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

                               FORM 10-KSB

              Annual Report Under Section 13 of 15(d) of the
                     Securities Exchange Act of 1934

               For the fiscal year ended December 31, 2002

                     Commission file Number: 0-24259

                  AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.


   British Columbia, Canada                                  75-2712845
  (State or other Jurisdiction of                         (IRS Employer
  Incorporation or Organization)                        Identification No.)

                              P.O. Box 1629
                              1301 Avenue M
                            Cisco, Texas 76437
                 (Address of Principal Executive Offices)

                              (254) 442-2638
             (Issuer's Telephone Number, including Area Code)

       Securities registered pursuant to Section 12(b) of the Act:

                                   None

       Securities registered pursuant to Section 12 (g) of the Act:

                        Common Stock, no par value

The registrant (1) has filed all reports required to be filed by section
13 or 15 (d) of the Securities Exchange Act during the preceding 12
months, and (2) has been subject to such filing requirements for the past
90 days.  Yes  [ X]   No [  ]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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]

State issuer's revenues for its most recent fiscal year:  $6,807

State the aggregate market value of the voting stock held by non-
affiliates of the Registrant:  As of April 14, 2003 the Company's stock
price was $0.30 bid and $2.00 ask per share.

          Common stock 1,788,500 shares, $3,577,000 market value

On December 31, 2002 the Issuer had 6,391,742 shares of Common Stock
outstanding with no par value. OTC Bulletin Board Symbol:  AUCAF.


                                    1

                                  PART I

ITEM 1.  DESCRIPTION OF BUSINESS

(a)  Business Development

Australian-Canadian Oil Royalties Ltd. ("ACOR" or "the Company") was
incorporated in British Columbia, Canada, in April of 1997.  The Company's
U.S. office is located at 1301 Avenue M., Cisco, Texas 76437.

The business of ACOR during 2002 was to make a study of available oil and
gas development acreage in Australia and select and apply for the
exploration permits on the areas which indicate a high probability of
success with the maximum rate of return for dollars invested.

The Company was organized to engage in the oil/gas business and to
purchase, hold and sell producing and non-producing oil and gas royalty
interests in Australia, Canada and the United States.  Since its
organization, ACOR has acquired overriding royalty interests (ORRIs) under
twelve concessions covering 10,942,200 gross surface acres in Australia.
Production has been discovered on five of the properties where ACOR holds
ORRIs.  The Company is currently receiving revenues from two of the ORRIs,
Authorities to Prospect 299 and 267.  Total gross revenues received from
ATP 299 and ATP 267 for the year 2002 were $6,807.

The Company plans to further develop its business by forming consortiums
of oil and gas entities with the necessary financial strength to apply for
Australian oil and gas concessions, which involve certain financial
requirements for exploration and drilling activities.

On March 27, 2001, the Company purchased a 0.05% overriding royalty
interest under VIC/P45 (formerly V99-2), consisting of 214,000 acres.  BHP
Billiton Ltd., Australia's largest public company, is conducting the
exploration.  BHP Billiton Ltd. owns one-half (1/2) interest under the
Kingfish Field on the adjoining block, with Exxon owning the other one-
half (1/2) working interest.

The VIC/P45 area is offshore in the most prolific oil-producing basin in
Australia, approximately 1.5 miles east of the Kingfish Oil Field in the
southern Gippsland Basin in the Bass Straits.  The Kingfish Oil Field, the
largest oil field in Australia, has produced more than one billion barrels
of oil since its discovery.  There are currently 23 producing wells and 41
total wells were drilled in this field.  Present cumulative production
figures are approximately 26,000,000 barrels per well drilled.  The
permeabilities in the pay section range between 5,000 millidarcies and
40,000 millidarcies, which is extremely high.

The production from the Kingfish Oil Field amounts to approximately
$US675,366,000 gross return per well drilled, at a crude price of $26 per
barrel.  The cost of drilling a Kingfish well is approximately
$US5,500,000, therefore the production is approximately 123 times the
drilling and completion costs. During flush production, the wells were
making 6,400 barrels of oil per day.

On present mapping, there are 14 structures on VIC/P45, which includes one
oil and gas field with 11 pays with a total of over 1,000 feet of pay
section, and a second with one gas pay section.  Development wells will
need to be drilled to bring these fields into production.

                                    2

Quoting from VIMP Report 61, published by the Victorian Government:

   "The Kingfish Southeast Prospect is the largest structural play in
   V99-2.  It has a four-way dip (fault, independent closure) mapped at
   several intra-Latrobe horizons and at the top of the Golden Beach
   Subgroup.  This play is estimated to contain 117 million barrels of
   recoverable oil.

   The Archer/Anemone/Anemone Southeast areas could be developed together.
   Total developable reserves are potentially 35.5 million barrels of oil
   and 117 billion cubic feet of gas."

The Breem, Kingfish and Kingfish Southeast Structures are in the same
primary trend.  The fault structure, through the middle of the Kingfish
Field, extends into the Kingfish Southeast Structure on VIC/P45. Drilling
wells on both the Kingfish Southeast Anticline and the Anemone Southeast
Structure is included in the first three years work program, as well as
other drilling.

ACOR holds an overriding royalty under the 214,000 acre VIC/P45.  Permit
VIC/P45 is scheduled for drilling by BHP Billiton Ltd. at the end of June
2003.  The prospect to be drilled, the Archer Prospect, has four oil pays
and seven gas pays, with an estimated 1,000 feet of total pay section.  If
successful, this equates to an estimated 40,000,000 barrels of oil and
66.9 billion cubic feet of gas.  This is the first of fourteen structures
on the area.  The Archer is located in 510 feet of water, and will be
drilled by a semi- sub drilling platform.  BHP Billiton Ltd.  Is conducted
a 3D seismic over the entire area of VIC/P45, starting with the Archer.
This is a multimillion dollar 3D seismic survey.

BHP Billiton Ltd. was supposed to drill the Archer in 2002, however,
during their application for the drilling permit, it was determined that
it would be necessary to change the shipping lanes in the area as the
lanes ran through the drilling site.

On December 9, 2002, the Company entered into an agreement with
International Oil Lease Service Corp. to purchase an overriding royalty of
1/20th of 1% of 8/8ths in VIC/P53.  This concession covers 185,000 acres
and is situated in the Bass Strait of Australia and is totally surrounded
by huge offshore oil and gas fields that have produced in excess of 2.8
billion barrels of oil and 5 trillion cubic feet of gas to date.  (See
Item 2 "Description of Property" for additional information.)

ACOR also owns 8,300,348 net 100% working interest acres in the Cooper-
Eromanga oil producing basin, Australia's main onshore oil and gas
producing basin.  The Company also holds 457,354 net royalty acres under
10,942,200 gross surface acres.  These holdings are all located within the
states of Queensland and South Australia.  ACOR has identified several
leads and prospects to drill on the 8,399,348 acres with very large
anticlines and seismic highs.

On one of these areas, CO-2000A, ACOR's technical staff has identified a
huge anticline consisting of more than 122,000 acres with approximately
500 feet of maximum closure.

During the fiscal year ended December 31, 2002, the Company made a
significant change in its operations by including domestic oil and gas

                                    3

exploration in its business plan.  The Company entered into an operating
agreement with Resource and Energy Technologies Company for the drilling
and development of oil and gas in the Park City Field Prospect in Edmonson
County, Kentucky.  This field is located in the Highland Rim Physiographic
Province that extends over portions of central Kentucky and middle
Tennessee.  The Company participates in the program with 1/8th of the
working interest.  Through March 2003, 25 wells have been drilled and
completed as gas wells that are awaiting further testing and pipeline
connection (14 of these wells were drilled in 2002).  The Company's
President, Ely Sakhai also participates with a 1/8 working interest in
this prospect.  (See Item 12 "Certain Relationships and Related
Transactions" and Item 2 "Description of Property" for additional
information.)

Since its organization in 1997, the Company has not been involved in any
bankruptcy, receivership, or similar proceeding and has undergone no
material reclassification, merger, or consolidation.

(b) Business of Issuer

As a purchaser and holder of overriding royalty interests, ACOR's business
is related to the principal products of oil and gas, and is dependent on
various factors, which are discussed following.  The average sales price
per barrel of oil from Australia during 2002 was $US 23.85.

The acquisition, exploration, development, production and sale of oil and
gas are subject to many factors that are outside the Company's control.
These factors include: market prices; national and international economic
conditions; import and export quotas; availability of drilling rigs,
casing, pipe, and other equipment and supplies; availability of and
proximity to pipelines and other transportation facilities; the supply and
price of competitive fuels; and the regulation of prices, production,
transportation, and marketing by domestic and foreign governmental
authorities.  Additionally, the Company generally has no control over
whether the owner or operator of leases to which its overriding royalty
interests are attributable will elect to explore for oil and gas on such
properties, or to develop them following discoveries that may occur.  Each
of these factors may affect the rate at which oil and gas are produced on
properties in which the Company has an interest or affect whether wells
will be drilled on such properties, and could otherwise materially affect
ACOR's earnings.

Competition and Markets

The Company is competing with other oil companies for oil and gas permits.
The oil and gas industry is highly competitive in all of its phases, with
competition for favorable producing royalties, overriding royalties, and
good oil and gas leases being particularly intense.  The Company believes
that the exploration program, promised expenditures, geological and
geophysical skill, and familiarity with an area of operations are the
primary competitive factors in the identification, selection, and
acquisition of desirable leases.  When attempting to purchase interests in
such properties, the Company competes with independent operators and major
oil companies.


                                    4

Foreign Taxes and United States Tax Credits

As a result of its overriding royalty interests attributable to properties
outside the United States, the Company is subject to the imposition of
taxes by foreign governments on the Company's income derived from such
foreign jurisdictions.  These taxes are of various types, with differing
tax rates, and are subject to change.  Generally, the Company's income
from a foreign jurisdiction will be taxed in the same manner as that for
other companies operating in the jurisdiction, but discriminatory taxation
by a particular jurisdiction may occur.  The current non-resident
corporate income tax rate in Australia, for overriding royalty interests,
is 30%.

