations
again.

Recent Accounting Pronouncements

     In April 2003, the FASB issued SFAS No. 149,  Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities.  This  Statement  amends  and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging activities under SFAS
No. 133.  This  Statement is effective  for  contracts  entered into or modified
after June 30, 2003. The adoption of SFAS No. 149 does not have an impact on our
financial statements.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with  Characteristics of Both Liabilities and Equity. This Statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances).  This Statement is effective
for  financial  instruments  entered into or modified  after May 30,  2003,  and
otherwise is effective at the  beginning of the first interim  period  beginning
after June 15, 2003. The adoption of SFAS No. 150 does not have an impact on our
financial statements.

     In December 2003,  the FASB Issued SFAS No. 132(R),  a revision to SFAS No.
132,  Employer's  Disclosure about Pensions and Other  Postretirement  Benefits.
SFAS No. 132(R) requires additional disclosure about assets,  obligations,  cash
flows and net periodic  benefit cost of defined  benefit pension plans and other
defined  benefit  postretirement  plans,  SFAS No.  132(R) is effective  for the
financials statements with fiscal years ending after December 15, 2003, with the
exception of  disclosure  requirements  related to foreign  plans and  estimated
future  benefit  payments  which are effective for the fiscal years ending after
June 15, 2004.  The  adoption of SFAS No.  132(R) does not have an impact on our
financial position or results of operations.

                                       19

     In December,  2003 the American  Institute of certified Public Accounts and
the  Securities  and  Exchange  Commission  ("SEC")  expressed  the opinion that
rate-lock  commitments represent written put options, and therefore be valued as
a liability.  The SEC  expressed  that they expect  registrants  to disclose the
effect on the financial  statement of recognizing  the rate-lock  commitments as
written put options, for quarters commencing after march 15, 2004, Additionally,
the SEC recently  issued Staff  Accounting  Bulletin  (SAB) No. 105. SAB No. 105
clarifies the SEC's  position that the inclusion of cash flows from servicing or
ancillary  income in the  determination  of the fair value of interest rate lock
commitments  is not  appropriate.  We have not yet  determined the impact on the
financial  statements  of SAB No.  105,  which  must  be  implemented  for  loan
commitments  entered into on or after April 1, 2004. We are currently  analyzing
the impact of the SEC's  position and will,  if  required,  account for its loan
origination commitments as prescribed.

     In January 2003, the FASB released FASB  Interpretation  No. 46 ("FIN 46"),
"Consolidation of Variable Interest  Entities." FIN 46 requires that all primary
beneficiaries of variable interest entities  consolidate that entity.  FIN 46 is
effective  immediately for variable  interest entities created after January 31,
2003  and to  variable  interest  entities  in which an  enterprise  obtains  an
interest  after that date. It applies in the first fiscal year or interim period
beginning  after  June  15,  2003 to  variable  interest  entities  in  which an
enterprise  holds a variable  interest it acquired  before  February 1, 2003. In
December  2003,  the FASB  published a revision to FIN 46 ("FIN 46R") to clarify
some of the provisions of the  interpretation and to defer the effective date of
implementation  for certain  entities.  Under the guidance of FIN 46R,  entities
that do not have  interests  in  structures  that are  commonly  referred  to as
special   purpose   entities  are  required  to  apply  the  provisions  of  the
interpretation in financial  statements for periods ending after March 14, 2004.
We did not create a variable interest entity after January 31, 2003 and does not
have a variable interest entity as of December 31, 2003. We expect that the full
adoption  of FIN 46R in 2004 will not have a  material  impact on our  financial
position or results of operations.

Application of Significant Accounting Policies

Cash and Cash Equivalents

     Cash equivalents comprise certain highly liquid instruments with a maturity
of three months or less when purchased.  As at March 31, 2004 and 2003, cash and
cash equivalents consist of cash only.

Accounting Estimates

     The  preparation of the 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 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.

Concentration of Credit Risk

     We place our cash and cash equivalents  with high credit quality  financial
institutions.  As of March 31, 2004 we had no balance in a bank  beyond  insured
limits.

Foreign Currency Transactions

     We maintain our accounting records in U.S. Dollars, as follows:

     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 remeasured by using
the exchange rate in effect at that date. The resulting  foreign  exchange gains
and losses are included in operations.

                                       20

Fair Value of Financial Instruments

     Our financial  instruments  consist of cash and cash equivalents,  accounts
payable and accrued  liabilities  and promissory  notes.  The carrying amount of
accounts  payable and  accrued  liabilities  approximates  fair value due to the
short-term  nature of these items.  The promissory  notes also  approximate fair
value based on evaluations of market interest rates and short-term nature of the
payable.

Income Taxes

     We have adopted  Statement of Financial  Accounting  Standards  (SFAS") No.
109,  "Accounting for Income Taxes", which requires us to recognize deferred tax
liabilities and assets for the expected  future tax  consequences of events that
have been  recognized  in our  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  statements
and tax bases of assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse.

Comprehensive Income

     We adopted SFAS No. 130, "Reporting  Comprehensive  Income", which requires
inclusion of foreign currency  translation  adjustments,  reported separately in
its Statement of Stockholders'  Equity, in other comprehensive income. We had no
other comprehensive income for the year ended March 31, 2004.

Advertising Expenses

     We  expense  advertising  costs  as  incurred.  There  were no  advertising
expenses incurred by us for the years ended March 31, 2004 and 2003.

Loss Per Share

     Loss per share is  computed  using the  weighted  average  number of shares
outstanding during the year. We have adopted SFAS No. 128, "Earnings Per Share".
Diluted  loss per  share is  equivalent  to basic  loss per  share as the  stock
options to acquire common shares as disclosed in the notes are anti-dilutive.

Stock-based Compensation

     We have adopted the disclosure-only provisions of SFAS No. 123, "Accounting
for  Stock-based  Compensation",  as  amended by SFAS No.  148  "Accounting  for
Stock-based  Compensation - Transition and Disclosure - An amendment of SFAS No.
123". SFAS No. 123 encourages,  but does not require,  companies to adopt a fair
value based method for determining expense related to stock-based  compensation.
We account for stock-based  compensation issued to employees and directors using
the  intrinsic  value method as prescribed  under  Accounting  Principles  Board
Opinion  No.  25,  "Accounting  for  Stock  Issued  to  Employees"  and  related
interpretations. We initiated a 2004 Non-Qualified Stock Option Plan. During the
year ended March 31, 2004, we granted 1,060,000 stock options to non-employees.

Goodwill and Intangible Assets

     Goodwill  represents  the  excess  of cost  over  fair  value of  assets of
business  acquired.  Goodwill  and  intangible  assets  acquired  in a  business
combination and determined to have an indefinite  useful life are not amortized,
but instead are tested for  impairment at lest  annually in accordance  with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 142. SFAS
No. 142 also  requires that  intangible  assets with  estimable  useful lives be
amortized  over  their  respective  estimated  useful  lives to their  estimated
residual  values,  and reviewed for impairment in accordance  with SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets.

                                       21

Accounting for Derivative Instruments and Hedging Activities

     We have adopted Statement of Financial  Accounting  Standards No. 133 (SFAS
133) Accounting for Derivative and Hedging Activities,  which requires companies
to recognize all  derivative  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 and 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.  We have has not  entered  into  derivative  contracts  either  to hedge
existing risks or for speculative purposes.

Long-Lived Assets Impairment

     Our long-term assets are reviewed when changes in circumstances  require as
to whether  their  carrying  value has become  impaired,  pursuant  to  guidance
established in Statement of Financial  Accounting  Standards No. 144 (SFAS 144),
Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets.  Management
considers  assets to be  impaired  if the  carrying  value  exceeds  the  future
projected  cash flows from the  related  operations  (undiscounted  and  without
interest charges).  If impairment is deemed to exist, the assets will be written
down to fair value.

                                       22


                                    BUSINESS

OVERVIEW

     We are an exploration  stage company  engaged in the exploration of coalbed
methane in the Coos Bay region of Oregon.  Through our wholly owned  subsidiary,
Methane  Energy  Corp.,  we  hold  leases  to  approximately   60,000  acres  of
prospective  coalbed  methane  lands  in the  Coos Bay  region.  Methane  Energy
operates the exploration project in the Coos Bay region.

Organizational/Historical Background


     We were formed by the merger of Scarab Systems,  Inc., a Nevada corporation
into iRV, Inc., a Colorado  corporation.  Scarab  Systems,  Inc. was a privately
owned Nevada corporation that was incorporated on October 8, 2001. The effective
date of the merger  transaction  between Scarab Systems,  Inc. and iRV, Inc. was
July 17, 2002.  Subsequent to completion of the reorganization,  Scarab Systems,
Inc.  transferred  all its  assets  and  liabilities  to iRV,  Inc.  and  ceased
operations.  The directors and executive officers of iRV, Inc. were subsequently
reconstituted.  iRV, Inc. and changed its name to Scarab Systems,  Inc. on March
24, 2003. We were initially  providing  services to the e-commerce  industry but
ceased all  activity  in the  e-commerce  industry by the end of the fiscal year
ended March 31, 2003.


     On  January  30,  2002,  we were given two  options in fiscal  year 2002 to
acquire all the issued and  outstanding  shares of 485017 B.C.  Ltd.,  a British
Columbia  company doing  business as MarketEdge  Direct,  as security  against a
subscription  receivable of $337,500 for 675,000 shares from the shareholders of
MarketEdge  Direct.  MarketEdge  Direct was in the  business of providing a wide
range of marketing products and services. Effective August 7, 2002, we exercised
both of the  options  and  acquired  all the  issued and  outstanding  shares of
MarketEdge Direct. Due to disappointing  financial results of MarketEdge Direct,
on March 28, 2003, we entered into an agreement with the former  shareholders of
MarketEdge Direct to sell MarketEdge  Direct back to them. As a result,  all the
issued and  outstanding  shares of MarketEdge  Direct that we acquired were sold
back to the former MarketEdge Direct  shareholders for the return to treasury of
540,000 of our common shares.


     On March 28,  2003,  we acquired all the issued and  outstanding  shares of
Catalyst  Technologies,  Inc.,  a British  Columbia  corporation.  Catalyst is a
Vancouver  based,  web  design  and  Internet  application  developer.  Catalyst
specializes  in the  development  of  web-sites  and Internet  software  design,
primarily for the Health and Nutraceutical industry. The acquisition of Catalyst
was treated as a non-material  business  combination in the fiscal year 2003 and
we abandoned  Catalyst during the fiscal year ended March 31, 2004 due to a lack
of working capital and disappointing financial results.


     On April 30, 2004,  we  incorporated  an Oregon  subsidiary  company  named
Methane Energy Corp. in  anticipation of acquiring oil and gas properties in the
State of Oregon.  On May 11, 2004,  Methane Energy entered into a Lease Purchase
and  Sale  Agreement  with  GeoTrends-Hampton   International  LLC  to  purchase
GeoTrends-Hampton  International's undivided working interest in certain oil and
gas leases for the Coos Bay Basin prospect located onshore in the Coos Bay Basin
of Oregon.  To acquire these oil and gas leases,  we paid a total of $300,000 in
cash   and   will   issue   1,800,000   restricted   common   shares   in  three
performance-based  tranches.  The  Lease and Sale  Agreement  closed on June 22,
2004. On closing, we paid $100,000 of the cash and 600,000 of our common shares.
We have since paid the  remaining  $200,000  so that the cash  consideration  is
fully paid.


     Pursuant  to the  GeoTrends-Hampton  International  Agreement,  we acquired
leases  of  certain  properties  in the  Coos  Bay  area  of  Oregon  which  are
prospective for oil and gas exploration.  Leases were acquired from the State of
Oregon and from property owners, and we have amassed  approximately 60,000 acres
under lease.  We are pursuing the leasing of  additional  properties in the Coos
Bay area.  As a result of this change in the focus of the  business and pursuant
to  shareholder  approval  on July 13,  2004,  we changed  our name from  Scarab
System, Inc. to Torrent Energy Corporation.

                                       23

New Business Plan

     We are an exploration  stage company  engaged in the exploration of coalbed
methane in the Coos Bay region of Oregon.  Through our wholly-owned  subsidiary,
Methane  Energy  Corp.,  we  hold  leases  to  approximately   60,000  acres  of
prospective  coalbed  methane  lands  in the  Coos Bay  region.  Methane  Energy
operates the exploration project in the Coos Bay region.

COOS BAY BASIN EXPLORATION PROSPECT

     The Coos Bay Basin is  located  along  the  Pacific  coast in  southwestern
Oregon,  approximately  200 miles south of the Columbia River and 80 miles north
of the  California  border.  The  onshore  portion  of the  Coos  Bay  Basin  is
elliptical in outline  covering  over 250 square  miles.  We estimate that up to
100,000  acres in the Coos Bay Basin are  potentially  prospective  for  coalbed
methane and conventional natural gas production.  The leases we acquired include
oil and gas leases,  lease option  agreements or other  exploration  commitments
covering  over  50,000  net  mineral  acres  within the  primary  Coos Bay Basin
Exploration  Prospect  area of  mutual  interest.  We are also  exploring  lease
commitments  for  additional  acres  and  have  identified   specific  leasehold
ownership falling within the Coos Bay Basin exploration  prospect area, although
we currently do not have any contracts to lease additional  acreage,  nor are we
certain we will be able to do so.  Access to virtually  all areas in Coos County
is excellent  year-round  via logging and fire control  roads  maintained by the
Forest Service or the timber industry.  Likewise,  numerous potential drill-site
locations are already constructed as timber recovery staging areas and available
to be utilized in the initial  testing phase of the drilling  program.  The Coos
Bay Basin is  basically a structural  basin formed by folding and faulting  that
preserves a portion of coal-bearing sediments that were deposited in this swampy
coastal plain.  The  coal-bearing  sandstones and siltstones of the Upper Eocene
Coaledo  formation  are  estimated  to form a section  approximately  6,600 feet
thick.

Natural Gas Market

     The port of Coos Bay is one of the largest  population  centers on the west
coast not  currently  served by natural gas. A project to bring natural gas into
the region via pipeline has been approved and funded by the County of Coos.  The
pipeline is currently under construction.  A local distribution  company serving
this market has already  constructed  the mains and many  services in this area.
Estimates of initial requirements are over 10 million cubic feet of gas per day,
approximately 20% of pipeline capacity.

     Coos County is also likely to benefit from new industrial  development when
natural  gas  becomes  available.  Expansion  of the  market  is likely to bring
greater demand for and value to natural gas. Because of its west coast location,
Coos Bay market prices would be subject to NYMEX  pricing  standards for most of
the year.  However,  seasonal or critical  gas demand  fluctuations  could cause
prices to exceed that price on a regular basis.

Exploration Objectives

     The Coos Bay Basin is the  southernmost  of a series of sedimentary  basins
that are  present in western  Oregon and  Washington  and  southwestern  British
Columbia west of the Cascade Range. The region  containing this series of basins
is generally referred to as Puget-Willamette Trough. These basins preserve thick
sequences of predominantly  non-marine,  coal-bearing sedimentary rock sequences
that are  correlative in age,  closely  related in genesis,  and very similar in
most  characteristics.  In a  hydrocarbon  exploration  sense,  some of the most
relevant characteristics of individual basins within the Puget-Willamette Trough
include:

     1.Commercial natural gas production from the Mist Gas Field in northwestern
          Oregon operated by Northwest Natural Gas;

     2.Underground  natural gas storage in the Jackson Prairie Gas Storage Field
          in southwestern Washington operated by Puget Sound Energy, utility and
          pipeline interests; and

     3.Ongoing coalbed methane exploration by major and independent companies in
          western Washington and British Columbia.

