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|UNITED STATES                                                                                                                                                                                                                                                                                                                                                             
|SECURITIES AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                                                        
|Delaware, D.C. 20549                                                                                                                                                                                                                                                                                                                                                      
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|FORM 10-K                                                                                                                                                                                                                                                                                                                                                                 
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|Commission File Number 1-1525                                                                                                                                                                                                                                                                                                                                             
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|GLADSTONE ENERGY, INC.                                                                                                                                                                                                                                                                                                                                                    
|(Exact name of Registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                    
|Delaware                                                                                                                                                                                                                                                                                                                                                                  
|(State of Incorporation)                                                                                                                                                                                                                                                                                                                                                  
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|3500 Oak Lawn, Suite 590                                                                                                                                                                                                                                                                                                                                                  
|Dallas, Texas                                                                                                                                                                                                                                                                                                                                                             
|(Address of principal executive offices)                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                          
|(214) 528-9710                                                                                                                                                                                                                                                                                                                                                            
|(Registrant's telephone number,                                                                                                                                                                                                                                                                                                                                           
|including area code)                                                                                                                                                                                                                                                                                                                                                      
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|Securities registered pursuant to Section 12(b) of the Act:                                                                                                                                                                                                                                                                                                               
|None                                                                                                                                                                                                                                                                                                                                                                      
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|Securities registered pursuant to Section 12(g) of the Act:                                                                                                                                                                                                                                                                                                               
|Common Stock Par Value $.001 Per Share                                                                                                                                                                                                                                                                                                                                    
|(Title of Class)                                                                                                                                                                                                                                                                                                                                                          
|______________________________                                                                                                                                                                                                                                                                                                                                            
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|Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve
(12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.
|YES [X]      NO [   ]                                                                                                                                                                                                                                                                                                                                                     
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|Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.          [   ]                      
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|DOCUMENTS INCORPORATED BY REFERENCE                                                                                                                                                                                                                                                                                                                                       
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GLADSTONE ENERGY, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

PART I

Other than historical and factual statements, the matters and items discussed in this Annual Report on Form 10-K are forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the forward-looking statements. Certain factors that could contribute to such differences are discussed in the forward-looking statements and are summarized in "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Information - Cautionary Statements."

ITEM 1.     BUSINESS

General

The principal activity of Gladstone Energy, Inc., a Delaware corporation (the "Company"), formerly known as Gladstone Resources, Inc., has been its involvement in the acquisition of,
exploration for and production of oil and natural gas. Historically, the Company has continually reviewed and evaluated potential oil and gas prospects. In evaluating prospects, the Company sometimes obtained engineering and technical assistance from
independent consultants at prevailing industry rates.

However, on November 23, 1999, the Board of Directors unanimously elected to pursue a strategic change in corporate direction to maximize shareholder value. On August 31, 2000, the Company sold,
in three simultaneous transactions an aggregate of 30% of the Company's interest in and to the Righthand Creek Field in Allen and Beauregard Parishes, Louisiana (the "Righthand Creek Field") for an aggregate purchase price of $201,000. The three
purchasers of the interest were i) G. R. Partners, Inc., who acquired 8.1632653% of the Company's interest in and to the Righthand Creek Field for a purchase price of $54,693.88; ii) Bagwell No. 6 Family L. P., who acquired 12.2448980% of the Company's
interest in and to the Righthand Creek Field for a purchase price of $82,040.82; and (iii) the Humphrey Children's Trust, who acquired 9.5918367% of the Company's interest in and to the Righthand Creek Field for a purchase price of $64,265.31. On October
10, 2000, the Company disposed of 100% of the Company's interest in and to the Company's San Juan County, New Mexico properties to EXCO Resources, Inc., for a purchase price of $267,000.00. Finally, on December 29, 2000, the Company disposed of the
remainder of the Company's 8.575% working interest in and to and to the Righthand Creek Field to EXCO Resources, Inc. for a cash purchase price of $434,000.00. The Company is now considering directing the business plan to other industries or a potential
merger, sale or recapitalization, or liquidation of the Company. Although the Company has not entered into any binding agreements in this regard, nor has the Board of Directors determined any specific course in connection with this action, the Company has
been engaged, and expects to continue to be engaged in discussions with third parties as opportunities present themselves. No assurances can be given that the Company will be able to locate or consummate any transaction of this nature, nor can any
assurances be given that such a transaction will result in any strategic benefit to the Company or its shareholders.

At December 31, 2000, due to the sale of properties, the Company owned no interests in developed or undeveloped oil and gas properties. As a result of the sale of properties, the Credit
Facility that the Company entered into on July 15, 1999, was paid off and terminated.



Operating Activities

Prior to the sale in 2000 of its remaining oil and gas properties, the Company had contracted with other parties, including officers, directors, principal stockholders or other
affiliates of the Company, to act as contract operator of the oil and gas prospects in which it owned an interest; provided such transactions were on terms and conditions substantially similar to those offered by nonaffiliated parties. The contract
operators supervised production, maintain production records, employ field personnel and perform other functions required in the production and administration of such property. The fees for such services customarily vary from well to well, depending on
the nature, depth and location of the well being operated. Generally, the operator of an oil and gas prospect is determined by such factors as the size of the working interest held by a participant in the prospect, a participant's knowledge and experience
in the geological area in which the prospect is located and geographical considerations. The wells that the Company previously owned were drilled by independent drilling contractors.

Products, Markets and Revenues

Prior to the sale in 2000 of it remaining oil and gas properties, oil and natural gas were the principal products produced by the Company. The Company did not refine or process the oil
and natural gas that it produced. The Company sold the oil it produces under short-term contracts at market prices in the areas in which the producing properties were located, generally at F.0.B. field prices posted by the principal purchaser of oil in
such areas.

Natural gas produced from the Company's properties was sold under both short-term and long-term contracts with transmission and utility companies that have pipelines in the vicinity of the
producing properties or that will construct pipelines to such properties. The contracts were of a type common within the industry, and a separate contract was usually negotiated for each property. Typically, the Company's contracts were made for terms
ranging from day to day up to six months.

The availability of a ready market for oil and gas and the prices of oil and gas depend on a number of factors that are beyond the control of the Company. These factors include, among other
things, the level of domestic production and economic activity generally, the availability of imported oil and gas, actions taken by foreign oil producing nations, the availability of gas pipelines with adequate capacity and other transportation
facilities, the availability and marketing of other competitive fuels, fluctuating and seasonal demand for oil, gas and refined products and the extent of governmental regulation and taxation (under both present and future legislation) of the production,
refining, transportation, pricing, use and allocation of oil, natural gas, refined products and substitute fuels. Accordingly, in view of the many uncertainties affecting the supply and demand for crude oil, natural gas and refined petroleum products, it
is not possible to predict accurately the prices or marketability of the oil and gas from any producing well in which the Company had or may have acquired an interest.

Crude oil prices are generally determined by global supply and demand, while natural gas prices are influenced by North American supply and demand. There could be no assurance that the Company
would be able to market all oil or gas that it was able to produce or, if such oil or gas could be marketed, that favorable price and contractual terms could be negotiated. Changes in oil and natural gas prices significantly affected the revenues and cash
flow of the Company and the value of oil and gas properties it held. Prior to the sale of its remaining oil and gas properties in 2000, significant declines in the prices of oil and natural gas could have a material adverse effect on the business and
financial condition of the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations."

In certain areas in which the Company engaged in gas exploration and production activities, the supply of natural gas available for delivery from time to time exceeded the demand. During such
times companies purchasing gas in such areas reduce the amount of gas that they will purchase or take. If buyers cannot be readily located for newly discovered gas reserves, newly completed gas wells may be shut-in for various periods of time. There could
be no assurances that the over-supply of natural gas in certain areas would not cause the Company to experience "take" problems or adversely affect the Company's ability to obtain contracts to market gas discovered in wells in which the Company owned an
interest.

The following table sets forth the amount of the Company's oil sales, gas sales and the percent of oil and gas sales to total revenues for the periods indicated.

|Year
Ended   |            |           | Total         | Percent of Oil/GasSales to Total Revenues
|------------ | ---------- | --------- | ------------- | -----------------------------------------
|December 31, | Oil Sales  | Gas Sales | Oil/Gas Sales | Oil                                      
|2000         | $  239,333 | $  56,346 | $  295,679    | 81%                                      
|1999         | 161,200    | 62,743    | 223,943       | 72%                                      
|1998         | 144,311    | 119,691   | 264,002       | 55%                                      
|1997         | 276,814    | 234,663   | 511,477       | 54%                                      



Delivery Commitments

The Company is not presently obligated to provide a fixed and determinable quantity of oil or gas under any existing contract or agreement.

Customers

During fiscal 2000, EXCO Resources, Inc. accounted for 81% and Bledsoe Petro Corp accounted for 16% of the Company's total revenues. During fiscal 1999 EXCO Resources, Inc. accounted for
72% and Bledsoe Petro Corp accounted for 19% of the Company's total revenues. All properties for which revenues were received from EXCO Resources, Inc. were included in the sales that occurred during 2000. See "Item 1. Business - Sale of Developed and
Undeveloped Acreage."

