U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC 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, 2001

                      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.)

                      1301 Ave. 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: $ 10,574

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 26, 2002 was $2,763,000 based on $2.00 per share and
1,381,500 shares of common stock.

On December 31, 2001 the Issuer had 5,201,500 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 2001 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 demonstrate 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 eleven concessions
covering 10,812,400 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 three of the ORRIs, Authorities to
Prospect 299, 267 and 543. Total gross revenues received from ATP 299, ATP
267 and ATP 543 for the year 2001 were $ 10,574.

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 oi and gas concessions, which involve certain financial
requirements for exploration and drilling activities.

On March 27, 2001, the Company purchased a .05% overriding royalty interest
under VIC/P45, 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 11/2 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 over 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.

Permit VIC/P45 is scheduled for drilling by BHP Billiton Ltd. at the end of
June 2002. 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 presently acquiring 3D
seismic over the entire area of VIC/P45, starting with the Archer. This is a
multi-million dollar 3D seismic survey.

BHP Billiton Ltd. was supposed to drill the Archer in May 2002, however,
during their application for drilling permit, it was necessary to change the
shipping lanes in the area as the lanes ran through the drilling site. This
caused a delay in the date of spud, moving the date 45 days forward.

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 457,374 net royalty acres under 10,812,400
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, CO2000-A, ACOR's technical staff has identified a
huge anticline consisting of over 122,000 acres with approximately 500 feet
of maximum closure.

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 2001 was $US 25.20.



                                     3

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.

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 upon 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 (on Canadian income). 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

                                     4

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.

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.

Due to certain risks and uncertainties of native title negotiations, which
are outside the control of the Company, the Company cannot be held
responsible for any results of native title negotiations, which may differ
from those anticipated.

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 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

Native Title affects areas CO-2000A, CO-2000B, CO-2000-E, held by ACOR.

The Native Title issue is showing progress in the state of South Australia
with the first of a series of negotiations having been completed in the last
quarter of 2001. The successful negotiation, between Industry, Government,
and a number of native tribes of Australia, covered areas leased under the

                                     5

Primary Industries and Resources, South Australia (PIRSA) Cooper-Eromanga
Basins Exploration Opportunities Acreage Release, 1998, (also known as the
"CO-98 Release"). The success of this negotiation was paramount in the
completion of all future negotiations within South Australia.

The completion of the CO-98 Release negotiation has opened the way for
future negotiations in South Australia, with the next group of areas, leased
under the PIRSA Cooper-Eromanga Basins Exploration Opportunities Acreage
Release, 1999, (also known as the "CO-99 Release"), having began the
negotiation process in the last quarter of 2001 and the first quarter of
2002. It is a widely accepted opinion that the CO-99 Release discussions
will be completed within a much shorter time period than the CO-98 Release
discussions, due to the new working relationships between Industry,
Government, and the Aboriginal Tribes. On that note, it is expected that
CO-99 Release negotiations will be completed by mid-2002. Upon completion of
CO-99 negotiations, negotiations for CO-2000 should commence, however, it is
possible that said negotiations would commence prior to the completion of
CO-99. It is expected that these discussions will be completed in an
equivalent time period as the CO-99 negotiations.

The following is in regard to ATP 582, which ACOR holds in Queensland.  The
State of Queensland has not progressed as well as South Australia; however,
Queensland is taking steps toward a number of negotiations over areas in the
northern section of the State. Although no specific time period has been
formally reported, it is expected that the first group of negotiations
should be completed within the year.

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

ACOR is excited about the prospect of exploration and development both in
South Australia and Queensland, and looks forward to the future in
Australia.

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
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
March 27, 2002 was $1.00 Australian = $0.524 United States.




                                     6

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 8,415,348
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.

Exploration Permit - an exclusive offshore exploration permit with a term of
six years. These permits are 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

                                     7

report applies to figures as of March 25, 2002 and the number will change as
relinquishments take place on the ATPs, as an ATP expires or is canceled, or
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.

Petroleum Resource Rent Tax - a tax on net income in Australia reduced by
indexing on offshore production, which replaces the 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, 2001.