                                       24

PREVIOUS COALBED METHANE EXPLORATION WELLS IN COOS BAY REGION

     The  following  sections  contain data and  information  obtained  from two
coalbed methane  exploration  wells drilled in late 1993 in the Coos Bay region.
These data and information are historical and isolated facts obtained from these
two exploration wells and are not indicative of such things as mineral resources
and reserves,  the amount and nature of any coalbed methane resource;  plans for
exploration and  development;  prices for mineral or coalbed  methane  products,
timing and amount of future  production;  operating  and other  costs,  business
strategies   and  plans  of  management,   and   prospective   development   and
acquisitions.  Variation  of  coalbed  methane  content  and the  degree  of gas
saturation  often varies across a coalbed methane  prospect.  The Coos Bay Basin
exploration  prospect  carries risks  commensurate  with an exploration play and
could require several years to reach  commercial  production,  if the amount and
nature of the coalbed methane resources warrant such production.  The success of
the Coos Bay Basin exploration  prospect is subject to risks,  uncertainties and
other factors. Please see "Risk Factors."

Coal Geology & Characteristics

     Coalbeds in the Coos Bay Basin are contained in 2 major  groups:  the upper
member of the Coaledo  formation  where six important coal zones are spread over
intervals of 600 to 1,000 feet. The Beaver Hill coalbed is typical in the series
and is 6-8 feet thick;  and the lower member of the Coaledo  formation  where at
least seven  important coal zones are included.  In October of 1993, two coalbed
methane  exploration  wells were drilled in the Coos Bay Basin: CCF 7-1 well and
WNS MT 32-1  well.  The CCF 7-1 well  penetrated  9 major  coal  zones  totaling
approximately  76 net feet of coal. The WNS MT 32-1 well penetrated 6 major coal
zones with a total thickness of 46 net feet.

Indications of Permeability

     Several  positive  indications  of  permeability  were observed  during the
drilling  phase of the CCF 7-1 well.  Drilled  partially  with air and completed
using  cavitation  techniques,  several  flow tests were  conducted  and yielded
significant  observable  flows of natural gas from  intervals  dominated by coal
seams.

Initial Production Testing Results

     A short period of production  testing was conducted on both wells following
completion. Traditional pump jack and plunger pump configurations were set up on
both wells.  Both wells produced gas and water throughout the testing with rates
not unlike many initial tests in coalbed methane  production  areas elsewhere in
the U.S.

     Testing of the CCF 7-1 well was confined to several coal zones in the cased
portion of the well several  hundred feet above the  targeted  coal zones.  As a
result of an unstable  downhole  environment  created by cavitation  operations,
plugging  of the  production  liner,  and  loss of a  drilling  assembly  in the
targeted interval, the greater portion of the targeted section was not tested.

Water Disposal

     Water produced from drilling and testing operations was of suitable quality
for surface discharge and was applied to forest lands.

Data Resources

     The Coos Bay Basin has been the subject of geologic mapping and studies for
many years. Most of the reports are published and generally available.  Historic
coal  mining  activity  has  produced  much  information  on  the  distribution,
disposition  and character of the coalbeds.  A significant  body of coal data is
also available.  Well records and logs from  exploration  tests,  dating back to
around 1910,  are  available  to the public.  Proprietary  seismic  information,
created in the late  1970's  and early  1980's,  is  available  from  commercial
sources.

     Specific and  detailed  information  and reports  regarding  the  drilling,
completion,  stimulation, testing, and subsequent analysis of the data generated
by the initial coalbed methane exploration operations have also been acquired by


                                       25

us under the Purchase and Sale Agreement.

THE COALBED METHANE INDUSTRY

     During the past two decades, coalbed methane has emerged as a viable source
of  natural  gas  compared  to the late  1980s  when  there  was no  significant
production  outside of the still dominant San Juan Basin,  in  northwestern  New
Mexico, and the Black Warrior Basin in Alabama and Mississippi. As noted in USGS
Fact Sheet FS-123-00 of October 2000, coalbed methane  production  accounted for
7% of US natural gas production or approximately 3.6 billion cubic feet (Bcf) of
gas per day or an  annual  1.35  trillion  cubic  feet of gas from  over  14,000
producing wells.

     We believe the success of coalbed methane developments has been largely the
result of improved drilling and completion techniques, better hydraulic fracture
designs and  significant  cost  reductions as a result of highly  dependable gas
content and coalbed methane  reservoir  performance  analysis.  Also aiding this
sector's  growth is the  apparent  shortage  of  quality  domestic  conventional
exploration  and  development  projects.  In comparison,  according to USGS Fact
Sheet FS-123-00 of October 2000, total "unconventional" coalbed methane resource
across  America's  25 basins  (lower US) is estimated to be roughly 700 trillion
cubic feet of which 14% or 100  trillion  cubic feet is  considered  technically
recoverable with existing technology. Technically recoverable gas volumes do not
necessarily  qualify as proved  reserves  and we do not have any proved  coalbed
methane  reserves at this time.  We also  believe  that  propelling  the coalbed
methane  production growth is its relatively low finding and development  costs.
Coalbed  methane  fields are often found where deeper  conventional  oil and gas
reservoirs    have   already    been    developed,    therefore,    considerable
exploration-cost-reducing  geologic information is often readily available. This
available  geological  information,  combined with coalbed  methane  reservoirs'
comparatively shallow locations, reduces finding and developing costs.

COALBED METHANE

     Natural  gas  normally  consists  of 80% or more  methane  with the balance
comprising such hydrocarbons as butane, ethane and propane. In some cases it may
contain minute quantities of highly poisonous  hydrogen sulfide,  referred to as
sour gas. Coalbed methane is,  generally,  a sweet gas consisting of 95% methane
and thus is normally of  pipeline  quality.  Coalbed  methane is  considered  an
unconventional  natural gas  resource  because it does not rely on  conventional
trapping  mechanisms,  such as a fault or  anticline,  or  stratigraphic  traps.
Instead  coalbed  methane is absorbed or attached to the molecular  structure of
the coals - an efficient  storage mechanism as coalbed methane coals can contain
as much as seven  times the  amount of gas  typically  stored in a  conventional
natural gas reservoir such as sandstone or shale.  The absorbed  coalbed methane
is kept in place as a result of a pressure  equilibrium  often from the presence
of water.  Thus the  production  of coalbed  methane in many cases  requires the
dewatering  of the coals to be  exploited.  This  process  usually  requires the
drilling of adjacent wells and from 6 to 36 months to complete.  Coalbed methane
production  typically has a low rate of production  decline and an economic life
typically from 10 to 20 years.

     The principal  sources of coalbed methane are either biogenic,  producing a
dry gas which is generated from bacteria in organic matter,  typically at depths
less than 1,000 feet,  or  thermogenic,  which is a deeper wet gas,  formed when
organic matter is broken down by temperature and pressure.

     The  three  main  factors  that  determine   whether  or  not  gas  can  be
economically  recovered  from  coalbeds  are: the gas content of the coals;  the
permeability  or flow  characteristics  of the coals;  and, the thickness of the
coalbeds.  Gas content is  measured in terms of standard  cubic feet per ton and
varies  widely from 430 standard  cubic feet per ton in the deep (2,000 to 3,500
feet) San Juan, New Mexico  thermogenic  coals,  and only 60 standard cubic feet
per ton for the shallow (300 to 700 feet deep) Powder  River,  Wyoming  biogenic
coals.  The San  Juan  coals  are  considered  to have  the  industry's  highest
permeability.  Relatively high permeability, which can affect the ability of gas
to easily  travel to the  borehole,  is an  important  factor for the success of
coalbed methane well, but is not absolutely required.  The thickness of coalbeds
from which coalbed methane is economically  being produced varies from as little
as a few feet in some  areas of the gas rich (300  standard  cubic  feet)  Raton
Basin to as much as 75 net feet of coalbed  thickness at the relatively gas poor
Powder River.

                                       26

COMPETITORS

     The three largest coalbed methane  producers in the United States' lower 48
states are BP Amoco, Burlington Resources and Phillips Petroleum,  all producing
most of their production from the  now-in-decline San Juan basin. Even though it
ranks  fourth in terms of natural  gas  production,  a leading  coalbed  methane
participant in terms of growth and  technology is Devon Energy.  Devon Energy is
aggressively  expanding  coalbed  methane  production  in the Powder River Basin
located in Wyoming  and Montana  and Raton  Basin  located in  Colorado  and has
coalbed methane  production in the San Juan Basin located in New Mexico and Wind
River Basin located in Wyoming.  Devon is also  developing  the coalbed  methane
potential of  southeastern  Kansas where it has amassed over 400,000 acres.  Its
project is centered in Cherokee  Basin,  that is the southern end of the coalbed
methane fairway.

     Other companies are also active in the coalbed methane  fairway,  including
Anadarko Petroleum Corporation, JM Huber Corporation,  Evergreen Resources, Inc.
and  Whiting  Petroleum.  In  addition,  there are dozens of smaller  public and
private  companies  engaging  in  exploratory  drilling  and testing for coalbed
methane.

GOVERNMENTAL REGULATIONS

     Our oil and gas operations  are subject to various  United States  federal,
state and local governmental regulations.  Matters subject to regulation include
discharge  permits for  drilling  operations,  drilling and  abandonment  bonds,
reports concerning  operations,  the spacing of wells, and pooling of properties
and taxation. From time to time, regulatory agencies have imposed price controls
and  limitations  on production by  restricting  the rate of flow of oil and gas
wells below actual production  capacity in order to conserve supplies of oil and
gas. The production,  handling, storage,  transportation and disposal of oil and
gas, by-products thereof, and other substances and materials produced or used in
connection  with oil and gas  operations  are also subject to  regulation  under
federal,  state, provincial and local laws and regulations relating primarily to
the  protection  of human  health  and the  environment.  To date,  expenditures
related  to  complying  with  these  laws,  and  for   remediation  of  existing
environmental  contamination,  have  not been  significant  in  relation  to the
results of operations of our company.  The requirements imposed by such laws and
regulations  are frequently  changed and subject to  interpretation,  and we are
unable to predict the ultimate cost of  compliance  with these  requirements  or
their effect on our operations.

RESEARCH AND DEVELOPMENT

     Our business  plan is focused on a strategy for  maximizing  the  long-term
exploration  and  development  of our drilling and  exploration in the Coos Bay,
Oregon region.  To date,  execution of our business plan has largely  focused on
acquiring prospective Coalbed Methane leases from which we intend to establish a
going forward exploration and development plan.


                                       27

                                   EMPLOYEES

         At September 14, 2004, we had one non-union, full time employee, who is
an executive. We consider our relations with our employee to be good.

                            DESCRIPTION OF PROPERTIES

     We maintain our principal  office at 3400-666  Burrard  Street,  Vancouver,
British Columbia V6C 2X8,  Canada.  Our telephone number at that office is (604)
639-3118  and our  facsimile  number  is (604)  688-1320.  Mark  Gustafson,  our
President,  provides the office  space,  which is provided to us free of charge.
The office space consists of a single office of  approximately  225 square feet.
In addition,  our  subsidiary  leases an office at 271 North  Baxter,  Coquille,
Oregon  97423.  The lease runs from July 1, 2004 through June 30, 2005 at a cost
of $700 per month.  The Oregon office is  approximately  4,000 square feet,  and
consists of three offices, a conference room and storage space.

     We believe that our current  office space and  facilities are sufficient to
meet our present needs and do not anticipate any difficulty securing alternative
or additional space, as needed, on terms acceptable to us.

     Through our subsidiary, we lease approximately 60,000 acres in the Coos Bay
Region.  13,000 acres are leased from Menasha  Development  Corporation,  29,000
acres from Coos County, 11,000 acres from the State of Oregon, and approximately
7,000 acres from various individual landowners.  The total annual lease payments
are  approximately  $73,000 per year.  These leases  typically  have a five-year
lease  term with an option  for an  additional  5 years.  In  addition,  we have
granted the lease holders royalties,  typically  averaging 12.5%, on gross sales
resulting from the leases.

                                LEGAL PROCEEDINGS

     From time to time,  we may become  involved in various  lawsuits  and legal
proceedings which arise in the ordinary course of business.  However, litigation
is subject to inherent  uncertainties,  and an adverse  result in these or other
matters may arise from time to time that may harm our business. We are currently
not aware of any such legal  proceedings  or claims  that we believe  will have,
individually  or in the  aggregate,  a material  adverse affect on our business,
financial condition or operating results.


                                       28

                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS


Name                       Age              Position
--------------------------------------------------------------------------------
Mark Gustafson             44               President and Director
John D. Carlson            50               Director
George L. Hampton III      51               Director

     Directors   are  elected  to  serve  until  the  next  annual   meeting  of
stockholders  and until their  successors are elected and  qualified.  Currently
there are three seats on our board of directors.

     Currently,  our Directors are not compensated for their services,  although
their expenses in attending meetings are reimbursed. Officers are elected by the
Board of Directors and serve until their  successors  are appointed by the Board
of  Directors.  Biographical  resumes of each officer and director are set forth
below.

     Mark Gustafson has been our President and a Director since  September 2004.
Between  April 1999 and August 2004,  Mr.  Gustafson  has been  President of MGG
Consulting,  a private  consulting firm. While at MGG Consulting,  Mr. Gustafson
provided consulting services to investment banks, oil and gas companies, and was
a consultant Chief Financial Officer to several private  companies.  From August
1997 until March 1999, Mr. Gustafson was the President,  Chief Executive Officer
and a Director of Total Energy  Services Ltd., a  Calgary-based  oilfield rental
and gas  compression  company.  Mr.  Gustafson  is a  chartered  accountant  and
received a bachelor's  degree in business  administration  from Wilfrid  Laurier
University in 1981.

     John D. Carlson has been a director since June 2004. From February 2004, to
July 2004,  Mr.  Carlson  was the  President  and a Director  of Pacific  Rodera
Ventures Inc., a Calgary-based oil and gas exploration and development  company.
From  September  2003,  Mr. Carlson has been the Vice President - Operations for
Pacific  Rodera  Ventures Inc. From  September  2001 until  December  2003,  Mr.
Carlson was the  President of Samson Oil and Gas Inc., a Hobbema,  Alberta-based
oil and gas exploration and development company. Between January 2001 and August
2001, Mr. Carlson was the General Manager of Samson Oil and Gas Inc., a Hobbema,
Alberta-based oil and gas exploration and development company.  Between 1984 and
2000,  Mr.  Carlson was an Associate and Senior  Petroleum  Engineer for Sproule
Associates, Ltd., Mr. Carlson is a registered professional engineer and received
a bachelor of science degree in civil engineering from the University of Calgary
in 1977.

     George L. Hampton III has been a director  since August 2004.  Between 1994
and 1997,  and from 2000 until the  present,  Mr.  Hampton has been a partner in
Geo-Trends,  Hampton  International,  LLC, a coalbed methane exploration company
based out of the Pacific Northwest. From 1998 until the present, Mr. Hampton has
been a member and geologic consultant for Hampton, Waechter & Associates, LLC, a
Denver,  Colorado-based  geological company.  Since June 1986 until the present,
Mr. Hampton has been the President and Chief Geological Consultant for Hampton &
Associates, Inc., a Denver,  Colorado-based coalbed methane exploration company.
Between  April 1998 and April 1999,  Mr.  Hampton  was the  Project  Manager and
Senior  Geologist  for  Pennaco  Energy  Corporation,  a Denver,  Colorado-based
coalbed methane exploration company.  Between 1996 and 1997, Mr. Hampton was the
Chief Geologist for Thermal Energy Corporation, a Tulsa,  Oklahoma-based coalbed
methane exploration company. Between 1995 and 2001, Mr. Hampton was the founding
partner  and  technical  manager  of Cairn  Point  Publishing,  Inc.,  a Denver,
Colorado-based  publishing  company that published  International  Coal Seam Gas
Directory (1996) and The International  Coal Seam Gas Report (1997). Mr. Hampton
has written or co-written a half-dozen  articles on coalbed methane  exploration
and has provided  testimony  before several state oil and gas  commissions.  Mr.
Hampton  received a bachelor of science  degree in geology  from  Brigham  Young
University in 1977 and a Masters degree in geology from Brigham Young University
in 1979.