Competition

The oil and gas industry is highly competitive. The Company encountered strong competition from other independent operators and from major oil companies in acquiring properties suitable
for exploration, in contracting for drilling equipment and in securing trained personnel. Many of these competitors have financial resources and staffs substantially larger than those available to the Company.

Exploration for and production of oil and gas is also affected by competition for drilling rigs and the availability of tubular goods and certain other equipment. While the oil and gas industry
has experienced shortages of drilling rigs and equipment, pipe and personnel in the past, the Company did not experience any shortages in 2000.

Competition for attractive oil and gas producing properties, undeveloped leases and drilling rights is also strong. Many major oil companies have publicly indicated their decisions to
concentrate on overseas activities and have been actively marketing certain of their existing producing properties for sale to independent producers.

Risks

The Company's oil and gas operations, conducted in 2000 until the sale of its remaining properties were subject to all of the risks normally incident to the exploration for and
production of oil and gas, including blowouts, cratering, pollution and fires, each of which could result in damage to or destruction of oil and gas wells or formations or production facilities or damage to persons and property. As is common in the oil
and gas industry, the Company was not fully insured against these risks either because insurance was not available or because the Company elected not to procure insurance due to prohibitive premium costs. The occurrence of such an event not fully insured
against could have had a material adverse effect on the Company's financial position.

The Company's prior oil and gas activities involved in part exploratory drilling, which carries a significant risk that no commercial oil or gas production will be obtained. The cost of
drilling, completing and operating wells is often uncertain. Further, drilling may be curtailed or delayed as a result of many factors, including title problems, weather conditions, delivery delays, shortages of pipe and equipment and the unavailability
of drilling rigs.

Employees

At March 30, 2001, the Company had no employees, either in field operations or office and administrative activities. The Company contracts with other parties, including officers,
directors, principal stockholders or other affiliates of the Company, to perform the office and administrative activities of the Company; provided such transactions are on terms and conditions substantially similar to those offered by nonaffiliated
parties. The Company also utilizes the services of outside consultants on a contract basis.

Regulation

General.  Domestic exploration for, and production and sale of, oil and gas are extensively regulated at the national, state and local levels. Legislation affecting the oil and
gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations
binding on the oil and gas industry and its individual members, compliance with which are often difficult and costly and which carry substantial penalties for the failure to comply. The heavy and increasing regulatory burden on the oil and gas industry
increases its cost of doing business and, consequently, affects its profitability. The following are some specific regulations that may have affected the Company. This summary should by no means be relied upon as a complete review of regulatory matters
that may have affected the Company's oil and natural gas production.

Federal Regulation of Natural Gas.  The interstate transportation and sale for resale of natural gas is subject to federal regulation, including regulation of tariffs charged
and various other matters, by the Federal Energy Regulation Commission (the "FERC") under the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). Beginning in 1978, the NGPA regulated maximum selling prices of certain
categories of gas in either interstate or intrastate commerce. The Natural Gas Wellhead Decontrol Act of 1989 terminated all NGA and NGPA price controls on wellhead sales of domestic natural gas on January 1, 1993.

In 1992, FERC issued Orders Nos. 636 and 636-A, which generally open access to interstate pipelines by requiring operators of such pipelines to unbundle transportation services from sales
services and allow customers to pay for only the services they require, regardless of whether the customer purchases gas from such pipelines or from other suppliers. The orders also require upstream pipelines to permit downstream pipelines to assign
upstream capacity to their shippers, and place comparable, unbundled access requirements on the downstream pipelines. The United States Court of Appeals upheld the unbundling provisions and other components of FERC's orders but remanded several issues to
that commission for further explanation. On February 27, 1997, the FERC issued Order No. 636-C, addressing the court's concern. Petitions for rehearing on Order No. 636-C were denied on May 28, 1998. That order remains subject to
judicial review and may change as a result of that review. Although these regulations should have generally facilitated the transportation of gas produced from the Company's properties it held and the direct access to end-user markets, the impact of these
regulations on marketing the Company's production or on its gas transportation business could not be predicted. The Company, however, does not believe that it was affected any differently than other natural gas producers and marketers with which it competed
 .

Federal Regulation of Oil. Sales of crude oil, condensate and natural gas liquids are not federally regulated and are made at market prices. The net price received from the sale of these
products is affected by market transportation costs. A significant part of the Company's oil production was transported by pipeline. The Energy Policy Act of 1992 required the FERC to adopt a simplified ratemaking methodology for interstate oil pipelines.
In 1993 and 1994, the FERC issued Order Nos. 561 and 562 adopting rules that establish new rate methods for such pipelines. Under those rules, interstate oil pipelines can change rates based on an inflation index, though other rate mechanisms may be
used in specific circumstances. The United States Court of Appeals upheld the FERC's orders in 1996. The Company's cost of transporting oil has not been affected to any significant extent by these rules.

State Regulation.  Certain states in which the Company operated regulate the spacing, drilling, plugging and abandonment of wells, limit the number of days in a given month
during which a well can produce and otherwise limit the rate of allowable production from a well on the basis of a number of factors, including market demand for gas. The Company did not experience any material reductions in production due to proration.
Nevertheless, these measures could materially affect the Company's production. Local, state and federal environmental controls could also effect the Company's operations through regulations enacted to protect against waste, conserve natural resources,
prevent pollution and otherwise guard against abusing the environment. Such regulations could require spending funds on environmental protection measures and remedial measures. Further, penalties imposed on the Company for violating such regulations could
seriously inhibit the Company's financial condition.

Environmental Regulation.  Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the
protection of the environment, directly impact oil and gas exploration, development and production operations and consequently may impact the Company. It is not anticipated that the Company will be required in the near future to expend amounts that are
material in relation to its total capital expenditure program by reason of environmental laws and regulations, but inasmuch as such laws and regulations are constantly being changed, the Company is unable to predict the ultimate cost to it of complying
with present and future environmental laws and regulations.

Other Proposed Legislation.  In the past, Congress has been very active in the area of natural gas regulation. There are legislative proposals pending in the legislatures of
various states which, if enacted, could significantly affect the petroleum industry. It is currently impossible to predict what proposals, if any, might actually be enacted by Congress or the various state legislatures and what effect, if any, such
proposals might have on the Company.



ITEM 2.     PROPERTIES

Location and General Character

The Company pays rent on a month-to-month basis and does not have a commitment on a lease contract. Rent expense for 2000, 1999, and 1998 was $7,060, $6,088, and $6,606. The Company
considers this arrangement adequate for its present needs.

Prior to the sale of its remaining properties in 2000, the Company's principal producing areas were in Louisiana, Texas and New Mexico.

Title to Properties

As is common industry practice, little or no investigation of title is made at the time of acquisition of undeveloped properties, other than a preliminary review of local mineral
records. Title investigations are made, and in most cases a title opinion of local counsel is obtained, before commencement of drilling operations. The Company believes that its methods of investigating title to properties in connection with the
acquisition of such properties were consistent with practices customary in the oil and gas industry and that such practices were adequately designed to enable the Company to acquire good title to such properties. Some title risks, however, are not
avoided, despite such practices.

The Company's properties generally were subject to customary royalty and overriding royalty interests, liens incident to operating agreements, liens for current taxes and other burdens and minor
encumbrances, easements and restrictions, and may be mortgaged to secure indebtedness of the Company. The Company believes that none of such burdens materially detracted from the value of such properties or materially interfered with their use in the
operation of the Company's business.

Oil and Gas Reserves

At December 31, 2000, the Company's had no remaining oil and gas reserves.





Reserves Reported to Other Agencies

Estimates of oil and gas reserves have not been filed with or included in reports to any federal authority or agency other than the Securities and Exchange Commission.

Production

The following table summarizes for the periods indicated, the Company's revenues, net production of oil and gas sold (including condensate and natural gas liquids) and the average sales
price per unit of oil (Bbl) and gas (Mcf):

|                   |                             | Year Ended December 31,
|------------------ | --------------------------- | -----------------------
|                   |                             | 2000                   
|Oil and Condensate |                             |                        
|                   | Revenues                    | $  239,333             
|                   | Production sold (Bbls)      | 9,132                  
|                   | Average sales price per Bbl | $26.21                 
|                   |                             |                        
|Natural Gas        |                             |                        
|                   | Revenues                    | $56,346                
|                   | Production sold (Mcf)       | 24,653                 
|                   | Average sales price per Mcf | $2.29                  
|                   |                             |                        



The Company's net production reported in the preceding table only includes production that is owned by the Company and produced to its oil and gas interest, less royalties. Fiscal 2000 oil
production was 15% higher than fiscal 1999 and gas production was 37% lower. On the basis of 6 mcf of gas being equivalent to 1 barrel of oil, total fiscal 2000 production decreased 9.0%. Total oil and gas revenues increased 32% due to increased prices.

The average production (lifting) costs per barrel-equivalent (gas production being converted to barrel-equivalents at 6,000 cubic feet per barrel of oil) for the fiscal years ending
December 31, 2000, 1999, and 1998, were, $3.67, $4.99, and $5.52, respectively. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on production costs. Depreciation,
depletion and amortization expense for the fiscal years ended December 31, 2000, 1999, and 1998 was $5.03, $4.53, and $4.75, respectively, per barrel of oil and gas equivalent produced.