                         Number       % Working        Net
        Concession #   of Acres      Interest       WI Acres
        ------------  ----------   -----------   ------------
        CO2000-A        506,811         50%         253,405.5
        CO2000-B        373,633         50%         186,816.5
        CO2000-E        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 March 25, 2002 (date of the title
searches on most of the properties), and upon which productive wells had

                                     8

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 &                 Gross      Gross    Royalty
 No. Of Wells      Concession Holder        Acres   Production  Acres   Blocks
--------------  -----------------------  ---------  ----------  ------- ------
267 - 21 wells  Santos Producing Block     423,000     17.15%    5,806    23
299 - 65 wells  Santos Producing Block     441,600     05.75%    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 March 25, 2002, 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   08.08%       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

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

The total acreage under which ACOR holds overriding royalty interests in
Queensland and South Australia is 457,374 net royalty acres under 10,812,400
gross surface acres.


                                     9

ACOR holds overriding royalty interests in eleven concessions covering
10,812,400 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).

On the 10,812,400 surface acres where ACOR 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.  In
addition, about $27 million worth of seismic information has been completed
and is available on the areas.

ACOR is currently receiving revenues from three of its overriding royalty
interests - ATP 267, ATP 543 and ATP 299.

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. The Company's
portion of the minimum exploration commitments under CO2000-A, CO2000-B and
CO2000-C total $145,000 in year 1, $275,000 in year 2 and $1,450,000 in year
3. The Company is responsible for all the exploration and drilling costs on
ATP 582.

On ATP 543, a successful gas well was completed on August 30, 1996. After
completion of a gas pipeline gas began to be marketed in August, 1999.


ITEM 3. LEGAL PROCEEDINGS

The Company was not a party to any legal proceedings as of December 31,
2001.  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 royalty payments of approximately $36,081, and royalty
payments in the future.  The expected cost of the barrister's fees for
ACOR's part will be approximately $15,750 in addition to any stamp duty,
which may be required, or other potential fees.


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

Not Applicable


                                     10

                                  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 5,201,500 common shares issued and outstanding. These
5,201,500 shares are owned by approximately 305 shareholders. The market
price on March 26, 2002 was $2.00 (US) per share.

(b) Holders

The approximate number of securities holders of record of Australian-
Canadian Oil Royalties Ltd. on March 26, 2002 was 305.

(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

The Company is jointly applying for an offshore area in the Bass Strait of
Australia, offshore Victoria, during 2002. The Company is taking a one-
quarter (25%) interest in this application. Ely Sakhai, President of ACOR,
is taking one-quarter (25%) and a non-related company is 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 for ACOR. The Company's portion of
the leasing fees will be $13,750, if the application is successful, 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 target area is approximately 185,000 acres and is surrounded by major
oil and gas producing fields, the closest of which is one and one-half miles
to the east. All of the surrounding oil and gas fields are operated by BHP
Billiton Ltd.-Exxon.

The Company is excited about this application due to four existing prospects
on the area.  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.

The Company will make a full disclosure statement after the application is
filed and application submittal dates are closed.



                                     11

LIQUIDITY AND CAPITAL RESOURCES

The Company's Total Current Assets as of December 31, 2001 was $260,202
compared to $139,255 on December 31, 2000.  Total Current Liabilities as of
December 31, 2001 were $271,600 placing the Company's liquidity ratio of
current assets to current liabilities to .95 to 1.00.  Of the $260,202 in
current assets, $250,000 is a certificate of deposit.  Cash on hand as of
December 31, 2000 was $134,877 compared to $7,060 on hand as of December 31,
2001.  The decline of cash is related to an increase in both personnel costs
and shareholder relations' expenditures.

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.  The Company is seeking exploration partners on its
various oil and gas concessions located in Australia.

A Private Placement Memorandum has been prepared to raise working capital
for the company's operations.  Subsequent to the end of the fiscal year,
energy prices have improved from $18.00 per barrel to $28.00 per barrel
making the Private Placement of the Company's common stock more appealing to
accredited investors.

RESULTS OF OPERATIONS

The Company's oil and gas revenues have remained approximately the same for
the past two years.  In 2001 the revenues were $10,574 compared to $11,451
in 2000.  Other income for the Company includes interest earned in 2000 of
$10,919 compared to $2,575 for 2001.  The decline in interest income is
attributable to having lower cash amounts on hand.

During the year the Company borrowed $20,000 from two of its principal
shareholders and prior to year-end borrowed $250,000 from the First National
Bank of Cisco, Texas.