                                       29


                             EXECUTIVE COMPENSATION

         The following tables set forth certain information regarding our CEO
and each of our most highly-compensated executive officers whose total annual
salary and bonus for the fiscal year ending March 31, 2004, 2003 and 2002
exceeded $100,000:


                           SUMMARY COMPENSATION TABLE

                               ANNUAL COMPENSATION


                                                             Other
                                                             Annual      Restricted     Options      LTIP
   Name & Principal                Salary        Bonus       Compen-       Stock         SARs       Payouts      All Other
       Position           Year       ($)          ($)        sation ($)   Awards($)       (#)         ($)      Compensation
------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ --------------
                                                                                           
Thomas E. Mills           2004          0          0         19,804 (1)        -            -            -             -
  President               2003          0          0         22,930 (1)        -            -            -             -
                          2002          0          0         25,830 (1)        -            -            -             -
------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ --------------

(1) The other annual compensation  represents consulting fees. In February 2004,
Mr. Mills  released us of all debt resulting  from the accrued  consulting  fees
during fiscal years 2003 and 2004.

Option/SAR Grants in Last Fiscal Year

     During the fiscal year ended March 31, 2004, no stock or stock options were
granted.

Stock Option Plans

2004 Non-Qualified Stock Option Plan

     In February 2004, the Board of Directors  authorized the 2004 Non-Qualified
Stock  Option Plan for our  executive,  employees  and outside  consultants  and
advisors.  Under the Plan,  executives,  employees and outside  consultants  and
advisors  may  receive  awards of  non-qualified  stock  options.  A maximum  of
1,800,000 shares of our common stock is subject to the Plan. As of September 15,
2004,  1,800,000  stock  options have been granted to  officers,  directors  and
consultants under the Plan to purchase 1,800,000 shares of our common stock. The
purpose  of the Plan is to  provide  executives,  employees  and  non-  employee
consultants and advisors with an increased  incentive to make  contributions  to
us.

Employment Agreements

         None.

                                       30

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Other than as disclosed below, there have been no transactions, or proposed
transactions,  which have materially  affected or will  materially  affect us in
which any director,  executive  officer or beneficial holder of more than 10% of
the outstanding  common stock, or any of their  respective  relatives,  spouses,
associates or affiliates,  has had or will have any direct or material  indirect
interest.

     On March 15,  2003,  we  issued  to our  President,  Thomas  E.  Mills,  an
unsecured  promissory note in the amount of $40,000 bearing interest at the rate
of twenty percent per year, that was due and payable on March 15, 2004. The note
was  issued in respect of $40,000  advanced  on behalf of us by Mr.  Mills.  The
Board of  Directors  convened to evaluate the  fairness of the  promissory  note
without the benefit of advice from any third party or  reference  materials.  It
was  resolved  by the  Board  of  Directors  (Mr.  Mills  abstaining)  that  the
promissory note was fair and further that we should issue the promissory note to
Mr. Mills. On February 2, 2004, the $40,000  unsecured  promissory  note,  along
with $11,000 in accrued  interest,  was  converted  into  510,000  shares of our
common stock at a price per share of $0.10.

     Over the year ended  March 31,  2004,  we incurred  consulting  fees in the
amount of $59,413.  The  consulting  fees were  charged to Thomas E. Mills,  Lou
Hilford and John Allen, our directors and officers. During February 2004, all of
the aforementioned consulting fees, which were previously accrued, were released
by the respective  individuals  for the purpose of improving our working capital
position.

     We have no policy  regarding  entering into  transactions  with  affiliated
parties.


                                       31

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information  regarding  beneficial
ownership of our common stock as of September 10, 2004

     o    by each person who is known by us to beneficially  own more than 5% of
          our common stock;

     o    by each of our officers and directors; and

     o    by all of our officers and directors as a group.


                                                                    PERCENTAGE OF      PERCENTAGE OF
                                                                       CLASS               CLASS
NAME AND ADDRESS                                   NUMBER OF          PRIOR TO             AFTER
OF OWNER                        TITLE OF CLASS     SHARES OWNED(1)   OFFERING(2)         OFFERING(3)
-----------------------------------------------------------------------------------------------------
                                                                                
Mark Gustafson                  Common Stock         377,500              2.41%             1.83%
528-666 Burrard Street
Vancouver, BC V6C 2X9 Canada

John D. Carlson                 Common Stock          61,250 (4)            *                 *
528-666 Burrard Street
Vancouver, BC V6C 2X9 Canada

George L. Hampton III           Common Stock         461,250 (5)          2.94%             2.23%
528-666 Burrard Street
Vancouver, BC V6C 2X9 Canada

All Officers and Directors      Common Stock         900,000 (6)          5.94%             4.35%
As a Group (3 persons)

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

* Less than 1%.

(1)  Beneficial  Ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within 60 days of September  10, 2004 are deemed  outstanding  for computing the
percentage  of the person  holding  such  option or  warrant  but are not deemed
outstanding for computing the percentage of any other person.

(2) Based upon 15,656,249 shares issued and outstanding on September 10, 2004.

(3) Percentage based on 20,656,249 shares of common stock outstanding.

(4) Includes 11,250 options currently exercisable.

(5) Includes  11,250 options  currently  exercisable and 450,000 shares owned by
GeoTrends Hampton International, LLC, of which Mr. Hampton is a 50% owner.

(6) Includes 22,500 options currently exercisable.


                                       32

                            DESCRIPTION OF SECURITIES

COMMON STOCK

     We are  authorized to issue up to 100,000,000  shares of common stock,  par
value $.001. As of September 10, 2004,  there were  15,656,249  shares of common
stock  outstanding.  Holders of the common  stock are  entitled  to one vote per
share on all  matters  to be voted upon by the  stockholders.  Holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors  out of funds  legally  available  therefor.  Upon the
liquidation,  dissolution,  or winding up of our company,  the holders of common
stock are  entitled  to share  ratably  in all of our assets  which are  legally
available for distribution  after payment of all debts and other liabilities and
liquidation  preference of any outstanding common stock. Holders of common stock
have  no  preemptive,   subscription,   redemption  or  conversion  rights.  The
outstanding  shares  of  common  stock  are  validly  issued,   fully  paid  and
nonassessable.

     We have engaged  Computershare  Trust Company,  Inc.,  350 Indiana  Street,
Suite 800, Golden, Colorado, as independent transfer agent and registrar.

PREFERRED STOCK

     We are authorized to issue up to 25,000,000  shares of Preferred Stock, par
value  $.01.  As of  September  15,  2004,  there were 1,100  shares of Series B
Convertible Preferred Stock issued and outstanding.

     To obtain funding for our ongoing operations, we entered into an Investment
Agreement with one accredited  investor on August 27, 2004 for the sale of 2,200
shares of Series B Convertible  Preferred Stock for $2,200,000.  This prospectus
relates to the resale of the common stock  underlying  this Series B Convertible
Preferred  Stock. The investors are obligated to provide us with an aggregate of
$2,200,000 as follows:

     o    $1,100,000 was disbursed on August 27, 2004;

     o    $550,000  will be  disbursed  within  five days of the  filing of this
          registration statement; and

     o    $550,000 will be disbursed  within five days of the  effectiveness  of
          this prospectus.

     Accordingly,  we  have  received  a total  of  $1,100,000  pursuant  to the
Investment Agreement.

     The  Series  B  Convertible  Preferred  Stock  is  entitled  to  cumulative
dividends  of 5% per annum and are  convertible  into our common  stock,  at the
selling  stockholders'  option and subject to a maximum cap of $250,000 worth of
Series B Convertible  Preferred  Stock in any 30 day calendar  period,  into the
number of our  shares of common  stock  equal to the sum of (i) the  liquidation
amount of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but
unpaid dividends,  which is then divided by the conversion price then in effect.
The liquidation  amount of the Series B Convertible  Preferred Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for the 10 trading  days  before  but not  including  the  conversion  date.  In
addition,  the conversion price of the Series B Convertible Preferred Stock will
be adjusted in the event that we issue  common  stock at a price below the fixed
conversion  price,  below market  price,  with the  exception of any  securities
issued in connection with the Investment Agreement.  The conversion price of the
Series B Convertible  Preferred  Stock may be adjusted in certain  circumstances
such as if we pay a stock dividend,  subdivide or combine  outstanding shares of
common  stock  into a greater  or lesser  number of  shares,  or take such other
actions as would  otherwise  result in  dilution  of the  selling  stockholder's
position.  The selling  stockholders have contractually agreed to restrict their
ability to convert and receive  shares of our common  stock such that the number
of  shares  of  common  stock  held by them  and  their  affiliates  after  such
conversion  does not exceed 4.99% of the then issued and  outstanding  shares of
common stock. In addition,  we have granted the investors a security interest in
substantially  all of our  assets and  intellectual  property  and  registration
rights.


                                       33

OPTIONS

     There are 200,000 options issued and  outstanding.  The options were issued
on August 3, 2004 to officers,  directors and consultants  pursuant to our stock
option plan. The options have a term of five years and are  exercisable at $0.50
per option.  25% of the options  vested upon  issuance,  with an additional  25%
vesting on December 31, 2004, June 30, 2005 and December 31, 2005.

WARRANTS

         We currently have 1,942,930 warrants issued and outstanding. 1,442,930
warrants are exercisable at $0.50 per share and 500,000 warrants are exercisable
at $0.55 per share.

CONVERTIBLE SECURITIES

         None.


                 INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

     Our Articles of  Incorporation,  as amended,  provide to the fullest extent
permitted by Colorado  law, our  directors or officers  shall not be  personally
liable to us or our  shareholders  for damages for breach of such  director's or
officer's  fiduciary  duty.  The effect of this  provision  of our  Articles  of
Incorporation,  as  amended,  is to  eliminate  our rights and our  shareholders
(through  shareholders'  derivative  suits on behalf of our  company) to recover
damages  against a director or officer for breach of the fiduciary  duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent  behavior),  except under certain  situations  defined by statute.  We
believe that the indemnification provisions in our Articles of Incorporation, as
amended,  are necessary to attract and retain qualified persons as directors and
officers.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act" or "Securities Act") may be permitted to directors,  officers
or persons controlling us pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission,
such  indemnification  is against  public policy as expressed in the Act and is,
therefore, unenforceable.

                              PLAN OF DISTRIBUTION

     The selling  stockholders  and any of their  respective  pledgees,  donees,
assignees and other  successors-in-interest  may, from time to time, sell any or
all of their  shares of common  stock on any stock  exchange,  market or trading
facility on which the shares are traded or in private transactions.  These sales
may be at fixed or negotiated prices.  The selling  stockholders may use any one
or more of the following methods when selling shares:

     o    ordinary   brokerage   transactions  and  transactions  in  which  the
          broker-dealer solicits the purchaser;
     o    block  trades  in which the  broker-dealer  will  attempt  to sell the
          shares as agent but may  position and resell a portion of the block as
          principal to facilitate the transaction;
     o    purchases  by  a   broker-dealer   as  principal  and  resale  by  the
          broker-dealer for its account;
     o    an  exchange   distribution  in  accordance  with  the  rules  of  the
          applicable exchange;
     o    privately-negotiated   transactions;
     o    short sales that are not violations of the laws and regulations of any
          state or the United States;
     o    broker-dealers  may  agree  with the  selling  stockholders  to sell a
          specified number of such shares at a stipulated price per share;
     o    through the writing of options on the shares;
     o    a combination of any such methods of sale; and
     o    any other method permitted pursuant to applicable law.

     The  selling  stockholders  may also sell  shares  under Rule 144 under the
Securities  Act, if available,  rather than under this  prospectus.  The selling
stockholders  shall  have the sole and  absolute  discretion  not to accept  any
purchase  offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.

                                       34

     The selling  stockholders  may also engage in short sales  against the box,
puts and calls and other  transactions  in our  securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.

     The selling stockholders or their respective pledgees,  donees, transferees
or other  successors  in interest,  may also sell the shares  directly to market
makers  acting  as  principals  and/or   broker-dealers  acting  as  agents  for
themselves or their customers.  Such broker-dealers may receive  compensation in
the form of discounts,  concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such  broker-dealers  may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer  might be in excess of customary  commissions.  Market  makers and
block  purchasers  purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling  stockholder  will attempt to sell
shares  of  common  stock  in  block  transactions  to  market  makers  or other
purchasers  at a price per share which may be below the then market  price.  The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders.  The selling
stockholders and any brokers,  dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus,  may be deemed to be "underwriters" as
that term is  defined  under the  Securities  Act of 1933,  as  amended,  or the
Securities  Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event,  any commissions  received by such  broker-dealers  or
agents  and any  profit on the  resale of the  shares  purchased  by them may be
deemed to be underwriting commissions or discounts under the Securities Act.

     We are required to pay all fees and expenses  incident to the  registration
of the  shares,  including  fees and  disbursements  of counsel  to the  selling
stockholders, but excluding brokerage commissions or underwriter discounts.

     The selling  stockholders,  alternatively,  may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement  with a prospective  underwriter  and there is no
assurance that any such agreement will be entered into.

     The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholder defaults on a
margin  loan,  the broker  may,  from time to time,  offer and sell the  pledged
shares. The selling stockholders and any other persons participating in the sale
or  distribution  of the shares will be subject to applicable  provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act,  including,  without  limitation,  Regulation M. These  provisions may
restrict  certain  activities of, and limit the timing of purchases and sales of
any of the shares by, the selling  stockholders or any other such person. In the
event  that  the  selling  stockholders  are  deemed  affiliated  purchasers  or
distribution  participants  within the meaning of Regulation M, then the selling
stockholders  will not be  permitted  to engage in short sales of common  stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from  simultaneously  engaging in market making and certain other
activities with respect to such securities for a specified  period of time prior
to the commencement of such  distributions,  subject to specified  exceptions or
exemptions.  In regards to short sells,  the selling  stockholder can only cover
its short position with the securities they receive from us upon conversion.  In
addition,  if such short sale is deemed to be a stabilizing  activity,  then the
selling  stockholder  will not be  permitted  to engage  in a short  sale of our
common  stock.  All of these  limitations  may affect the  marketability  of the
shares.

     We have agreed to indemnify the selling stockholders,  or their transferees
or assignees,  against  certain  liabilities,  including  liabilities  under the
Securities  Act of 1933,  as amended,  or to  contribute to payments the selling
stockholders  or  their  respective  pledgees,   donees,  transferees  or  other
successors in interest, may be required to make in respect of such liabilities.

     If the selling stockholders notify us that they have a material arrangement
with a  broker-dealer  for the  resale  of the  common  stock,  then we would be
required to amend the registration statement of which this prospectus is a part,
and file a prospectus  supplement to describe the agreements between the selling
stockholders and the broker-dealer.


                                       35

                                   PENNY STOCK

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

     o    that a broker or dealer approve a person's account for transactions in
          penny stocks; and

     o    the broker or dealer receive from the investor a written  agreement to
          the transaction,  setting forth the identity and quantity of the penny
          stock to be purchased.

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

     o    obtain financial  information and investment  experience objectives of
          the person; and

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

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

     o    sets  forth  the  basis  on  which  the  broker  or  dealer  made  the
          suitability determination; and

     o    that the broker or dealer  received a signed,  written  agreement from
          the investor prior to the transaction.

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


                                       36

                              SELLING STOCKHOLDERS

     The table below sets forth information  concerning the resale of the shares
of common  stock by the selling  stockholders.  We will not receive any proceeds
from the resale of the common stock by the selling stockholders. We will receive
proceeds  from the  exercise of the  warrants  unless the  selling  stockholders
exercise the warrants on a cashless  basis.  Assuming all the shares  registered
below are sold by the selling  stockholders,  none of the  selling  stockholders
will continue to own any shares of our common stock.

     The following table also sets forth the name of each person who is offering
the resale of shares of common stock by this prospectus, the number of shares of
common stock  beneficially  owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the  offering,  assuming  they sell all of the shares
offered.

     For the table set forth below,  Michael  Finkelstein and Elizabeth  Leonard
are the control persons for Stonestreet Limited Partnership, Arthur Davis is the
control person for Ettinger  Investment  Corporation,  Ben Casado is the control
person for BC Capital,  Rogier Groen is the control person for Eclipse  Ventures
Intl.,  Patrick Kephart is the control person for Liberty Management LLC Defined
Benefit Plan and Brian Sodi is the control  person for Capital  Financial  Media
LLC.



