U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                                (Amendment No. 1)

                                        

X Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
(No fee required, effective October 7, 1996.)



For the fiscal year ended December 31, 1996.

Transition  report under Section 13 or 15(d) of the  Securities  Exchange Act of
1934 (No fee required)

For the transition period from _________ to ____________.
Commission File Number: 0-9435

                            ENERGY PRODUCTION COMPANY
                 ----------------------------------------------                
                 (Name of Small Business Issuer in Its Charter)

                    Colorado                                   84-0811034
                    --------                                   ----------
           (State or Other Jurisdiction of                  (I.R.S. Employer
           Incorporation or Organization)                    Identification No.)

              1703 Edelweiss Drive
                Cedar Park, Texas                                78613
                -----------------                                -----
     (Address of Principal Executive Offices)                  (Zip Code)

                                 (512) 250-8692
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

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

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

                          Common Stock, $.01 Par Value
                          ----------------------------
                                 Title of Class

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes                        No       X

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X ]

The issuer's revenues for its most recent fiscal year were $2,000.00.

As of June 1, 1997,  30,961,778  shares of the  Registrant's  common stock,  par
value $.01 per share, were outstanding. The aggregate market value of the voting
stock held by non-affiliates of the Registrant at June 1, 1997, was $1,423.38.

Documents Incorporated by Reference:  None.

<PAGE>


Preliminary Note

This  Amendment  No. 1  ("Amendment  No. 1") to Form 10-KSB  amends the original
report ("Original Report") on Form 10-KSB for the fiscal year ended December 31,
1996 for Energy Production Company, a Colorado corporation (the "Company"). This
Amendment  No. 1 is filed to disclose  the steps taken by the Company to satisfy
any  possible  failure of the  Company to properly  approve the  issuance by the
Company of 44,038,222  shares of the Company's common stock, par value $0.01 per
share ("Common Stock"), to Bass Petroleum, Inc., a Texas corporation ("BPI"), in
consideration of the cash payment by BPI of $5,000, and assignment by BPI to the
Company of certain oil and gas  properties  located in Texas,  which the Company
believes are valued at $40,000 (the "Stock Issuance").  The Company and BPI have
agreed to rescind the Stock Issuance.  Accordingly,  all consideration  given by
BPI to the Company has been  returned  to BPI and the  certificate  representing
44,038,222  shares of Common Stock has been  surrendered  by BPI to the Company.
This  Amendment  No.  1  deletes  all  references  to the  Stock  Issuance,  the
consideration  received by the Company  from BPI and the  increase in issued and
outstanding  shares of Common Stock caused by the Stock Issuance.  The financial
statements  attached to this  Amendment  No. 1 have also been  revised to delete
such references. This Amendment No. 1 also more accurately describes the $20,000
Management  Fee paid to Robert  Watson,  Inc. in light of the  rescission of the
Stock Issuance.

                                     PART I

ITEM 1 - BUSINESS

General

The Company is an  independent  oil and gas  producer  which was formed in March
1980 for the  primary  purpose  of  identifying,  acquiring,  revitalizing,  and
enhancing the production of mature oil and natural gas fields located  primarily
in the mid-continent and Rocky Mountain region. Since inception, the Company has
been a developmental  stage company with no material operations that has devoted
substantially all of its efforts to establishing its business,  and beginning in
December  1986,  the Company sold all of its oil and gas assets and  operations.
Since December 1986, the Company has not engaged in any oil and gas  operations,
nor does the Company  presently  have the  requisite  personnel,  equipment,  or
finances to  operate.  Since the 1986 fiscal  year,  as a primary  result of the
Company's  lack of  business  operations,  the  Company  has  failed to file the
required  reports and other filings required to be filed with the Securities and
Exchange  Commission in accordance with the Securities  Exchange Act of 1934, as
amended (the "Exchange  Act"). The Company intends to become current with regard
to its  reporting  requirements  pursuant to the  applicable  provisions  of the
Exchange  Act, and through  strategic  acquisitions  of  identified  oil and gas
properties,  the  Company  believes  that it will be able to  commence  business
operations although its planned operations have not yet commenced.

<PAGE>


     The principal  offices of the Company are located at 1703 Edelweiss  Drive,
Cedar Park, Texas 78613, and its telephone number is (512) 250-8692.

