===============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

|X|  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITITES
     EXCHANGE ACT OF 1934. For the quarter ended January 31, 2002

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934




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

                                      Texas
                         (State or other jurisdiction of
                         incorporation or organization)

                                   76-0582614
                                (I.R.S. Employer
                               Identification No.)

                        8303 Southwest Freeway, Suite 950
                              Houston, Texas 77074
                     (Address of principal executive office)

                                 (713) 773-3284
                           (Issuer's telephone number)



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by  Section  12, 13 or 15(d) of the  Exchange  Act after  distribution  of
securities under a plan confirmed by a court Yes |_| No |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

At March 21, 2002 there were 41,501,449 shares of no par value common stock
outstanding.

Transitional Small Business Disclosure Format (Check one) Yes |_| No |X|

===============================================================================





<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

The unaudited financial  statements of the Company appearing at page F-1 through
F-10 hereof are incorporated by reference.

Item 2.     Management's Discussion and Analysis or Plan of Operation

On January 31, 2002, The Company had a working  capital  deficit of $ 6,261,627.
This is primarily due to net payables  assumed in the acquisition of oil and gas
properties, and the classification of the Company's secured debt as current. The
Company has begun to settle many of the assumed  payables for a  combination  of
cash and the Company's common stock.  Management believes that they will be able
to continue this.

On May 8, 1998,  the Company  entered into an asset  acquisition  transaction in
which it acquired its initial operating  assets.  Prior to this time the Company
had no employees or operations.

In exchange for its initial operating assets,  the Company issued 313,124 shares
of  common  stock,  30,000  shares  of  the  Company's  class  AA 6%  cumulative
convertible  preferred  stock and  assumed  $6.1  million  in  secured  debt and
$511,465 in accounts payable, net of accounts receivable and cash acquired.  The
secured  debt  assumed  by the  Company  is a  credit  facility  secured  by the
production on the acquired  producing  properties that allows the Company access
to a line of credit of up to $10 million with a national bank.

In  connection  with the above  transaction,  the  Company  additionally  issued
2,480,026  shares of common stock,  a warrant to purchase an additional  300,000
shares of common stock at $.10 per share,  and 500,000  shares of the  Company's
class  B  preferred   stock  to   subscribers   in  exchange  for  an  aggregate
consideration of $773,002 in cash and services.

On November 4, 1998, the Company  entered into an additional  asset  acquisition
transaction in which the Company issued  1,226,667  shares of common stock and a
$120,000  non-interest  bearing  note  and  assumed  $690,522  in bank  debt and
$600,954 in accounts  payable.  Subsequently,  the Company  issued an additional
500,000  shares of common  stock  under this  agreement.  The  Company  does not
believe any further shares will be issued to the Sellers under this agreement.

On March 7, 2000, the Company  closed a purchase and sale agreement  under which
the Company  issued  550,000  shares of common  stock.  In  accordance  with the
agreement,  the Company immediately repurchased 16,667 shares of common stock at
$3.00 per share. In addition,  the Company may be required to issue a maximum of
370,000 additional shares of common stock to the seller.

                                      -1-
<PAGE>

Liquidity and Capital Resources

On October 19, 2000,  the Company sold 543,197  shares of common stock  together
with a warrant to purchase 543,197 shares of common stock at $0.50 per share and
an undivided 2.2% working  interest in two  nonproducing  oil and gas wells to a
private investor for a total  consideration of $100,000.00 in cash. The investor
is also  entitled to recoup his  investment  out of future  production  from the
wells,  if any. On October 19, 2000,  the closing  price of the common stock was
$0.24 per share.  The proceeds of this transaction were used to fund development
of the Mustang Island Properties.

On October 27, 2000,  the Company sold 407,398  shares of common stock  together
with a warrant to purchase 407,398 shares of common stock at $0.50 per share and
an undivided 2.2% working  interest in two  nonproducing  oil and gas wells to a
private investor for a total  consideration of $100,000.00 in cash. The investor
is also  entitled to recoup his  investment  out of future  production  from the
wells,  if any. On October 27, 2000,  the closing  price of the common stock was
$0.155 per share. The proceeds of this transaction were used to fund development
of the Mustang Island Properties.