------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
                                          Total
                      Total Shares of   Percentage                                                           Percentage
                       Common Stock     of Common     Shares of                                 Beneficial   of Common
                       Issuable Upon      Stock,     Common Stock   Beneficial  Percentage of   Ownership   Stock Owned
                       Conversion of     Assuming     Included in   Ownership   Common Stock    After the      After
        Name        Series B Preferred     Full       Prospectus    Before the  Owned Before    Offering     Offering
                    Convertible Stock*   Conversion               Offering**   Offering**        (4)           (4)

------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
                                                                                       
Cornell Capital        3,627,969       18.81%       Up to           822,278 (2)  4.99%           --            --
Partners, L.P. (3)                                  5,000,000
101 Hudson Street                                   shares of
Suite 3606                                          common stock
Jersey City, NJ 07302                               (1)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Stonestreet LP             --               --      Up to         1,142,858 (5)  7.04%           --            --
1300-320 Bay Street                                 1,142,858
Toronto, Ontario                                    shares of
M5H 4A6, Canada                                     common stock
                                                    (5)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Paul Andreola              --               --      Up to           143,000 (6)  0.91%           --            --
4188 Citadel Court                                  143,000
North Vancouver                                     shares of
British Columbia                                    common stock
V7K 3C5, Canada                                     (6)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Ettinger Investment        --               --      Up to         1,392,860 (7)  8.45%           --            --
Corporation                                         1,392,860
666 Burrard Street                                  shares of
Suite 3400                                          common stock
Vancouver                                           (7)
British Columbia
V6C 2X8, Canada
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
BC Capital                 --               --      Up to           457,142 (8)  2.88%           --            --
79 Sprain Valley                                    457,142
Road                                                shares of
Scarsdale, NY 10583                                 common stock
                                                    (8)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Barry Davis Roth IRA       --               --      Up to           300,000 (9)  1.90%           --            --
17281 Coral Cove Way                                300,000
Boca Raton, FL 33496                                shares of
                                                    common stock
                                                    (9)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------

                                       37

Nannette Goldberg          --               --      Up to           200,000 (10) 1.27%           --            --
2805 E. Long Ct.                                    200,000
Littleton, CO 80121                                 shares of
                                                    common stock
                                                    (10)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Astrid Lundrigan           --               --      700,000         700,000      4.47%           --            --
109-10 Regency Park                                 shares of
Drive                                               common stock
Haifax, Nova Scotia
B3S 1P2
Canada
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Ray Gustafson              --               --      300,000         300,000      1.92%           --            --
RR #2                                               shares of
Fort Frances                                        common stock
Ontario, P9A 3M3
Canada
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Thomas Mills               --               --      510,000         510,000      3.26%           --            --
2708-939 Homer St.                                  shares of
Vancouver                                           common stock
British Columbia
V6B 2W6  Canada
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Eclipse Ventures Intl      --               --      300,000         300,000      1.92%           --            --
Keizersgracht 453                                   shares of
1017 DK, Amsterdam                                  common stock
Netherlands
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Liberty Management LLC     --               --      100,000         100,000      0.64%           --            --
Defined Benefit Plan                                shares of
424 E. Central Blvd.                                common stock
Orlando, FL 32801
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
Capital Financial          --               --      Up to 400,000   400,000      2.49%           --            --
Media LLC                                           shares of      (11)
120 A NE 5th Ave.                                   common stock
Delray Beach, FL 33483                              (11)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------

* This column represents an estimated number based on a conversion price as of a
recent date of September 21, 2004 of $.6064, divided into the principal amount.

** These columns represent the aggregate maximum number and percentage of shares
that the selling stockholders can own at one time (and therefore, offer for
resale at any one time) due to their 4.99% limitation.

     The number and  percentage  of shares  beneficially  owned is determined in
accordance  with Rule  13d-3 of the  Securities  Exchange  Act of 1934,  and the
information is not necessarily  indicative of beneficial ownership for any other
purpose.  Under such rule,  beneficial ownership includes any shares as to which
the selling stockholders has sole or shared voting power or investment power and
also any shares,  which the selling stockholders has the right to acquire within
60 days.  The  actual  number  of  shares  of  common  stock  issuable  upon the
conversion of the secured  convertible notes is subject to adjustment  depending
on, among other factors,  the future market price of the common stock, and could
be materially less or more than the number estimated in the table.

(1) Includes a good faith estimate of the shares issuable upon conversion of the
Series B Convertible  Preferred Stock,  based on current market prices.  Because
the number of shares of common stock  issuable  upon  conversion of the Series B
Convertible  Preferred  Stock is  dependent in part upon the market price of the
common stock prior to a conversion,  the actual number of shares of common stock
that  will be  issued  upon  conversion  will  fluctuate  daily  and  cannot  be
determined at this time.  Under the terms of the Series B Convertible  Preferred
Stock,  if the Series B Convertible  Preferred Stock had actually been converted
on September 21, 2004, the conversion price would have been $.6064.

(2) The actual number of shares of common stock offered in this prospectus,  and
included  in the  registration  statement  of which this  prospectus  is a part,
includes  such  additional  number of shares of common stock as may be issued or


                                       38

issuable upon  conversion of the Series B Convertible  Preferred Stock by reason
of any stock split, stock dividend or similar  transaction  involving the common
stock, in accordance with Rule 416 under the Securities Act of 1933. However the
selling  stockholders  have  contractually  agreed to restrict  their ability to
convert their Series B  Convertible  Preferred  Stock and receive  shares of our
common  stock such that the number of shares of common stock held by them in the
aggregate and their affiliates after such conversion or exercise does not exceed
4.99% of the then issued and outstanding shares of common stock as determined in
accordance  with Section 13(d) of the Exchange Act.  Accordingly,  the number of
shares of common  stock  set  forth in the  table for the  selling  stockholders
exceeds the number of shares of common stock that the selling stockholders could
own  beneficially  at any given time  through  their  ownership  of the Series B
Convertible  Preferred  Stock. In that regard,  the beneficial  ownership of the
common stock by the selling stockholder set forth in the table is not determined
in  accordance  with Rule 13d-3 under the  Securities  Exchange Act of 1934,  as
amended.

(3) Cornell Capital Partners, L.P. is a private investment fund that is owned by
its  investors  and managed by its general  partner,  Yorkville  Advisors,  LLC.
Yorkville  Advisors,  LLC, of which Mr. Mark Angelo is the managing member,  has
voting and  investment  control over the shares listed owned by Cornell  Capital
Partners, L.P. We have been notified by the selling stockholder that it is not a
broker-dealer  or affiliate of a broker-dealer  and that it believes they is not
required to be a broker-dealer.

(4) Assumes that all securities registered will be sold.

(5) Includes 571,429 shares of common stock underlying warrants.

(6) Includes 71,500 shares of common stock underlying warrants.

(7) Includes 821,430 shares of common stock underlying warrants.

(8) Includes 228,571 shares of common stock underlying warrants.

(9) Includes 150,000 shares of common stock underlying warrants.

(10) Includes 100,000 shares of common stock underlying warrants.

(11) Includes 400,000 shares of common stock underlying options.

                  TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK

     To obtain funding for our ongoing operations, we entered into an Investment
Agreement with one accredited  investor on August 27, 2004 for the sale of 2,200
shares of Series B Convertible Preferred Stock for $2,200,000.

     This prospectus  relates to the resale of the common stock  underlying this
Series B Convertible  Preferred Stock. The investors are obligated to provide us
with an aggregate of $2,200,000 as follows:

     o    $1,100,000 was disbursed on August 27, 2004;

     o    $550,000  will be  disbursed  within  five days of the  filing of this
          registration statement; and

     o    $550,000 will be disbursed  within five days of the  effectiveness  of
          this prospectus.

     Accordingly,  we  have  received  a total  of  $1,100,000  pursuant  to the
Investment Agreement.

     The  Series  B  Convertible  Preferred  Stock  is  entitled  to  cumulative
dividends  of 5% per annum and are  convertible  into our common  stock,  at the
selling  stockholders'  option and subject to a maximum cap of $250,000 worth of
Series B Convertible  Preferred  Stock in any 30 day calendar  period,  into the
number of our  shares of common  stock  equal to the sum of (i) the  liquidation
amount of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but


                                       39

unpaid dividends,  which is then divided by the conversion price then in effect.
The liquidation  amount of the Series B Convertible  Preferred Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for  the  10  trading  days  before  but  not  including  the  conversion  date.
Accordingly,  there is in fact no limit on the  number of shares  into which the
Series B Convertible Preferred Stock may be converted. As of September 21, 2004,
the volume weighted  average price of the common stock on a principal market for
the 10 trading days as reported on the Over-The-Counter Bulletin Board was $.758
and,  therefore,  the  conversion  price for the Series B Convertible  Preferred
Stock was $.6064. Based on this conversion price, the 2,200 Series B Convertible
Preferred Stock,  excluding dividends,  was convertible into 3,627,969 shares of
our common stock.

     In  addition,  we  have  granted  the  investors  a  security  interest  in
substantially  all of our  assets and  intellectual  property  and  registration
rights.  In the event that we fail to timely file our registration  statement or
have it declared effective by the Securities and Exchange  Commission within 120
days of filing,  fail to disclose such  information as is necessary for sales to
be made  pursuant to the  registration  statement,  fail to register  sufficient
shares of common  stock or  otherwise  in addition to filing a new  registration
statement or post  effective  amendment  within 30 calendar days of  determining
that  there are  insufficient  shares of Common  Stock  registered,  then we are
liable to pay liquidated damages in cash equal to two percent of the outstanding
liquidation  amount of the Series B Convertible  Preferred  Stock per month plus
accrued and unpaid dividends.

     The  conversion  price of the Series B Convertible  Preferred  Stock may be
adjusted in certain circumstances such as if we pay a stock dividend,  subdivide
or combine outstanding shares of common stock into a greater or lesser number of
shares,  or take such other actions as would otherwise result in dilution of the
selling stockholder's position.

     The  selling  stockholders  have  contractually  agreed to  restrict  their
ability to convert their Series B Convertible Preferred Stock and receive shares
of our common  stock such that the number of shares of common stock held by them
in the  aggregate and their  affiliates  after such  conversion  does not exceed
4.99% of the then issued and outstanding shares of common stock.

     A complete copy of the Investment Agreement and related documents are filed
with the SEC as exhibits to our Form SB-2 relating to this prospectus.

Sample Conversion Calculation

     The number of shares of common stock issuable upon conversion of the Series
B Convertible  Preferred Stock is equal to the sum of (i) the liquidation amount
of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but unpaid
dividends,  which is then divided by the  conversion  price then in effect.  The
liquidation  amount  of the  Series B  Convertible  Preferred  Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for the 10 trading  days  before but not  including  the  conversion  date.  For
example,  assuming  conversion  of all  2,200  shares  of  Series B  Convertible
Preferred Stock, excluding dividends,  on September 21, 2004, a conversion price
of $0.6064, the number of shares issuable upon conversion would be:

2,200 shares * $1,000 = 2,200,000/$.6064 = 3,627,969 shares

     The  following  is an example  of the amount of shares of our common  stock
that are  issuable,  upon  conversion  of the  principal  amount of our  secured
convertible  notes,  based on market  prices  25%,  50% and 75% below the market
price, as of September 20, 2004 of $0.75.


                                                                          Number                          % of
% Below             Price Per                  With Discount             of Shares                        Outstanding
Market                 Share                     at 50%                  Issuable                         Stock
------                 -----                     ------                  --------                         -----
                                                                                              
25%                   $.5625                     $.45                    4,888,889                        23.80%
50%                   $.375                      $.30                    7,333,334                        31.90%
75%                   $.1875                     $.15                   14,666,667                        48.37%



                                       40

                                  LEGAL MATTERS

     Sichenzia  Ross  Friedman  Ference  LLP,  New York,  New York will issue an
opinion with respect to the validity of the shares of common stock being offered
hereby.

                                     EXPERTS

     Moore  Stephens  Ellis  Foster  Ltd.,  Chartered  Accountants,  independent
registered  public  accounting firm, have audited,  as set forth in their report
thereon appearing  elsewhere herein, our financial  statements at March 31, 2004
and 2003 and for the  years  then  ended  that  appear  in the  prospectus.  The
financial  statements  referred to above are  included in this  prospectus  with
reliance upon the independent  registered public accounting firm's opinion based
on their expertise in accounting and auditing.

                              AVAILABLE INFORMATION

     We have filed a  registration  statement on Form SB-2 under the  Securities
Act of 1933, as amended, relating to the shares of common stock being offered by
this  prospectus,  and reference is made to such  registration  statement.  This
prospectus  constitutes the prospectus of Torrent Energy  Corporation,  filed as
part of the registration  statement,  and it does not contain all information in
the registration  statement, as certain portions have been omitted in accordance
with the rules and regulations of the Securities and Exchange Commission.

     We are subject to the informational requirements of the Securities Exchange
Act of 1934  which  requires  us to file  reports,  proxy  statements  and other
information  with the Securities and Exchange  Commission.  Such reports,  proxy
statements and other information may be inspected at public reference facilities
of the SEC at Judiciary  Plaza,  450 Fifth Street N.W.,  Washington  D.C. 20549.
Copies of such material can be obtained from the Public Reference Section of the
SEC at  Judiciary  Plaza,  450 Fifth  Street  N.W.,  Washington,  D.C.  20549 at
prescribed rates. Because we file documents electronically with the SEC, you may
also  obtain  this  information  by  visiting  the  SEC's  Internet  website  at
http://www.sec.gov.


                                       41

                          INDEX TO FINANCIAL STATEMENTS

                   TORRENT ENERGY CORPORATION AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS


For the Years Ended March 31, 2004 and March 31, 2003

                                                                                              
         Report of Independent Registered Public Accounting Firm                                 F-1
         Balance Sheets                                                                          F-2
         Statement of Deficiency in Stockholders Equity                                          F-3
         Statement of Operations                                                                 F-5
         Statement of Cash Flows                                                                 F-6
         Notes to Financial Statements                                                           F-7 to
                                                                                                 F-14

For the Three Months Ended June 30, 2004 and June 30, 2003

      Consolidated Balance Sheets June 30, 2004 (Unaudited) and March 31, 2004                   F-15
         Consolidated Statement of Changes in Stockholders' Deficiency (Unaudited)               F-16
         Consolidated Statements of Operations (Unaudited)                                       F-17
         Consolidated Statements of Cash Flows (Unaudited)                                       F-18
         Notes to the Consolidated Financial Statements (Unaudited)                              F-19 to
                                                                                                 F-23


                                       42

MOORE STEPHENS ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
Website: www.ellisfoster.com

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
SCARAB SYSTEMS, INC.
(A development stage enterprise)

We have audited the balance sheets of Scarab  Systems,  Inc. (the  "Company") (a
development  stage  enterprise)  as at March  31,  2004 and  2003,  the  related
statements of  stockholders'  deficit from October 8, 2001  (inception) to March
31, 2004 and the  statements  of  operations  and cash flows for the years ended
March 31,  2004,  2003 and from October 8, 2001  (inception)  to March 31, 2004.
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 auditing standards generally accepted
in the  United  States of  America.  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 March 31, 2004 and 2003
and the results of its  operations  and cash flows for the years ended March 31,
2004, 2003 and from October 8, 2001  (inception) to March 31, 2004 in conformity
with generally accepted accounting principles in the United States of America.