The net loss for the year ended December 31, 2000 was $59,726 compared to a
net loss of $179,411 for the year ended December 31, 2001.  The $119,685
increase in loss incurred is directly related to the additional expenditures
in shareholder relations ($69,246), personnel costs ($66,210) and
professional fees ($16,001).  Total operating expenses were $178,814 for the
year ended December 2001 compared to $63,051 for the previous year.  The
increase in expenses mentioned were initiated during the year to promote the
Company following its listing on the OTC-NASDAQ Bulletin Board (Symbol:
AUCAF) on December 21, 2000.

Management is optimistic about the drilling planned on its Australian
interests and the new applications planned for the year 2002.

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

                                     12

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
    Statement of Operations
    Statement of Stockholders' Equity
    Statement 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.

                                                   Date First
                                 Position With      Elected
        Name              Age     the Company     as Director
  --------------------   ----  ----------------  -------------
    Larry Braun           58       Director          1997
    Kenneth W. Campbell`  72       Director          1997
    Robert Kamon          74       Director &        1997
                                    Secretary
    William A. Randall    61       Director          1997
    Ely Sakhai            50       Director &        1997
                                    President

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.




                                     13

                                                   Date First
                                 Position With      Elected
        Name              Age     the Company      as Officer
  --------------------   ----  ----------------  -------------
    Robert Kamon          74    Secretary and        1997
                                  Director
    Ely Sakhai            50    President and        1997
                                  Director

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

Larry Braun, Director, was president and owner of Cordoba Resources, Ltd.
previous to June 1993.  Between June 1993 and May 1995, he was President of
Senercorp Ventures, Inc.  Since May 1995, he has been a Vice President of
Carpatsky Petroleum in Calgary, Alberta, Canada.

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.

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.

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.

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.


ITEM 10.  EXECUTIVE COMPENSATION

Value of the office space used by ACOR was $ 1,200.00* for 2001.

Value of the time cost by ACOR executives $ 8,000.00* for 2001.

*These have been recorded as expenses and contributed capital in the
financials 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, 2002 by each of

                                     14

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     Percent
            Name and                          Beneficially       of
      Address of Stockholder                      Owned         Class
  --------------------------------------     ----------------  -------
  Tensleep Oil & Production, Inc.*               908,000        17.46%
  1304 Avenue L
  Cisco, Texas   76437

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

  Ken Campbell                                   100,000         1.92%
  307 Triune Bay
  Calgary, Alberta T1X 1G4
  Canada

  Robert Kamon**                               1,500,000        28.84%
  1304 Avenue L
  Cisco, Texas  76437

  William A. Randall                              20,000         0.38%
  2100-1075 W. Georgia St.
  Vancouver, British Columbia V6E 3G2
  Canada

  Ely Sakhai                                   1,400,000        26.92%
  10 Windsor Dr.
  Old Westbury, New York 11568

  All officers and directors as a group        3,020,000        58.06%


  Jan Soleimani                                  800,000        15.38%
  21 Windsor Dr.
  Old Westbury, New York   11568

  *Tensleep Oil & Production, Inc. (Tensleep) is controlled by Robert Kamon.
  Robert Kamon owns 50% of the shares of Tensleep.

  **Robert Kamon (592,000 shares) and Tensleep's (908,000 shares) holdings
  are included together in Robert Kamon's ownership percentage.

Note: 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

                                     15

Kamon, prior to the Company 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, currently President of ACOR, presently each own 50%
working interest in Areas CO2000-A, CO2000-B, and CO2000-E.

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.

Robert Kamon is President of International Oil Lease Service Corp.  Mr.
Kamon is also President of Tensleep Oil & Production, Inc.  International
Oil Lease Service Corp. is in the business of applying for and acquiring oil
and gas concessions in Australia; therefore, its activities may involve a
conflict of interest with the Company.

Tensleep Oil & Production, Inc., controlled by Robert Kamon, is in the
business of oil and gas exploration and its activities may involve a
conflict of interest with the Company.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

    None

                                 SIGNATURES

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

                                          AUSTRALIAN-CANADIAN OIL
                                          ROYALTIES LTD.