Productive Wells

At December 31, 2000, the Company's had no remaining interest in productive wells.

Developed Acreage

At December 31, 2000, the Company's had no remaining interest in developed acreage.

Undeveloped Acreage

At December 31, 2000, the Company's had no remaining interest in undeveloped acreage.



Drilling Activities

The following table summarizes the Company's approximate gross and net interests in the exploratory and development wells drilled during the periods indicated:



|                  | EXPLORATORY WELLS
|----------------- | -----------------
|                  | Gross            
|                  | Productive       
|December 31, 2000 | 0                
|December 31, 1999 | 0                
|December 31, 1998 | 0                





|                  | DEVELOPMENT WELLS
|----------------- | -----------------
|                  | Gross            
|                  | Productive       
|December 31, 2000 | 0                
|December 31, 1999 | 0                
|December 31, 1998 | 0                

For purposes of the foregoing table, a dry well (hole) is an exploratory or development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion
of an oil or gas well. A productive well is an exploratory or a development well that is not a dry hole. The number of wells drilled refers to the number of wells (holes) completed at any time during the fiscal years, regardless of when drilling was
initiated. The term "completed" refers to the installation of permanent equipment for the production of oil or gas, or, in the case of a dry hole, to the reporting of abandonment to the appropriate agency. There were no drilling activities in fiscal 2000.



Present Activities

At March 30, 2001, and since the sale of its remaining oil and gas properties in December 2000, the Company is not and has not been participating in the drilling of any development or
exploratory wells.



ITEM 3.     LEGAL PROCEEDINGS

The Company is not presently party to, nor is any of its property the subject of, any material pending legal proceedings other than routine litigation incidental to the Company's business.





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

During the fourth quarter of the fiscal year, the shareholders were asked to approve and adopt the Sale and Purchase Agreement between the Company and EXCO Resources, Inc. ("Buyer")
dated October 25, 2000, ("sale agreement") pursuant to which the Company proposed to sell for cash the 8.575% working interest in the Right Hand Creek Field in the Beauregard and Allen Parishes of Louisiana (the "Right Hand Creek property") that
constituted substantially all of the remaining assets of the Company ("asset sale"). The Company received $434,000 cash as consideration for the asset sale under the terms of the sale agreement. The information in regard to the sale was submitted by the
Company to a vote of its shareholders through the solicitation of proxies. At the Annual Meeting of Stockholders held on December 29, 2000, the stockholders approved the sale. The number of votes cast for, against and withheld were 725,831, 150 and 410
votes, respectively, and broker non-votes were 10,840.

PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED              STOCKHOLDER MATTERS

Market Information

There is no established public trading market for the Common Stock.

Shareholders

According to the records of the Company's transfer agent, there were 512 holders of record of the Common Stock at March 30, 2001.

Dividends

The Company has not paid any cash dividends on its Common Stock. The Board of Directors of the Company presently plans to retain the Company's earnings, if any, to use to explore
opportunities in other industries or, in connection with a merger, sale, recapitalization or liquidation of the Company. Future dividend policy is subject to the discretion of the Board of Directors and will depend on a number of factors, including future
earnings, capital requirements and the financial condition of the Company.

ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA

The comparative selected consolidated financial data of the Company is presented for the five (5) years ended December 31, 2000. The information should be read in conjunction with
"Item 7. Management's Discussion and Analysis of Financial Condition and Result of Operations" and the Company's Financial Statements and notes thereto included elsewhere herein.

|                                              | Year Ended December 31,
|--------------------------------------------- | -----------------------
|                                              | 2000                   
|Operations                                    |                        
|Revenues                                      | $295,679               
|Net Income (loss) before
  extraordinary item | 460,657                
|Net income (loss)                             | 460,657                
|Net income (loss) per share (1)               | .51                    
|                                              |                        
|Balance Sheet                                 |                        
|Current Assets                                | 859,489                
|Current liabilities                           | 31,053                 
|Working capital (deficit)                     | 828,436                
|Total assets                                  | 859,489                
|Long-term debt                                | 0                      
|Stockholders' equity                          | 828,436                
|                                              |                        
|Current ratio                                 | 27.68                  



(1)

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION               AND RESULTS OF OPERATIONS





Fiscal 2000 Results Compared to Fiscal 1999 Results

The net income for fiscal 2000 was $433,795, or $.51 per share, compared to a net loss of $204,066, or $.24 per share, in fiscal 1999. This difference of $637,861 was primarily the
result of the sale of the Company's remaining oil and gas properties during 2000.

Oil and gas sales increased $71,736, or 32%, to 295,679 in fiscal 2000 from $223,943 in fiscal 1999. On the basis of 6 mcf of gas being equivalent to 1 barrel of oil, total fiscal 2000 gas
production decreased 9%. The total oil and gas revenue increase of 32% was due to the increase of all oil and gas prices during 2000.

The Company's costs and expenses decreased $89,846, or 21%, to $347,846 in fiscal 2000 from $437,692 in fiscal 1999. Oil and gas production costs decreased $14,828 or 15%, to $81,760 in fiscal
2000 from $96,588 due to the sale of properties. Dry hole and abandonment costs decreased $11,742 or 10% to $102,646 in fiscal 2000 due to the sale of the Company's remaining oil and gas properties and no participation in new wells. Depletion,
depreciation and amortization decreased from $65,697 to $66,680, or 1%, in fiscal 2000 due to the sale of the Company's remaining oil and gas properties. General and administrative costs increased from $43,115 to $43,581 or 1.0% in fiscal 2000 as a result
of administration on the sale of properties. Legal, audit and accounting costs decreased from $75,501 to $32,304, or 57%, in fiscal 2000 due to the completion of the reorganization of the Company.

Fiscal 1999 Results Compared to Fiscal 1998 Results

The net loss for fiscal 1999 was $204,066, or $.24 per share, compared to net loss of $486,267, or $.57 per share, in fiscal 1998. This difference of $282,201 was primarily the result of
an asset impairment charge taken in 1998.

Oil and gas sales decreased $40,509, or 15%, to $223,943 in fiscal 1999 from $264,002 in fiscal 1998. On the basis of 6 mcf of gas being equivalent to 1 barrel of oil, total fiscal 1999 gas
production decreased 33%. The total oil and gas revenue drop of 15% was due to the sale of properties in January 1999 which was partially offset by the July acquisition of properties.

The Company's costs and expenses decreased $209,715, or 32%, to 437,692 in fiscal 1999 from $647,407 in fiscal 1998. Oil and gas production costs decreased $34,324 or 26%, to $130,912 in fiscal
1999 from $130,912 due to decreased production. Dry hole and abandonment costs decreased $129,376 or 53% to $114,388 in fiscal 1999 due to smaller participation in fewer wells. Depletion, depreciation and amortization decreased from $102,215 to $65,697,
or 36%, in fiscal 1999 due to decreased production. General and administrative costs increased from $11,162 to $43,115 or 386% in fiscal 1999 as a result of due to legal and accounting time necessary to prepare for and conduct or implement the annual
meeting, the change of incorporation from Washington to Delaware, the 1 for 5 reverse split, as well as improving reporting procedures in readiness of future activities. Legal, audit and accounting costs increased from $12,704 to $75,501, or 594%, in
fiscal 1999 due to legal and accounting time necessary to prepare for and conduct or implement the annual meeting, the change of incorporation from Washington to Delaware, the 1 for 5 reverse split, as well as improving reporting procedures in readiness
of future activities.

Liquidity and Capital Resources

Cash increased $450,718 to $585,060 at December 31, 2000, from $134,342 at December 31, 1999. This increase was due to the cash sale of the Company's oil and gas properties. Accounts
receivable decreased $17,012 to $23,809 from $40,821 during the corresponding periods, and accounts payable decreased $133,267 to $4,191 from $137,458. These decreases are all related to the sale of the Company's remaining oil and gas properties that
occurred during 2000.



Inflation and Changing Prices

With the sale of all of the oil and gas assets of the Company, the impact of inflation, should have minimal effect on the companies assets.



Forward-Looking Information - Cautionary Statements

Other than the historical and factual matters set forth herein, the matters and items set forth in this report are forward-looking statements that involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following:

Certain Industry and Marketing Risks. Prior to the sale in 2000 of the Company's remaining oil and gas properties, the Company's operations were subject to the risks and uncertainties
associated with drilling for, and production and transport of, oil and natural gas. The Company incurred significant expenditures for the identification and acquisition of properties and for the drilling and completion of wells. Drilling activities are
subject to numerous risks, including the risk that no commercial productive oil or gas reservoirs will be encountered. The Company's operations may have been materially curtailed, delayed or canceled as a result of numerous factors, including the presence
of unanticipated pressure or irregularities in formations, accidents, title problems, weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment. The Company's prospects for future growth and
profitability would have depended predominately on its ability to replace present reserves through acquisition as well as its ability to successfully develop additional reserves. The Company's ability to market its oil and gas production was dependent
upon the availability and capacity of oil and gas gathering systems and pipelines. Federal and state regulation of oil and gas production and transportation, general economic conditions, changes in supply and in demand all could have materially adversely
affected the Company's ability to market its oil and gas production.