Both of the  transactions  in October  2000 were treated by the Company as loans
repayable out of production for accounting purposes. The stock issued was booked
at its fair  market  value and treated as a loan cost to be  amortized  over the
life of the loan.


On December 27, 2000,  the Company sold certain  interest in 5 wells  located in
McClain,  Oklahoma and  undivided 10% interest in 6 wells located on the Mustang
Island Property to Old Jersey Oil Ventures, LLC. for $1,000,000.00.  The brother
of the President of the Company is a principal in Old Jersey Oil Ventures,  LLC.
At the same time Old  Jersey  Oil  Ventures  LLC,  as holder of  $591,849.41  in
indebtedness  owed by the  Company,  agreed to exchange  such  indebtedness  for
3,945,663  shares of the  Company's  common stock.  This  represented a price of
$0.15 per share. On December 27, 2000, the closing price of the common stock was
$0.125. Old Jersey Oil Ventures, LLC also exercised warrants to purchase 400,000
shares of the  Company's  common stock at $0.10 per share.  All shares issued to
Old Jersey Oil Ventures,  LLC. were issued in a private transaction and may only
be transferred in a private  transaction or pursuant to an applicable  exemption
to the registration requirements. The Company is under no obligation to register
such shares. The proceeds of this transaction were used as follows:  $250,000.00
to make payments to general  creditors;  $300,000.00 to make a principal payment
to the lender under the  Company's  secured  indebtedness  as a condition to the
lender's  agreement to enter into the fifth  amendment  to the credit  agreement
described below;  $50,000 reserved for capital investment on properties owned by
the Company in St. Mary's Parish, Louisiana; and $400,000.00 reserved to pay the
costs of this  registration  and to pay  principal  and  interest  due under the
Company's credit agreement.

On December 27, 2000, the company entered into the Fifth Amendment to its credit
agreement. As a result of that agreement, the Company's indebtedness was reduced
by  $3,000,000  This   indebtedness   was  payable  in  (a)  three  (3)  monthly
installments  of $31,250.00  from January 15, 2001 through  March 15, 2001;  (b)
seven (7)  monthly  installments  of  $125,000.00  from April 15,  2001  through
October 15, 2001 and (c) a final  installment of $2,400,845.81  due November 15,
2001.  No further  borrowings  were  available.  All  financial  covenants  were
removed.  As a part of this amendment,  the Company issued 3,000 shares of Class
A-1  Cumulative  Convertible  Preferred  Stock to its  lender  in  exchange  for
$3,000,000 in outstanding  indebtedness  and pledged its interest in the Mustang
Island Properties as additional collateral to the lender. Under the terms of the
preferred  stock,  the holder of such stock is required to convert the preferred
stock into  shares of common  stock  immediately  upon the  registration  of the
common stock. Each share of preferred stock converts into an number of Initial

                                      -2-
<PAGE>
Shares  equal to $1,000  worth of common stock at a price equal to the lesser of
(i) $0.50 per share or (ii) ninety  percent  (90%) of the Average  Market Price.
The Average Market Price is defined as the average of the highest bid and lowest
asked prices of the common stock over a period of twenty-one consecutive Trading
Days ending on the Trading Day immediately  prior to the date of conversion.  In
addition,  following  conversion,  the holder of each  preferred  share prior to
conversion will also be entitled to receive a number of Contingent  Shares equal
to one hundred ten percent (110%) of the Liquidation Value of such share divided
by the Average  Market Price on the first  anniversary  of the  Conversion  Date
minus the number of Initial Shares.  The Liquidation Value is an amount equal to
all declared and unpaid  dividends and  distributions,  in any, on the preferred
stock plus $1,000.  The Company is required to register the resale of the common
stock with the  Securities  and  Exchange  Commission.  On December 17, 2001 the
closing price of the Common Stock,  which is quoted on the  Electronic  Bulletin
Board under the symbol "VECT", was $0.082 per share.