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

Vancouver, Canada                      /s/ MOORE STEPHENS ELLIS FOSTER LTD.
April 7, 2004                          Chartered Accountants

                                      F-1

SCARAB SYSTEMS, INC.
(A development stage enterprise)
Balance Sheets

(Expressed in U.S. Dollars)
================================================================================

                                               March 31                 March 31
                                                   2004                     2003
--------------------------------------------------------------------------------
ASSETS

Current assets
  Cash and cash equivalents                   $  12,621            $          -
--------------------------------------------------------------------------------

Total current assets                                  -                       -

Furniture, net of accumulated depreciation            -                   1,305
--------------------------------------------------------------------------------

Total assets                                  $  12,621            $      1,305
================================================================================

LIABILITIES

Current liabilities
  Accounts payable and accrued liabilities    $  27,882            $    124,306
  Promissory notes                                    -                  85,921
--------------------------------------------------------------------------------

Total current liabilities                        27,882                 210,227

Promissory notes - non current                        -                   5,000
--------------------------------------------------------------------------------

Total liabilities                                27,882                 215,227
--------------------------------------------------------------------------------

STOCKHOLDERS' DEFICIT

Share capital

Authorized: 100,000,000 common shares with a par value of $0.001 per share

Issued and outstanding: 12,173,319
     Common shares
     (March 31, 2003 - 9,166,299)             $  12,173            $      9,166

Additional paid in capital                      855,883                 245,123

Share subscriptions received                          -                  40,500

Deficit accumulated during
    the development stage                      (883,317)               (508,711)
--------------------------------------------------------------------------------

Total stockholders' deficit                     (15,261)               (213,922)
--------------------------------------------------------------------------------

Total liabilities and
    stockholders' (deficit)                   $  12,621            $      1,305
================================================================================

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

                                      F-2

SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Stockholders' Deficit
For the period from October 8, 2001 (inception) to March 31, 2004 (Expressed in
US Dollars)


==================================================================================================================================
                                                                                                         Deficit
                                                                                          Share          accumulated
                                                       Common stock           Additional  subscription   during       Total
                                                   ---------     ---------    Paid-in     received/      development  shareholders'
                                                     Shares        Amount     capital     (receivable)   stage        deficit
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Stock issued for cash at $0.001 per share
   in October, 2001                               5,425,000  $      5,425   $          -   $        -   $         -   $      5,425

Stock issued for intangible asset acquisition
   at $0.001 per share in October,2001              200,000           200              -            -             -            200

Issued 1,440,000 common stock at
   $0.001 per share in October, 2001              1,440,000         1,440              -       (1,440)            -              -

Stock issued at $0.50 per share
   in November, 2001                                675,000           675        336,825     (337,500)            -              -

Stock issued for cash at $0.50 per share
   in January, 2002                                 390,000           390        194,610            -             -        195,000

 Net (loss) for the period                                -             -              -            -      (112,434)      (112,434)
----------------------------------------------------------------------------------------------------------------------------------

Balance, March 31, 2002                           8,130,000  $      8,130   $    531,435   $ (338,940) $   (112,434)   $    88,191

Stock issued for cash at $0.25 $0.50 per share
   in April 2003                                    130,000           130         39,870            -             -         40,000

Recapitalization to effect the acquisition
   of iRV, Inc.                                   1,446,299         1,446         (1,446)           -             -              -

Acquisition of MarketEdgeDirect                           -             -              -      337,500             -        337,500

Proceeds of share subscriptions                                                                 1,440                        1,440

Return of stocks in connection of
   disposal of MarketEdgeDirect                    (540,000)         (540)      (358,042)           -             -       (358,582)

Proceeds of 96,000 share subscriptions
   at $0.40 to $0.50 per share                                                                 40,500                       40,500

241,020 Shares allotted for services
   rendered at $0.10 to $0.40 per share                                           33,306            -                       33,306

 Net (loss) for the period                                -             -              -            -      (396,277)      (396,277)
----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003                           9,166,299   $     9,166   $    245,123   $   40,500   $  (508,711)   $  (213,922)
==================================================================================================================================

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

                                      F-3

SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Stockholders' Deficit
For the period from October 8, 2001 (inception) to March 31, 2004 (Expressed in
US Dollars)


===================================================================================================================================
                                                                                                       Deficit
                                                                                          Share        accumulated
                                                       Common stock           Additional  subscription during       Total
                                                   ---------     ---------    Paid-in     received/    development  shareholders'
                                                     Shares        Amount     capital     (receivable) stage        deficit
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Balance, March 31, 2003                           9,166,299   $     9,166   $    245,123   $   40,500   $  (508,711)  $   (213,922)

Stocks issued for services rendered and
   recorded in fiscal year 2003                     241,020           241           (241)           -             -              -

Stocks issued at $0.40 to $0.50 per share
   in fiscal year 2003                               96,000            96         40,404      (40,500)            -              -

Stocks issued for conversion of debt
   at $0.10 per share in February 2004              510,000           510         50,490            -             -         51,000

Stocks issued for cash at $0.10 per share
   in February and March 2004                     1,200,000         1,200        118,800            -                      120,000

Stocks issued for exercise of stock options
   at $0.10 per share in February and March 2004    960,000           960         95,040            -             -         96,000

Issuance of stock options as compensation                 -             -        195,740            -             -        195,740

Forgiveness of debt - related party                       -             -        110,527            -             -        110,527

 Net (loss) for the period                                -             -              -            -      (374,606)      (374,606)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2004                          12,173,319     $  12,173   $    855,883   $        -   $  (883,317)   $   (15,261)
===================================================================================================================================

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

                                      F-4

SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Operations
(Expressed in U.S. Dollars)


==========================================================================================
                                            Cumulative              Year              Year
                                       October 8, 2001             Ended             Ended
                                        (inception) to March 31, March 31,
                                        March 31, 2004              2004              2003
                                                                  
General and administrative expenses
  Consulting                           $       400,620   $       169,059    $      170,469
  Interest expense on long term debt            16,569             8,948             7,621
  Legal and accounting                          55,478            14,924            20,181
  Office and Miscellaneous                      60,513            21,501            30,756
  Professional fees                             65,780                 -            65,780
  Rent                                          43,383                 -            29,485
  Stock based compensation                     195,740           195,740                 -
  Telephone                                     16,594               232            15,252
  Travel                                        16,453             1,247             7,501
-------------------------------------------------------------------------------------------

Operating (loss)                              (871,130)         (411,651)         (347,045)

Other income (expense)
  Gain on settlement of debt                    37,045            37,045                 -
  Write-off of goodwill                        (70,114)                -           (70,114)
  Write-off of Smart-e-Card
     Distribution Rights                          (200)                -              (200)
-------------------------------------------------------------------------------------------

Loss from continued operations                (904,399)         (374,606)         (417,359)

Net income from discontinued operations         21,082                 -            21,082
-------------------------------------------------------------------------------------------

Net loss for the period                $      (883,317)  $      (374,606)   $     (396,277)
===========================================================================================

Basic and diluted earning (loss) per share,
  Loss from continued operations                         $         (0.04)   $        (0.05)
  Net income from discontinued operations                           0.00              0.00
-------------------------------------------------------------------------------------------

Net (loss) for the year                                  $        (0.04)    $        (0.05)
===========================================================================================

Weighted average number of
  common shares outstanding                                   9,481,502          8,802,948
===========================================================================================

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

                                      F-5

SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Cash Flows
(Expressed in U.S. Dollars)


===========================================================================================
                                          Cumulative                Year           Year
                                          October 8, 2001           Ended          Ended
                                          (inception) to            March 31,      March 31,
                                          March 31, 2004            2004           2003
                                                                       
Cash flows from (used in) operating activities
  Net (loss) for the period             $     (883,317)   $     (374,606)   $     (396,277)
  Adjustment to reconcile net loss to
   net cash used in operating activities:
    - amortization                               2,194             1,305               559
    - stock based compensation                 195,740           195,740                 -
    - foreign exchange                          (5,989)            2,688                 -
    - write-off of goodwill                     70,114                 -            70,114
    - debt forgiven                            103,140           103,140                 -
    - write-off of Smart-e-Card
        Distribution Rights                        200                 -               200
    - net income from the discontinued
        operations                             (21,082)                -           (21,082)
    - shares allotted for service rendered      33,306                 -            33,306
  Changes in non-cash working capital items:
    - prepaid expenses and deposits                  -                 -             8,515
    - accounts payable and accrued liabilities  35,269           (80,037)          116,877
-------------------------------------------------------------------------------------------

Net cash used in operating activities         (470,425)         (151,770)         (187,788)
-------------------------------------------------------------------------------------------

Cash flows used in investing activities
  Loan to Healthnet (Note 4)                   (62,684)                -                 -
  Acquisition of fixed assets                   (2,195)                -                 -
-------------------------------------------------------------------------------------------

Net cash used in investing activities          (64,879)                -                 -
-------------------------------------------------------------------------------------------

Cash flows provided by financing activities
  Proceeds from issuance of common stock       547,925           216,000            40,000
  Proceeds from promissory notes                     -             7,500            90,921
  Repayment of promissory notes                      -           (59,109)                -
  Proceeds from share subscriptions                  -                 -            41,940
-------------------------------------------------------------------------------------------

Net cash provided by financing activities      547,925           164,391           172,861
-------------------------------------------------------------------------------------------

Increase (decrease) in cash
   and cash equivalents                         12,621            12,621           (14,927)
-------------------------------------------------------------------------------------------

Cash and cash equivalents,
   beginning of period                               -                 -            14,927
-------------------------------------------------------------------------------------------

Cash and cash equivalents,
   end of period                        $       12,621   $        12,621   $             -
===========================================================================================
 Interest expenses paid                 $        5,513   $         3,801   $         1,712
===========================================================================================

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

                                      F-6

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

1.        Incorporation and Continuance of Operations

          Scarab Systems,  Inc.  (formerly called iRV, Inc.) was incorporated in
          Colorado on August 1, 1999.

          The  financial  statements  presented  are those of Scarab Nevada (see
          below).

          The original Scarab Systems,  Inc.  ("Scarab Nevada") was incorporated
          on  October  8, 2001  under the laws of the  State of  Nevada.  Scarab
          Nevada was a development  stage  enterprise  and was seeking  business
          opportunities.

          On March 25, 2002,  iRV,  Inc.  ("iRV")  entered into an Agreement and
          Plan  of  Reorganization  with  Scarab  Nevada,   whereby  iRV  issued
          8,260,000  share  of its  common  stock  in  exchange  for  all of the
          outstanding  common stock of Scarab Nevada.  As part of the definitive
          agreement and plan of  reorganization,  iRV transferred all its assets
          and liabilities to its subsidiaries and then spun off the subsidiaries
          and iRV became a non-  operating  shell company  without any assets or
          liabilities.   Immediately   prior  to  the   Agreement  and  Plan  of
          Reorganization,  iRV had  1,446,299  shares of common stock issued and
          outstanding.  The acquisition was accounted for as a  recapitalization
          of Scarab Nevada because the shareholders of Scarab Nevada  controlled
          iRV after the acquisition.  Scarab Nevada was treated as the acquiring
          entity for  accounting  purposes and iRV was the surviving  entity for
          legal  purposes.  The issued and  outstanding  common  stock of Scarab
          Nevada prior to the completion of acquisition  was restated to reflect
          the 8,260,000 common stock issued by iRV.

          Subsequent  to the  completion  of the  reorganization,  Scarab Nevada
          transferred  all its assets and  liabilities  to iRV and Scarab Nevada
          ceased to exist,  and iRV  changed  its name to Scarab  Systems,  Inc.
          Accordingly,  the financial  statements are the continuation of Scarab
          Nevada. The effective date of the Agreement and Plan of Reorganization
          was July 17, 2002.

          These  financial  statements  have been  prepared in  accordance  with
          generally  accepted  accounting   principles  applicable  to  a  going
          concern,   which  contemplates  the  realization  of  assets  and  the
          satisfaction  of liabilities  and  commitments in the normal course of
          business.  The Company  has not  generated  any  revenue and  requires
          additional  funds to maintain its  operations.  Management's  plans in
          this regard are to raise equity financing as required.

          These conditions raise  substantial  doubt about the Company's ability
          to continue as a going  concern.  These  financial  statements  do not
          include any adjustments that might result from this uncertainty.

          The Company has not generated any material operating revenues to date.

          On March 15, 2004, the Company abandoned its only subsidiary, Catalyst
          Technologies, Inc.

          In fiscal year 2004,  the  Company  consolidated  its common  stock by
          issuing one new share for ten old  shares.  The  financial  statements
          have been restated to reflect the stock consolidation.

2.        Significant Accounting Policies

          a) Cash and Cash Equivalents

          Cash  equivalents  comprise  certain highly liquid  instruments with a
          maturity of three months or less when purchased.  As at March 31, 2004
          and 2003, cash and cash equivalents consist of cash only.

          b) Accounting Estimates

          The  preparation  of  the  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  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.

                                      F-7

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.        Significant Accounting Policies (continued)

          c) Furniture

          Furniture is recorded at cost.  Depreciation is based on the estimated
          useful lives of the assets and is computed using the declining balance
          method as follows:

          Furniture and fixtures 30%

          d) Concentration of Credit Risk

          The  Company  places its cash and cash  equivalents  with high  credit
          quality financial  institutions.  As of March 31, 2004 the Company had
          no balance in a bank beyond insured limits.

          e) Foreign Currency Transactions

          The Company  maintains  its  accounting  records in U.S.  Dollars,  as
          follows:

          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
          remeasured  by using the  exchange  rate in effect at that  date.  The
          resulting   foreign   exchange   gains  and  losses  are  included  in
          operations.

          f) Fair Value of Financial Instruments

          The  Company's   financial   instruments  consist  of  cash  and  cash
          equivalents,  accounts payable and accrued  liabilities and promissory
          notes. The carrying amount of accounts payable and accrued liabilities
          approximates  fair value due to the short-term  nature of these items.
          The promissory  notes also approximate fair value based on evaluations
          of market interest rates and short-term nature of the payable.

          g) Income Taxes

          The Company has adopted  Statement of Financial  Accounting  Standards
          (SFAS") No. 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  statements  and tax bases of assets and  liabilities  using
          enacted tax rates in effect in the years in which the  differences are
          expected to reverse.

          h) Comprehensive Income

          The Company adopted SFAS No. 130,  "Reporting  Comprehensive  Income",
          which requires inclusion of foreign currency translation  adjustments,
          reported separately in its Statement of Stockholders' Equity, in other
          comprehensive  income. The Company had no other  comprehensive  income
          for the year ended March 31, 2004.

          i) Advertising Expenses

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

                                      F-8

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.        Significant Accounting Policies (continued)

          j) Loss Per Share

          Loss per share is computed using the weighted average number of shares
          outstanding  during the year.  The Company  has adopted  SFAS No. 128,
          "Earnings  Per Share".  Diluted loss per share is  equivalent to basic
          loss per  share as the  stock  options  to  acquire  common  shares as
          disclosed in the notes are anti-dilutive.

          k) Stock-based Compensation

          The Company has adopted  the  disclosure-only  provisions  of SFAS No.
          123, "Accounting for Stock-based Compensation", as amended by SFAS No.
          148  "Accounting   for  Stock-based   Compensation  -  Transition  and
          Disclosure - An amendment of SFAS No. 123".  SFAS No. 123  encourages,
          but does not require, companies to adopt a fair value based method for
          determining expense related to stock-based  compensation.  The Company
          accounts  for  stock-based   compensation   issued  to  employees  and
          directors  using  the  intrinsic  value  method  as  prescribed  under
          Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock
          Issued to Employees" and related interpretations.

          The Company initiated a 2004  Non-Qualified  Stock Option Plan. During
          the year ended March 31, 2004,  the Company  granted  1,060,000  stock
          options to non-employees.

          l) Goodwill and Intangible Assets

          Goodwill  represents  the  excess of cost over fair value of assets of
          business  acquired.  Goodwill  and  intangible  assets  acquired  in a
          business  combination and determined to have an indefinite useful life
          are not  amortized,  but  instead  are tested for  impairment  at lest
          annually in accordance  with the  provisions of Statement of Financial
          Accounting Standards ("SFAS") No. 142. SFAS No. 142 also requires that
          intangible  assets with estimable useful lives be amortized over their
          respective  estimated useful lives to their estimated residual values,
          and  reviewed  for  impairment  in  accordance   with  SFAS  No.  144,
          Accounting for Impairment or Disposal of Long-Lived Assets.

          m) Accounting for Derivative Instruments and Hedging Activities

          The Company has adopted  Statement of Financial  Accounting  Standards
          No. 133 (SFAS 133)  Accounting for Derivative and Hedging  Activities,
          which  requires  companies to recognize  all  derivative  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 and 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.