Recent Developments

In May 1997, the controlling  shareholder of the Company sold 16,728,000  shares
of Common Stock to BPI in  consideration  of the cash payment of $45,000 by BPI.
To date,  BPI owns an aggregate of  16,728,000  shares of the  Company's  Common
Stock,  constituting  approximately  54% of all of the  issued  and  outstanding
shares of Common Stock of the Company.

Business Strategy

The Company intends to merge with or acquire a company actively  involved in oil
and gas  exploration,  development  and  operations  with existing  revenues and
operating properties. Once such acquisition or merger is complete, the Company's
activities  will focus on the  acquisition of producing oil and gas  properties.
Such acquisitions  will be based on an analysis of the properties'  current cash
flow and the  Company's  ability to profit from the  acquisition.  The Company's
acquisitions  will include  leasehold and other working interests in exploration
areas.

The Company will also seek to identify  promising  areas for the  exploration of
oil and gas  through the use of outside  consultants  and the  expertise  of the
Company.  This identification  will include collecting and analyzing  geological
and  geophysical  data for  exploration  areas.  Once  promising  properties are
identified,  the  Company  will  attempt to acquire  the  properties  either for
drilling oil and natural gas wells,  using independent  contractors for drilling
operations, or for sale to third parties.

Market for Oil and Gas

The demand for oil and gas is dependent upon a number of factors,  including the
availability of other domestic production,  crude oil imports, the proximity and
size of oil and gas pipelines in general, other transportation  facilities,  the
marketing  of  competitive  fuels,  and general  fluctuations  in the supply and
demand for oil and gas. The Company has not generated any revenues from the sale
of oil and gas during its past three fiscal years.  The Company  intends to sell
of all of its production to traditional  industry  purchasers,  such as pipeline
and crude oil companies,  who have  facilities to transport the oil and gas from
the wellsite.


<PAGE>

Competition

The oil and gas industry is highly competitive in all aspects.  The Company will
be  competing  with  major  oil  companies,  numerous  independent  oil  and gas
producers,  individual  proprietors,  and  investment  programs.  Many of  these
competitors possess financial and personnel resources substantially in excess of
those which are  available  to the Company  and may,  therefore,  be able to pay
greater amounts for desirable leases and define,  evaluate, bid for and purchase
a  greater  number of  potential  producing  prospects  than the  Company's  own
resources permit.  The Company's  ability to generate  resources will depend not
only on its ability to develop  existing  properties  but also on its ability to
identify  and acquire  proven and  unproven  acreage and  prospects  for further
exploration.

Environmental Matters and Government Regulations

The Company's  operations are subject to numerous federal,  state and local laws
and  regulations  controlling the discharge of materials into the environment or
otherwise  relating to the protection of the environment.  Such matters have not
had a material  effect on  operations  of the  Company to date,  but the Company
cannot predict whether such matters will have any material effect on its capital
expenditures, earnings or competitive position in the future.

The  production  and sale of crude oil and natural gas are currently  subject to
extensive  regulations  of both  federal and state  authorities.  At the federal
level, there are price  regulations,  windfall profits tax, and income tax laws.
At the state level, there are severance taxes, proration of production,  spacing
of wells,  prevention and clean-up of pollution and permits to drill and produce
oil and gas.  Although  compliance with their laws and regulations has not had a
material adverse effect on the Company's operations,  the Company cannot predict
whether its future operations will be adversely effected thereby.

Employees

At December 31, 1996, the Company had three employees, and the Company currently
has one employee.

ITEM 2 - PROPERTIES

The Company owns no significant  properties  other than oil and gas  properties.
The  Company  owned no oil and gas  properties  during  the 1994,  1995 and 1996
fiscal  years.  As of June 1,  1997,  the  Company  had no  sales,  no  drilling
activity, no operations, no production and no delivery commitments.

The office space for the Company's  executive  offices at 1703 Edelweiss  Drive,
Cedar Park, Texas 78613, is currently provided by the majority shareholder at no
cost to the Company.

<PAGE>


Revenues Reported To Other Agencies

The Company  filed no  estimates  of total,  proved net oil or gas  reserves and
included no such  estimates  in any reports to any federal  authority  or agency
since the beginning of the last fiscal year.