The Company  failed to make all of the  principal  payments  due under the Fifth
Amendment to its credit  agreement and on November 15, 2001 entered into a Sixth
Amendment  to its credit  agreement.  The note,  as amended,  was payable in one
monthly installment of $125,000 due on December 15, 2001 and a final installment
of $2,686,706 on January 15, 2002.

The Company  failed to make the  principal  payment due on December 15, 2001. On
December 17, 2001, the lender agreed to forebear exercising its rights under the
credit agreement,  as amended, as a result of the Company's failure to make such
payment. Such forebearance will automatically terminate on January 15, 2002 when
the credit agreement, as amended, terminates.

On January 15, 2002, the Company entered into the Seventh Amendment to the First
Amended  and  Restated  Credit  Agreement.  As  aresult of that  agreement,  the
termination  date of the  Company's  indebtedness  was extended  until April 15,
2002. The Company  agreed to make monthly  payments of principal and interest in
the amount of $25,000 through the  termination  date. The Company also agreed to
make a good faith attempt to sell certain of its  properties,  with the proceeds
of such sale to be used to retire the indebtedness.

For the  past  three  months,  the  Company's  oil and gas  revenues  have  been
sufficient  to satisfy its oil and gas  operating  expenses and a portion of the
interest   payments.   The  Company's  general  and   administrative   expenses,
development  costs and the  remainder of the interest  payments have been funded
primarily  from a single  transaction  involving the granting of an option which
has  expired.  Pursuant  to the Fifth  Amendment  to the Credit  Agreement,  the
Company  escrowed  $400,000 to pay  principal  and  interest due pursuant to the
Fifth Amendment. The company anticipates that wells currently being brought into
production will be sufficient to meet its obligations after April 2002. However,
there can be no  assurance  that this will occur.  It may be that an  additional
equity  funding will be required to meet the current  needs of the Company.  Any
inability of the Company to raise  additional  capital under such  circumstances
will limit the development of most of its oil and gas properties and may prevent
the  Company  from  meeting  its cash  requirements.  In any  event,  it will be
necessary  for the Company to obtain new financing or  renegotiate  the terms of
existing financing prior to Apri; 15, 2002. If the wells currently being brought
into production perform as expected such financing should be available; however,
there is no assurance  that such financing will in fact be available or that the
wells  will,  in  fact,  perform  as  expected.  In the  absence  of  such  well
performance,  new financing or renegotiation of existing financing,  the company
will not be able to meet the payment due under its credit agreement on April 15,
2002.

The Company is currently negotiating with many of the vendors for which accounts
payable were assumed in the asset acquisition transactions,  and believes that a
significant  portion of these payables can be satisfied  through the issuance of
common stock. If the Company is unsuccessful in these  negotiations,  additional
equity  funding may be needed in order to comply with the terms of the revolving
credit note.

The Company is aggressively  seeking additional property  acquisitions with near
term revenue generating capability and future development potential. The Company
is currently  evaluating  several potential  acquisitions  which would utilize a
combination  of the  issuance  of its  equity  securities  and  additional  debt
financing.

                                      -3-
<PAGE>
                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

The  Company is  involved  from time to time in  various  claims,  lawsuits  and
administrative  proceedings  incidental  to  its  business.  In the  opinion  of
management,  the  ultimate  liability  thereunder,  if  any,  will  not  have  a
materially adverse effect on the financial condition or results of operations of
the Company

Item 2.     Changes in Securities and Use of Proceeds

The  information  required by this item is  provided  in the Notes to  Financial
Statements  appearing at pages F-7 through F-10 hereof and are  incorporated  by
reference.

Item 3.     Defaults Upon Senior Securities

None

Item 4.     Submission of Matters to a Vote of Security Holders

None.