As a Canadian corporation, the Company is liable for income taxes under
the laws of Canada.  Under Canadian law the Company's Australian-source
income is subject to a 46% tax.  We believe the 30% Australian tax should
be a credit toward the payment of the 46% Canadian tax under double
taxation treaties between the countries.

The Company is taxable in the U.S. on U.S. source income.  Because there
has been neither U.S. source net income nor any income effectively
connected with a U.S. trade or business, there have been no U.S. taxes
incurred to date.

Governmental Regulation

Oil and gas operations are subject to federal, state and local laws and
regulations governing waste, environmental quality, pollution control,
conservation and other measures regarding environmental and ecological
matters.  It is impossible to predict the impact of environmental
legislation and regulations on the Company's operations and earnings in
the future.

Native title claims over oil and gas areas by native aboriginal groups
have become commonplace in Australia since the mid-1990's.  Native title
is the activity of aboriginal groups' land claims over existing and
potential oil and gas exploration and development areas.  Although native
Australians are claiming certain areas, they have not, as yet, proven
actual ownership.  However, any recognized native title claim must be
dealt with under the provisions of the Native Title Act of 1993, and
overseen by the state governments, which manage specific areas within
state boundaries.  Due to native title claims, a certain level of risk can
be expected which could have a detrimental effect on the timing of
projects.  Certain concessions awarded to the Company and its consortium
have been delayed due to these native title considerations as discussed
below.

Both the South Australian and Queensland State governments have initiated
negotiations between industry and native title claimants.  These
negotiations are being managed independently by each state and could have
independent outcomes.  The Company has involvement in these negotiations.

The Company's operations could also be affected from time to time by other
federal, state and local laws and regulations and by political
developments, such as the Native Title issue in onshore Australia.  The
domestic production and sale of oil and gas are subject to federal
regulation by the Department of Energy and the Federal Energy Regulation
Commission.  Rates of production of oil and gas have for many years been

                                    5

subject to federal and state conservation laws and regulations.  In
addition, oil and gas operations are subject to extensive federal and
state regulations concerning exploration, development, production,
transportation, and pricing, and even to interruption or termination by
governmental authorities.

In foreign countries, the Company may be subject to governmental
restrictions on production, pricing and export controls.  Regulations
existing or imposed upon the Company or its properties at the time of
their acquisition may change to an unpredictable extent.  The Company will
have little or no control over the change of regulations or imposition of
new regulations and restrictions, expropriation or nationalization by
foreign governments or the imposition of additional foreign taxes.
Management believes that these actions are unlikely to be undertaken by
the state governments of South Australia or Queensland, where all of the
foreign oil and gas properties from which the Company receives royalty
income are currently located.  The same applies for the government of
Victoria, since ACOR has acquired an overriding royalty under VIC/P45.

Native Title

As discussed above, native title considerations can delay and interfere
with concession holders access to and/or initiation of exploration on
approved concessions.  In South Australia, the development of areas
CO-2000A, CO-2000B, CO-2000E have been delayed.  In Queensland, ATP 582
has also been delayed.

South Australia

The Company received notice subsequent to the end of the 2002 fiscal year
that Native Title negotiations have been completed on the South Australian
areas and exploration can now commence.

The Native Title issue in South Australia has been resolved during the
first quarter of 2003.  The successful negotiation, between Industry,
Government, and a number of native tribes of Australia, covered areas
leased under the Primary Industries and Resources, South Australia (PIRSA)
Cooper-Eromanga Basins Exploration Opportunities Acreage Release 1998,
(also know as the "CO-98" Release").  The success of these negotiations
allows exploration work to start in South Australia.

Queensland

In Queensland the Company is still paying annual rentals but access for
exploration is blocked until successful Native Title negotiations are
completed.  It is not clear at the time of this report how long the
negotiations will take to settle with the local Natives on ATP 582.

While title to permits is assured, there can be no exploration on the
permit areas until native negotiations are completed.  As negotiations
over the release areas are completed, exploration and development on the
related areas will commence.

Foreign Currency

Due to the nature of the Company's activities in Australia, portions of
the Company's operating capital may at times be held in various foreign

                                    6

currencies.  This subjects the Company to the risk of currency
fluctuations and changes in rates of conversion for different currencies.
The Company does not engage or expect to engage in any hedging or other
transactions, which are intended to manage risks relating to foreign
currency fluctuations.  Additionally, revenues generated in foreign
countries in which the Company has or may acquire interests may be subject
to governmental regulations, which restrict the free convertibility of
such funds, and all remittances of funds out of these countries might
require the approval of the applicable government's exchange control
agency.  Presently, the Company experiences no difficulties with the free
convertibility of funds from Australia.  In the Company's opinion, the
foreign exchange control laws currently in effect in Australia, do not
unreasonably delay the remittance of funds generated in Australia to the
United States.  The exchange rate on April 10, 2003 was $1.00 Australian =
$0.59 United States.

Personnel

The Company employs two people who serve the Company as needed on a part-
time basis, and an outside consultant.  The Company expects an increase in
personnel now that it is conducting an exploration program on 7,565,674
gross surface acres and also when Native Title is cleared up on our
overriding royalty interests.

Definitions

The following definitions are provided to clarify certain terms used in
this report:

  Application Area - An area for which the Company has applied for the
  grant of an Exploration Permit.

  Authority to Prospect ("ATP") - a concession granted by the State of
  Queensland, Australia, which entitles its holders to an exclusive right
  to explore for oil and natural gas in Queensland in the particular area
  covered by the ATP.  Each ATP has an initial term of four years.  The
  area covered by an ATP is reduced by relinquishment of approximately
  one-fourth of the area at the start of the third year of its
  effectiveness and an additional one-fourth of the original area at the
  start of the fourth year of its effectiveness.  The area to be
  relinquished is chosen by the holder of the ATP.  An ATP will require
  some kind of geological and/or geophysical operations, such as new
  seismic or seismic interpretation, drilling or other operations during
  the term of the tenure.  The amount of work to be performed depends upon
  the expenditures required for each specific year of the tenure.  Holders
  are only required to expend those amounts as set out in the original
  concession document.  Applications for renewal may be filed at the time
  of expiration of an ATP.

  Developmental Wells - oil and gas wells drilled within the proven area
  of an oil or gas reservoir to the depth of a stratigraphic horizon known
  to be productive.

  Dry Hole - a well found to be incapable of producing oil or gas in
  sufficient quantities to justify completion.



                                    7

  Exploration Permit - an exclusive offshore exploration permit with a
  term of six years.  Said permit is managed by the Victorian State
  Government.

  Exploratory Well - a well drilled to find and produce oil and gas in an
  unproved area or to find a new reservoir in a field previously found to
  be productive of oil or gas in another reservoir.

  Gross Production - the total production of oil, gas, or natural gas
  liquids from a property or group of properties for any specified period
  of time.

  MCF - thousand cubic feet of natural gas

  MMCF - million cubic feet of natural gas

  Net Royalty Acre - generally, a measurement of royalty or overriding
  royalty and the equivalent of the full customary one-eighth royalty of
  the gross production of revenue free and clear of exploration, drilling
  and production costs from one acre of land.  The number of net royalty
  acres used in this report applies to figures as of January 14, 2003 and
  the number will change as relinquishments take place on the ATPs, as an
  ATP expires or is canceled, or as any new areas are added.

  Overriding Royalty Interest ("ORRI") - an interest assigned out of the
  lessee's leasehold or working interest.  The amounts payable from ORRIs
  are payments calculated as a percentage of either gross production or
  the gross revenues of the working interest (based on the wellhead price)
  from a concession or lease, usually free and clear of all exploration,
  drilling and development and production costs, except for any applicable
  taxes and federal levies.  In calculating the wellhead price, pipeline
  and trucking costs have already been deducted from the refinery price.
  The overriding royalties discussed herein are generally expressed as a
  percent of the gross production.

  Petroleum Exploration License ("PEL") - an exclusive oil and gas
  exploration permit issued by the South Australian Department of Primary
  Industries and Resources.  The initial term of the tenure is for a five
  (5) year period.

  Producing Wells - wells capable of producing oil or gas in commercial
  quantities, including those wells capable of producing in commercial
  quantities that are shut in, or wells which are not currently producing
  in commercial quantities but have been commercially productive in the
  past.

  Royalty - generally, a share of the production reserved by the grantor
  of an oil or gas lease or concession. The royalty interest is
  customarily free of cost or expense incident to exploration, development
  or production, except for production or gathering taxes.

  Working Interest ("WI") - all or a fractional part of the ownership
  rights granted by a concession or lease. The owner of a WI or a part
  thereof pays all costs of exploration and is entitled to the gross
  production, less royalties retained by the grantor or lessor, and less
  ORRIs or other non-operating interests created and assigned from the WI.
  The owner of a WI may incur operating expenses in excess of income.

                                    8

  Petroleum Resource Rent Tax - a tax on net income in Australia reduced
  by indexing on offshore production, which replaces the onshore 10%
  royalty and is a deduction from Australian income tax.


ITEM 2.  DESCRIPTION OF PROPERTY

The following table shows working interests holdings for the year ended
December 31, 2002.

     Concession           Number          % Working         Net
         #               of Acres         Interest       WI Acres
     ----------          --------         --------     -----------
      CO-2000A            506,811           50%          253,405.5
      CO-2000B            373,633           50%          186,816.5
      CO-2000E            818,904           50%          409,452.0
      ATP 582           6,716,000          100%        6,716,000.0

The following table sets forth the ATP number of each Australian
concession in which the Company had an ORRI as of January 14, 2003 (date
of the title searches on most of the properties), and upon which
productive wells had been drilled, the percentage interest of the Company
therein, the number of such wells, the gross acreage of each concession,
and the net royalty acres held in each concession.