                                      F-9

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.        Significant Accounting Policies (continued)

          n) Long-Lived Assets Impairment

          Long-term   assets  of  the  Company  are  reviewed  when  changes  in
          circumstances  require as to whether their  carrying  value has become
          impaired,  pursuant to guidance  established in Statement of Financial
          Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment
          or Disposal of Long-Lived  Assets.  Management  considers assets to be
          impaired if the carrying value exceeds the future projected cash flows
          from  the  related  operations   (undiscounted  and  without  interest
          charges). If impairment is deemed to exist, the assets will be written
          down to fair value.

          o) New Accounting Pronouncements

          In April 2003,  the FASB issued SFAS No. 149,  Amendment  of Statement
          133 on Derivative  Instruments and Hedging Activities.  This Statement
          amends and clarifies financial accounting and reporting for derivative
          instruments,  including  certain  derivative  instruments  embedded in
          other  contracts  (collectively  referred to as  derivatives)  and for
          hedging activities under SFAS No. 133. This Statement is effective for
          contracts  entered into or modified  after June 30, 2003. The adoption
          of SFAS No.  149 does not have an  impact on the  Company's  financial
          statements.

          In May 2003,  the FASB  issued SFAS No.  150,  Accounting  for Certain
          Financial  Instruments  with  Characteristics  of Both Liabilities and
          Equity.  This  Statement  establishes  standards  for  how  an  issuer
          classifies   and   measures   certain   financial   instruments   with
          characteristics  of both  liabilities and equity.  It requires that an
          issuer  classify a financial  instrument that is within its scope as a
          liability  (or an  asset in some  circumstances).  This  Statement  is
          effective for financial instruments entered into or modified after May
          30, 2003,  and  otherwise  is effective at the  beginning of the first
          interim period beginning after June 15, 2003. The adoption of SFAS No.
          150 does not have an impact on the Company's financial statements.

          In December 2003, the FASB Issued SFAS No. 132(R),  a revision to SFAS
          No. 132, Employer's Disclosure about Pensions and Other Postretirement
          Benefits. SFAS No. 132(R) requires additional disclosure about assets,
          obligations,  cash  flows and net  periodic  benefit  cost of  defined
          benefit pension plans and other defined benefit  postretirement plans,
          SFAS No. 132(R) is effective for the financials statements with fiscal
          years ending after December 15, 2003, with the exception of disclosure
          requirements  related to foreign  plans and estimated  future  benefit
          payments  which are  effective  for the fiscal years ending after June
          15, 2004.  The adoption of SFAS No.  132(R) does not have an impact on
          the Company's financial position or results of operations.

          In December,  2003 the American Institute of certified Public Accounts
          and the  Securities  and Exchange  Commission  ("SEC")  expressed  the
          opinion that rate-lock  commitments represent written put options, and
          therefore be valued as a liability. The SEC expressed that they expect
          registrants  to  disclose  the effect on the  financial  statement  of
          recognizing  the  rate-lock  commitments  as written put options,  for
          quarters  commencing  after  march  15,  2004,  Additionally,  the SEC
          recently issued Staff  Accounting  Bulletin (SAB) No. 105. SAB No. 105
          clarifies  the SEC's  position  that the  inclusion of cash flows from
          servicing or ancillary  income in the  determination of the fair value
          of interest rate lock commitments is not appropriate.  The Company has
          not yet determined  the impact on the financial  statements of SAB No.
          105, which must be implemented for loan commitments entered into on or
          after April 1, 2004. The Company is currently  analyzing the impact of
          the  SEC's  position  and  will,  if  required,  account  for its loan
          origination commitments as prescribed.


                                      F-10

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.        Significant Accounting Policies (continued)

          o) New Accounting Pronouncements (continued)

          In January 2003,  the FASB released FASB  Interpretation  No. 46 ("FIN
          46"),  "Consolidation of Variable Interest  Entities." FIN 46 requires
          that  all  primary   beneficiaries  of  variable   interest   entities
          consolidate that entity. FIN 46 is effective  immediately for variable
          interest  entities  created  after  January  31,  2003 and to variable
          interest  entities in which an  enterprise  obtains an interest  after
          that  date.  It  applies in the first  fiscal  year or interim  period
          beginning after June 15, 2003 to variable  interest  entities in which
          an enterprise holds a variable interest it acquired before February 1,
          2003. In December  2003, the FASB published a revision to FIN 46 ("FIN
          46R") to clarify some of the provisions of the  interpretation  and to
          defer the effective date of implementation for certain entities. Under
          the  guidance  of FIN  46R,  entities  that do not have  interests  in
          structures that are commonly  referred to as special purpose  entities
          are  required  to  apply  the  provisions  of  the  interpretation  in
          financial  statements  for periods  ending after March 14,  2004.  The
          Company did not create a variable  interest  entity after  January 31,
          2003 and does not have a variable  interest  entity as of December 31,
          2003.  The Company  expects that the full  adoption of FIN 46R in 2004
          will not have a material impact on the Company's financial position or
          results of operations

3.        Smart-e-Card Distribution Rights

          In October 2001, the Company entered into an agreement with BentleyTel
          USA Inc.  ("Bentley"),  pursuant  to which the  Company  was granted a
          perpetual worldwide exclusive agency to Bentley's  Smart-e-Cards.  The
          Company  issued  200,000 shares of its common stock at $0.001 each for
          the distribution  rights.  In fiscal year 2003, the Company  abandoned
          Smart-e-Card sales and distribution operations and charged the cost to
          operations.

4.        Business Acquisition

          In  fiscal  year  2002,  the  Company  loaned  the sum of  $62,684  to
          Healthnet International, Inc. ("Healthnet"). The loan bore interest at
          15% per annum and was  convertible  into stocks in  Healthnet at $0.50
          per share (125,000 shares).

          On  March  28,  2003,  Healthnet  sold  Catalyst  Technologies,   Inc.
          ("Catalyst") to the Company in satisfaction of the related debt owing.
          Catalyst  was  incorporated  under the law of the  Province of British
          Columbia,  Canada,  and is in the  business  of  providing  e-commerce
          services to bricks and mortar retailers. The acquisition was accounted
          for using the  purchase  method of  accounting  and  accordingly,  the
          purchase price was allocated to the tangible and intangible net assets
          acquired  on  the  basis  of  their  respective  fair  values  on  the
          acquisition date.

          The allocation of the purchase price was as follows:


            ----------------------------------------------------
             Net liabilities acquired              $     (7,430)
             Consideration                               62,684
            ----------------------------------------------------
             Goodwill                                    70,114
             Impairment of Goodwill                     (70,114)
            ----------------------------------------------------
             Balance                               $          -
            ====================================================



          In accordance  with SFAS No. 142 and 144, the Company has written down
          the goodwill  arising from the  acquisition  of Catalyst to nil, being
          the estimated fair value of the goodwill at year-end.

          On March 15, 2004, the Company abandoned Catalyst. There was no effect
          on the financials statements because the subsidiary had a nil carrying
          value.

                                      F-11

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

5.        Discontinued Operations

          Effective  August 7,  2002,  in  connection  with the  675,000  shares
          subscription  receivable,  the Company exercised its option to acquire
          all of the outstanding  shares of 485017 B.C. Ltd., a Canadian company
          involved in marketing and advertising services. On March 28, 2003, the
          Company  entered into an  agreement  with the former  shareholders  of
          485017 B.C.  Ltd. to sell 485017 B.C.  Ltd. to the former  shareholder
          for the return of 540,000  shares of the Company  which were valued at
          the $358,582 (the  original  investment of $337,500 plus net income of
          485017 B.C. Ltd.  totalling  $21,082 from the period of August 7, 2002
          to March 28, 2003).

6.        Promissory Notes

          --------------------------------------------------------------------
                                                       2004          2003
          --------------------------------------------------------------------
          Promissory notes - related party           $         -   $    41,361
          Promissory notes - convertible
           at $0.05 to $0.075 per share                        -        16,531
          Promissory notes - unrelated party                   -        33,029
          --------------------------------------------------------------------
          Total                                                -        90,921
          Less:  Long-term portion                             -        (5,000)
          --------------------------------------------------------------------
                                                     $         -   $    85,921
          ====================================================================

          Promissory  notes are unsecured and bearing  interest at 0% to 20% per
          annum and repayable on maturity.

7.        Share Issuances

          In fiscal year 2004, the Company received $120,000 for the issuance of
          1,200,000 shares at $0.10 per share.

8.        Stock Options

          a) On February 10, 2004, the Company's Board of Directors  adopted the
          2004  Non-Qualified  Stock  Option Plan (the  "Plan").  The  aggregate
          number of shares of common  stock that may be  granted by the  Company
          under the Plan will not exceed a maximum of  1,800,000  shares  during
          the period of the Plan.  The Plan shall  terminate upon the earlier of
          February  10,  2014 or the  issuance of all shares  granted  under the
          Plan.  The  option  prices  per share are  determined  by the Board of
          Directors when the stock option is granted.

          b) During the year,  the Company  granted  1,060,000  stock options to
          consultants.   These  options  have  vesting   periods   ranging  from
          immediately to over seven months,  expiring two (2) years from date of
          grant. The Company charged $195,740  stock-based  compensation expense
          to operations  for the options  granted to the  consultants  using the
          Black-Scholes option pricing model with the following weighted average
          assumptions:

          * Dividend yield of 0%, volatibility of 159%,  risk-free interest rate
          of 2.75% and expended life of two (2) years. The weighted average fair
          value of the stock option granted in 2004 fiscal year was estimated at
          $0.19.

                                      F-12

SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

8.        Stock Options (continued)

          As  at  March  31,  2004,   the  Company  had  100,000  stock  options
          outstanding  under the Plan with a weighted  average exercise price of
          $0.10. The weighted average remaining  contractual life of the options
          outstanding is 1.89 years.

      ----------------------------------------------------------------------
                                                                    Weighted
                                                         Weighted    Average
                                                          Average  Remaining
                                                 Stock   Exercise       Life
                                               Options      Price     (yrs.)
      Outstanding at April 1, 2003  and 2002         -  $       -          -

      Granted                                1,060,000  $    0.10
      Exercised                               (960,000) $    0.10
      ----------------------------------------------------------------------

      Outstanding at March 31, 2004            100,000  $    0.10       1.89
      Exercisable at March 31, 2004             25,000  $    0.10       1.89
      ======================================================================

          As  required  by  SFAS  123,  the  Company  will  disclose   pro-forma
          information  regarding  its net income as if it has  accounted for its
          employee stock options  granted under the fair value method.  However,
          the Company did not grant any stock options to officers,  directors or
          employees  during  the fiscal  year 2004 and 2003 and as such,  no pro
          forma information has been provided.

9.        Income Taxes

          As  at  March  31,  2004,   the  Company  has   estimated  tax  losses
          carryforward for tax purposes of $543,500.  This amount may be applied
          against  future  federal  taxable  income.  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.

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


                ------------------------------------------------
                                               2004        2003
                ------------------------------------------------
                Loss carry forwards      $  190,000  $  182,000
                Valuation allowance        (190,000)   (182,000)
                ------------------------------------------------
                                         $        -  $        -
                ================================================


                                      F-13

 
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements March 31, 2004 and 2003
(Expressed in U.S. Dollars)

10.       Related Party Transactions

          a) In fiscal year 2004, the Company accrued consulting fees of $59,413
          (2003 - $84,516) to the  directors  and  officers of the  Company.  In
          fiscal year 2004, the related parties released the Company of $110,527
          of accrued  consulting  fees and  expenses and this was recorded as an
          additional   paid-in   capital  on  the  statement  of   stockholders'
          deficiency.

          b) Included in the  accounts  payable  and  promissory  notes are $nil
          (2003 - $50,600) and $nil (2003 - $41,361),  respectively,  payable to
          the directors and officers of the Company.

          c) On February 2, 2004, a $40,000  unsecured  promissory  note with an
          officer of the Company,  along with $11,000 in accrued  interest,  was
          converted  into  510,000  common  shares of the Company at a price per
          share of $0.10.

11.       Non-cash Activities

          a) In fiscal year 2004,  the Company  issued  510,000 common shares in
          connection with the conversion of a $40,000 unsecured promissory note,
          along with $11,000 of accrued interest, to a related party.

          b) Pursuant to the grant of  1,060,000  stock  options to  consultants
          during  the  fiscal  year  2004,  the  Company  recorded  stock  based
          compensation charges of $195,740.

          c) In fiscal year 2004,  the amount  totalling  $110,527  owing to the
          directors and officers of the Company was released.

12.       Comparative Figure

          Certain of the comparative  figures have been  reclassified to conform
          to the current year's presentation.

                                      F-15

TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)
Consolidated Balance Sheets
(Unaudited and Prepared by Management)


                                                                                        June 30,          March 31,
                                                                                          2004              2004
                                                                                      (Unaudited)
                                                                                                
ASSETS
Current
       Cash and cash equivalents                                                  $         88,985    $     12,621

       Accounts receivable (Note 8)                                                         21,000               -
                                                                                         ----------      ----------

Total current assets                                                                       109,985          12,621
Oil and gas properties, unproven (Note 5)                                                  455,154               -
                                                                                         ----------      ----------
Total assets                                                                      $        565,139    $     12,621
                                                                                         ==========      ==========
LIABILITIES
Current
       Accounts payable and accrued liabilities                                   $         52,984    $     27,882
                                                                                         ----------      ----------

Total current liabilities                                                                   52,984          27,882
                                                                                         ----------      ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Share capital

       Authorized:

       100,000,000 common shares with a par value of $0.001 per share

Issued and outstanding: 15,056,249 Common shares
       (March 31, 2004 - 12,173,319)                                                        15,056          12,173

Additional paid in capital                                                               2,015,735         855,883
Share subscriptions received                                                                40,000               -
Deficit accumulated during the exploration stage                                        (1,558,636)       (883,317)
                                                                                         ----------      ----------
Total stockholders' equity (deficit)                                                       512,155         (15,261)
                                                                                         ----------      ----------
Total liabilities and equity                                                      $        565,139    $     12,621
                                                                                         ==========      ==========

 The accompanying notes are an integral part of these consolidated financial statements


                                      F-15


TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited and Prepared by Management)


                                                   Common stock         Additional          Share        Deficit           Total
                                                                           paid-in  subscriptions    accumulated   stockholders'
                                                                           capital       received         during          equity
                                                                                      (receivable)   exploration
                                                                                                        (deficit)
                                                                                                           Stage
                                              Shares          Amount
                                                                                                  
Balance , March 31, 2003                   9,166,299      $     9,166   $  245,123    $ 40,500   $   (508,711)    $    (213,922)
Stocks issued for services                   241,020              241         (241)          -              -                 -
rendered and recorded in fiscal year
2003
Stocks issued at $0.40 to $0.50               96,000               96       40,404     (40,500)             -                 -
per share in fiscal year 2003
Stocks issued for conversion of debt         510,000              510       50,490           -              -            51,000
at $0.10 per share in February 2004
Stocks issued for cash at $0.10            1,200,000            1,200      118,800           -                          120,000
per share in February and March 2004
Stocks issued for exercise of stock          960,000              960       95,040           -              -            96,000
options
at $0.10 per share in February and
March 2004
Issuance of stock options as                       -                -      195,740           -              -           195,740
compensation
Forgiveness of debt - related party                -                -      110,527           -              -           110,527
Net (loss) for the period                          -                -            -           -       (374,606)         (374,606)
Balance, March 31, 2004                   12,173,319      $    12,173   $  855,883    $      -   $   (883,317)    $     (15,261)
Stocks issued for exercise of stock          540,000              540       53,460           -              -            54,000
options
at $0.10 per share in May and June
2004
Stocks and warrants issued under a         1,442,930            1,443      503,582           -              -           505,025
private placement at $0.35 per share
in May 2004 (Note 7)
Stocks issued for investor relations         300,000              300      161,700           -              -           162,000
services
at $0.54 per share in June 2004
Stocks issued for acquisition of oil         600,000              600      227,400           -              -           228,000
and gas
properties at $0.38 per share in June
2004
Proceeds of 100,000 share                          -                -            -      40,000              -            40,000
subscriptions at $0.40 per share in
June 2004
Issuance of stock options as                       -                -      213,710           -              -           213,710
compensation
Net (loss) for the period                          -                -            -           -       (675,319)         (675,319)