Item 5.     Other Information

None

Item 6.     Exhibits and Reports on Form 8-K

None

                                   SIGNATURES

In  accordance  with the Exchange Act, the  registrant  caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                        VECTOR ENERGY CORPORATION
                                        (Registrant)


                                        By  /S/ Randal B. McDonald, Jr,
                                            ------------------------------------
                                            Randal B. McDonald, Jr.
                                            Chief Financial Officer
                                            Principal Financial and Accounting
                                            Officer

                                            Date: March 22, 2002


                                        By  /S/ Stephen F. Noser,
                                            ------------------------------------
                                            Stephen F. Noser
                                            President
                                            Principal Executive Officer

                                            Date: March 22, 2002

                                      -4-

<PAGE>





















                            Vector Energy Corporation

                              FINANCIAL STATEMENTS

                                January 31, 2002

                                   (Unaudited)
















                                      F-1



<PAGE>
















                                    CONTENTS



                                                              Page
                                                              ----

UNAUDITED CONSOLIDATED BALANCE SHEET                          F-3 to F-4

UNAUDITED CONSOLIDATED STATEMENT OF INCOME                    F-5

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS                F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                    F-7 to F-10









                                      F-2


<PAGE>


                            Vector Energy Corporation
                           CONSOLIDATED BALANCE SHEET
                                January 31, 2002
                                   (Unaudited)






ASSETS

CURRENT ASSETS
  Cash                                                       $    113,398
  Certificates of deposit                                         100,000
  Revenue accounts receivable                                     158,906
  JIB accounts receivable                                          68,864
                                                             ------------
     Total current assets                                         441,168
                                                             ------------
PROVED OIL AND GAS PROPERTIES, USING THE
  FULL COST METHOD OF ACCOUNTING                               17,299,165


Less accumulated depreciation, depletion, amortization
  and impairment                                                  721,096
                                                             ------------
Net oil and gas properties                                     16,578,069
                                                             ------------
OTHER ASSETS
  Other property and equipment, less accumulated
    depreciation of $58,757                                        47,904
  Long term accounts receivable                                   136,642
  Deferred loan costs - net                                          -
  Other assets                                                     18,353
                                                             ------------
     Total other assets                                           202,899
                                                             ------------
                                                             $ 17,222,136
                                                             ============

    The accompanying notes are an integral part of the financial statements


                                      F-3

<PAGE>



                            Vector Energy Corporation
                           CONSOLIDATED BALANCE SHEET
                                January 31, 2002
                                   (Unaudited)



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Line of Credit                                             $  2,800,437
  Notes payable                                                    22,018
  Production payments payable                                   1,184,518
  Accounts payable - trade                                      1,384,799
  Royalties payable                                               427,423
  Working interest revenues payable                               168,403
  Taxes payable                                                   175,261
  Advances from related party                                     149,492
  Accrued payroll                                                 106,883
  Accrued dividends payable                                       280,000
  Accrued interest                                                  3,561
                                                             -------------
     Total current liabilities                                  6,702,795
                                                             -------------
STOCKHOLDERS' EQUITY
  Preferred stock class A-1, cumulative convertible;
    $1,000 par value per share, 3,000 shares authorized;
    issued and outstanding                                      3,000,000
  Preferred stock class B, noncumulative nonconvertible;
    $1 par value per share, 500,000 shares authorized;
    500,000 shares issued and outstanding                          50,000
Common stock, no par value; 100,000,000
    shares authorized; 35,284,286 shares issued and
    outstanding at January 31, 2002                             2,533,683
  Additional paid-in capital                                   19,711,553
  Retained earnings                                           (14,775,895)
                                                             -------------
     Total stockholders' equity                                10,519,341
                                                             -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 17,222,136
                                                             =============

    The accompanying notes are an integral part of the financial statements

                                      F-4


<PAGE>


                            Vector Energy Corporation
                        CONSOLIDATED STATEMENT OF INCOME
                                Three Months Ended
                                 January 31, 2002
                                   (Unaudited)





REVENUES

  Oil sales                                                  $      21,648
  Gas sales                                                        217,577
  Production byproducts                                              4,229
  Other income                                                      11,355
                                                             --------------
      Total revenues                                               254,809
                                                             --------------
EXPENSES