Dated: April 13, 2001                     /s/    Ely Sakhai
                                          Ely Sakhai, President & Director

Dated:  April 13, 2001                    /s/    Robert Kamon
                                          Robert Kamon, Secretary & Director

Dated: April 13, 2001                     /s/    Ken Campbell
                                          Ken Campbell, Director

Dated: April 13, 2001                     /s/    Larry Braun
                                          Larry Braun, Director

Dated: April 13, 2001                     /s/    William A. Randall
                                          William A. Randall, Director

                                     16





                   AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.




                       INDEX TO FINANCIAL STATEMENTS



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

  Balance Sheets as of December 31, 2001 and 2000  .  .  .  .  .  .   F-3

  Statements of Operations for the years ended
            December 31, 2001 and 2000 .  .  .  .  .  .  .  .  .  .   F-4

  Statement of Stockholders' Equity for the years ended
            December 31, 2001 and 2000 .  .  .  .  .  .  .  .  .  .   F-5

  Statements of Cash Flows for the years ended
            December 31, 2001 and 2000 .  .  .  .  .  .  .  .  .  .   F-7

  Notes to Financial Statements  .  .  .  .  .  .  .  .  .  .  .  .   F-8











                                    F-1





             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, 2001 and 2000, 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, 2001, and 2000, 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 12 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 12.  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

April 4, 2002







                                    F-2

                   Australian-Canadian Oil Royalties Ltd.
                               Balance Sheets
                      As of December 31, 2001 and 2000

                                                      2001              2000
                                                    ---------        ---------
                              Assets
CURRENT ASSETS
  Cash                                              $   7,060        $ 134,877
  Cash-restricted                                     250,000               -
  Accounts receivable                                   1,917            1,578
  Accrued interest receivable                              -             1,519
  Prepaid expenses                                      1,225            1,281
                                                    ---------        ---------
    Total Current Assets                              260,202          139,255
                                                    ---------        ---------
PROPERTY AND EQUIPMENT
  Oil and gas properties                              383,672          378,407
  Accumulated depletion                               (26,569)         (18,436)
                                                    ---------        ---------
    Net Property and Equipment                        357,103          359,971
                                                    ---------        ---------
OTHER ASSETS
  Investment in equity method investee                     54               54
  Organization Costs (net of accumulated amor-
    tization of $2,513 and $1,984 respectively)           132              661
                                                    ---------        ---------
     Total Other Assets                                   186              715
                                                    ---------        ---------
    TOTAL ASSETS                                    $ 617,491        $ 499,941
                                                    =========        =========

                Liabilities & Stockholders' Equity

CURRENT LIABILITIES
  Accounts payable                                  $   1,600        $   1,807
  Loans from officers                                  20,000               -
  Note payable to bank                                250,000               -
                                                    ---------        ---------
    Total current liabilities                         271,600            1,807
                                                    ---------        ---------
STOCKHOLDERS' EQUITY
  Preferred stock no par (50,000,000 shares
    authorized, none outstanding)                          -                -
  Common stock, no par (50,000,000 shares
    authorized, 5,201,500 and 5,150,000 shares
    respectively outstanding)                         620,473          602,448
  Additional paid in capital                           24,100           14,900
  Accumulated deficit                                (298,388)        (118,977)
  Other comprehensive income:
    Foreign currency translation adjustment              (294)            (237)
                                                    ---------        ---------
    Total Stockholders' Equity                        345,891          498,134
                                                    ---------        ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $ 617,491        $ 499,941
                                                    =========        =========

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

                   Australian-Canadian Oil Royalties Ltd.
               Statements of Income and Comprehensive Income
               For the years ended December 31, 2001 and 2000




                                                       2001            2000
                                                    ---------        ---------
OPERATING REVENUES
  Oil & gas revenues                                $  10,574        $  11,451

OPERATING EXPENSES
  Depletion and amortization                            8,662            8,539
  Personnel costs                                      66,210           26,793
  Professional fees                                    14,594           15,321
  Adjustment for excess costs                          16,001            6,861
  Shareholder relations                                69,246              799
  General and administrative expenses                  14,675           16,189
                                                    ---------        ---------
     Total Operating Expenses                         189,388           74,502
                                                    ---------        ---------
(LOSS) FROM OPERATIONS                               (178,814)         (63,051)

OTHER INCOME
  Interest                                              2,575           10,919
  Equity in loss of investee                               -            (4,159)
                                                    ---------        ---------

(LOSS) BEFORE INCOME TAXES                           (176,239)         (56,291)

Australian income taxes                                 3,172            3,435
                                                    ---------        ---------