                                                   Percentage
                                                    of 1% of    Net
  Area and                                Gross      Gross    Royalty
No. Of Wells       Concession Holder       Acres   Production  Acres   Blocks
-------------   ----------------------- ---------  ----------  ------- ------
267--21 wells   Santos Producing Block    367,800    17.15%     5,046     20
299--65 wells   Santos Producing Block    441,600     5.75%     2,031     24
543--1 well     Vernon E. Faulconer
                  Australia, Inc.       1,232,800    25.00%    24,656     67
560--3 wells    First Sourcenergy
                  Group Inc.              625,600    25.00%    12,512     34
Patchawarra SW  Santos Producing Block     18,400     6.25%        92      1

The following table sets forth the undeveloped acreage in which the
Company had an ORRI in Australia as of January 14, 2003, the date of the
title searches on the Queensland properties.

                                              Percentage
                                               of 1% of      Net
                                      Gross     Gross      Royalty
 Area     Concession Holder           Acres   Production     Acres   Blocks
-------  ------------------------- ---------- ----------  ---------  ------
  544    Australian Petroleum
           Industries Pty. Ltd.       607,200     8.08%       3,925    33
  550    Discovery Geo (AUSTRALIA)
           Corporation                276,000    25.00%       5,520    15
  554    DyAd Australia, Inc.         110,400    25.00%       2,208     6
  582    Cooper-Eromanga Oil, Inc.  6,716,000    67.10%     360,515   365
  616    East Jackson Oil, Inc.       147,200   333.33%      39,253     8
VIC/P45  BHP Billiton Ltd.            214,000     5.00%         856    11.63
VIC/P53  Australia Crude Oil
           Company                    185,000     5.00%         740    10

                                    9

The estimated number of non-producing wells on the above areas is included
below:

                                   Estimated number of
                Area               non-producing wells
                ----              --------------------
                 267                         5
                 299                         8
                 543                        10
                 560                         8
                 544                         6
                 550                         5
                 554                         2
                 582                         1
                 616                         3
               VIC/P45                       5
               VIC/P53                       5

The total acreage under which ACOR holds overriding royalty interests in
Queensland and South Australia is 455,758 net royalty acres under
10,543,000 gross surface acres.

ACOR holds overriding royalty interests in nine concessions covering
10,543,000 surface acres in the Eromanga and Cooper Basins in Australia.
Production has been discovered on five of the concessions. The Eromanga
Basin encompasses the southwestern portion of the province of Queensland
and the northeast corner of South Australia, and is Australia's main
onshore producing oil and gas basin.  The Cooper Basin is located in the
northeast part of the province of South Australia.  Management believes
ACOR's overrides are in a prime location since the majority of ACOR's
interests form nearly continuous blocks adjoining the producing block of
Santos, et al, which has reserves in excess of 1,056,000,000 barrels of
oil equivalent and is making approximately $A930,000,000 worth of oil, gas
and associated hydrocarbons per year (equivalent to about $550 million in
U. S. dollars).

Under the 10,942,200 surface acres where the Company holds overriding
royalty interests, there are giant anticlines, large faults and hundreds
of seismic highs, all of which indicate possibilities of oil and gas
reserves.  About $27 million worth of seismic information has been
completed and is available on the areas.

ACOR is currently receiving revenues from two of its overriding royalty
interests - ATP 267 and ATP 299. A successful gas well was completed on
ATP 543 in 1996.  After completion of a gas pipeline, gas began to be
marketed in August 1999.  However, economic considerations caused the well
to be shut in during the last quarter of 2001.

New Override Acquisition -- Bass Strait, Australia

In December the Company purchased from International Oil Lease Service
Corp. an overriding royalty of 1/20th of 1% of 8/8ths in VIC/P53 for
407,000 restricted shares of its common stock.  This concession covers
185,000 acres and is situated in the Bass Strait of Australia and is
totally surrounded by huge offshore oil and gas fields that have produced
in excess of 2.8 billion barrels of oil and 5 trillion cubic feet of gas
to date.  This concession has seven structures with estimated reserves of

                                    10

167,000,000 as reported by The Australian government publication
"Victorian Initiative for Mineral and Petroleum (VIMP) Report 67".  These
estimated reserves are allocated as follows:

          Structure Name          Estimated Barrels
          --------------          -----------------
            Knifejaw                 50,000,000
            Catfish                  49,000,000
            Hake                     35,000,000
            Spineback                33,000,000

Robert Kamon, Secretary of the Company is also president of International
Oil Lease Service Corp.  (See Item 12 "Certain Relationships and Related
Transactions" for additional information.)

New Application -- Bass Strait, Australia

The Company filed an application with a strong consortium for area VO2-2,
covering 155,000 acres, located in the Bass Straits of Australia on
October 24, 2002.  The consortium consists of two oil companies and two
individuals who are active in the oil business.  The following shows the
consortium members and their ownership in the application:

     Australian-Canadian Oil Royalties Ltd.       25%
     Australia Crude Oil Company, Inc.            25%
     Ely Sakhai, Individually                     25%
     Oliver C. McBryde, Jr. Individually          25%

The importance of this application is its location among the major oil and
gas fields in the Bass Strait.  The area, VO2-2 is four miles north of the
Marlin Gas Field that has producing approximately 2.4 trillion cubic feet
of gas in cumulative production to date, averaging 126 billion cubic feet
of gas per well.  The next field to the south is the Halibut Oil Field
which has made 60,000,000 barrels per well and further to the south is the
Kingfish Field which has produced 1.1 billion barrels from 41 wells.

The consortium is confident that the work program, as matched with the
experience of the consortium, is very competitive.  Included in the
consortium is Texas Crude Oil Company, Inc., the parent company of
Australia Crude Oil Company, Inc., which brings experience with its
extensive oil operations, both domestically and internationally including
offshore operations.  Oliver C. McBryde, Jr. is a Petroleum Engineer with
offshore experience that complements the consortium.  The Company's
President, Ely Sakhai is a successful businessman with a strong financial
net worth to assist in the financial strength of the consortium, both for
himself and the Company.

The first year's work program, if the consortium is selected as the
successful applicant, is within the Company's capability.  The second year
will require the Company to raise working capital through some type of
equity financing.  Concession VO1-4 in the Bass Strait was issued to
Australia Crude Oil Company, Inc. (owned by Texas Crude).  Australia Crude
Oil Company, Inc. is participating in the consortium in this new
application for VO2-2.  The Company believes the consortium for this new
application is strong in that it has members of the team that have
offshore experience.


                                    11

The Company plans to continue to acquire oil and gas exploration
properties both domestically and internationally plus make trades and
deals for their exploration and development, as well as actively conduct
exploration.  When necessary to meet financial requirements, the Company
will apply for oil and gas properties in conjunction with the Company's
President, Ely Sakhai, due to his substantial financial position.

Domestic -- Kentucky Park City Gas Field

During the year the Company entered into an operating agreement to develop
the Park City Gas Prospect in Kentucky.  The Company's ownership is a
12.5% working interest in the drilling and development of this area.  As
of December 31, 2002, 14 wells have been drilled and completed with an
additional 11 wells drilled subsequent to the year-end.  The development
plan calls for a total of 50 wells to be drilled on this prospect.

The following is a list of the wells drilled and completed awaiting
further testing and pipeline connection as of December 31, 2002.

          Lease Name        Wells # Drilled and Completed on Lease
        ---------------     --------------------------------------
        Alton Parsley            #1, #2, #3, #4 and # 5
        Edward Parsley           #1, #2, #3, #4, #5, #6 and #7
        Jackie McComb            #2
        Tarter                   #1

Subsequent to year-end the following wells were drilled to further develop
the Park City Gas Field.

          Lease Name        Wells # Drilled and Completed on Lease
        ---------------     --------------------------------------
         Alton Parsley                 #6 and #7
         Honeycutt                     #1
         Houchin                       #1
         Houchin Honeycutt             #1
         Tarter                        #2
         Jackie McComb                 #3
         Mollie Kersey                 #1
         Edna Sanders                  #1
         Harvey Davis                  #1
         Earl Dean Parsons             #1

The Park City Gas Field is located in Edmonson County, Kentucky, which is
geographically located in the Highland Rim Physiographic Province, a
geological feature which extends over portions of central Kentucky and
middle Tennessee.  Well records indicate that the primary oil and gas
formations in the Park City area are in the Fort Payne, Sellersburg, Dutch
Creek and Clear Creek formations.

Of the twenty-five wells drilled in the Park City Gas Field, all have been
logged and completed as gas wells.  Only one of these wells has been
acidized and tested.  However the remaining wells each flowed gas.  The
Jackie McComb #3 penetrated 2 feet into the Fort Payne formation and
encountered high gas pressure.  This well was tested by Swager Engineering
and indicated an initial potential of 985 MCF per day with flowing
wellhead pressure of 100 psi.


                                    12

Gas analysis has been completed on about half the wells.  The results show
relatively good, clean gas except for the presence of nitrogen.  There is
no sulfur.  The gas in these wells averages 16.5% nitrogen.  The pipeline
companies require that the nitrogen level in the gas must be reduced down
to less than 4.5%, depending on the pipeline company, before it may be
injected into the commercial pipeline system.

The gas from each well will need to be tested for composition, flow rates,
and reserves and analyzed by an independent testing laboratory.  Most of
this testing has been completed on about half of the wells. However, tests
of long-term flow rates still need to be performed.

Of the 25 already drilled wells, only one has been treated with a light
acid treatment.  This particular well showed a 17 fold increase in flow
rates after treatment indicating the need to stimulate the remaining wells
with acid.

A feasibility and cost study must be conducted by a pipeline company in
order to interconnect with a commercial pipeline.  The closest and least
expensive route to connect to the nearest pipeline is from the southern
most edge of the Edward Parsley farm directly south to the Texas Gas
Pipeline, a distance of 1.2 miles.  Negotiations are in progress,
subsequent to year end, with one or more pipeline gathering companies to
conduct their due diligence for the installation of a gathering system to
the leases on which we have established gas production capability.

Twenty-five additional wells are planned to further develop the Park City
Gas Field.  No gas sales have been made during 2002 and it is not certain
when gas sales will begin.  The Park City Gas Field was discovered in 2002
with indications of significant potential for gas production.  However,
more production testing and a gathering system needs to be in place before
initiation of gas sales.  The timing of both of these activities is not
certain at the present time.  As a result, no definitive tests of
pressures and gas flow have been undertaken to establish a basis for
reasonable estimates of future cash flows and revenues.