  Production taxes                                                  11,515
  Lease operating expense                                          187,258
  Depletion of oil and gas properties                               31,484
  Interest expense                                                  45,717
  General and administrative expense                               181,466
                                                             --------------
      Total expenses                                               457,440
                                                             --------------
Net Loss                                                        (  202,631)

Preferred Dividend                                                  60,000
                                                             --------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS                    $  (  262,631)
                                                             ==============

NET LOSS PER COMMON SHARE
   Basic                                                           $ (0.01)
                                                                   ========

 WEIGHTED AVERAGE NUMBER SHARES OUTSTANDING                     35,347,396
                                                             ==============


    The accompanying notes are an integral part of the financial statements

                                      F-5


<PAGE>


                            Vector Energy Corporation
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                Nine Months Ended
                                January 31, 2002
                                   (Unaudited)





CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                   $  (   262,631)
  Adjustments to reconcile net loss to
    net cash used by operating activities:
      Depletion of oil and gas properties                            31,483
      Depreciation expense                                            2,098
      Stock issued for consulting fees                               50,000
      Decrease in accounts receivable                                 2,775
      Increase in accounts payable                                   22,116
      Increase in royalties and revenues payable                     44,857
      Increase in accrued dividends payable                          60,000
      Increase in other current liabilities                           1,772
      Increase in other assets                                  (     6,000)
                                                             ---------------
         Net cash used by operating activities                  (    53,530)
                                                             ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Development Costs Incurred                                    (    25,893)
  Sales of oil and gas properties                                    40,000
                                                             ---------------
         Net cash provided by investing activities                   14,107
                                                             ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment on Line of Credit                                     (    11,269)
  Note repayments                                               (    13,075)
                                                             ---------------
         Net cash used by financing activities                  (    24,344)
                                                             ---------------
NET DECREASE IN CASH
  AND CASH EQUIVALENTS                                          (    63,737)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                               177,165
                                                             ---------------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                              $      113,398
                                                             ===============


    The accompanying notes are an integral part of the financial statements

                                      F-6


<PAGE>


                            Vector Energy Corporation
              Notes to Unaudited Consolidated Financial Statements
                                January 31, 2002

Management's Representation of Interim Financial Information

The  accompanying  financial  statements  have been  prepared  by Vector  Energy
Corporation (The Company) without audit pursuant to the rules and regulations of
the  Securities  and  Exchange  Commission.  Certain  information  and  footnote
disclosure normally included in the financial  statements prepared in accordance
with generally accepted accounting  principles have been condensed or omitted as
allowed  by such  rules  and  regulations,  and  management  believes  that  the
disclosures are adequate to make the information presented not misleading. These
financial  statements  include all of the  adjustments  which, in the opinion of
management,  are  necessary to a fair  presentation  of  financial  position and
results of operations.  These financial statements should be read in conjunction
with the audited financial  statements included in the Company's Form 10-KSB, as
of April 30, 2001 and Form 10-QSB as of October 31, 2001.

Business and Organization

Vector Energy  Corporation,  a Texas corporation  (together with its subsidiary,
Vector Exploration,  Inc.,  collectively,  "the Company") was formed on June 18,
1998 as a result of an  agreement  and plan of  reorganization.  The  Company is
primarily engaged in the acquisition, development, production and exploration of
oil and natural gas properties in the United States.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly  owned  subsidiary.   All  significant   intercompany  accounts  and
transactions have been eliminated in consolidation.

Oil and Gas Properties

The  Company  follows  the full cost  method of  accounting  for its oil and gas
properties.  All costs associated with property  acquisition,  exploration,  and
development  activities are capitalized in a single,  United States cost center.
Internal  costs  directly  identified  with  the  acquisition,  exploration  and
development  activities of the Company are also  capitalized.  Capitalized costs
are amortized on the unit-of-production basis using proved oil and gas reserves.
Capitalized  costs are  limited to the  present  value of  estimated  future net
revenues  less  estimated  future  expenditures  using a discount  factor of ten
percent.  Sales  and  abandonments  of oil and gas  properties  are  treated  as
reductions of the capitalized cost pool. At January 31,2001, there were no costs
of unproved properties or major development projects included in the capitalized
cost pool.