Production

During the last  three  fiscal  years,  the  Company  had no  operations  and no
production.

Productive Wells And Acreage

For the last three fiscal years, the Company had no productive wells or acreage.

Underdeveloped Acreage

For the last three fiscal years, the Company had no underdeveloped acreage.

Drilling Activity

The Company had no drilling activity in each of the last three fiscal years.

Present Activities

As of June 1,  1997,  the  Company  had no  drilling,  waterflood  installation,
pressure maintenance operations, or other related operations.

Delivery Commitments

As of June 1, 1997,  and for the last three  years,  the Company had no delivery
commitments.

                                     PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's  Common Stock was quoted in the NASDAQ  System until  February 22,
1984, when the Company's  Common Stock was deleted from the NASDAQ System due to
an insufficient  number of active market makers.  Since that date, the Company's
Common  Stock has  experienced  only  limited  trading and its prices are quoted
irregularly  in the  National  Quotation  Bureau's  "Pink  Sheets".  Information
regarding  bid prices  and  closing  bids has been  obtained  from the  National
Quotation Bureau. The following quotations, where quotes were available, reflect

<PAGE>

inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.

         FISCAL 1995                          CLOSING BID
         -----------                          -----------
                                       HIGH                 LOW
                                       ----                 ---
First Quarter (1)                     .0001                .0001
Second Quarter                        .0001                .0001
Third Quarter                         .0001                .0001
Fourth Quarter                        .0001                .0001

         FISCAL 1996
         -----------
                                       HIGH                 LOW
                                       ----                 ---
First Quarter                         .0001                .0001
Second Quarter                        .0001                .0001
Third Quarter                         .0001                .0001
Fourth Quarter                        .0001                .0001

         FISCAL 1997
         -----------
                                       HIGH                 LOW
                                       ----                 ---
First Quarter                         .0001                .0001
Second Quarter                        .0001                .0001

-------------------
(1)  Closing  Bid prices for the first  quarter  of 1995 were  unavailable.  The
     prices provided are Bid Prices.

At June 1, 1997,  the  approximate  number of holders of record of the Company's
Common Stock was 792. The Company has not paid any dividends on its Common Stock
and does not expect to do so in the foreseeable future.

Recent Sales Of Unregistered Securities

The  Company  has not sold any  unregistered  securities  within  the past three
years.

ITEM 7 - FINANCIAL STATEMENTS

The  information  required is included in this report as set forth in the "Index
to Financial Statements."

                          Index to Financial Statements

Report of Independent Public Accountants                        F-1
Balance Sheets                                                  F-2
Statement of Operations                                         F-3
Statement of Changes in Stockholders' Equity                    F-4
Statement of Cash Flows                                         F-5
Notes to Financial Statements                                   F-6 
Notes to Financial Statements                                   F-7    
<PAGE>



ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth  the  persons  known  to the  Company  to own
beneficially more than five percent of the outstanding shares of Common Stock as
of December 31, 1996 and  information  as of December 31, 1996,  with respect to
the  ownership of Common Stock by each  director  and  executive  officer of the
Company.  In all cases,  the owners have sole voting and investment  powers with
respect to the shares.

Name and Address of               Amount and Nature
Beneficial Owner                  of Beneficial Owner          Percent of Class
-------------------               -------------------          ----------------

Robert N. Watson, Jr.(1)             16,728,000 (3)                  54%
P.O. Box 202650
Austin, Texas  78720

William G. Watson(1)                          0                       0
P.O. Box 202650
Austin, Texas  78720

Linda R. Watson (1)                           0                       0
P.O. Box 202650
Austin, Texas  78720

Robert Watson, Inc. (2)              16,728,000                      54%        
P.O. Box 202650
Austin, Texas  78720

(1)  Resigned as Directors and Officers effective May 22, 1997.
(2)  Sold to Bass Petroleum, Inc. on May 22, 1997.
(3)  Mr. Watson is the beneficial owner of these shares based upon his ownership
     of one hundred percent (100%) of the common stock of Robert Watson, Inc.