Balance, June 30, 2004 (Unaudited)        15,056,249      $    15,056   $2,015,735    $ 40,000    $(1,558,636)     $    512,155

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


                                      F-16





TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)
Consolidated Statements of Operations
(Unaudited and Prepared by Management)


                                                                               Cumulative               Three            Three
                                                                               October 8,              Months           Months
                                                                                     2001               Ended            Ended
                                                                           (inception) to            June 30,         June 30,
                                                                                 June 30,                2004             2003
                                                                                     2004
                                                                                                      
General and administrative expenses
       Consulting                                               $                 502,830  $          102,210  $         26,473

       Insurance                                                                   46,569              46,569                 -

       Interest expense on long term debt                                          16,569                   -                 -

       Investor relations                                                          72,168              72,168                 -

       Legal and accounting                                                        94,169              38,691               720

       Office and Miscellaneous                                                    62,652               2,139             1,397

       Professional fees                                                           65,780                   -                 -

       Rent                                                                        43,383                   -                 -

       Shareholder relations                                                       37,153              37,153                 -

       Stock based compensation                                                   571,450             375,710                 -

       Telephone                                                                   16,594                   -                 -

       Travel                                                                      17,132                 679                 -

Operating (loss)                                                               (1,546,449)           (675,319)          (28,590)
Other income (expense)
       Gain on settlement of debt                                                  37,045                   -                 -

       Write-off of goodwill                                                      (70,314)                  -                 -

Loss from continued operations                                                 (1,579,718)           (675,319)          (28,590)
Net income from discontinued operations                                            21,082                   -                 -
Net loss for the period                                         $              (1,558,636) $         (675,319) $        (28,590)
Net (loss) for the period - basic and diluted                                              $            (0.05) $          (0.00)
Weighted average number of
common shares outstanding                                                                          13,143,870         9,166,290


 The accompanying notes are an integral part of these consolidated financial statements


                                      F-17

TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)
Consolidated Statements of Cash Flows
(Unaudited and Prepared by Management)



                                                              Cumulative     Three Months                Three
                                                         October 8, 2001            Ended               Months
                                                          (inception) to          June 30,               Ended
                                                           June 30, 2004             2004        June 30, 2003
                                                                                         
Cash flows used in operating activities
Net (loss) for the period                              $      (1,558,636)         (675,319)       $     (28,590)
Adjustment to reconcile net loss to
       net cash used in operating activities:

       - amortization                                              2,194                 -                    -

       - stock based compensation                                571,450           375,710                    -

       - foreign exchange                                          1,398                 -                    -

       - write-off of goodwill                                    70,314                 -                    -

       - debt forgiven                                           103,140                 -                    -

       - net income from the discontinued operations             (21,082)                -                    -

       - shares allotted for service rendered                     33,306                 -                    -

Changes in non-cash working capital items:
       - accounts receivable                                     (21,000)          (21,000)                   -

       - accounts payable and accrued liabilities                 52,984            25,102               23,416

Net cash used in operating activities                           (765,932)         (295,507)              (5,174)

Cash flows used in investing activities
Oil and gas properties                                          (227,154)         (227,154)                   -
Loan to Healthnet                                                (62,684)                -                    -
Acquisition of fixed assets                                       (2,195)                -                    -
                                                                (292,033)         (227,154)                   -
Net cash used in investing activities

Cash flows provided by financing activities
Proceeds from issuance of common stock                         1,106,950           559,025                    -
Proceeds from share subscriptions                                 40,000            40,000                    -
Proceeds from promissory notes                                         -                 -                7,500
                                                               1,146,950           599,025                7,500
Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents                  88,985            76,364                2,326
Cash and cash equivalents, beginning of period                         -            12,621                    -
Cash and cash equivalents, end of period               $          88,985            88,985       $        2,326
Supplemental cash flow information:
Interest expenses paid                                 $           5,513  $              -       $            -
Common stock issued for oil and gas property                     228,000           228,000                    -
Common stock issued for investor relations                       162,000           162,000                    -

 The accompanying notes are an integral part of these consolidated financial statements

                                      F-18

TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)

Notes to Consolidated Financial Statements
(Unaudited and Prepared by Management)

1.        Incorporation and Continuance of Operations

          Torrent  Energy   Corporation  (the  "Company"  or  "Torrent")  is  an
          exploration  stage company that,  pursuant to shareholder  approval on
          July 13, 2004, changed its name from Scarab System, Inc.

          Torrent  was formed by the merger of Scarab  Systems,  Inc.,  a Nevada
          corporation  into iRV, Inc., a Colorado  corporation.  Scarab Systems,
          Inc.  (Nevada)  was a  privately  owned  Nevada  corporation  that was
          incorporated  on  October 8, 2001.  The  effective  date of the merger
          transaction  between Scarab Systems,  Inc.  (Nevada) and iRV, Inc. was
          July 17, 2002. Subsequent to completion of the reorganization,  Scarab
          Systems,  Inc. (Nevada)  transferred all its assets and liabilities to
          iRV, Inc. and ceased operations.  The directors and executive officers
          of iRV, Inc. were  subsequently  reconstituted.  iRV, Inc. changed its
          name to Scarab Systems,  Inc. on March 24, 2003. The corporate charter
          of Scarab  Systems Inc.  (Nevada) was revoked in 2002. The Company was
          initially providing services to the e-commerce industry but ceased all
          activity  in the  e-commerce  industry  by the end of the fiscal  year
          ended March 31, 2003.

          On January 30, 2002,  the Company was given two options in fiscal year
          2002 to acquire all the issued and  outstanding  shares of 485017 B.C.
          Ltd., a British Columbia  company doing business as MarketEdge  Direct
          ("MED"), as security against a subscription receivable of $337,500 for
          675,000 shares from the  shareholders  of MED. MED was in the business
          of  providing  a  wide  range  of  marketing  products  and  services.
          Effective  August 7, 2002,  the Company  exercised both of the options
          and  acquired  all the issued and  outstanding  shares of MED.  Due to
          disappointing financial results of MED, on March 28, 2003, the Company
          entered into an agreement with the former  shareholders of MED to sell
          MED back to them. As a result,  all the issued and outstanding  shares
          of MED that the  Company  acquired  were sold back to the  former  MED
          shareholders  for the  return to  treasury  of  540,000  of its common
          shares.

          On March 28, 2003, the Company acquired all the issued and outstanding
          shares of Catalyst Technologies,  Inc., a British Columbia corporation
          ("Catalyst").  Catalyst is a Vancouver  based, web design and Internet
          application  developer.  Catalyst  specializes  in the  development of
          web-sites and Internet  software design,  primarily for the Health and
          Nutraceutical  industry.  The acquisition of Catalyst was treated as a
          non-material  business  combination  in the  fiscal  year 2003 and the
          Company abandoned Catalyst during the fiscal year ended March 31, 2004
          due to a lack of working capital and disappointing financial results.

          On April 30, 2004,  Torrent  incorporated an Oregon subsidiary company
          named Methane Energy Corp.  ("Methane") in  anticipation  of acquiring
          oil and gas properties in the State of Oregon.

          On May 11,  2004,  Methane  entered  into a Lease  Purchase  and  Sale
          Agreement (the "Agreement") with  GeoTrends-Hampton  International LLC
          ("GHI") to purchase GHI's  undivided  working  interest in certain oil
          and gas leases for the Coos Bay Basin prospect  located onshore in the
          Coos Bay Basin of Oregon.  To acquire  these oil and gas  leases,  the
          Company  paid a total of  $300,000  in cash and will  issue  1,800,000
          restricted  common shares in three  performance  based  tranches.  The
          agreement  closed on June 22,  2004.  On  closing,  the  Company  paid
          $100,000 of the cash and 600,000 of the common shares. The Company has
          since paid the remaining  $200,000 so that the cash  consideration  is
          fully paid.

          Pursuant to the GHI Agreement,  the Company acquired leases of certain
          properties  in the Coos Bay area of Oregon which are  prospective  for
          oil and gas exploration. Leases were acquired from the State of Oregon
          and


                                      F-19

TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)

Notes to Consolidated Financial Statements
(Unaudited and Prepared by Management)

          from property owners, and the Company has amassed approximately 60,000
          acres under lease.  The Company is pursuing the leasing of  additional
          properties in the Coos Bay area.

          The consolidated  financial  statements presented are those of Torrent
          and  its  wholly-owned  subsidiary  Methane.  Collectively,  they  are
          referred to herein as the "Company".

2.        Significant Accounting Policies

          Basis of Presentation

          The accompanying  consolidated financial statements of the Company are
          unaudited  and  include,  in the  opinion  of  management,  all normal
          recurring  adjustments  necessary to present  fairly the  consolidated
          balance  sheet as of June 30,  2004,  and the  related  statements  of
          operations  and  cash  flows  for  the  periods   presented.   Certain
          information and footnote  disclosures  normally  included in financial
          statements prepared in accordance with accounting principles generally
          accepted in the United  States have been  condensed or omitted.  These
          consolidated  financials statements should be read in conjunction with
          the  Company's  audited  financial  statements  and the related  notes
          thereto   included  in  the  Company's  Form  10-KSB  filed  with  the
          Securities and Exchange Commission.

          Oil and Gas Properties

          The  Company  utilizes  the  full  cost  method  to  account  for  its
          investment  in  oil  and  gas  properties.   Accordingly,   all  costs
          associated  with  acquisition,  exploration and development of oil and
          gas reserves,  including  such costs as leasehold  acquisition  costs,
          capitalized interest costs relating to unproved properties, geological
          expenditures,  tangible and  intangible  development  costs  including
          direct  internal  costs are  capitalized  to the full cost pool. As of
          June 30, 2004,  the Company has no  properties  with proven  reserves.
          When the  Company  obtains  proven oil and gas  reserves,  capitalized
          costs,  including  estimated  future costs to develop the reserves and
          estimated  abandonment costs, net of salvage,  will be depleted on the
          units-of-production   method  using  estimates  of  proved   reserves.
          Investments  in unproved  properties  and major  development  projects
          including capitalized interest, if any, are not amortized until proved
          reserves associated with the projects can be determined. If the future
          exploration of unproved  properties are  determined  uneconomical  the
          amount  of such  properties  are added to the  capitalized  cost to be
          amortized.  As of June  30,  2004,  all of the  Company's  oil and gas
          properties were unproved and were excluded from amortization.  At June
          30, 2004,  none of the Company's  unproved oil and gas properties were
          considered impaired.

          The capitalized  costs included in the full cost pool are subject to a
          "ceiling  test",  which  limits  such  costs to the  aggregate  of the
          estimated  present  value,  using a ten percent  discount rate, of the
          future net revenues from proved  reserves,  based on current  economic
          and operating conditions and estimated value of proven properties.  No
          impairment existed as of June 30, 2004.

          Sales  of  proved  and  unproved   properties  are  accounted  for  as
          adjustments  of  capitalized  costs  with no gain or loss  recognized,
          unless such  adjustments  would  significantly  alter the relationship
          between capitalized costs and proved reserves of oil and gas, in which
          case the gain or loss is recognized in the statement of operations.


                                      F-20




TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)

Notes to Consolidated Financial Statements
(Unaudited and Prepared by Management)

          Stock Based Compensation

          The Company has adopted  the  disclosure-only  provisions  of SFAS No.
          123, "Accounting for Stock-based Compensation", as amended by SFAS No.
          148  "Accounting   for  Stock-based   Compensation  -  Transition  and
          Disclosure - An amendment of SFAS No. 123".  SFAS No. 123  encourages,
          but does not require, companies to adopt a fair value based method for
          determining expense related to stock-based  compensation.  The Company
          accounts  for  stock-based   compensation   issued  to  employees  and
          directors  using  the  intrinsic  value  method  as  prescribed  under
          Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock
          Issued to Employees" and related interpretations.

          The Company  initiated a 2004  Non-Qualified  Stock Option Plan. Since
          inception of the plan, the Company has granted 1,600,000 stock options
          to non-employees.

          Recent Accounting Pronouncements

          A reporting  issue has arisen  regarding  the  application  of certain
          provisions  of SFAS  No.  141 and  SFAS No.  142 to  companies  in the
          extractive industries,  including oil and gas companies.  The issue is
          whether SFAS No. 142 requires registrants to classify the costs of oil
          and gas  rights  held  under  lease or other  contractual  arrangement
          associated  with  extracting  oil and gas as intangible  assets in the
          balance  sheet,  apart from  other  capitalized  oil and gas  property
          costs, and provide specific footnote  disclosures.  Historically,  the
          Company has included  the costs of such oil and gas rights  associated
          with  extracting oil and gas as a component of oil and gas properties.
          If it is ultimately  determined that SFAS No. 142 requires oil and gas
          companies to classify  costs of oil and gas rights held under lease or
          other contractual  arrangement  associated with extracting oil and gas
          as a separate  intangible  assets line item on the balance sheet,  the
          Company would be required to reclassify approximately $455,154 at June
          30, 2004 and $nil at March 31, 2004 out of oil and gas  properties and
          into a separate  intangible assets line item. The Company's cash flows
          and results of operations  would not be affected since such intangible
          assets would  continue to be depleted and assessed for  impairment  in
          accordance with full-cost accounting rules.

3.        Going Concern

          These  financial  statements  have been  prepared in  conformity  with
          generally  accepted  accounting  principles  in the  United  States of
          America   applicable  to  a  going  concern  which   contemplates  the
          realization  of  assets  and  the   satisfaction  of  liabilities  and
          commitments  in the normal  course of business.  The general  business
          strategy of the Company is to explore its  newly-acquired  oil and gas
          properties.  The Company has  incurred  operating  losses and requires
          additional  funds to meet its obligations and maintain its operations.
          Management's  plan in this  regard  is to raise  equity  financing  as
          required. These conditions raise substantial doubt about the Company's
          ability to continue as a going concern.  These financial statements do
          not include any adjustments that might result from this uncertainty.


                                                                   June 30, 2004        March 31, 2004
                                                                                        
Deficit accumulated during the exploration stage                      $1,558,636              $883,317
Working capital (deficit)                                                $57,001              ($15,261)



                                      F-21

TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)

Notes to Consolidated Financial Statements
(Unaudited and Prepared by Management)

4.        Related Party Transactions

          During the three month period ended June 30, 2004, the Company paid or
          accrued no consulting fees to the directors and senior officers of the
          Company, as compared to $19,327 during the three months ended June 30,
          2003.  At June 30, 2004 and March 31,  2004,  there were no amounts in
          accounts  payable  and accrued  liabilities  that are owing to related
          parties.

5.        Oil and Gas Properties, Unproven

          The total costs incurred and excluded from amortization are summarized
          as follows:


                                                  Acquisition costs     Lease costs       Total
                                                                        
Costs incurred during periods ended:
June 30, 2004                                          $ 333,541         $ 121,613     $ 455,154
March 31, 2004                                                 -                 -             -
Total                                                  $ 333,541         $ 121,613     $ 455,154


          At June 30, 2004,  all of the  Company's  oil and gas  properties  are
          considered unproven.  Based on the status of the Company's exploration
          activities, management has determined that no impairment has occurred.

6.        Stock Options

          As at June 30, 2004, the Company had 100,000 stock options outstanding
          under the 2004  Non-Qualified  Stock  Option Plan (the  "Plan") with a
          weighted  average  exercise  price  of  $0.10.  The  weighted  average
          remaining  contractual life of the options  outstanding is 1.63 years.
          There are 200,000  stocks  options still  eligible to be granted under
          the Plan.