The Company participates in the drilling and development of the Park City
Gas Field through the issuance of its common restricted stock.  Shares are
issued based on $1.00 per share.  During the year the Company issued
250,000 shares of its restricted common stock for the acquisition of its
12.5% working interest in the Park City Gas Field and issued 78,696 shares
for its portion of the drilling and completion incurred following the
acquisition.

Plans for the next 12 months on overriding royalties in Queensland, South
Australia, and Victoria are at the discretion of the working interest
holders.  All exploration costs on overriding royalties are borne by the
working interest holders.  The Company is responsible for one-half (1/2)
of the exploration program costs on working interest holdings under its
CO-2000 concessions.  The Company's portion of the minimum exploration
commitments under CO-2000A, CO-2000B and CO-2000C total $145,000 in year
1, $275,000 in year 2 and $1,450,000 in year 3.  The Company is
responsible for 100% of the exploration and drilling costs on ATP 582.





                                    13

ITEM 3.  LEGAL PROCEEDINGS

The Company was not a party to any legal proceedings as of December 31,
2002.  However, the Company plans to work with legal counsel in Australia
to undertake necessary litigation to perfect its title in an overriding
royalty interest in the Patchawarra Southwest Block of PEL 5 and PEL 6.
The overriding royalty interest was created in June 1971 and, since that
time, has been assigned to six different companies with the last assignee
being ACOR.  The Company has determined that due to the extensive time
elapsing between assignments and the failure of some intermediate
assignees to properly assign title, it will be necessary to engage in
litigation in order to collect past and future royalty payments.  ACOR's
part of the expected cost of the barrister's fees will be approximately
$15,750 plus any stamp duty, which may be required, or other potential
fees.


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

     Not Applicable



                            PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

  (a)     Market Information

The Company is listed on the OTC Bulletin Board.  The symbol is:  AUCAF.
There are currently 6,508,470 common shares issued and outstanding.  The
market price on April 14, 2003 was $0.30 bid and $2.00 ask (US) per share.

  (b)     Holders

There were approximately 307 securities holders of record of the Company's
shares on April 14, 2003.

  (c)     Dividends

The Company does not anticipate the payment of cash dividends in the
foreseeable future.  Payment of cash dividends is within the discretion of
the Company's Board of Directors and will depend on, among other factors,
earnings, capital requirements and the operating and financial condition
of the Company.


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

During October 2002, the Company participated in a joint application for
an offshore area in the Bass Strait of Australia, offshore Victoria.  The
Company is taking a one-quarter (25%) interest in this application. Ely
Sakhai, President of ACOR, is taking one-quarter (25%) and non-related
entities are taking the remaining one-half (50%) interest in the
application.  International Oil Lease Service Corporation (IOLS) will be
acting as the leasing agent for this application.  Robert Kamon, Secretary
of ACOR, is President of IOLS, and has leased a number of successful areas

                                    14

for ACOR.  If the application is successful, the Company's portion of the
leasing fees will be $13,750 plus one-half of one percent (1/2 of 1%)
overriding royalty.  If the application is unsuccessful, the Company's
fees will be $7,500 for non- refundable application fees to governments
and for data acquisition.

This area is approximately 155,000 acres and is surrounded by major oil
and gas producing fields.  Four miles north is the Marlin Gas Field
producing approximately 2.4 trillion cubic feet of gas in cumulative
production to date, averaging 126 billion cubic feet of gas per well.  The
next field to the south is the Halibut Oil Field that has made 60,000,000
barrels of oil per well and further to the south is the Kingfish Field
that has produced 1.1 billion barrels of oil from 41 wells.

The Company is excited about this application because of its proximity to
large oil and gas fields as previously stated.  Additionally, the area
will be relatively easy to explore and develop due to shallow water depths
and close proximity to pipelines.

This represents a major commitment for ACOR, if the application is
successful, and will necessitate the Company raising sizable funds for
exploration and development.

In December 2002 the Company purchased an overriding royalty of 1/20th of
1% of 8/8ths in VIC/P53 from International Oil Lease Service Corp.  This
concession covers 185,000 acres, is also situated in the Bass Strait of
Australia, and is totally surrounded by huge offshore oil and gas fields
that have produced in excess of 2.8 billion barrels of oil and 5 trillion
cubic feet of gas to date.  This concession, VIC/P53 has seven structures
with estimated reserves of 167,000,000 as reported by The Australian
government publication "Victorian Initiative for Mineral and Petroleum
(VIMP) Report 67."  (See Item 2  "Description of Property" for additional
information.)

The Company issued 407,000 restricted shares of its common stock to
International Oil Lease Service Corp. for the 1/20th of 1% of 8/8ths
override.  Robert Kamon, Secretary of the Company is also president of
International Oil Lease Service Corp.  (See Item 12 "Certain Relationships
and Related Transactions" for additional information.)

During the year the Company entered into an operating agreement to develop
the Park City Gas Prospect in Kentucky.  The Company's ownership is 12.5%
working interest in the drilling and development of this Park City area.
As of December 31, 2002, 14 wells have been drilled with an additional 11
wells drilled subsequent to the year-end.  Currently all wells are shut in
awaiting further testing and pipeline connection.  Negotiations are now in
progress (April 2003) with gas gathering companies to conduct feasibility
studies and marketing proposal for the gas discovered.  (See Item 2
"Description of Property" for additional information.)

Liquidity and Capital Resources

The Company's Total Current Assets as of December 31, 2002 was $262,185
compared to $260,202 on December 31, 2001.  Total Current Liabilities as
of December 31, 2002 were $254,887 placing the Company's liquidity ratio
of current assets to current liabilities to 1.03 to 1.00.  Of the
$262,185, $250,000 is a certificate of deposit.  Cash on hand as of

                                    15

December 31, 2002 was $8,622 compared to $7,060 on hand as of December 31,
2001.  The only significant change in current assets and current
liabilities when comparing December 31, 2001 to December 31, 2002 is the
$20,000 in loans due to officers of the Company shown on December 31, 2001
that was paid in 2002 through the issuance of restricted stock. During
2002, $80,000 in additional loans were made from officers of the Company
that were also paid with restricted stock.  A total of 456,546 restricted
common shares were issued to pay off $100,000 in funds borrowed from its
officers, Ely Sakhai, President, and Robert Kamon, Secretary.  (See Notes
6 and 7 for additional information.)

The Company plans to meet its operating expenditures from loans from two
of its principal shareholders, which have loaned to the Company as of
December 31, 2001 $20,000. No loans were outstanding with these principal
shareholders as of December 31, 2002.   The Company did have an increase
in accounts payable from $1,600 in 2001 to $4,887 on December 31, 2002.
This increase is primarily due to a payable for services rendered by a
consultant for $2,900 and outside proxy services provided by ADP.

Total assets of the Company increased from $617,491 on December 31, 2001
to $898,584 on December 31, 2002, an increase of $281,093, representing a
45% increase in assets from 2001 to 2002.  The increase is attributable to
the acquisition of the override in VIC/P53 ($100,000) and the acquisition
of the 12.5% working interest in the Park City Gas Field in Kentucky
($181,093).

Results of Operations

The Company's oil and gas revenues declined from last year by $3,767.  In
2001 the revenues were $10,574 compared to $6,807 in 2002.  The decrease
in revenues is a result of lower oil prices and decline in total barrels
produced.  These revenues came from the Company's overriding royalty
interests in Australia, ATP 267 and ATP 299.  Other income for the Company
includes interest earned in 2001 of $2,575 compared to $4,919 for 2002.
The increase in interest income is attributable to the $250,000
certificate of deposit held during the full fiscal 2002 year compared to a
partial 2001 year.

During the 2001 fiscal year the Company borrowed $20,000 from two of its
principal shareholders and borrowed an additional $80,000 from them during
2002.  Prior to the end of 2001, $250,000 was borrowed from the First
National Bank of Cisco, Texas.  The $250,000 was renewed in 2002 and
remains in effect on December 31, 2002.  Interest expense on this $250,000
note during 2002 was $10,005.

The net loss for the year ended December 31, 2002 was $71,632 compared to
a net loss of $179,411 for the year ended December 31, 2001.  The $107,779
decrease in loss incurred is directly related to the lower expenditures
made in shareholder relations ($10,302 vs. $69,246) and personnel costs
($28,945 vs. $66,210).  Total operating expenses were $178,814 for the
year ended December 2001 compared to $62,613 for the current year.
Expenditures were lower in 2002 because of the Company's efforts to
promote itself following its listing on the OTC-NASDAQ Bulletin Board,
which became effective on December 21, 2000.

Management is optimistic about the drilling planned on its Australian
interests and the new application made during the end of the fiscal year

                                    16

2002 on the Bass Strait concession VO2-2 in Australia. Domestically,
management is looking forward to bringing the gas wells in the Park City
Gas Field on line upon the finalization of an agreement with a gas
gathering company to initiate gas sales.

Disclosure Regarding Forward-Looking Statements

The forward-looking statements in this Form 10-KSB reflect the Company's
current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ from those
anticipated.  In the Form 10-KSB, the words "anticipates," "believes,
"expects," "intends," "future" and similar expressions identify forward-
looking statements.  The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances
that may arise after the date hereof.  All subsequent written and oral
forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by this section.


ITEM 7.  FINANCIAL STATEMENTS

The following financial statement information for Australian-Canadian Oil
Royalties Ltd., begins following the signature page of this form.  The
Index to the Financial Statements is on page F-1.

     Report of Independent Certified Public Accountants
     Balance Sheets
     Statements of Operations
     Statements of Stockholders' Equity
     Statements of Cash Flows
     Notes to Financial Statements


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

       None


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Directors - The Board of Directors of the Company presently consists of
five members.  Each director is elected at the annual meeting of
shareholders to hold office until the next annual meeting of shareholders
and until his successor has been elected and qualified.  The following
table sets forth information concerning the persons currently serving as
directors of the Company.