       NET LOSS                                      (179,411)         (59,726)


OTHER COMPREHENSIVE INCOME:
  Foreign currency translation adjustment                 (57)             (84)
                                                    ---------        ---------
   TOTAL COMPREHENSIVE LOSS                         $(179,468)       $ (59,810)
                                                    =========        =========

Net loss per weighted average share outstanding     $   (0.03)       $   (0.01)
                                                    =========        =========

Weighted average shares outstanding                 5,151,693        5,150,000
                                                    =========        =========




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

                   Australian-Canadian Oil Royalties Ltd.
                     Statement of Stockholders' Equity
               For the years ended December 31, 2001 and 2000



                                                                   Accumulated
                                           Additional Accumulated    Other
                             Common Stock    Paid In   Earnings/  Comprehensive
                           Shares   Amount   Capital   (Deficit)      Income
                         --------- --------- --------  ---------    ---------

BALANCES, 01/01/00       5,150,000 $ 602,448 $  9,000  $ (59,251)   $    (153)

Additional contributed
  capital                       -         -     5,900         -            -
Net loss                        -         -        -     (59,726)          -
Other comprehensive
  income:
 Foreign currency
 translation adjustment         -         -        -          -           (84)
                         --------- --------- --------  ---------    ---------

BALANCES, 12/31/00       5,150,000   602,448   14,900   (118,977)        (237)

Stock issued for
  services                  51,500    18,025       -          -            -
Additional contributed
  capital                       -         -     9,200         -            -
Net loss                        -         -        -    (179,411)          -
Other comprehensive
  income:
 Foreign currency
 translation adjustment         -         -        -          -           (57)
                         --------- --------- --------  ---------    ---------

BALANCES, 12/31/01       5,201,500 $ 620,473 $ 24,100  $(298,388)   $    (294)
                         ========= ========= ========  =========    =========









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, 2001 and 2000


                                                           2001        2000
                                                        ---------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                $(179,411)   $ (59,726)
Adjustments to reconcile net (loss) to net cash
  provided by operations:
  Depletion and amortization                                8,662        8,539
  Value of expenses contributed by officers                 9,200        5,900
  Stock issued for services                                18,025           -
  Adjustment for foreign currency translation                  56          (84)
  Equity in loss of investee                                   -         4,159
  Adjustment for excess costs                              16,001        6,861
Changes in:
  Receivables                                               1,180       (1,211)
  Prepaid expenses                                            (57)          61
  Accounts payable                                           (207)         528
                                                        ---------    ---------
NET CASH (USED) BY OPERATING ACTIVITIES                  (126,551)     (34,973)
                                                        ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Oil & Gas Properties                                    (21,266)     (76,302)
                                                        ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable to officers                  20,000           -
  Proceeds from bank notes                                250,000           -
                                                        ---------    ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                 270,000           -
                                                        ---------    ---------

  Increase/(Decrease) in cash for period                  122,183     (111,275)

  Cash and cash equivalents, beginning of period          134,877      246,152
                                                        ---------    ---------
Cash and cash equivalents, end of period                $ 257,060    $ 134,877
                                                        =========    =========

SUPPLEMENTAL DISCLOSURES:

  Cash payments for:
    Interest                                            $     -      $      -
    Australian income taxes                                3,105         3,493

  Noncash Investing and Financing Activities:
    Contributed expenses                                   9,200         5,900
    Stock issued for services                             18,025            -





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

                   Australian-Canadian Oil Royalties Ltd.
                       Notes to  Financial Statements
                         December 31, 2001 and 2000


GENERAL:

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.


NOTE 1:   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.  Costs are recorded in cost
   centers on a country-by- country basis.  At present, all of the Company's
   oil and gas properties consist of overriding royalty interests and are
   located in a single cost center - Australia.  The Company has not
   participated in the exploration and development of proved oil and gas
   properties.  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.  Sales or
   abandonments of properties are accounted for as adjustments of overall
   capitalized costs with no gain or loss recognized.

   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.

Investments in Equity Method Investee

   The Company's investment of 20% of the common stock of Cooper Basin Oil
   and Gas, Inc. was carried at cost because the activities of CBOG were
   immaterial through the end of 1999.  During 2000, CBOG's activity was
   recorded on the equity basis and the investment is reported at the
   Company's equity in the remaining assets of CBOG.  CBOG had no activity
   during 2001.