                                             Stock          Weighted Average Exercise              Weighted Average Remaining
                                             Options        Price                                  Life (yrs.)
                                                                                          
Outstanding at April 1, 2004                 100,000           $0.10                                  1.89
Granted                                      540,000           $0.10
Exercised                                   (540,000)          $0.10
Outstanding at June 30, 2004                 100,000           $0.10                                  1.63
Exercisable at June 30, 2004                  62,500           $0.10                                  1.63


7.        Warrants

          In  connection  with the sale of common  stock during the three months
          ended June 30, 2004, the Company issued warrants to purchase 1,442,930
          shares of common  stock at $0.50 per share  exercisable  until May 19,
          2006. Using the Black-Scholes valuation model, the fair value of these
          warrants was estimated at $221,373 and has been included in additional
          paid in capital.

                                      F-22

TORRENT ENERGY CORPORATION
(formerly Scarab Systems, Inc.)
(An exploration stage enterprise)

Notes to Consolidated Financial Statements
(Unaudited and Prepared by Management)

8.        Accounts Receivable

          During June 2004,  the Company  issued  210,000  common  shares of its
          capital  pursuant to the exercise of 210,000  stock  options for gross
          proceeds  of $21,000.  The Company  deposited  the  proceeds  from the
          exercise  shortly  after the quarter end date and, as a result,  had a
          receivable outstanding of $21,000 as at June 30, 2004.

9.        Subsequent Events

          Subsequent  to the three months ended June 30, 2004,  the Company made
          the final cash payment to GHI of $200,000.

          Subsequent  to the three  months  ended  June 30,  2004,  the  Company
          completed  the  sale of  500,000  units at  $0.40  per unit for  gross
          proceeds  of  $200,000.  Each unit is  comprised  of one share and one
          non-transferable  share purchase  warrant.  Each warrant  entitles the
          holder to purchase an  additional  share in the capital of the Company
          at a price of $0.55 per  common  share for a period of two years  from
          the date of closing.

          Subsequent  to the three  months  ended  June 30,  2004,  the  Company
          received the payment of $21,000  relating to the  accounts  receivable
          existing at the quarter end date.

          Subsequent to the three months ended June 30, 2004, the Company issued
          100,000  common shares for gross  proceeds of $10,000  pursuant to the
          exercise of stock options.

          Subsequent to the three months ended June 30, 2004, the Company leased
          an additional  10,400 acres within the Coos Bay Basin in Oregon.  With
          this  additional  acreage the total land  position held by Methane now
          exceeds 60,000 acres.


                                      F-23

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Our Articles of  Incorporation,  as amended,  provide to the fullest extent
permitted by Colorado  law, our  directors or officers  shall not be  personally
liable to us or our  shareholders  for damages for breach of such  director's or
officer's  fiduciary  duty.  The effect of this  provision  of our  Articles  of
Incorporation,  as  amended,  is to  eliminate  our right  and our  shareholders
(through  shareholders'  derivative  suits on behalf of our  company) to recover
damages  against a director or officer for breach of the fiduciary  duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent  behavior),  except under certain  situations  defined by statute.  We
believe that the indemnification provisions in its Articles of Incorporation, as
amended,  are necessary to attract and retain qualified persons as directors and
officers.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors,  officers and controlling  persons of the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore,  unenforceable. In the event that a claim for indemnification
against such  liabilities  (other than the payment by the registrant of expenses
incurred or paid by a director,  officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as  expressed  in the  Securities  Act and will be  governed by the final
adjudication of such issue.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following  table sets forth an itemization  of all estimated  expenses,
all of which we will pay, in connection  with the issuance and  distribution  of
the securities being registered:

NATURE OF EXPENSE AMOUNT


SEC Registration fee               $   1,077.15
Accounting fees and expenses          10,000.00*
Legal fees and expenses               35,000.00*
Miscellaneous                          3,922.85
                                    -----------
                            TOTAL    $50,000.00*
                                    ===========

* Estimated.

                                      II-1

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

     On September 10, 2002, we sold 750,000 shares to an accredited  investor at
a price of $0.04 per  share.  In  connection  with such  sale,  we relied on the
exemption  from  registration  provided by Section 4(2) of the Securities Act of
1933. The investor  represented in writing that he was purchasing the shares for
investment  purposes and, in addition,  the certificate  representing the shares
will bear a restrictive securities legend.

     On September  15, 2002, we issued  100,000  shares of our common stock to a
foreign  investor  at a price of $0.04  per share as  consideration  for all the
issued and outstanding shares of Excelsior Ventures,  Ltd., an inactive Barbados
corporation  having no assets,  liabilities,  income or debts.  The  certificate
representing the shares will bear a restrictive securities legend.

     On September 15, 2002, we issued  1,877,000 shares of its common stock to a
foreign  investor  to secure a loan of $40,000 by the  foreign  investor  to us,
pursuant to a secured  promissory note dated September 15, 2002. Under the terms
of the secured  promissory  note, we had one year to redeem the shares by paying
the  principal  plus  accrued  interest at the rate of 20 percent per annum.  In
connection with such sale, we relied on the exemption from registration provided
by  Regulation S  promulgated  under the  Securities  Act of 1933.  The investor
represented  in writing  that it was not a U.S.  person  and, in  addition,  the
certificates  representing the shares will bear a restrictive securities legend.
On March 14, 2003, our President,  Thomas Mills,  personally  repaid the foreign
investor and received an assignment  of the debt.  In February,  2004, we issued
510,000  shares of common stock upon the conversion of the debt in the amount of
$51,000  (including accrued interest in the amount of $11,000) to Mr. Mills. Mr.
Mills is a non-U.S.  person and the shares were issued in reliance on Regulation
S under the Securities Act of 1933.

     In February, 2004, we issued 1,200,000 shares of common stock pursuant to a
private placement in exchange for aggregate cash payments of $120,000. We issued
750,000 of the common shares to two non-U.S.  persons for aggregate  payments of
$75,000 and in reliance on  Regulation S under the  Securities  Act of 1933.  We
also issued 450,000 of the common shares to two U.S.  persons for aggregate cash
payments of $45,000 and in reliance on Section 4(2) under the  Securities Act of
1933.

     In May of  2004,  we  issued  1,442,930  shares  of our  common  stock  and
1,442,930  warrants to purchase our common  stock at an exercise  price of $0.50
pursuant to a private  placement  in exchange  for  aggregate  cash  payments of
$505,025.  We issued  300,071 of our common  shares to two  non-U.S.  persons or
entities for  aggregate  payments of $105,025 in reliance on  Regulation S under
the Securities Act of 1933. We also issued 1,142,859 of our common shares to two
U.S. persons or entities for aggregate cash payments of $400,000 and in reliance
on Regulation D under the Securities Act of 1933.  Certain  registration  rights
were granted to investors pursuant to this financing.

     In June 2004, we issued  600,000 shares of our common stock pursuant to the
Lease  Purchase  and Sale  Agreement.  These  shares  were issued in reliance on
Regulation D under the Securities Act of 1933.

     In June 2004, we issued  300,000  shares of our common stock pursuant to an
investor  relation's  agreement.   These  shares  were  issued  in  reliance  on
Regulation S under the Securities Act of 1933.

     In June 2004,  we issued  500,000  shares of our common  stock and  500,000
warrants to purchase our common stock at an exercise  price of $0.55 pursuant to
a private  placement in exchange for aggregate cash payments of $200,000.  These
shares were issued in reliance on Regulation D under the Securities Act of 1933.
Certain   registration  rights  were  granted  to  investors  pursuant  to  this
financing.

     To obtain funding for its ongoing operations, we entered into an Investment
Agreement with the selling stockholders on August 27, 2004 for the sale of 2,200
shares of Series B Convertible Preferred Stock for $2,200,000.

     The  investors  are obligated to provide us with an aggregate of $2,200,000
as follows:

     o    $1,100,000 was disbursed on August 27, 2004;

                                      II-2


     o    $550,000  will be  disbursed  within  five days of the  filing of this
          registration statement; and

     o    $550,000 will be disbursed  within five days of the  effectiveness  of
          this prospectus.

     Accordingly,  we  have  received  a total  of  $1,100,000  pursuant  to the
Investment Agreement.

     The  Series  B  Convertible  Preferred  Stock  is  entitled  to  cumulative
dividends  of 5% per annum and are  convertible  into our common  stock,  at the
selling  stockholders'  option and subject to a maximum cap of $250,000 worth of
Series B Convertible  Preferred  Stock in any 30 day calendar  period,  into the
number of our  shares of common  stock  equal to the sum of (i) the  liquidation
amount of the Series B Convertible  Preferred  Stock,  plus (ii) all accrued but
unpaid dividends,  which is then divided by the conversion price then in effect.
The liquidation  amount of the Series B Convertible  Preferred Stock is equal to
$1,000 per share of Series B Convertible  Preferred  Stock. The conversion price
for the Series B Convertible  Preferred  Stock is the lesser of (i) $1.20 or 80%
of the volume weighted  average price of the common stock on a principal  market
for the 10 trading  days  before  but not  including  the  conversion  date.  In
addition, we have granted the investors a security interest in substantially all
of our assets and intellectual property and registration rights.

     * All of the above  offerings and sales were deemed to be exempt under rule
506 of Regulation D and Section 4(2) of the  Securities Act of 1933, as amended.
No advertising or general  solicitation was employed in offering the securities.
The  offerings and sales were made to a limited  number of persons,  all of whom
were accredited  investors,  business  associates of Torrent Energy or executive
officers of Torrent  Energy,  and transfer was  restricted by Torrent  Energy in
accordance  with the  requirements of the Securities Act of 1933. In addition to
representations  by the  above-referenced  persons,  we  have  made  independent
determinations  that all of the  above-referenced  persons  were  accredited  or
sophisticated  investors, and that they were capable of analyzing the merits and
risks of their  investment,  and that they understood the speculative  nature of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.

     Except as expressly set forth above,  the  individuals and entities to whom
we issued securities as indicated in this section of the registration  statement
are unaffiliated with us.

                                      II-3

ITEM 27. EXHIBITS.

     The following  exhibits are included as part of this Form SB-2.  References
to "the  Company"  in this  Exhibit  List mean  Torrent  Energy  Corporation,  a
Colorado corporation.

Exhibit No.       Description

3.1  Restated  Articles of  Incorporation,  incorporated  by reference  from the
     Company's  annual  report on Form  10-KSB/A,  filed with the  Commission on
     February 11, 2004.

3.2  Articles of Amendment to the Restated Articles of  Incorporation,  changing
     the name to Torrent Energy Corporation.

3.3  Articles of Amendment to the Restated Articles of  Incorporation,  creating
     Series B Convertible  Preferred  Stock,  incorporated by reference from the
     Company's  Current  Report  on Form  8-K,  filed  with  the  Commission  on
     September 1, 2004.

3.4  Bylaws of the Company,  incorporated by reference from the Company's annual
     report on Form 10-KSB/A, filed with the Commission on February 11, 2004.

5.1  Sichenzia Ross Friedman Ference LLP Opinion and Consent (filed herewith)

10.1 Lease Purchase and Sale Agreement between the Company, Methane Energy Corp.
     and Geotrends Hampton International LLC dated May 11, 2004, incorporated by
     reference  to the  Company's  current  report  on Form 8-K  filed  with the
     Commission on May 20, 2004.

10.2 Amending Agreement to Lease Purchase and Sale Agreement dated May 19, 2004,
     incorporated by reference to the Company's current report on Form 8-K filed
     with the Commission on June 23, 2004.

10.3 Second  Amending  Agreement to Lease Purchase and Sale Agreement dated June
     11, 2004, incorporated by reference to the Company's current report on Form
     8-K filed with the Commission on June 23, 2004.

10.4 Investor  Relations  Agreement  between  Scarab  Systems  Inc.  and  Eclips
     Ventures  International  dated June 11, 2004,  incorporated by reference to
     the Company's  current report on Form 8-K filed with the Commission on June
     23, 2004.

10.5 Scarab Systems, Inc. 2004 Non-Qualified Stock Option Plan,  incorporated by
     reference from the Company's  registration statement on Form S-8 filed with
     the Commission on February 19, 2004.

10.6 Investment  Rights  Agreement,  dated as of August 27, 2004, by and between
     the Company and Cornell Capital Partners,  L.P.,  incorporated by reference
     from the Company's Current Report on Form 8-K, filed with the Commission on
     September 1, 2004.

10.7 Registration Rights Agreement,  dated as of August 27, 2004, by and between
     the Company and Cornell Capital Partners,  L.P.,  incorporated by reference
     from the Company's Current Report on Form 8-K, filed with the Commission on
     September 1, 2004.

14.1 Code of Ethics for Senior  Financial  Officers,  incorporated  by reference
     from the Company's annual report on Form 10-KSB,  filed with the Commission
     on April 30, 2004.

23.1 Consent of Moore Stephens Ellis Foster Ltd.,  Chartered  Accountants (filed
     herewith).

23.2 Consent of legal counsel (see Exhibit 5.1).

                                      II-4

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes to:

(1) File,  during  any  period  in which  offers  or sales  are  being  made,  a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");

(ii)  Reflect  in the  prospectus  any facts or events  which,  individually  or
together,  represent a fundamental change in the information in the registration
statement.  Notwithstanding the foregoing, any increase or decrease in volume of
securities  offered (if the total dollar value of the  securities  offered would
not exceed that which was registered) and any deviation from the low or high end
of the  estimated  maximum  offering  range  may be  reflected  in the  form  of
prospectus  filed  with  the  Commission  pursuant  to  Rule  424(b)  under  the
Securities Act if, in the aggregate,  the changes in volume and price  represent
no more than a 20% change in the maximum  aggregate  offering price set forth in
the  "Calculation  of  Registration  Fee"  table in the  effective  registration
statement, and

(iii) Include any  additional  or changed  material  information  on the plan of
distribution.

(2)  For   determining   liability   under  the   Securities   Act,  treat  each
post-effective  amendment  as a new  registration  statement  of the  securities
offered,  and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a  post-effective  amendment  to remove  from  registration  any of the
securities that remain unsold at the end of the offering.

(4) For purposes of determining  any liability  under the Securities  Act, treat
the  information  omitted  from  the  form of  prospectus  filed as part of this
registration  statement  in reliance  upon Rule 430A and  contained in a form of
prospectus  filed by the registrant  pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this  registration  statement as of the time
it was declared effective.

(5)  For  determining  any  liability  under  the  Securities  Act,  treat  each
post-effective   amendment   that  contains  a  form  of  prospectus  as  a  new
registration statement for the securities offered in the registration statement,
and that  offering  of the  securities  at that  time as the  initial  bona fide
offering of those securities.

     Insofar as indemnification for liabilities arising under the Securities Act
may  be  permitted  to  directors,  officers  and  controlling  persons  of  the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

     In the event  that a claim for  indemnification  against  such  liabilities
(other than the  payment by the  registrant  of  expenses  incurred or paid by a
director,  officer or  controlling  person of the  registrant in the  successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling  person in connection with the securities being  registered,  the
registrant  will,  unless in the  opinion  of its  counsel  the  matter has been
settled by controlling precedent,  submit to a court of appropriate jurisdiction
the question  whether such  indemnification  by it is against  public  policy as
expressed in the Securities  Act and will be governed by the final  adjudication
of such issue.


                                      II-5

                                   SIGNATURES

     In accordance  with the  requirements  of the  Securities  Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the  requirements  of filing on Form SB-2 and  authorizes  this  registration
statement  to be  signed  on its  behalf  by the  undersigned,  in the  City  of
Vancouver, Providence of British Columbia, Canada, on September 23, 2004.

                           TORRENT ENERGY CORPORATION





             By: /s/ MARK GUSTAFSON
             ---------------------------------------
             Mark Gustafson, President, Principal Executive Officer,
             Principal Accounting Officer and Chief Financial Officer



     In accordance  with the  requirements  of the Securities Act of 1933,  this
registration statement was signed by the following persons in the capacities and
on the dates stated.



SIGNATURE                                            TITLE                                   DATE
                                                                                       
/s/ MARK GUSTAFSON                          President and Director                      September 23, 2004
--------------------------------
    Mark Gustafson


/s/ JOHN D. CARLSON                         Director                                    September 23, 2004
--------------------------------
    John D. Carlson


/s/ GEORGE L. HAMPTON III                   Director                                    September 23, 2004
----------------------------------------
    George L. Hampton III