                                    17

                                                   Date First
                                 Position With      Elected
        Name              Age     the Company     as Director
  --------------------   ----  ----------------  -------------
   Ely Sakhai             51      President          1997
                                   & Director
   Robert Kamon           75      Secretary          1997
                                   & Director
   Larry Braun            59      Director           1997
   Kenneth W. Campbell    73      Director           1997
   William A. Randall     62      Director           1997

Executive Officers - Unless otherwise specified by the Board, all
executive officers are elected for a term of one year, commencing with the
date of the first meeting of the Board following the annual meeting of
shareholders, and serve until their successors are elected or appointed
and qualified, or until their respective death, resignation, removal or
disqualification.  All of the Company's officers are executive officers.
The following table sets forth certain information with respect to the
persons currently serving as executive officers of the Company.

                                                   Date First
                                 Position With      Elected
        Name              Age     the Company      as Officer
  --------------------   ----  ----------------  -------------
   Ely Sakhai             51     President and        1997
                                   Director
   Robert Kamon           75     Secretary and        1997
                                   Director

There are no family relationships between any of the officers or directors
of the Company.

Ely Sakhai, Director and President, is a civil engineering graduate of a
University in New York.  He has been engaged in the art gallery business
in New York City for the past sixteen years.

Robert Kamon, Director and Secretary, is a petroleum-engineering graduate
of the University of Texas at Austin, Texas.  Mr. Kamon has been President
of three NASDAQ listed companies.  He is currently the President of
several private companies - Australian Grazing and Pastoral Co. Pty. Ltd.
since 1954, International Oil Lease Service Corp. since 1961, and Tensleep
Oil and Production Inc. since 1989.

Larry Braun, Director, is a business graduate of the University of Texas
at Austin, Texas.  He is President and Owner of Cordoba Resources Ltd., a
private oil and gas company.

Kenneth W. Campbell, Director, is a graduate of the University of Brandon
(Manitoba, Canada).  He is President of Solar Energy Resources, Ltd., a
privately held independent Canadian oil and gas producer.

William A. Randall, Director, is a graduate of the University of British
Columbia and has an LLB degree from the University of British Columbia.
He has been a practicing commercial attorney for the last thirty years,
and is currently a partner in the Vancouver firm of Russell and DuMoulin.


                                    18

ITEM 10.  EXECUTIVE COMPENSATION

Value of the office space used by ACOR was $1,200* for 2002 and 2001.

Value of the time provided by ACOR executives $2,000* for 2002 and $8,000*
for 2001.

   * These amounts have been recorded as expenses and contributed capital
in the financial statements in their respective periods.

The executive officers of ACOR have received no salary, bonus or stock
compensation since the organization of the Company.  The Company has no
bonus, pension, or profit sharing plans.  The Company pays for copies,
phone usage, travel expenses, and other labor to non-related parties.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of the common stock of the Company as of March 26, 2003 by each
of the Company's officers and directors, each person who is known by the
Company to own beneficially more than 5% of the outstanding common stock,
and all officers and directors of the Company as a group.  The title of
class is common stock, no par value.

                                             # of Shares
              Name and                      Beneficially    Percent of
         Address of Stockholder                Owned          Class
   ----------------------------------       ------------    ----------
   Tensleep Oil & Production, Inc. (1)         908,000        13.95%
   1304 Avenue L
   Cisco, Texas   76437

   International Oil Lease Service Corp. (2)   407,000         6.25%
   PO Box 1629
   Cisco, Texas 76437

   Larry Braun                                     -0-         0.00%
   226 Lake Fraser Place, SE
   Calgary, Alberta, T2J 3T5
   Canada

   Ken Campbell                                100,000         1.54%
   307 Triune Bay
   Calgary, Alberta T1X 1G4
   Canada

   Robert Kamon (3)                          2,134,273        32.79%
   1304 Avenue L
   Cisco, Texas  76437

   William A. Randall                           20,000         0.31%
   2100-1075 W. Georgia St.
   Vancouver, British Columbia V6E 3G2
   Canada


                                    19

                                             # of Shares
              Name and                      Beneficially    Percent of
         Address of Stockholder                Owned          Class
   ----------------------------------       ------------    ----------
(continued)

   Ely Sakhai                                1,627,273        25.00%
   10 Windsor Dr.
   Old Westbury, New York   11568

   All officers and directors as a group     3,881,546        59.64%

   Jan Soleimani                               800,000        12.29%
   21 Windsor Dr.
   Old Westbury, New York   11568

   Robert Thorpe                               445,424         6.84%
   1811 Sullivan Lane
   Bardstown, KY 40004

(1) Tensleep Oil & Production, Inc. (Tensleep) is controlled by Robert
    Kamon.  Mr. Kamon owns 50% of the shares of Ten sleep.
(2) International Oil Lease Service Corp. is owned by Mr. Kamon.
(3) Mr. Kamon's 819,273 shares, Tensleep's 908,000 shares, and IOLS'
    407,000 shares have been combined in the number of shares reported as
    Mr. Kamon's ownership total and percentage.

The stockholders identified in this table have sole voting and investment
power with respect to the shares beneficially owned by them.  The owners
have no rights to acquire additional shares through options, warrants,
rights, or conversion privileges within the next sixty days.  The present
principal owners have not sold any of the original 4,000,000 shares since
incorporation, except that International Oil Lease Service Corp., an
original shareholder, sold 592,000 shares on December 1, 1997, to Robert
Kamon, prior to the Company's initiating its 504 Regulation D issue.
During 2001, Australian Grazing & Pastoral Co., Pty. Ltd. sold their
1,008,000 shares to Tensleep Oil & Production, Inc.  During February 2002,
Tensleep Oil & Production, Inc. sold 100,000 shares to a non-affiliate of
the Company.

Management is not aware of any current arrangements, which would result in
a change of control of the Company.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ACOR and Ely Sakhai, President of ACOR, each own 50% working interest in
Areas CO-2000A, CO-2000B, and CO-2000E.  Mr. Sakhai acquired a 1/8th
working interest in the Park City Gas Field on the same basis as the
Company acquired its 1/8th interest.  Also, during the year, Mr. Sakhai
participated with the Company in an application for an oil concession in
the Bass Straits of Australia known as V02-2.  (See Item 2  "Description
of Property" for additional information.)

Three of the directors of the Company, Robert Kamon, Ken Campbell and
Larry Braun, are active in the oil and gas industry personally.  The
activities of each could result in a conflict of interest between their
other oil and gas activities and those of the Company.

                                    20

Mr. Kamon, Secretary of ACOR, is President of International Oil Lease
Service Corp. (IOLS).  IOLS is in the business of applying for and
acquiring oil and gas concessions in Australia; therefore, its activities
may involve conflicts of interest with the Company.  The Company issued
407,000 restricted common shares to IOLS for a 1/20th of 1% of 8/8ths
Australian ORRI.  (See Item 2  "Description of Property" for additional
information.)

Mr. Kamon is also President of Tensleep Oil & Production, Inc. (Tensleep).
Ten sleep is controlled by Mr. Kamon and is in the business of oil and gas
exploration.  Its activities may involve conflicts of interest with the
Company.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     None


ITEM 14.   CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, our management
conducted an evaluation, under the supervision and with the participation
of our President and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on
this evaluation, the President and Chief Financial Officer concluded that
our disclosure controls and procedures are effective. There have been no
significant changes in our internal controls or in other factors that
could significantly affect those controls subsequent to the date of our
last evaluation.

                           SIGNATURES

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

                              AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.


Dated: April 14, 2003                 /s/ Ely Sakhai
                                      Ely Sakhai, President & Director


Dated: April 14, 2003                 /s/ Robert Kamon
                                      Robert Kamon, Secretary & Director


Dated: April 14, 2003                 /s/ Ken Campbell
                                      Ken Campbell, Director


Dated: April 14, 2003                 /s/ Larry Braun
                                      Larry Braun, Director


Dated: April 14, 2003                 /s/ William A. Randall
                                      William A. Randall, Director

                                    21

                          CERTIFICATION

I, Robert Kamon, certify that:

1.  I have reviewed this annual report on Form 10-KSB of Australian-
Canadian Oil Royalties Ltd.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;

4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and have:

   a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this annual report is
being prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

   c) Presented in this annual report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;

5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):

   a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

   b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. I have indicated in this annual report whether there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date:   April 14, 2003               /s/ Robert Kamon
                                     Robert Kamon, Secretary and
                                     Chief Financial Officer

                                    22




                  AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.




                      INDEX TO FINANCIAL STATEMENTS




  Report of Independent Certified Public Accountants  .  .  .  .  .   F-2

  Balance Sheets as of December 31, 2002 and 2001  .  .  .  .  .  .   F-3

  Statements of Operations for the years ended
            December 31, 2002 and 2001 .  .  .  .  .  .  .  .  .  .   F-4

  Statement of Stockholders' Equity for the years ended
            December 31, 2002 and 2001 .  .  .  .  .  .  .  .  .  .   F-5

  Statements of Cash Flows for the years ended
            December 31, 2002 and 2001 .  .  .  .  .  .  .  .  .  .   F-6

  Notes to Financial Statements  .  .  .  .  .  .  .  .  .  .  .  .   F-7











                                    F-1

                       ROBERT EARLY & COMPANY, P.C.
                       Certified Public Accountants



            REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Australian-Canadian Oil Royalties Ltd.
Cisco, Texas

We have audited the accompanying  balance sheets of Australian-Canadian
Oil Royalties Ltd. as of December 31, 2002 and 2001, and the related
statements of operations, stockholders' equity, and cash flows for the
years then ended.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform 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.  We believe that our audit provides 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 Australian-Canadian
Oil Royalties Ltd. as of December 31, 2002, and 2001, and the results of
its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 13 to the
financial statements, the Company currently has limited disposable cash
and its revenues are not sufficient to fund operations at historical
levels.  These facts raise substantial doubts about the Company's ability
to continue as a going concern.  Management's plans in regard to these
matters are also discussed in Note 13.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.