Other Property and Equipment

Other  property  and  equipment  of the Company  consists  primarily of computer
equipment,  vehicles and  furniture  and fixtures,  which are  depreciated  over
estimated  useful lives,  ranging from three to seven years,  on a straight-line
basis.

Loss Per Share

Loss per share has been calculated  using the weighted  average number of shares
outstanding. Outstanding warrants and other potentially dilutive securities have
been excluded from the  calculation of loss per share,  as their effect would be
anti-dilutive.

                                      F-7

<PAGE>


                           Vector Energy Corporation
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                January 31, 2002

Statement of Cash Flows

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid debt instruments  purchased with an original  maturity of three months or
less to be cash equivalents.

The following is a summary of all  significant  noncash  investing and financing
activities  and payments made for interest and income taxes for the period ended
January 31, 2002:

Noncash activities:
     Common stock issued for consulting fees                    $    50,000
     Common stock issued in settlement of payables                   45,716
Cash payments:
     Interest                                                   $    51,030

Acquisitions of Oil and Gas Properties

On May 8, 1998, the Company  acquired  various working and royalty  interests in
wells located in Texas,  Louisiana and Oklahoma. To effect the transaction,  the
Company issued 30,000 shares of class AA preferred stock,  valued at $3,000,000,
and 313,124 shares of common stock, valued at $939,372. In addition, the Company
assumed  $6,100,000  in bank  debt and  $511,465  in  accounts  payable,  net of
accounts receivable and cash acquired.  The Company has capitalized  $251,704 in
expenses  incurred  in  conjunction  with this  transaction.  Subsequently,  the
Company  issued  116,014  shares  of  common  stock,  valued  at  $163,065,  for
additional working interests in certain of the properties acquired.

On November 4, 1998, the Company  acquired  various  working  interests in wells
located in Louisiana, Texas and Oklahoma. To effect the transaction, the Company
issued  1,226,667 shares of common stock,  valued at $1,840,000,  and a $120,000
non-interest  bearing  note payable to the  sellers.  In  addition,  the Company
assumed $690,522 in bank debt and $600,954 in accounts payable.  The Company has
capitalized  $15,145 in expenses  incurred in conjunction with this transaction.
The  Company  was also  required  to expend a minimum  of  $500,000  in  capital
investment on the properties  acquired within nine months.  Because such capital
investment  was not made,  the sellers  were  entitled to receive an  additional
500,000 shares of common stock. Subsequently,  the Company exchanged the working
interests  acquired in certain  properties  in Texas and $30,000 for  additional
working interests in the properties acquired in Louisiana.

On March 7, 2000,  the  Company  closed a  purchase  and sale  agreement  with a
company,  which is a debtor in possession in a Chapter 11 Bankruptcy.  Under the
agreement, the Company acquired all of the Bankrupt Debtor's interest in a block
located in the Offshore Texas,  Mustang Island Area for 550,000 shares of common
stock  valued  at  $550,000.  In  accordance  with the  agreement,  the  Company
immediately  repurchased 16,667 shares of common stock at $3.00 per share, for a
total of $50,000. Under the terms of the agreement,  in the event that the daily
rate of production from the properties  acquired averages at least 5,000 Mcf per
day over a  complete  calendar  month the  seller  has the right to put  150,000
shares of common stock to the Company at $3.00 per share. If the seller fails to
exercise such right,  the Company has the right to call 150,000 shares of common
stock at $3.00 per share.  In  addition,  the Company may be required to issue a
maximum of 370,000  additional  shares of common  stock to the seller based upon
the required future development costs associated with the properties acquired

                                      F-8

<PAGE>


                            Vector Energy Corporation
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                January 31, 2002