Uncertainty of Estimates of Oil and Gas Reserves. Numerous uncertainties are inherent in estimating quantities of proved oil and gas reserves, including many factors beyond the control of
the Company. This report contains an estimate of the Company's proved oil and gas reserves based upon reports of the Company's operators prior to the sale of its remaining oil and gas properties. The process of estimating gas and oil reserves is complex,
requiring significant decisions and assumptions in the evaluation of available geological, engineering and economic data for each reservoir. As a result, such estimates are inherently an imprecise evaluation of reserve quantities. Actual future
production, revenue, taxes, development expenditures, operating expenses and quantities of recoverable gas and oil reserves may vary substantially from those assumed in the estimate. Any significant variance in these assumptions could materially affect
the estimated quantity and value of reserves set forth in this report.



Inability to Develop Additional Reserves. The Company's success as an oil and natural gas producer, as is generally the case in the industry, depends upon its ability to find, develop and
acquire additional oil and gas reserves that are economically recoverable. Except to the extent that the Company conducted successful development activities or acquired properties containing proved reserves, the Company's proved reserves will generally
decline as reserves are produced. There can be no assurance that the Company would be able to locate additional reserves or that the Company would drill economically productive wells or acquire properties containing proved reserves.

Effects of Changing Oil and Gas Prices. The financial condition and results of operations of the Company depended upon the prices it receives for its oil and natural gas production and
the costs of acquiring, developing and producing oil and natural gas. Oil and natural gas prices have historically been volatile and are subject to fluctuations in response to changes in supply, market uncertainty and a variety of additional factors that
are also beyond the control of the Company. These factors include, without limitation, the level of domestic production, the availability of imported oil and natural gas, actions taken by foreign oil and natural gas producing nations, the availability of
transportation systems with adequate capacity, the availability of competitive fuels, fluctuating and seasonal demand for oil and natural gas, conservation and the extent of governmental regulation of production and general economic conditions. A
substantial or extended decline in oil or natural gas prices could have a material adverse effect on the estimated value of the Company's oil and gas reserves, and on its financial position, results of operations and access to capital.

Operating Hazards and Uninsured Risks. The Company's operations were subject to the risks inherent in the oil and gas industry, including the risks of fire, explosions, blow-outs, pipe
failure, abnormally pressured formations and environmental accidents such as oil spills, gas leaks, ruptures or discharges of toxic gases. The occurrence of any of these risks could result in substantial losses to the Company due to injury or loss of
life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations. In accordance with customary
industry practice, the Company maintained insurance against some, but not all, of the risks described above. There can be no assurance that any insurance would be adequate to cover any losses or liabilities. Further, the Company cannot predict the
continued availability of insurance, or availability at commercially acceptable premium levels.

Government Regulation. Oil and gas operations are subject to certain federal, state and local laws and regulations that may be changed from time to time in response to economic and
political conditions. Such laws and regulations have generally become more stringent in recent years, often imposing greater environmental operating requirements on an increasing number of parties. Because the requirements imposed by such laws and
regulations are frequently changed, the Company is unable to predict the effect or cost of compliance with such requirements or their effects on oil and natural gas usage or prices. In addition, a number of legislative proposals have been introduced in
Congress and state legislatures which, if enacted, would significantly affect the oil and gas industry. In view of the many uncertainties which exist with respect to any legislative proposals, the Company cannot predict the effect on the Company of any
legislation which might be enacted.

Environmental Liabilities. The Company's operations could result in liability for oil spills, discharge of hazardous materials and other environmental damages. In addition, the Company
may be liable for environmental damages caused by previous owners of property purchased by the Company. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the
funds available for investment in other industries or merger, sale, recapitalization or liquidation of the Company. Although the Company maintained insurance coverage it considered to be customary in the industry, it was not fully insured against certain
of these risks, either because such insurance is not available or because of high premium costs. Accordingly, the Company may be subject to liability due to hazards that cannot be insured against or have not been insured against due to prohibitive premium
costs or for other reasons.

Substantial Competition. The oil and gas industry is highly competitive and there are many other companies engaged in the oil and gas business. Many of the companies with which the
Company competed have substantially greater financial, technical and other resources and may have greater experience in the oil and gas business than the Company.

Need for Additional Capital. The Company's ability to acquire and exploit oil and gas properties is depended upon its ability to obtain necessary outside funding or to generate cash flow
from operations. There is no assurance that any such required additional funds would be available on satisfactory terms and conditions, if at all. The amount and timing of the Company's future capital requirements, if any, will depend upon a number of
factors, including the business opportunity, if any, chosen by the company or the merger or sale transaction or recapitalization, if any, chosen by the Company. Failure to obtain any required additional financing could materially adversely affect the
Company's ability to pursue such business opportunity or transaction. In addition, the Company's pursuit of additional capital could result in the incurrence of additional debt or potentially dilutive issuances of additional equity securities.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.





|                           
|---------------------------
|                           
|                           
|                           
|                           
|REPORT OF AUDIT            
|                           
|AND                        
|                           
|FINANCIAL STATEMENTS       
|                           
|AND                        
|                           
|OTHER FINANCIAL INFORMATION
|                           
|                           
|                           
|GLADSTONE ENERGY, INC.     
|                           
|DALLAS, TEXAS              
|                           
|DECEMBER 31, 2000          
|                           







ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Set forth below is the index to the financial statements of Gladstone Energy, Inc. and Subsidiary.

|                                                                                                                                                                        | Page
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . .                                                | 17  
|Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       | 18  
|Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . .                                             | 19  
|Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . .                                                   | 20  
|Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . .                                               | 21  
|Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . .                                                 | 22  
|Independent Auditor's Report on Additional Information . . . . . . . . . . . . . . . . . . . . . 
 . . .                                                                | 28  
|Summary of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . .                                              | 29  
|Schedules V, and VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . .. . . . . . . . . . . . . . . .                                           | 30  
|Capitalized Costs of Oil and Gas Producing Activities . . . . . . . . . . . . . . . . . . . . 
 . . . . . . .                                                           | 31  
|Costs Incurred in Oil and Gas Property Acquisitions,
 Exploration and Development Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . | 32  
|Results of Operations for Producing Activities. . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . .                                                       | 33  
|Reserve Quantity Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . .                                                | 34  

All other schedules and historical financial information are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto.





|HAROLDL. RATCLIFF                                                                                                                                                  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CERTIFIEDPUBLICACCOUNTANT                                                                                                                                          
|12700 Park Central Drive                                                                                                                                           
|Suite 1600                                                                                                                                                         
|DALLAS, TEXAS 75251                                                                                                                                                
|MEMBER                                                                                                                                                             
|(972) 404-4010                                   
                                          
                                          
         AMERICAN INSTITUTE
|(972) 404-4042 - FAX                                  
                                          
                               CERTIFIED PUBLIC ACCOUNTANTS      

INDEPENDENT AUDITOR'S REPORT



Board of Directors and Stockholders

Gladstone Energy, Inc.

I have audited the accompanying balance sheet of Gladstone Energy, Inc. (a Delaware corporation) as of December 31, 2000 and 1999, and the related statements of operations, stockholders' equity and cash flows for the three years then
ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about 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. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gladstone Energy, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flow
for the three years then ended in conformity with generally accepted accounting principles.





Harold L. Ratcliff

Certified Public Accountant



Dallas, Texas
March 9, 2001



GLADSTONE ENERGY, INC. 
BALANCE SHEET
December 31, 2000 and 1999

|ASSETS                                                                                 
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|Current assets:                                                                        
|Cash                                                                                   
|Marketable securities                                                                  
|Accounts receivable                                                                    
|Total current assets                                                                   
|Property and equipment:                                                                
|                                                                                       
|Gas and oil properties (successful efforts             method)                         
|Equipment                                                                              
|                                                                                       
|Less accumulated depletion and 
           depreciation                                
|Total property and equipment                                                           
|Other assets:                                                                          
|Loan origination fee                                                                   
|Cost in excess of amount assigned to net assets of 
  subsidiary at date of acquisition
|                                                                                       
|Less accumulated amortization                                                          
|Total other assets                                                                     
|                                                                                       
|                                                                                       
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                   
|                                                                                       
|Current liabilities:                                                                   
|Current portion of long-term bank debt                                                 
|Accounts payable                                                                       
|Federal and state taxes                                                                
|Accrued interest                                                                       
|Total current liabilities                                                              
|Deferred income taxes                                                                  
|Long term portion of bank debt                                                         
|Stockholders' equity:                                                                  
|Common stock                                                                           
|Capital in excess of stated value                                                      
|Retained earnings (deficit)                                                            
|Total stockholders' equity                                                             
|                                                                                       

The accompanying notes are an integral part of this financial statement.