The  following  table  sets  forth  the  persons  known  to the  Company  to own
beneficially more than five percent of the outstanding shares of Common Stock as
of  June 1,  1997  and  information  as of June 1,  1997,  with  respect  to the
ownership of Common Stock by each director and executive officer of the Company.
Unless otherwise  indicated,  the owners have sole voting and investment  powers
with respect to the shares.

<PAGE>


Bass Petroleum, Inc.                    16,728,000                    54%
1703 Edelweiss
Cedar Park, Texas  78613

Ray D. Reaves                           16,728,000(1)                 54%
1703 Edelweiss
Cedar Park, Texas  78613

All Officers, Directors and             16,728,000                    54%
Five Percent Shareholders
as a group
-----------------------
(1)  Mr. Reaves is the beneficial  owner of these shares based upon his position
     as Chairman, Chief Executive Officer, Chief Financial Officer, Director and
     owner of  approximately  60% of the common stock of BPI; Mr. Reaves' voting
     and  investment  powers  with  respect to the  Company's  Common  Stock are
     limited by his position as Director and shareholder of BPI.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company  entered into an annual  management  agreement with its  controlling
shareholder,  Robert  Watson,  Inc., in 1987 and renewed the agreement each year
until  December  1996.  The  agreement  called  for an amount  reached by mutual
agreement of the Company and the  shareholder  to be paid each year. The Company
paid management fees of $0 in 1996, $0 in 1995, and $1,500 in 1994.

As of December 31, 1996, 1995 and 1994, the Company had a receivable from Robert
Watson,  Inc.  in the amount of $20,000  ("Receivable").  This  Receivable  bore
interest  at 10%  and was due on  demand.  In  connection  with  the  successful
completion of the transfer of the  management of the Company to BPI, the Company
paid a $20,000  management fee  ("Management  Fee") to Robert  Watson,  Inc. The
Receivable was repaid in May 1997 by offsetting the Management Fee.

The  Company  intends  to  acquire  all of the  outstanding  shares of BPI,  the
majority  shareholder  of the  Company,  in a  share  exchange.  Ray D.  Reaves,
Director,  President,  Chairman,  Chief  Executive  Officer and Chief  Financial
Officer of the Company,  is Chairman,  Chief Executive Officer,  Chief Financial
Officer,  and Director of BPI and owns  approximately 60% of the common stock of
Bass Petroleum,  Inc. Such acquisition is subject to any required  approvals for
the  shareholders and Board of Directors of the Company and BPI. There can be no
assurance that such acquisition will be successful.


<PAGE>

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Financial  Statements  of the  Company  as set forth  under  Item 7 of this
Report on Form 10-KSB.


<PAGE>



                                   SIGNATURES

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

                            ENERGY PRODUCTION COMPANY
                                  (Registrant)

         By:      /s/  Ray Reaves
                  --------------------------
                  Ray Reaves, President

         Date:    October 16, 1997

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

         By:     /s/  Ray Reaves
                 ---------------------------
                 Ray Reaves, President, Chief Executive Officer, Chairman,
                 Chief Financial Officer

         Date:   October 16, 1997

                  SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
                 REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
                      EXCHANGE ACT BY NON-REPORTING ISSUERS

No annual  report or proxy  material  has been sent to security  holders.  Proxy
material,  which is to be furnished to security holders subsequent to the filing
of the annual report on this form,  shall be furnished to the Commission when it
is sent to security holders.

<PAGE>
                          INDEPENDENT AUDITOR'S REPORT



The Board of Directors
Energy Production Company

We have audited the accompanying  balance sheets of Energy Production Company as
of December 31, 1996,  1995 and 1994 and the related  statements of  operations,
changes in stockholders' equity and cash flows for each of the years then ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on the financial statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Energy Production Company as of
December 31, 1996,  1995 and 1994 and the results of its operations and its cash
flows for each of the years then ended,  in conformity  with generally  accepted
accounting principles






HEIN + ASSOCIATES LLP

Dallas, Texas
July 1, 1997, except Note 4 which
   is dated October 10, 1997

                                       F-1

<PAGE>


                            ENERGY PRODUCTION COMPANY

                          NOTES TO FINANCIAL STATEMENTS

                                 BALANCE SHEETS

                                     ASSETS


<TABLE> 
<S>                                             <C>         <C>                 <C>     
 
                                                             DECEMBER 31,
                                                ------------------------------------
                                                    1996        1995          1994
                                                ----------  ----------     ---------
CURRENT ASSETS:
   Cash                                         $      874  $    1,272    $    1,041
   Receivable from related party - current          20,000        -              - 
                                                ----------  ----------    ----------
           Total current assets                     20,874       1,272         1,041