                                    F-7

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 $529
   for each of 2001 and 2000.  These amounts are included with depletion
   expense for presentation of depletion and amortization.

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, 2001, 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 forwards                December 31,
        -------------------                ------------
           $   4,151                          2004
              36,557                          2005
              18,543                          2006
              52,865                          2007
             163,410                          2008
           ---------
           $ 275,527
           =========

   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
   $126,742 and $51,574 in 2001 and 200, 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.

   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
   $3,172 and $3,435 in 2001 and 2000, respectively.


                                    F-8

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 5,151,693 and 5,150,000 for 2001
   and 2000, 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
amounts is restricted under the terms of the collateral agreement.


NOTE 3:   ACCOUNTS RECEIVABLE

At December 31, 2001 and 2000 the Company has accrued receivables for oil
and gas production from its Australian overriding royalty interests totaling

                                    F-9

$1,917 and $1,578, 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 or
2000.  Adjustments in the balance occur with fluctuations in the exchange
rates.  Balances at December 31, 2001 and 2000 were $US1,224 and $US1,282.


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 as described in NOTE 5 below.  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, ATP 582 was assigned from
CEO 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 1/2% in assigned overriding royalty
interests (including the 2% interest) in addition to the standard 10%
royalty retained by the Queensland government.  During 2001, the Company
paid another $2,266 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 2, and
$1,450,000 in the third year. These concessions lie under 1,698,348 surface
acres.  These commitments will not commence until native title
considerations have been negotiated.

During 2001, the Company purchased a .05% overriding royalty interest under
permit VIC/P45 for $19,000.  This is an offshore prospect that the Company
believes has high production potential.

                                    F-10

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

                                           2001              2000
                                        ---------         ---------
   Acquisition cost                     $ 398,558         $ 377,292
   Assignment and transfer costs            7,976             7,976
   Less allowance for excess costs        (22,862)           (6,861)
                                        ---------         ---------
        Total                             383,672           378,407
   Less accumulated depletion             (26,569)          (18,436)
                                        ---------         ---------
      Net Oil and Gas Properties        $ 357,103         $ 359,971
                                        =========         =========

The costs 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 $8,133 and $8,010 for 2001 and
2000.

Additionally, these costs are subjected to a "ceiling" test based on
reported reserves.  It has been determined that book values  exceed the
ceiling test at December 31, 2001 and 2000.  Adjustments to reduce the
carrying values according to the ceiling test were $16,001 in 2001 and
$6,861 in 2000.


NOTE 6:   NOTES PAYABLE

During September, October, and November 2001, the Company borrowed a total
of $20,000 due in one year 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 bears interest at 4.5% and each note is due
one year from its date of origination.

On December 28 and December 31, 2001, the Company borrowed $100,000 and
$150,000, respectively, from the First National Bank of Cisco.  These notes
bear interest at 4%, are due on March 29 and April 1, 2002, respectively,
and are collateralized by certificates of deposit in the Company's name held
by the bank.


NOTE 7:   TRANSACTIONS WITH RELATED PARTIES

During 1997, the Company issued stock for the package of overriding royalty
interests as described in NOTE 4 above.  Since these properties were
acquired from related parties (controlling stockholders after the
transaction), they were recorded by the Company at the transferors' cost
basis. On May 19, 1997, the Company acquired 60% of these interests from Ely
Sakhai, Jan Soleimani and Mike Altamura (the Sakhai group) for 2,400,000
shares of the Company's common stock.  The Sakhai group had previously
acquired these royalties from Australian Grazing and Pastoral Co., Pty. Ltd.
(AGP) at a cost of $300,000. There was no affiliation between the Sakhai

                                    F-11

group and AGP.  Therefore, this transaction established the cost basis of
the Sakhai group. This value, in turn, became the cost basis for recording
the properties as received by the Company in exchange for its stock.  On May
22, 1997, the Company acquired the remaining 40% of the overriding royalty
package from AGP and International Oil Lease Service Corp. (IOLS) for
1,600,000 shares of the Company's common stock.  The cost basis of AGP and
IOLS in these royalties was not susceptible to reasonable, cost-effective
substantiation.  As a result, this portion of the royalty package was
recorded by the Company at no cost ($0).