GLADSTONE ENERGY, INC. 
STATEMENT OF OPERATIONS
Three years ended December 31, 2000

|                                | 2000     | 1999       | 1998(Consolidated)
|------------------------------- | -------- | ---------- | ------------------
|Sales:                          |          |            |                   
|Gas and oil                     | $295,679 | $223,943   | $264,002          
|                                |          |            |                   
|Cost of Sales:                  |          |            |                   
|Revenue deductions              | 33,135   | 24,346     | 12,003            
|Well operating expense          | 48,625   | 72,242     | 118,909           
|                                | 81,760   | 96,588     | 130,912           
|Gross profit on sales           | 213,919  | 127,355    | 133,090           
|Expenses:                       |          |            |                   
|Oil and gas prospect expense    | -        | 24,491     | -                 
|Dry hole and abandonments       | 102,646  | 114,388    | 243,764           
|Depletion                       | 53,921   | 56,973     | 90,846            
|Depreciation and amortization   | 12,759   | 8,724      | 11,369            
|General and administrative      | 43,581   | 43,115     | 11,162            
|Interest                        | 14,377   | 9,862      | -                 
|Taxes                           | 6,498    | 8,050      | 352               
|Legal, audit and accounting     | 32,304   | 75,501     | 12,704            
|Asset impairment charge         | -        | -          | 181,946           
|Recovery of taxes               | -        | -          | (35,648)          
|                                | 266,086  | 341,104    | 516,495           
|Loss from operations            | (52,167) | (213,749)  | (383,405)         
|Other income:                   |          |            |                   
|Gain on sale of assets          | 505,977  | -          | -                 
|Unrealized loss on investments  | -        | -          | (108,134)         
|Interest and dividend income    | 6,847    | 9,683      | 3,972             
|                                |          |            |                   
|Income (loss) before taxes      | 460,657  | (204,066)  | (487,567)         
|Current income tax expense      | 26,862   | -          | -                 
|Income taxes (benefit)-deferred | -        | -          | (1,300)           
|NET INCOME (LOSS)               | $433,795 | $(204,066) | $(486,267)        
|Income (Loss) per share (1):    |          |            |                   
|Basic                           | $.51     | $(.24)     | $(.57)            
|Diluted                         | $.51     | $(.24)     | $(.57)            

(1)



The accompanying notes are an integral part of this financial statement.





GLADSTONE ENERGY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Three years ended December 31, 2000



|                                | Stated/ParValue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Capital
Excess ofStated Value | Retained
Earnings(Deficit) | Total     
|------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | -------------------------- | ----------
|Balance at January 1, 1998      | $  150,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $1,230,134                    | $ (295,146)                | $1,084,988
|Net loss for the year 1998      | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | -                             | (486,267)                  | (486,267) 
|Balance at December 31, 1999(C) | $  150,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $1,230,134                    | $ (781,413)                | $  598,721
|Net loss for the year 1999      | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | -                             | (204,066)                  | (204,066) 
|Changes to stock par value (A)  | (149,151)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 149,151                       | -                          | -         
|Balance at December 31, 1999    | $      849                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $1,379,285                    | $ (985,479)                | $  394,655
|Purchase Partial Shares         | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (14)                          | -                          | (14)      
|Net income for the year 2000    | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | -                             | 433,795                    | 433,795   
|Balance at December 31, 2000    | $849                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $1,379,271                    | $(551,684)                 | $828,436  
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                               |                            |           
|(A)                             | Common stock consisted of no par value shares only in 1998. There were 6,000,000 shares authorized and 4,244,060 shares issued and outstanding in 1998. The stated value for all outstanding shares in 1998 was $150,000. As of August 12,
1999, the company completed a reorganization and issued one new share of Gladstone Energy, Inc. stock for each five shares of Gladstone Resources, Inc. stock. The new company has authorized 10,000,000 shares of common stock with a par value of $.001 per
share. There are now 848,782 common shares outstanding.
|(B)                             | Authorized preferred stock consists of 5,000,000 shares with a par value of $.001 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(C)                             | The Company merged the subsidiary into the parent company in 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



The accompanying notes are an integral part of this financial statement.





GLADSTONE ENERGY, INC.
STATEMENT OF CASH FLOWS
Three years ended December 31, 2000

|                                                                                               | 2000           | 1999           | 1998(Consolidated)
|---------------------------------------------------------------------------------------------- | -------------- | -------------- | ------------------
|Cash flows from operating activities:                                                          |                |                |                   
|Net income (loss)                                                                              | $ 433,795      | $(204,066)     | $(486,267)        
|Adjustments to reconcile net earnings to 
          net cash provided by operating activities: |                |                |                   
|Non-productive properties written off                                                          | 77,141         | 56,584         | 58,970            
|Depreciation, depletion and Amortization                                                       | 66,680         | 65,697         | 102,215           
|Change in accounts receivable                                                                  | 17,012         | (34,692)       | 45,948            
|Change in value of producing properties                                                        | -              | -              | 149,267           
|Change in accounts payable                                                                     | (133,267)      | 115,729        | 2,372             
|Change in accrued expenses                                                                     | (1,878)        | 1,878          | (35,648)          
|Gain from sale of properties                                                                   | (505,977)      | -              | -                 
|Decrease in value of listed securities                                                         | -              | -              | 108,134           
|Increase in current taxes due                                                                  | 26,862         | -              | -                 
|Change in deferred income taxes                                                                | -              | -              | (1,300)           
|Net cash provided (used) by operations                                                         | (19,632)       | 1,130          | (56,309)          
|Cash flows from (to) investing activities:                                                     |                |                |                   
|Investment in oil and gas properties                                                           | (4,484)        | (425,618)      | (34,390)          
|Proceeds from sale of oil and gas properties                                                   | 955,468        | 315,000        | -                 
|Purchase of listed securities                                                                  | (250,620)      | -              | -                 
|Net cash provided (used) by investing activities                                               | 700,364        | (110,618)      | (34,390)          
|Cash flow from financing activities:                                                           |                |                |                   
|Proceeds from (payment on) long-term debt                                                      | (230,000)      | 230,000        | -                 
|Purchase partial shares                                                                        | (14)           | -              | -                 
|Loan origination fee                                                                           | -              | (9,342)        | -                 
|Net cash provided (used) by financing activities                                               | (230,014)      | 220,458        | -                 
|Net increase (decrease) in cash                                                                | 450,718        | 110,970        | (90,699)          
|Cash at beginning of year                                                                      | 134,342        | 23,372         | 114,071           
|Cash at end of year                                                                            | $585,060       | $134,342       | $23,372           
|Supplemental disclosure of cash flow    information:                                           |                |                |                   
|Cash paid during the period for:                                                               |                |                |                   
|Interest paid                                                                                  | $    14,377    | $     7,984    | $            -    
|Income tax                                                                                     | $            - | $            - | $            -    

The accompanying notes are an integral part of this financial statement.





GLADSTONE ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000



NOTE 1 - ORGANIZATION

Gladstone Resources, Inc. was incorporated in the State of Washington on July 19, 1916. The Company sells oil and gas in Louisiana, Texas and New Mexico. The sales to the customers are on open accounts receivable, which are unsecured.
As of August 10, 1999, the Company merged its wholly owned subsidiary into the parent company. As of August 12, 1999, the Company did a reorganization under Code Section 3687 of the Internal Revenue Code of 1986 and it merged into Gladstone Energy, Inc.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

On an accrual basis, the Company uses the successful efforts method of accounting. This method follows the premise that an enterprise is to capitalize only those costs it incurs that directly result in an asset that has future benefits
measured in terms of future cash flows.

For purpose of consolidation all intercompany transactions have been eliminated.

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no significant non-cash investing or financing
activities during the three year period ended December 31, 2000.

Depreciation, depletion and amortization are calculated using the straight-line and unit of production method over the estimated useful lives of the assets or production of the estimated recoverable oil and gas reserves. Vehicles are
depreciated over a five-year life.

For income tax reporting, the Company uses accounting methods that recognize depreciation sooner than for financial statement reporting. As a result, the basis of property and equipment for financial reporting exceeds its tax basis by
the cumulative amount that accelerated depreciation exceeds straight-line depreciation. Also, for tax purposes the Company deducts intangible drilling costs and capitalizes them on the successful efforts accounting method. Deferred income taxes had been
recorded in prior years for the excess deductions, which will be taxable in future periods through reduced depreciation and cost depletion deductions for tax purposes. Currently the company has not assigned any future tax benefits to the accumulated losses.

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

NOTE 3 - ACCOUNTS RECEIVABLE

Revenue from all sales of oil and gas is generally received within 60 days. The accounts receivable at December 31, 2000 was received by March 1, 2001 and was the result of the sale of prospects.

NOTE 4 - INVESTMENT IN LISTED SECURITIES

The company invested on December 30, 2000, $250,620 in trading securities, for a short term investment.  There was no change in value as of December 31, 2000.

Under former management, the Company invested $109,071 in Windsor Energy Corporation in 1997, during 1998 the company filed bankruptcy and the investment was written off the books. The shares are not listed on an exchange and have no
value.

NOTE 5 - PROPERTY AND EQUIPMENT

Gas and oil properties

NM Corporation, the subsidiary of Gladstone Resources, Inc., owned a 28.71% net revenue interest in 6 producing gas wells in San Juan County, New Mexico. The subsidiary was merged into its parent company in 1999. These properties
were sold effective August 1, 2000 for $267,000.