OIL AND GAS PROPERTIES                                -           -             -

RECEIVABLE FROM RELATED PARTY                         -         20,000        20,000
                                                ----------  ----------    ----------

           Total assets                         $   20,874  $   21,272    $   21,041
                                                ==========  ==========    ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES-
   Accounts payable                             $       65  $       65    $       65
STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value; 75,000,000
    shares authorized, 30,961,778 shares issued
    and outstanding                                309,618     309,618       309,618
  Additional paid-in capital                     1,794,373   1,794,373     1,794,373
  Accumulated deficit                           (2,083,182) (2,082,784)   (2,083,015)
                                               -----------  ----------    ---------- 
    Total stockholders' equity                      20,809      21,207        20,976
                                               -----------  ----------    ---------- 
    Total liabilities and stockholders' equity  $   20,874  $   21,272    $   21,041
                                               ===========  ===========  ===========
</TABLE>











              See accompanying notes to these financial statements.


                                       F-2

<PAGE>


                            ENERGY PRODUCTION COMPANY

                          NOTES TO FINANCIAL STATEMENTS
                            ENERGY PRODUCTION COMPANY

                            STATEMENTS OF OPERATIONS


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



                                                    YEARS ENDED DECEMBER 31,

                                             1996            1995           1994
                                         ------------    ------------   ------------
INTEREST INCOME                          $      2,000    $      2,000   $      2,000
GENERAL AND ADMINISTRATIVE EXPENSES             2,398           1,769          3,184
                                         ------------    ------------   ------------
NET INCOME (LOSS)                                (398)            231         (1,184)
                                         ============    ============   ============
NET LOSS PER SHARE                                  *               *              *
                                         ============    ============   ============
WEIGHTED AVERAGE NUMBER OF
   COMMON SHARES OUTSTANDING               30,961,778      30,961,778     30,961,778
                                         ============    ============   ============

</TABLE>

       * Less than $.01 per share





              See accompanying notes to these financial statements.


                                 

                                       F-3

<PAGE>


                            ENERGY PRODUCTION COMPANY

                          NOTES TO FINANCIAL STATEMENTS
                            ENERGY PRODUCTION COMPANY

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

          FOR THE PERIOD FROM JANUARY 1, 1994 THROUGH DECEMBER 31, 1996

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

                                                                   Additional
                                               Common Stock         Paid-in     Accumulated
                                         Shares        Amount       Capital       Deficit         Total
                                     -----------   -----------   -----------   -----------    ----------- 

Balance, January 1, 1994              30,961,778   $   309,618   $ 1,794,373   $(2,081,831)   $    22,160

Net loss                                    --            --            --          (1,184)        (1,184)
                                     -----------   -----------   -----------   -----------    -----------

Balance, December 31, 1994            30,961,778       309,618     1,794,373    (2,083,015)        20,976

Net income                                  --            --            --             231            231
                                     -----------   -----------   -----------   -----------    -----------

Balance, December 31, 1995            30,961,778       309,618     1,794,373    (2,082,784)        21,207

Net loss                                    --            --            --            (398)          (398)
                                     -----------   -----------   -----------   -----------    -----------

Balance, December 31, 1996            30,961,778   $   309,618   $ 1,794,373   $(2,083,182)   $    20,809
                                     ===========   ===========   ===========   ===========    ===========

</TABLE>











              See accompanying notes to these financial statements.


                                       F-4

                                     <PAGE>


                            ENERGY PRODUCTION COMPANY

                          NOTES TO FINANCIAL STATEMENTS
                            ENERGY PRODUCTION COMPANY

                            STATEMENTS OF CASH FLOWS



                                                     YEARS ENDED DECEMBER 31,
                                                  -----------------------------
                                                    1996       1995      1994
                                                  -------    -------   -------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                              $  (398)   $   231   $(1,184)
                                                  -------    -------   -------

NET CHANGE IN CASH                                   (398)       231    (1,184)

CASH AT BEGINNING OF YEAR                           1,272      1,041     2,225
                                                  -------    -------   -------

CASH AT END OF YEAR                               $   874    $ 1,272   $ 1,041
                                                  =======    =======   =======




                               
              See accompanying notes to these financial statements.