Office space and time provided, with no cash outflows by the Company, by
officers had estimated unpaid values of $9,200 and $5,900 during 2001 and
2000.  These amounts have been reported as operating expenses and also
recorded as additional paid-in capital in their respective years.

During 2000 and 2001, the Company reimbursed commonly-controlled entities
for personnel and office expenses totaling $16,643 and $1,632, respectively.

As discussed at Note 5, the Company was successful in applications during
2000 for three new South Australia concessions.  In the application process,
Australian Grazing & Pastoral Co., PTY. Ltd. and International Oil Lease
Service Corp. paid various expenses and provided various services to the
Company.  A total of $74,261 was paid to these entities in this process.
Some of these costs were merely passthrough items allowing a monetary
conversion to provide for payment in Australian dollars.  Other costs were
for services rendered by these entities.

As discussed at Note 6, the Company borrowed a total of $20,000 from two of
its officers in order to fund administrative costs and efforts to promote
the Company's name and availability.


NOTE 8:   FOREIGN OPERATIONS

As noted above, the Company was incorporated in Canada.  Additionally, the
Company operates primarily in Australia where all of its properties are
presently located.  All revenues reported by the Company during 2001 and
2000 were received from Australian oil and gas royalty interests.  Depletion
expense and Australian income taxes reported by the Company during 2001 and
2000 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 2001 and the Company has no current commitments with CBOG.

                                    F-12


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.


NOTE 11:   CONTINGENCY

The package of Australian overriding royalty interests acquired by the
Company in 1997 includes 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 the stamp duty, charged by
the Australian government, for any previous assignment between parties that
has not been paid.

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, 2001, no litigation has been undertaken.  Legal counsel has
advised the Company that the expected cost of the litigation process will be
in the range of $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 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, 2001 at the Company's primary bank exceeded federally insured
limits by $150,090.


NOTE 13:   GOING CONCERN CONSIDERATIONS

As of December 31, 2001, 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

                                    F-13

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 will be
successful.


NOTE 14:   SUBSEQUENT EVENTS

Subsequent to December 31, 2001, the Company has borrowed and additional
$10,000 from its officers in order to meet current operational expenses.


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, 2001 and 2000 and for the years then
ended.  All interests are in Australia.

                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 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.

                                                  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      -        -       -
    Discoveries                                    -   15,272       -       -
    Cumulative previous production             (2,270)     -    (1,839) (1,409)
    Current year production                    (2,137) (2,270)    (448)   (430)
                                               ------  ------   ------  ------
  Unrecovered reserves                         10,865  13,002    1,675   2,123
                                               ======  ======   ======  ======

          Results of Operations for Producing Activities
          For the Years Ended December 31, 2001 and 2000

                                                        2001        2000
                                                     ---------   ---------
Sales of oil and gas                                 $  10,574   $  11,451

Production costs (including taxes)                          -           -
Acquisition & exploration costs                         21,266          -
Depletion                                                8,133       6,142
                                                     ---------   ---------
Results of operations from producing activities
  (excluding corporate overhead)                     $ (18,825)  $   5,309
                                                     =========   =========

                                    F-13

All sales were to unaffiliated entities.  Amortization costs were $10.11 and
$7.60 per equivalent barrel for 2001 and 2000, respectively.


       Capitalized Costs Relating to Oil and Gas Producing Activities
                       At December 31, 2001 and 2000

                                                        2001        2000
                                                     ---------   ---------
   Unproved properties (not being amortized)         $ 282,962   $ 261,696
   Proved properties (being amortized)                 123,572     123,572
   Capitalized pre-acquisition costs                        -           -
                                                     ---------   ---------
   Total Capitalized Costs                             406,534     385,268

     Allowance for excess costs                        (22,862)     (6,861)
     Accumulated depletion                             (26,569)    (18,436)
                                                     ---------   ---------
   Net Capitalized Costs                             $ 357,103   $ 359,971
                                                     =========   =========

    Costs Incurred in Oil and Gas Property Acquisition, Exploration and
           Development For the Years Ended December 31, 2001 and 2000

                                                              Australia
                                                        2001        2000
                                                     ---------   ---------
Property acquisition costs:
   Proved                                            $      -    $      -
   Unproved                                             21,266      76,302
   Exploration costs                                        -           -
   Development costs                                        -           -
                                                     ---------   ---------
Total                                                $  21,266   $  76,302
                                                     =========   =========


                                    F-13