On January 1, 1982, Gladstone Resources, Inc. purchased producing properties for $550,000 in Kent County, Texas. Previously in 1981, Gladstone purchased a 6.25% interest in a 207 acre lease with one producing well. The 1982 purchase
consists of four leases on 3,035 acres with 68 producing wells. The reserves on some of the properties were reduced by production declines. These properties were sold for $20,000 in January, 1999, with an effective date of October 1, 1998, for income and
expenses.

From 1990 through 1994, the Company participated in successful wells in Schleicher and Pecos Counties in Texas. The reserves in Schleicher County were estimated by management to be 1,524,300 MCF's in 1994, there are currently seven
producing wells and a pipeline. Gladstone Resources, Inc. had a 40.17% revenue interest in the Wilson-Pope wells in Schleicher County. The Schleicher County wells were sold for $295,000 in January, 1999, with an effective date of October 1, 1998, for
income and expenses. The Pecos County property was sold effective December 30, 2000 for $8,500.

The company purchased a 12.25% working interest in producing oil wells in the Right Hand Check Field for $334,125 as of June 30, 1999. These properties were sold effective September 1, 2000 for $635,000.

Currently, the Company does not own any oil and gas properties or equipment.

A summary of changes in the Company's gas reserves (in MCF's) is as follows (oil reserves have been included as MCF's by multiplying barrels by 6). ALL RESERVE
AMOUNTS INCLUDING THE REVISIONS HAVE BEEN FURNISHED BY MANAGEMENT. There are no "proved undeveloped reserves" according to management.

|Total for the United States         
|------------------------------------
|Reserves in MCF's                   
|Beginning of year                   
|Additions through purchase of leases
|Sales of reserves                   
|Adjustment to reserve (1)           
|Production                          
|Balance at end of year (2)          

(1) Based on reevaluation of estimated reserves by management. The estimates were based on current production levels of all properties.

(2) In January, 1999, the Kent and Schleicher Counties properties including reserves of 976,459 MCF's were sold.

NOTE 6 - FEDERAL AND STATE INCOME TAXES

A reconciliation of income tax expense (benefit) computed by applying the U.S. federal tax rates to loss from continuing operations before income taxes and extraordinary items and recorded income tax expense (benefit) is as follows:

|                                           | 2000        | 1999         | 1998        
|------------------------------------------ | ----------- | ------------ | ------------
|Tax expense (benefit) at statutory rate    | $    28,862 | $   (28,535) | $   (32,119)
|Non-deductible items                       | -           | 10,052       | 96,403      
|Change in valuation allowance              | -           | (18,483)     | (65,584)    
|Provision for income tax (benefit) expense | $28,862     | $-           | $(1,300)    



The components of the Company's deferred income taxes for 2000 and 1999 are as follows:

|                                | 2000     | 1999          
|------------------------------- | -------- | --------------
|Depreciation and depletion      | $      - | $      (3,484)
|Unrealized investment loss      | -        | 18,129        
|Intangible Development costs    | -        | 9,296         
|Impairment of asset value       | -        | 27,292        
|Net operating loss carryforward | -        | 60,923        
|Valuation allowance             | -        | (112,156)     
|Total                           | -        | -             

Net operating loss deductions and credits carryforward consists of the following:



NOTE 7 - LONG-TERM DEBT

The Company had a commitment from Compass Bank to receive up to $15,000,000 in loans for oil and gas exploration or purchase of oil and gas properties. The Company had received $230,000 from the bank. The interest rate was 1% over the
index rate. The due date was August 1, 2001. The note required monthly payments of $5,000 plus interest, beginning February 1, 2000. Also, the bank required the Company to meet certain financial ratios at year end. The Company paid the note in full on
September 1, 2000.





NOTE 8 - SIGNIFICANT ESTIMATES AND CONCENTRATIONS

Generally accepted accounting principles require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations.

Major Customers

In 2000, the Company had two customers which represent 81% and 16% of its total revenue.



NOTE 9 - RENT EXPENSE

The Company pays rent on a month-to-month basis. The Company does not have a commitment on a lease contract. Rent expense for 2000, 1999, and 1998 was $7,060, $6,088, and $6,606, respectively.

NOTE 10 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to certain operating agreements by and between the Company and Edward B. Brooks, Jr., Mr. Brooks served as the operator of certain of the Company's oil and gas interests. Pursuant to such operating agreements, the Company paid
the following described amounts to Mr. Brooks in 1998 and Mr. Brooks paid the following described amounts to the Company in 1998.

Mr. Brooks paid the Company $72,602 in 1998 as the Company's share of gas sales from properties in Schleicher County. The Company paid Mr. Brooks $52,306 in 1998 for the Company's share of operating costs on properties in Kent County
and Schleicher County. In 1998, the Company also paid Mr. Brooks $4,734 for the Company's share of operating expenses on the Schleicher and Kent County properties that were paid by Mr. Brooks in 1997.

In 1998, the Company paid Mr. Brooks $18,915 for the Company's share of the seismic study on properties in Stonewall County and $37,591 for the Company's share of the cost of drilling a well in Stonewall County that was nonproductive.
In 1998, the Company paid $24,334 to Mr. Brooks for the Company's share of lease costs of properties in Stonewall County.

In 1999, the Company purchased 50% of the working interest owned by Humphrey Oil Interests, L.P. in the Right Hand Creek field in Louisiana. The Company paid Humphrey Oil Interests, L.P. the same amount that they had paid for the
working interest. Some of the Humphrey Oil Interests, L.P. partners are officers and directors of Gladstone Energy, Inc. The cost of the 12.25% working interest and 8.93% revenue interest was $334,125. The gross revenue averaged $29,917 per month and the
net revenue averaged $24,880 per month in 2000. The gross revenue averaged $20,150 per month and net revenue averaged $14,438 per month in 1999.

The Company pays Humphrey Oil Interests, L.P. for monthly administrative expenses, including employees' time charges, rent, telephone, computer expenses and other office expenses. The Company paid $5,000 during the year 2000.

















OTHER FINANCIAL INFORMATION















|HAROLDL. RATCLIFF                                                                                                                                                  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CERTIFIEDPUBLICACCOUNTANT                                                                                                                                          
|12700 Park Central Drive                                                                                                                                           
|Suite 1600                                                                                                                                                         
|DALLAS, TEXAS 75251                                                                                                                                                
|MEMBER                                                                                                                                                             
|(972) 404-4010                                   
                                          
                                          
         AMERICAN INSTITUTE
|(972) 404-4042 - FAX                                  
                                          
                               CERTIFIED PUBLIC ACCOUNTANTS      











Board of Directors and Stockholders

Gladstone Energy, Inc.

My report on my audit of the basic financial statements of Gladstone Energy, Inc. for 2000 appears on page 3. That audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The information
on pages 15 through 20 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements
and, accordingly, I express no opinion on it.







Certified Public Accountant
Dallas, Texas
March 9, 2001







GLADSTONE ENERGY, INC.
EXHIBIT A
SUMMARY OF OPERATIONS

For the year ended December 31,

|                                                          | 2000       | 1999        | 1998        | 1997        | 1996       
|--------------------------------------------------------- | ---------- | ----------- | ----------- | ----------- | -----------
|Sales                                                     |            |             |             |             |            
|Gas and oil                                               | $  295,679 | $  223,943  | $  264,002  | $  511,477  | $  472,915 
|Cost of sales:                                            |            |             |             |             |            
|Revenue deductions                                        | 33,135     | 24,346      | 12,003      | 24,291      | 22,021     
|Well operating expenses                                   | 50,030     | 72,242      | 118,909     | 113,964     | 142,053    
|                                                          | 83,165     | 96,588      | 130,912     | 138,255     | 164,074    
|Gross profit on sales                                     | 212,514    | 127,355     | 133,090     | 373,222     | 308,841    
|                                                          |            |             |             |             |            
|Expenses:                                                 |            |             |             |             |            
|Depletion                                                 | 53,921     | 56,973      | 90,846      | 115,003     | 101,275    
|Depreciation and 
          amortization                  | 12,759     | 8,724       | 11,369      | 18,100      | 9,072      
|Dryhole and 
          abandonment                        | 102,646    | 114,388     | 243,764     | 462,631     | 97,544     
|Oil and gas prospect expense                              | -          | 24,491      | -           | -           | -          
|General and 
          administrative                     | 43,581     | 43,115      | 11,162      | 12,851      | 18,222     
|Interest                                                  | 14,377     | 9,862       | -           | -           | -          
|Taxes                                                     | 6,498      | 8,050       | 352         | 2,905       | 586        
|Legal, audit and 
          accounting                    | 32,304     | 75,501      | 12,704      | 9,623       | 7,664      
|Asset impairment 
          charge                        | -          | -           | 181,946     | -           | -          
|Recovery of taxes                                         | -          | -           | (35,648)    | -           | -          
|                                                          | 266,086    | 341,104     | 516,495     | 621,113     | 234,363    
|Income (loss) from operations                             | (56,572)   | (213,749)   | (383,405)   | (247,891)   | 74,478     
|Other income (losses)                                     | 514,229    | 9,683       | (104,162)   | 24,369      | 13,783     
|Income (loss) before taxes                                | 460,657    | (204,066)   | (487,567)   | (223,522)   | 88,261     
|Income taxes (benefit)                                    | 26,862     | -           | (1,300)     | (26,860)    | 14,509     
|NET INCOME (LOSS)                                         | 433,795    | (204,066)   | (486,267)   | (196,662)   | 73,752     
|Retained earnings (deficit) at 
        beginning of year | (985,479)  | (781,413)   | (295,146)   | (98,484)    | (172,236)  
|Retained earnings (deficit) at 
        end of year       | $(551,684) | $(985,479)  | $(781,413)  | $(295,146)  | $(98,484)  
|Capital stock and paid in capital                         | $1,380,134 | $1,380,134) | $1,380,134) | $1,380,134) | $1,380,134)
|Average common shares                                     | 848,782    | 848,791     | 4,244,060   | 4,244,060   | 4,244,060  
|Income (loss) per common share                            | $.51       | $(.24)      | $(.57)*     | $(.23)*     | $.09*      

*Adjusted for 1 for 5 reverse split.