/s/ ROBERT EARLY & COMPANY, P.C.
Robert Early & Company, P.C.
Abilene, Texas

February 18, 2003



                                   F-2
               2500 S. Willis, Suite 104, Abilene, TX 79605

                Australian-Canadian Oil Royalties Ltd.
                          Balance Sheets
                 As of December 31, 2002 and 2001

                                                      2002            2001
                                                    ---------      ---------
                              Assets
CURRENT ASSETS
  Cash                                              $   8,622      $   7,060
  Cash-restricted                                     250,000        250,000
  Accounts receivable                                   3,243          1,917
  Accrued interest receivable                              -              -
  Prepaid expenses                                        320          1,225
                                                    ---------      ---------
     Total Current Assets                             262,185        260,202
                                                    ---------      ---------
PROPERTY AND EQUIPMENT
  Oil and gas properties                              664,815        383,672
  Accumulated depletion                               (28,470)       (26,569)
                                                    ---------      ---------
     Net Property and Equipment                       636,345        357,103
                                                    ---------      ---------
OTHER ASSETS
  Investment in equity method investee                     54             54
  Other                                                    -             132
                                                    ---------      ---------
     Total Other Assets                                    54            186
                                                    ---------      ---------
     TOTAL ASSETS                                   $ 898,584      $ 617,491
                                                    =========      =========

                Liabilities & Stockholders' Equity

CURRENT LIABILITIES
  Accounts payable                                  $   4,887      $   1,600
  Loans from officers                                      -          20,000
  Note payable to bank                                250,000        250,000
                                                    ---------      ---------
    Total current liabilities                         254,887        271,600
                                                    ---------      ---------
STOCKHOLDERS' EQUITY
  Preferred stock no par (50,000,000 shares
    authorized, none outstanding)                          -              -
  Common stock, no par (50,000,000 shares
    authorized, 6,391,742 and 5,201,500 shares
    respectively outstanding)                         986,711        620,473
  Additional paid in capital                           27,300         24,100
  Accumulated deficit                                (370,020)      (298,388)
  Other comprehensive income:
    Foreign currency translation adjustment              (294)          (294)
                                                    ---------      ---------
     Total Stockholders' Equity                       643,697        345,891
                                                    ---------      ---------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 898,584      $ 617,491
                                                    =========      =========


The accompanying notes are an integral part of these financial statements.
                                    F-3

                  Australian-Canadian Oil Royalties Ltd.
            Statements of Operations and Comprehensive Income
              For the years ended December 31, 2002 and 2001



                                                      2002            2001
                                                    ---------      ---------
OPERATING REVENUES
     Oil & gas revenues                             $   6,807      $  10,574

OPERATING EXPENSES
     Depletion and amortization                         2,033          8,662
     Personnel costs                                   28,945         66,210
     Professional fees                                 12,256         14,594
     Adjustment for excess costs                        6,355         16,001
     Shareholder relations                             10,302         69,246
     General and administrative expenses                9,529         14,675
                                                    ---------      ---------
          Total Operating Expenses                     69,420        189,388
                                                    ---------      ---------
(LOSS) FROM OPERATIONS                                (62,613)      (178,814)

OTHER INCOME
     Interest income                                    4,919          2,575
     Interest expense                                 (11,896)            -
                                                    ---------      ---------
(LOSS) BEFORE INCOME TAXES                            (69,590)      (176,239)

Australian income taxes                                 2,042          3,172
                                                    ---------      ---------

          NET LOSS                                    (71,632)      (179,411)


OTHER COMPREHENSIVE INCOME:
     Foreign currency translation adjustment               -             (57)
                                                    ---------      ---------

    TOTAL COMPREHENSIVE LOSS                        $ (71,632)     $(179,468)
                                                    =========      =========

Net loss per weighted average share outstanding     $   (0.01)     $   (0.03)
                                                    =========      =========
Weighted average shares outstanding                 5,422,556      5,151,693
                                                    =========      =========





The accompanying notes are an integral part of these financial statements.
                                    F-4

<TABLE>
                 Australian-Canadian Oil Royalties Ltd.
                   Statement of Stockholders' Equity
            For the years ended December 31, 2002 and 2001
<CAPTION>
                                                                           Accumulated
                                                   Additional Accumulated    Other
                                     Common Stock    Paid In   Earnings/  Comprehensive
                                   Shares   Amount   Capital   (Deficit)      Income       Total
                                 --------- --------- --------  ---------    ---------    ---------
<S>                              <C>       <C>       <C>       <C>          <C>          <C>
BALANCES, 12/31/00               5,150,000 $ 602,448 $ 14,900  $(118,977)   $    (237)   $ 498,134

Stock issued for services           51,500    18,025       -          -            -        18,025
Additional contributed capital          -         -     9,200         -            -         9,200
Net loss                                -         -        -    (179,411)          -      (179,411)
Other comprehensive income:
  Foreign currency translation
    adjustment                          -         -        -          -           (57)         (57)
                                 --------- --------- --------  ---------    ---------    ---------
BALANCES, 12/31/01               5,201,500   620,473   24,100   (298,388)        (294)     345,891

Stock issued for:
  Oil & gas properties             735,696   264,348       -          -            -       264,348
  Notes payable & interest         454,546   101,890       -          -            -       101,890
Additional contributed capital          -         -     3,200         -            -         3,200
Net loss                                -         -        -     (71,632)          -       (71,632)
Other comprehensive income:
  Foreign currency translation
    adjustment                          -         -        -          -            -            -
                                 --------- --------- --------  ---------    ---------    ---------

BALANCES, 12/31/02               6,391,742 $ 986,711 $ 27,300  $(370,020)   $    (294)   $ 643,697
                                 ========= ========= ========  =========    =========    =========












</TABLE>
The accompanying notes are an integral part of these financial statements.
                                    F-5

               Australian-Canadian Oil Royalties Ltd.
                     Statements of Cash Flows
                Increases/(Decreases) in Cash Flow
          For the years ended December 31, 2002 and 2001

                                                      2002            2001
                                                    ---------      ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                            $ (71,632)     $(179,411)
Adjustments to reconcile net (loss) to net cash
     provided by operations:
     Depletion and amortization                         2,033          8,662
     Value of expenses contributed by officers          3,200          9,200
     Stock issued for services                             -          18,025
     Stock issued for interest                          1,890             -
     Adjustment for foreign currency translation           -              56
     Adjustment for excess costs                        6,355         16,001
Changes in operating assets and liabilities:
     Receivables                                       (1,326)         1,180
     Prepaid expenses                                     905            (57)
     Accounts payable                                   3,287           (207)
                                                    ---------      ---------
NET CASH (USED) BY OPERATING ACTIVITIES               (55,288)      (126,551)
                                                    ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Oil & Gas Properties                             (23,150)       (21,266)
                                                    ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from notes payable to officers           80,000         20,000
     Repayment of bank loans                         (250,000)            -
     Proceeds from bank notes                         250,000        250,000
                                                    ---------      ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES              80,000        270,000
                                                    ---------      ---------

     Increase/(Decrease) in cash for period             1,562        122,183

Cash and cash equivalents, beginning of period        257,060        134,877
                                                    ---------      ---------
    Cash and cash equivalents, end of period        $ 258,622      $ 257,060
                                                    =========      =========

SUPPLEMENTAL DISCLOSURES:

  Cash payments for:
    Interest                                        $  10,005      $      -
    Australian income taxes                             1,333          3,105

  Noncash Investing and Financing Activities:
    Contributed expenses                                3,200          9,200
    Stock issued for services                              -          18,025
    Stock issued for oil & gas properties and
      drilling                                        264,348             -
    Stock issued for related party notes and
      interest                                        101,890             -


The accompanying notes are an integral part of these financial statements.
                                    F-6

                  Australian-Canadian Oil Royalties Ltd.
                      Notes to  Financial Statements
                        December 31, 2002 and 2001


NOTE 1:   DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Australian-Canadian Oil Royalties Ltd. (the Company) was incorporated
April 28, 1997 in Vancouver, British Columbia, Canada.  Its primary
business plan is the purchase of overriding royalty interests for long-
term passive income and capital gains, with sales of these interests as
deemed in the best interest of the Company.  Current primary income
sources are royalties earned on overriding royalty interests held by the
Company.  The Company also engages third parties for leasing operations in
various countries.  At present, all of the producing properties held by
the Company are located in Australia's main onshore oil and gas producing
basin.  These financial statements are prepared in U.S. dollars for use in
U.S. securities filings.  During 2002, the Company acquired an interest in
a gas field in Kentucky.  The activity of this field has consisted of
drilling wells while working to identify a third party interested in
constructing a gathering system.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

   The Company follows the full cost method of accounting for oil and gas
   producing activities and, accordingly, capitalizes all costs incurred
   in the acquisition, exploration, and development of proved oil and gas
   properties, including the costs of abandoned properties, dry holes,
   geophysical costs, and annual rentals.  All general corporate costs are
   expensed as incurred.  In general, sales or other dispositions of oil
   and gas properties are accounted for as adjustments to capitalized
   costs with no gain or loss recorded. Costs are recorded in cost centers
   on a country-by-country basis.  Most of the Company's oil and gas
   properties consist of overriding royalty interests that are located in
   Australia.  The Company has not participated in the exploration and
   development of proved oil and gas properties until 2002.  Capitalized
   costs are subject to a "ceiling test," which basically limits such
   costs to the aggregate of the "estimated present value," discounted at
   a 10% interest rate of future net revenues from proved reserves, based
   on current economic and operating conditions, plus the lower of cost or
   fair market value of unproved properties.  Costs in excess of the
   ceiling test are adjusted against income.

   Costs of the producing royalty interests acquired in 1997 are being
   amortized over the estimated reserves reported by the Queensland,
   Australia government at June 30, 1997; as revised by subsequent reports
   for discoveries, changes in estimates, etc.; based on actual quantities
   sold.  (These reports are generally released one year after the end of
   the reporting period.)  Costs of non-producing interests are not being
   amortized pending development or production and sale of oil or gas, but
   they are assessed for impairment on an aggregate country-by-country
   basis.