                                       F-5

<PAGE>


                            ENERGY PRODUCTION COMPANY

                          NOTES TO FINANCIAL STATEMENTS




1. NATURE OF OPERATIONS

       Energy Production Company (the "Company") was incorporated under the laws
       of the State of  Colorado  on March 11,  1980 and  completed  an  initial
       public  offering in  November  1980.  From 1980 to 1986,  the Company was
       engaged in the  acquisition,  operation  and  development  of oil and gas
       properties.  In December  1986, the Company began to divest its remaining
       oil and gas assets and operations and has been relatively  inactive since
       that time.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)  Income Taxes
              ------------
              Income  taxes are  provided  for the tax  effects of  transactions
              reported  in  the  financial   statements  and  consist  of  taxes
              currently due plus deferred taxes related primarily to differences
              between the financial and income tax reporting bases of assets and
              liabilities.  Deferred tax assets and  liabilities  represent  the
              future tax return  consequences of those  differences,  which will
              either be taxable or  deductible  when the assets and  liabilities
              are  recovered or settled.  The Company has no deferred tax assets
              or  liabilities  December  31,  1996,  1995  or  1994,  except  as
              described below.

              The Company had substantial  Federal income tax net operating loss
              carryforwards (NOL) available at December 31, 1996, 1995 and 1994.
              However,  following a change in control of the Company in December
              1986 and again in May 1997,  use of the NOL is  severely  limited.
              The deferred tax asset resulting from the NOL is fully reserved.

         (b)  Statements of Cash Flows
              ------------------------
              For purposes of the statement of cash flows, the Company considers
              cash on deposit and all highly  liquid  investments  with original
              maturities of three months or less to be cash equivalents.

         (c)  Net loss Per Common Share
              -------------------------
              Net  loss  per  common  share  has been  computed  based  upon the
              weighted average number of common shares  outstanding  during each
              year.

         (d)  Use of Estimates
              ----------------
              The   preparation  of  the  Company's   financial   statements  in
              conformity with generally accepted accounting  principles requires
              the Company's  management to make estimates and  assumptions  that
              affect the amounts  reported  in these  financial  statements  and
              accompanying   notes.  Actual  results  could  differ  from  those
              estimates.

3. RELATED PARTY TRANSACTIONS

       As of December 31, 1996, 1995 and 1994, the Company had a receivable from
       the  controlling  shareholder  in the amount of $20,000.  This  unsecured
       receivable bore interest at 10% and was due on demand. The receivable was
       repaid in May 1997 by offsetting a management fee as described in Note 4.



              See accompanying notes to these financial statements.


                                       F-6

<PAGE>


                            ENERGY PRODUCTION COMPANY

                          NOTES TO FINANCIAL STATEMENTS



       The  Company  entered  into  an  annual  management  agreement  with  its
       controlling shareholder in 1987 and renewed the agreement each year until
       December  1996.  The  agreement  called  for an amount  reached by mutual
       agreement of the Company and the  shareholder  to be paid each year.  The
       Company  paid  management  fees of $0, $0 and $1,500 for the years  ended
       December 31, 1996, 1995 and 1994, respectively.

4. SUBSEQUENT EVENTS

       In May 1997,  the Company's  controlling  shareholder  sold his shares to
       Bass Petroleum,  Inc. (Bass) and the Company issued  44,038,222 shares of
       its  common  stock  to Bass in  exchange  for two oil and gas  properties
       valued  at a total  of  $40,000,  and  $5,000  in  cash.  The oil and gas
       properties  were valued by management  based upon an independent  reserve
       report.

       In connection  with the  successful  transfer of management to Bass,  the
       Company paid a $20,000 management fee to the old controlling shareholder.
       In October 1997, the Company  rescinded the sale of 44,038,222  shares of
       its common  stock to Bass.  The shares were  returned to the Company from
       Bass in exchange for the return of the purchase price.










              See accompanying notes to these financial statements.


                                       F-7

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