See auditor's report on other financial information







GLADSTONE ENERGY, INC.
December 31, 2000

SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT

|Description:           | Balance1-1-00 | Additions    | Retirement   | Balance12-31-00
|---------------------- | ------------- | ------------ | ------------ | ---------------
|Oil and gas properties | $    991,709  | $      2,886 | $    994,595 | $        -     
|Field and equipment    | 17,128        | 1,598        | 18,726       | -              
|Totals                 | $1,008,837    | $4,484       | $1,013,321   | $-             





SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND

AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT

|Description:           | Balance1-1-00 | Additions    | Retirement   | Balance12-31-00
|---------------------- | ------------- | ------------ | ------------ | ---------------
|Oil and gas properties | $    464,044  | $     59,524 | $    523,568 | $       -      
|Field and equipment    | -             | -            | -            | -              
|Totals                 | $464,044      | $59,524      | $523,568     | $-             





See auditor's report on other financial information







GLADSTONE ENERGY, INC.
CAPATILIZED COSTS OF OIL AND GAS PRODUCING ACTIVITIES
Years ended December 31, 2000

DISCLOSURE 2

|                                       | United States Total
|-------------------------------------- | -------------------
|                                       | 2000               
|Capitalized costs proved properties    | $       -          
|Capitalized costs unproven properties  | -                  
|                                       |                    
|Total capitalized costs                | -                  
|                                       |                    
|Accumulated depletion and depreciation | -                  
|                                       |                    
|Net costs                              | $ -                







See auditor's report on other financial Information







GLADSTONE ENERGY, INC.
COSTS INCURRED IN OIL AND GAS PROPERTY
ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES

Three years ended December 31, 2000

DISCLOSURE 3

|                           |          | United States Total
|-------------------------- | -------- | -------------------
|                           |          | 2000               
|Acquisition of properties: |          |                    
|                           | Proved   | $       -          
|                           | Unproven | 2,886              
|                           |          |                    
|Exploration                | 27,248   | 187,033            
|                           |          |                    
|Development costs          | -        | 41,564             
|                           |          |                    
|Production costs           | 50,030   | 63,742             







See auditor's report on other financial information







GLADSTONE ENERGY, INC.
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
For the three years ended December 31, 2000

DISCLOSURE 4





|                                                                                                  |            | For United States
|------------------------------------------------------------------------------------------------- | ---------- | -----------------
|                                                                                                  |            | 2000             
|                                                                                                  |            |                  
|Sales                                                                                             | $  295,679 | $  223,943       
|                                                                                                  |            |                  
|Production costs and taxes                                                                        | 83,165     | 96,588           
|                                                                                                  |            |                  
|Exploration expenses (included dry holes, 
abandonments and delay rents)                          | 102,646    | 138,879          
|                                                                                                  |            |                  
|Asset impairment charge                                                                           | -          | -                
|Depreciation, depletion and amortization                                                          | 59,524     | 63,311           
|                                                                                                  | 245,335    | 298,778          
|                                                                                                  |            |                  
|Results of operations from producing activities (excluding corporate overhead and interest costs) | $ 50,344   | $ ( 74,835)      







See auditor's report on other financial information









GLADSTONE ENERGY, INC.
RESERVE QUANTITY INFORMATION
For the three years ended December 31, 2000

DISCLOSURE 5

|Proved developed reserves*          | United States and Total
|----------------------------------- | -----------------------
|                                    | 2000                   
|                                    | Oil                    
|                                    |                        
|Beginning of year                   | 69,570                 
|                                    |                        
|Purchase of new properties          | -                      
|                                    |                        
|Revisions of previous 
   estimates | -                      
|                                    |                        
|Extensions of proved 
   reserves   | -                      
|                                    |                        
|Sales of producing 
   properties   | (60,438)(3)            
|                                    |                        
|Production                          | (9,132)                
|                                    |                        
|End of year                         | -                      
|                                    |                        

(1)



*All undeveloped reserves that may exist are on the same leases as the developed reserves and additional wells, if drilled, may or may not produce additional reserves.



See auditor's report on other financial information





ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON               ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

The directors of the Company at March 30, 2001, were as follows:

|Director            | Age | Current Office(s) Held
In the Company         | Year First Elected Director
|------------------- | --- | --------------------------------------------- | ---------------------------
|Johnathan M. Hill   | 52  | President and a Director                      | 1999                       
|Katherine R. Murphy | 44  | Treasurer, Assistant Secretary and a Director | 1999                       
|H. Wayne Gifford    | 64  | Director                                      | 1999                       
|Charles B. Humphrey | 45  | Director                                      | 1999                       
|Fred Oliver         | 76  | Director                                      | 1999                       
|                    |     |                                               |                            

Mr. Hill was appointed a Director and President of the Company in March 1999. Mr. Hill has been the President of Hill & Hill Production Company, an oil and gas production company, the
Secretary and Treasurer of Hill Energy Company, an oil and gas investment company, and the Vice President of HPC Operating Company, an oil and gas operating company, all based in Dallas, Texas, since 1985.

Ms. Murphy was appointed Treasurer, Assistant Secretary and a Director of the Company in March 1999. Ms. Murphy has been the Vice President and Assistant Secretary of Humphrey Oil Corporation
since 1989.

Mr. Gifford, was appointed a Director of the Company in March 1999. Mr. Gifford has been the President and a Director of Gifford Operating Company, an oil and gas operating company based in
Dallas, Texas, since 1987. Mr. Gifford has also been active as an independent geological consultant since 1980.

Mr. Humphrey was appointed a Director of the Company in March 1999. Mr. Humphrey has been the President, Treasurer, and sole director of Humphrey Oil Corporation, an oil and gas exploration
company based in Dallas, Texas, and the President and a Director of Lindenshire, Inc., a real estate development company based in Dallas, Texas, since 1984. Mr. Humphrey also has been engaged in real estate development and investment individually and
through numerous other partnerships, joint ventures and corporations since 1984.

Mr. Oliver was appointed a Director of the Company in March 1999. Mr. Oliver has been the President of Petroleum Ventures of Texas, Inc., an oil and gas investment company based in Dallas,
Texas, since 1975. Mr. Oliver also has been engaged in geological and engineering consulting since 1953.

Executive Officers

The executive officers of the Company at March 30, 2001, were as follows:



|Officers            | Age | Current Office(s) Held in the Company
|------------------- | --- | -------------------------------------
|Johnathan M. Hill   | 52  | President                            
|Sheila Irons        | 59  | Vice President and Secretary         
|Katherine R. Murphy | 44  | Treasurer and Assistant Secretary    

For information regarding the business experience of Messr. Hill and Madame Murphy, see the biographies above.

Ms. Irons was appointed the Company's Vice President and Secretary of the Company in March 1999. Ms. Irons has been Vice President of Humphrey Oil Corporation since 1989.

The term of each director and executive officer expires at the annual meeting of shareholders and directors, respectively, or at such times as their respective successors are duly elected and qualified
 .



ITEM 11.      EXECUTIVE COMPENSATION

Summary Compensation Table

None of the executive officers of the Company received any salary or bonus during the fiscal year ended December 31, 2000. The Directors of the Company each received no Director's fees in 2000.
The table below includes compensation paid by the Company for services rendered in fiscal 1998 to Edward B. Brooks, Jr., the former President and Chief Executive Officer of the Company.

|                                        |      |                     |          |              | Long-Term   |             
|--------------------------------------- | ---- | ------------------- | -------- | ------------ | ----------- | ------------
|                                        |      |                     |          |              | Compensaton |             
|                                        |      | Annual Compensation | Awards   |             
|                                        |      |                     |          | Other Annual | Securities  | All Other   
|Name and Principal                      |      |                     |          | Compensation | Underlying  | Compensation
|Position                                | Year | Salary($)           | Bonus($) | ($)          | Options(#)  | ($)         
|Edward B. Brooks, Jr.
President and CEO | 1998 | 0                   | ---      | (1)          | ---         | ---         



(1)  The Company provided Mr. Brooks a vehicle for Company business. The Company's depreciation expense for 1998 for the vehicle was $2,664.00. The Company also reimbursed Mr. Brooks $1,159.29 in 1998, for costs
incurred by Mr. Brooks in connection with the operation of such vehicle.

Option/SAR Grants in Last Fiscal Year

No stock options or stock appreciation rights were granted to the President by the Company during fiscal 2000.