                                    F-7

Investments in Equity Method Investee

   The Company's investment in 20% of the common stock of Cooper Basin Oil
   and Gas, Inc. is carried at cost. CBOG had no activity during 2001 or
   2002.

Intangible Assets and Amortization

   Intangible assets consist of organization costs.  These costs, which
   were incurred in the formation of the Company, are being amortized over
   a period of 60 months on a straight-line basis.  Amortization totaled
   $132 and $529 for 2002 and 2001, respectively.

Income Taxes

   Deferred tax liabilities and assets result from temporary differences
   between the financial statement and income tax bases of assets and
   liabilities.  The Company records and adjusts any deferred tax asset
   valuation based on judgment as to future realization of the deferred
   tax benefits supported by demonstrated trends in the Company's
   operating results.

   As a Canadian corporation, the Company is liable for income taxes under
   the laws of Canada.  Under Canadian law the Company's Canadian-source
   income is subject to a 46% tax (denominated in Canadian dollars).  The
   operating losses can be carried forward for seven years.  The Company
   has available at December 31, 2002, unused operating loss carry-
   forwards that may be applied against future Canadian taxable income.
   These expire as presented below.  Because the timing of realization of
   the tax benefit from these loss carry-forwards cannot be currently
   projected, a valuation allowance has been established to completely
   offset this asset.

       Amount of Unused Operating    Expiring During Year Ended
           Loss Carry forward               December 31,
         -----------------------     --------------------------
              $   4,151                        2004
                 36,557                        2005
                 18,543                        2006
                 52,866                        2007
                163,410                        2008
                 65,277                        2009
              ---------
              $ 340,804
              =========

   The difference between taxable income and net income for financial
   reporting is the write-down of the oil and gas properties due to the
   ceiling test that is not deductible for tax purposes.

   The potential tax benefit from these operating loss carry forwards is
   $156,770 and $126,742 in 2002 and 2001, respectively.  The Company has
   recognized a valuation allowance against these deferred tax assets due
   the inability to foresee when such benefits will be realized.

   The Company has no net U.S. source income nor any income effectively
   connected with a U.S. trade or business.  Therefore, there is no U.S.
   tax liability or benefit related to its activities to date.

                                    F-8

   The Company is subject to a 30% Australian income tax on Australian
   source royalty income.  This tax is withheld by the payer.  The Company
   incurred Australian income taxes on its oil and gas production totaling
   $2,042 and $3,172 in 2002 and 2001, respectively.

Earnings Per Share

   U.S. accounting rules provide for the calculation of "Basic" and
   "Diluted" earnings per share.  Basic earnings per common share is
   computed by dividing net income available to common stockholders by the
   weighted average number of common shares outstanding for the period.
   Diluted earnings per common share reflects the potential dilution of
   securities that could share in the earnings of the entity on an as if
   converted basis. This is computed by dividing net income available to
   common shareholders, as adjusted if necessary, by the weighted average
   number of common shares outstanding plus potentially dilutive
   securities.

   Weighted average shares outstanding were 5,422,556 and 5,151,693 for
   2002 and 2001, respectively.

Foreign Currency Transactions

   As noted above, these statements have been prepared in U.S. dollars.
   However, the Company conducts transactions in Canadian, Australian and
   U.S. dollars.  Transactions denominated in Canadian or Australian
   dollars are translated to equivalent U.S. dollars for recording in the
   financial statements based on the currency exchange rates existing at
   the dates of the transactions.  Ending balances of accounts that are
   denominated in Canadian dollars are translated to U.S. dollars based on
   the currency exchange rates existing at December 31.  The exchange
   gains and losses that result from translating these amounts to U.S.
   dollars are accumulated and reported as Other Comprehensive Income, a
   separate component of the Company's stockholders' equity.

Cash Flows

   The Company considers cash and cash investments with an initial
   maturity or marketability of three months or less to be cash
   equivalents for purposes of presenting its Statement of Cash Flows.

Use of Estimates

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


NOTE 2:   RESTRICTED CASH

The amounts presented as restricted cash consists of certificates of
deposit that serve as collateral for the short- term bank notes.  Use of
these funds is restricted under the terms of the collateral agreement.

                                    F-9


NOTE 3:   ACCOUNTS RECEIVABLE

At December 31, 2002 and 2001 the Company has accrued receivables for oil
and gas production from its Australian overriding royalty interests
totaling $3,243 and $1,917, respectively. Collection of the accrued
Australian production generally occurs during the quarter following the
quarter of production.  The cost basis of the receivable is believed to
approximate its fair value.  No allowance for bad debts has been
established because the Company has not experienced any significant
inability to collect its receivables.


NOTE 4:   PREPAID EXPENSES

During 1997, the Company advanced $C5,000 to Dales, Matheson, Carr-Hilton,
Chartered Accountants of Vancouver, British Columbia for services in
connection with the formation of the Company and the initial public
offering.  This excess of the advance over the costs has been being used
to pay for services as they arise.  No services were billed during 2001.
During 2002, fees of $US904 were billed.  Adjustments in the balance occur
with fluctuations in the exchange rates.  Balances at December 31, 2002
and 2001 were $US320 and $US1,225.


NOTE 5:   OIL AND GAS PROPERTIES

During 1997, the Company acquired a package of overriding royalty
interests comprising 1,005,143 net royalty acres under 28,572,609 gross
surface acres in Australia's main onshore oil and gas producing basin in
exchange for 4,000,000 shares of its common stock.  In addition to the
acquisition cost, the Company incurred costs associated with preparation
of assignments and registering chain of title transactions in Australia.

During December 2000, the Company purchased all of the outstanding stock
of Cooper Eromanga Oil, Inc. (CEO).  Subsequently, the sole asset of CEO,
an interest in ATP 582, was assigned to the Company.  The interest
assigned represents 100% of the working interest in Queensland concession
582.  ATP 582 consists of 6,700,000 surface acres and will require minimum
annual exploration expenditures (which are yet to be determined) after an
agreement has been reached with the Aboriginal Tribes regarding ingress
and egress on the concession.  The Company acquired its interest in
exchange for paying certain legal costs and delay rentals totaling $3,373
and agreeing to assign a 2% of all production overriding royalty interest
to CEO's previous owner. The out-of-pocket costs have been included in
capitalized oil and gas acquisition costs.  This concession is subject to
a total of 11.5% in assigned overriding royalty interests (including the
2% interest) in addition to the standard 10% royalty retained by the
Queensland government.  During 2001 and 2002, the Company paid $2,266 and
$2,400 in rental costs.

During the September 2000, the Company was successful in applications for
three Australian oil and gas concessions in South Australia.  The Company
submitted these applications on a 50/50 basis with, its President, Ely
Sakhai.  The Company's portion of the minimum exploration commitments
under these three applications total $145,000 in year 1, $275,000 in year

                                    F-10

2, and $1,450,000 in the third year. These concessions lie under
1,698,348 surface acres.  These exploration commitments will not commence
until native title considerations have been negotiated.

During 2001, the Company purchased a 0.05% overriding royalty interest
under permit VIC/P45 for $19,000.  This is an offshore prospect that the
Company believes has high production potential.

During 2002, the Company paid a leasing fee for the successful application
for South Australian areas of $20,750. Additionally, 407,000 shares were
issued to International Oil Lease Service for a 0.05% interest in Permit
53. This acquisition was valued at $100,000 based on cash sales by IOLS of
comparable interests.

In the U.S., the Company has entered into an operating agreement with
regard to the Park City Gas Field in Kentucky.  The Company purchased a
12.5% working interest in this field and is paying for its share of
drilling costs with stock.  The Company's President has acquired an equal
position in this field.  Significant drilling has taken place, with 14
wells drilled on the property.  The operator expects to drill a total of
50 wells during the development of this field.  The Company has the
ability to terminate its participation in undrilled wells at any time.
Geological analysis has indicated that the completed wells have identified
producible zones with significant potential.  However, production tests
have not been completed and the lack of a gathering system has precluded
marketable production.  As a result, estimating the timing and quantities
of producible gas is solely a volumetric calculation based on assumed
porosities and zone sizes.  No definitive tests of pressures and gas flow
has been undertaken.

Below is a summary of capitalized costs related to oil and gas properties:

                                                 2002              2001
                                          --------------------   ---------
                                          Australia      U.S.    Australia
                                          ---------  ---------   ---------
  Acquisition cost                        $ 511,059  $ 164,348   $ 398,558
  Assignments, transfers, and rentals        18,626         -        7,976
    Less allowance for excess costs         (29,218)        -      (22,862)
                                          ---------  ---------   ---------
        Total                               500,467    164,348     383,672
    Less accumulated depletion              (28,470)        -      (26,569)
                                          ---------  ---------   ---------
    Net Oil and Gas Properties            $ 471,997  $ 164,348   $ 357,103
                                          =========  =========   =========

The costs of producing properties are being amortized over reserve
estimates reported by the Queensland, Australia government for June 30,
1997, as adjusted for subsequently reported information, based on
quantities produced.  These producing properties are ATP 267, ATP 299, and
ATP 543.  Other interests have not produced saleable oil or gas from which
the Company has received revenues.  The costs associated with these
properties are not being amortized pending determination of reserve
quantities and commencement of production. Depletion expense totaled
$1,901 and $8,133 for 2002 and 2001.

Additionally, these costs are subjected to a "ceiling" test based on

                                    F-11

reported reserves.  It has been determined that book values exceed the
ceiling test at December 31, 2002 and 2001.  Adjustments to reduce the
carrying values according to the ceiling test were $6,355 in 2002 and
$16,001 in 2001.


NOTE 6:   NOTES PAYABLE

During September, October, and November 2001, the Company borrowed a total
of $20,000 from its President and Secretary.  These funds were used to
meet current operating obligations incurred by the Company.  This series
of four $5,000 notes bore interest at 4.5% and each note was due one year
from its date of origination.

During 2002, the Company borrowed an additional $80,000 from its President
and Secretary under notes bearing interest at 4.5%.  In November 2002, the
Company issued 454,546 shares of stock to pay off all of these notes plus
accrued interest of $1,890.

On December 28 and December 31, 2001, the Company borrowed $100,000 and
$150,000, respectively, from the First National Bank of Cisco.  During
2002, these notes were renewed in April and December.  The notes
outstanding at December 31, 2002, bear interest at 4% and are due March
31, 2003.  These notes are secured by the certificates of deposit shown as
restricted cash on the balance sheet.

Total interest paid on these bank notes during 2002 was $10,005.


NOTE 7:   TRANSACTIONS WITH RELATED PARTIES

Officers provided office space and services with no cash outflows by the
Company.  These had estimated unpaid values of $3,200 and $9,200 during
2002 and 2001.  These amounts have been recorded as operating expenses and
as additional paid-in capital in their respective years.

During 2001 and 2002, the Company reimbursed commonly-controlled entities
for personnel and office expenses totaling $12,674 and $16,643,
respectively.

As discussed at Note 6, the Company borrowed a total of $100,000 from two
of its officers in order to fund administrative costs and efforts to
promote the Company's name and availability.  These borrowing were repaid
through the issuance of 456,546 new shares by the Company.

In December 2002, the Company acquired a 0.05% interest in Australian
Permit 53 from IOLS in exchange for the issuance of 128,000 shares of
stock.


NOTE 8:   FOREIGN OPERATIONS

As noted above, the Company was incorporated in Canada.  Additionally, the
Company operates primarily in Australia where all of its currently
producing properties are presently located.  All operating revenues
reported by the Company during 2002 and 2001 were received from Australian
oil and gas royalty interests.  Depletion expense and Australian income

                                    F-12

taxes reported by the Company during 2002 and 2001 are also related to the
revenue received from the Australian royalties.  The Company also incurred
personnel and office expenses in the United States.  All of the U.S. costs
and expenses were general and administrative in nature.


NOTE 9:   INVESTMENT IN EQUITY METHOD INVESTEE

In 1999, the Company contributed $2,100 of the creation capital of Cooper
Basin Oil & Gas, Inc. (CBOG) for a 20% ownership interest.  CBOG was
created to pursue Australian oil and gas concessions.  As the owner of a
20% interest in CBOG, the Company has agreed that it will fund 20% of new
concession costs or forfeit its ownership interest.  During the last
quarter of 1999, the Company contributed $2,112 toward costs to be
incurred in 2000 for an application for another concession.  The
activities of this investment are recorded on the equity basis.  The
Company's share of the expenses of CBOG totaled $4,159 in 2000.  There was
no activity in this entity during 2002 and the Company has no current
commitments with CBOG.


NOTE 10:   STOCK TRANSACTIONS

During December 2001, the Company issued 51,500 shares valued at $18,025
to a consultant for services to be provided regarding promotion and
management of the Company.

During July 2002, the Company issued 250,000 for the acquisition of its
interest in the Park City Gas Field in Kentucky discussed above.  During
August and November 2002 , 48,786, and 29,910 shares were issued for
drilling costs incurred in that field.

As discussed at Notes 6 and 7, the Company issued 454,546 shares to its
President and Secretary as repayment for amounts loaned to the Company.
An 0.05% ORRI in Permit 53 was acquired through the issuance of 407,000
shares to IOLS.


NOTE 11:   CONTINGENCY

The original package of Australian overriding royalty interests acquired
by the Company in 1997 included a 1/8 of 1% interest in all production
from the Patchawarra Southwest Block of PEL's 5 & 6.  This overriding
royalty comprises approximately 5,348 net royalty acres under 1,069,717
surface acres.  The Patchawarra Southwest Block became productive in June
1989 and has produced approximately $A67,119,716 in revenues from oil, gas
and LPG since that time.  This overriding royalty was first created in
June 1971 as a 1/4 of 1% interest out of a 10% working interest.   Since
that time, this interest has been assigned to six different companies with
the last assignee being Australian-Canadian Oil Royalties Ltd.  During
1997, the Company determined that, due to the extensive time elapsing
between assignments and the failure of some intermediate assignees to
properly assign title, it will be necessary to engage in litigation in
order to collect both past and future royalty payments.  In addition to
the legal costs incurred in this litigation, the Company will be required
to pay any unpaid stamp duty, charged by the Australian government, for
any previously unrecorded assignment.

                                    F-13

The Company is working with legal counsel in Australia to undertake the
necessary litigation to perfect its title in this royalty interest.  As of
December 31, 2002, no litigation has been undertaken.  Legal counsel has
advised the Company that the expected cost of the litigation process will
be in a range around $A25,000 in addition to any stamp duty that may be
required.  The required stamp duty will be based on the state's
determination of value and will be required to be paid for each
unregistered transfer in the chain of title.  At this time no estimate of
this cost can be made.  Upon successfully clearing title to the property,
the Company expects to collect approximately $A42,000 in royalties on
previous production.


NOTE 12:   CONCENTRATION OF RISK

The producing oil and gas assets of the Company are all located in
Australia.  These are the sole source of operating revenues for the
Company.

Accounts at the bank are insured by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000 per depositor.  Combined balances at
December 31, 2002 at the Company's primary bank exceeded federally insured
limits by $158,622.


NOTE 13:   GOING CONCERN CONSIDERATIONS

As of December 31, 2002, the Company has limited disposable cash.
Additionally, its revenues are not sufficient to cover operating expenses
and expansion by the Company.  These factors raise substantial doubt as to
the ability of the Company to continue as a going concern.  Management's
plans include attempting to find a drilling company to farm out the
working interest under ATP 582, raising funds from the public through a
stock offering, and attempting to acquire additional producing interests
in exchange for stock.  Management intends to make every effort to
identify and develop sources of funds.  There is no assurance that
Management's plans will be successful.


NOTE 14:   SUBSEQUENT EVENTS

In January 2003, the Company has issued 116,728 shares for the cost of
drilling the next eight wells on the Park City Gas Field.  Additional
shares are expected to be issued as drilling continues, however, the
Company's agreement allows it to drop out of this program at any time.


NOTE 15:   SUPPLEMENTARY DATA - RESERVES OF OIL AND GAS  (UNAUDITED)

The following schedules set out available information about the Company's
oil and gas activities at December 31, 2002 and 2001 and for the years
then ended.

            Reserves of oil and gas - Royalty Interests

The current quantities of proved reserves of oil and gas relating to
royalty interests are not presented because the necessary information is

                                    F-14

not available or the Company's interests are not large enough to
economically and reasonably obtain this information. The Company's share
of oil and gas produced from the producing interests is presented in the
following schedule.  No estimates of reserves have been reported to or
filed with any Federal authority or agency during the year presented.  All
of these royalty interests are in Australia.  The gas wells on ATP 543
were shut in for all of 2002.

                                                Gas (mcf)       Oil (bbls)
                                              2001    2000     2001    2000
                                             ------  ------   ------  ------
   Reserves reported by the Queensland
        government as of June 30, 1997           -       -     3,962   3,962
   Additions or adjustments after 1997       15,272  15,272       -       -
     Discoveries                                 -       -        -       -
     Cumulative previous production          (4,232) (2,270)  (2,287) (1,839)
     Current year production                     -   (1,962)    (363)   (448)
                                             ------  ------   ------  ------
   Unrecovered reserves                      11,040  11,040    1,312   1,675
                                             ======  ======   ======  ======

            Results of Operations for Producing Activities (1)
              For the Years Ended December 31, 2002 and 2001

                                                    2002              2001
                                             --------------------   ---------
                                             Australia      U.S.    Australia
                                             ---------  ---------   ---------
Sales of oil and gas                         $   6,807  $      -    $  10,574

Production costs (including taxes)                  -          -           -
Acquisition & exploration costs                123,150    164,348      21,266
Depletion                                        1,901         -        8,133
                                             ---------  ---------   ---------
Results of operations from producing
  activities (excluding corporate overhead)  $(118,244) $(164,348)  $ (18,825)
                                             =========  =========   =========

All sales were to unaffiliated entities.  Amortization costs were $10.11
per equivalent barrel for 2002 and 2001.


    Capitalized Costs Relating to Oil and Gas Producing Activities (1)
                   At December 31, 2002 and 2001

                                                    2002              2001
                                             --------------------   ---------
                                             Australia      U.S.    Australia
                                             ---------  ---------   ---------
  Unproved properties (not being amortized)  $ 406,113  $      -    $ 282,962
  Proved properties (being amortized)          123,572    164,348     123,572
  Capitalized pre-acquisition costs                 -          -           -
                                             ---------  ---------   ---------
    Total Capitalized Costs                    529,685    164,348     406,534

  Allowance for excess costs                   (29,218)        -      (22,862)
  Accumulated depletion                        (28,470)        -      (26,569)
                                             ---------  ---------   ---------
    Net Capitalized Costs                    $ 471,997  $ 164,348   $ 357,103
                                             =========  =========   =========

                                    F-15


           Costs Incurred in Oil and Gas Property Acquisition,
                     Exploration and Development (1)
              For the Years Ended December 31, 2002 and 2001

                                                    2002              2001
                                             --------------------   ---------
                                             Australia      U.S.    Australia
                                             ---------  ---------   ---------
Property acquisition costs:
   Proved                                    $      -   $ 125,000   $      -
   Unproved                                    123,150         -       21,266
   Exploration costs                                -      39,348          -
   Development costs                                -          -           -
                                             ---------  ---------   ---------
Total                                        $ 123,150  $ 164,348   $  21,266
                                             =========  =========   =========

(1) As mentioned at Note 5, the Company has acquired a working interest in
the Park City Gas Field in the U.S. that is being drilled but is not in
production.  Reserve information for this property is highly subjective at
the time of preparation of these financial statements because the field
has opened a previously unexplored area in Kentucky.  Producible reserves
are relatively shallow and there has not been a substantive test of the
production rates and rate of decline of the estimated reserves.  Because
of these facts, a reliable estimate of the timing of production and future
cash flows has not been determined.  Since reliable information is not
available at the time of preparation of these financial statements, the
Company has not presented disclosures of reserve information normally
required for working interests for this property based on information that
management believes might not be supportable.










                                    F-16