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

No stock options or stock appreciation rights were exercised by the President in fiscal 2000, and no stock options or stock appreciation rights were outstanding at the end of fiscal 2000.

Long-term Incentive Plan Awards in Last Fiscal Year

The Company did not have any long-term incentive plans in effect during fiscal 2000.

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

The Company does not have any employment agreements with any of its officers.



ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                OWNERS AND MANAGEMENT

Beneficial Ownership of Five Percent or Greater Shareholders

The following table sets forth beneficial owners of five percent or more of the Company's outstanding shares of Common Stock known to the Company as of March 30, 2001. All shares shown in the table reflect sole voting and investment
power unless otherwise indicated.

|                                                                                   |                                                          | Number of |        
|---------------------------------------------------------------------------------- | -------------------------------------------------------- | --------- | -------
|                                                                                   |                                                          | Shares    | Percent
|Name and address                                                                   | Beneficially                                             | Of Total 
|of beneficial owner                                                                | Owned                                                    | Shares   
|Charles B. Humphrey                                                                | 229,321                                                  | 27.02%   
|                                                                                   | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           |        
|Johnathan M. Hill                                                                  | 229,321                                                  | 27.02%   
|                                                                                   | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           |        
|Sheila Irons, individually and as Trustee of Humphrey Children's Trust             | 64,209(1)                                                | 7.56%    
|                                                                                   | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           |        
|Fred Oliver                                                                        | 55,037                                                   | 6.48%    
|                                                                                   | 4625 Greenville Ave., Suite 205, Dallas, TX 75206        |           |        
|David Tyrrell, individually and as Trustee of the Katherine Desporte Tyrrell Trust | 45,864(2)                                                | 5.40%    
|                                                                                   | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           |        



(1)

(2)

Beneficial Ownership of Directors and Executive Officers

The following table sets forth the number of shares of Common Stock beneficially owned by each director of the Company, each executive officer of the Company and all directors and executive officers as
a group as of March 30, 2001. All shares shown in the table reflect sole voting and investment power unless otherwise indicated.

|                                                                       |                                                          | Number of | 
|---------------------------------------------------------------------- | -------------------------------------------------------- | --------- | 
|Name and address                                                       | Shares                                                   | Percent  
|of beneficial owner                                                    | Beneficially                                             | Of Total 
|Directors and Executive Officers                                       | Owned                                                    | Shares   
|Charles B. Humphrey                                                    | 229,321                                                  | 27.02%   
|                                                                       | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           | 
|Johnathan M. Hill                                                      | 229,321                                                  | 27.02%   
|                                                                       | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           | 
|Fred Oliver                                                            | 55,037                                                   | 6.48%    
|                                                                       | 4625 Greenville Ave., Suite 205, Dallas, TX 75206        |           | 
|H. Wayne Gifford                                                       | 36,691                                                   | 4.32%    
|                                                                       | 4625 Greenville Ave., Suite 203, Dallas, TX 75206        |           | 
|Katherine Murphy                                                       | 18,345                                                   | 2.16%    
|                                                                       | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           | 
|Sheila Irons, individually and as Trustee of Humphrey Children's Trust | 64,209(1)                                                | 7.56%    
|                                                                       | 3500 Oak Lawn Avenue, Suite 590, LB 49, Dallas, TX 75219 |           | 
|Directors and Executive Officers as a Group (6 individuals)            | 632,924                                                  | 74.57%   



ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



On August 31, 2000, the Company sold to the Humphrey Children's Trust 9.5918367% of the Company's interest in and to the Righthand Creek Field for a purchase price of $64,265.31. The
Humphrey Children's Trust is a trust set up for the benefit of Charles B. Humphrey's children. Mr. Humphrey currently serves as the Chairman of the Board of Gladstone Energy, Inc. The terms of the sale to the Humphrey Children's Trust were proportionately
the same as the sale to two other parties, who have no affiliation with the Company, which occurred within the same time period.

The Company reimburses Humphrey Oil Corporation, which is the General Partner of Humphrey Oil Interests, L. P. and of which Charles B. Humphrey owns a majority interest, for certain monthly administrative expenses, including employees'
time charges, rent, telephone, computer expenses and other office expenses incurred on behalf of the Company. These costs for fiscal 2000 totaled $12,363.

PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

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

1.       Financial Statements

See Index to Financial Statements on page 19 to this report.

2.       Financial Statement Schedules

All schedules are omitted because the information is not required under the related instructions or is inapplicable or because the information is
included in the Financial Statements or related Notes.

3.       Exhibits:



|3.1  | Certificate of Incorporation of Gladstone Energy, Inc. incorporated by reference to Exhibit C from our 1999 Proxy Statement.                                                                                                                                                                
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  | Bylaws incorporated by reference to Exhibit 3.2 from our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.                                                                                                                                                                 
|10.1 | Purchase and Sale Agreement made and entered into as of the 30th day of August, 2000 between Gladstone Energy, Inc., as Seller, and G. R. Partners, Inc., as Purchaser incorporated by reference to Exhibit 2.1 of our report on
Form 8-K dated August 31, 2000.                            
|10.2 | Purchase and Sale Agreement made and entered into as of the 30th day of August, 2000 between Gladstone Energy, Inc., as Seller, and Bagwell No. 6 Family L. P., as Purchaser incorporated by reference to Exhibit 2.2 of our report
on Form 8-K dated August 31, 2000.                      
|10.3 | Purchase and Sale Agreement made and entered into as of the 30th day of August, 2000 between Gladstone Energy, Inc., as Seller, and Humphrey Children's Trust, Sheila Irons, Trustee, as Purchaser incorporated by reference to
Exhibit 2.3 of our report on Form 8-K dated August 31, 2000.
|10.4 | Assignment and Bill of Sale dated August 31, 2000, effective as to accounting for production as of August 1, 2000 incorporated by reference to Exhibit 2.4 of our report on Form 8-K dated August 31, 2000.                                                                                 
|10.5 | Purchase and Sale Agreement made and entered into as of the 10th day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser. Incorporated by reference to Exhibit 2.1 in our report on Form 8-K
dated October 20, 2000.                         
|10.6 | Purchase and Sale Agreement made and entered into as of the 25th day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser. Incorporated by reference to Exhibit 2.2 in our report on Form 8-K
dated December 29, 2000.                        
|27.1 | Financial Data Schedule.                                                                                                                                                                                                                                                                    

(b)    Reports on Form 8-K

1.

2.



Signatures



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Dallas, Texas on the 30th of March, 2001.

GLADSTONE ENERGY, INC.





By:/s/ Johnathan M. HillJohnathan M. HillPresident



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

March 30, 2001                                       
      /s/ Johnathan M. HillJohnathan M. Hill, President (ChiefExecutive Officer) and a Director



March 30, 2001                                       
      /s/ Katherine R. MurphyKatherine R. Murphy, Director, Treasurerand Assistant Secretary



March 30, 2001                                       
      /s/ Sheila IronsSheila Irons, Vice President and Secretary



March 30, 2001                                       
      /s/ H. Wayne GiffordH. Wayne Gifford, Director



March 30, 2001                                       
      /s/ C. B. HumphreyCharles B. Humphrey, Director



March 30, 2001                                       
      /s/ Fred L. OliverFred L. Oliver, Director



INDEX TO EXHIBITS

|Exhibit
No. | Item                                                                                                                                                                                                                                                                                        
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         | Certificate of Incorporation of Gladstone Energy, Inc. incorporated by reference to Exhibit C from our 1999 Proxy Statement.                                                                                                                                                                
|3.2         | Bylaws incorporated by reference to Exhibit 3.2 from our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.                                                                                                                                                                 
|10.1        | Purchase and Sale Agreement made and entered into as of the 30th day of August, 2000 between Gladstone Energy, Inc., as Seller, and G. R. Partners, Inc., as Purchaser incorporated by reference to Exhibit 2.1 of our report on
Form 8-K dated August 31, 2000.                            
|10.2        | Purchase and Sale Agreement made and entered into as of the 30th day of August, 2000 between Gladstone Energy, Inc., as Seller, and Bagwell No. 6 Family L. P., as Purchaser incorporated by reference to Exhibit 2.2 of our report
on Form 8-K dated August 31, 2000.                      
|10.3        | Purchase and Sale Agreement made and entered into as of the 30th day of August, 2000 between Gladstone Energy, Inc., as Seller, and Humphrey Children's Trust, Sheila Irons, Trustee, as Purchaser incorporated by reference to
Exhibit 2.3 of our report on Form 8-K dated August 31, 2000.
|10.4        | Assignment and Bill of Sale dated August 31, 2000, effective as to accounting for production as of August 1, 2000 incorporated by reference to Exhibit 2.4 of our report on Form 8-K dated August 31, 2000.                                                                                 
|10.5        | Purchase and Sale Agreement made and entered into as of the 10th day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser. Incorporated by reference to Exhibit 2.1 in our report on Form 8-K
dated October 20, 2000.                         
|10.6        | Purchase and Sale Agreement made and entered into as of the 25th day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser. Incorporated by reference to Exhibit 2.2 in our report on Form 8-K
dated December 29, 2000.                        
|27.1        | Financial Data Schedule.