Line of Credit

The  Company  has a $10  million  revolving  credit  note with the  First  Union
National  Bank which  terminates  on April 15,  2002.  Interest on the note is
payable  monthly at a floating  rate which was 5.75% at January 31, 2002.  The
borrowing  base  under  the  note is  determined  periodically  based  upon  the
collateral  value  assigned  to  the  mortgaged  properties,  and  is  currently
$2,800,437.   The  borrowing  base  may  be  redetermined  at  the  Bank's  sole
discretion.  Principle  payments were scheduled at $125,000 on December 15, 2001
and the balance of $2,686,706 on January 15, 2002. In addition,  the note places
certain  restrictions on the use of the revenues from the mortgaged  properties.
The Company does not  anticipate  that the borrowing  base under the note can be
increased  without incurring  development costs which are significantly  greater
than those required under the terms of the note.

On December 27, 2000, the company entered into the Fifth Amendment to its credit
agreement.  As a result of that  agreement,  the  Company's  note was reduced by
$3,000,000.  The note,  as amended was payable in six  monthly  installments  of
$125,000.  from May 15, 2001 through October 15, 2001 and a final installment of
$2,400,846  due November 15, 2001. No further  borrowings  were  available.  All
financial  covenants  were  removed.  As a part of this  amendment,  the Company
issued 3,000 shares of Class A-1 Cumulative  Convertible  Preferred Stock to its
lender in exchange for  $3,000,000 in outstanding  indebtedness  and pledged its
interest  in the Mustang  Island  Properties  as  additional  collateral  to the
lender.  Under the terms of the  preferred  stock,  the  holder of such stock is
required to convert the preferred stock into shares of common stock  immediately
upon the  registration  of the  common  stock.  Each  share of  preferred  stock
converts into an number of Initial  Shares equal to $1,000 worth of common stock
at a price  equal to the  lesser of (i) $0.50 per share or (ii)  ninety  percent
(90%) of the Average  Market Price.  The Average  Market Price is defined as the
average of the highest bid and lowest  asked  prices of the common  stock over a
period  of  twenty-one  consecutive  Trading  Days  ending  on the  Trading  Day
immediately prior to the date of conversion. In addition,  following conversion,
the holder of each preferred  share prior to conversion will also be entitled to
receive a number of Contingent Shares equal to one hundred ten percent (110%) of
the  Liquidation  Value of such share divided by the Average Market Price on the
first anniversary of the Conversion Date minus the number of Initial Shares. The
Liquidation  Value is an amount equal to all declared and unpaid  dividends  and
distributions,  in any,  on the  preferred  stock plus  $1,000.  The  Company is
required  to register  the resale of the common  stock with the  Securities  and
Exchange Commission.  On October 31, 2001 the closing price of the Common Stock,
which is quoted on the Electronic  Bulletin  Board under the symbol "VECT",  was
$0.115 per share.

The Company  failed to make all of the  principal  payments  due under the Fifth
Amendment to its credit  agreement and on November 15, 2001 entered into a Sixth
Amendment  to its credit  agreement.  The note,  as amended,  was payable in one
monthly installment of $125,000 due on December 15, 2001 and a final installment
of $2,686,706 on January 15, 2002.

The Company  failed to make the  principal  payment due on December 15, 2001. On
December 17, 2001, the lender agreed to forebear exercising its rights under the
credit agreement,  as amended, as a result of the Company's failure to make such
payment. Such forebearance will automatically terminate on January 15, 2002 when
the credit agreement, as amended, terminates.

On January 15, 2002, the Company entered into the Seventh Amendment to the First
Amended  and  Restated  Credit  Agreement.  As  aresult of that  agreement,  the
termination  date of the  Company's  indebtedness  was extended  until April 15,
2002. The Company  agreed to make monthly  payments of principal and interest in
the amount of $25,000 through the  termination  date. The Company also agreed to
make a good faith attempt to sell certain of its  properties,  with the proceeds
of such sale to be used to retire the indebtedness.


Notes Payable

The Company is obligated under unsecured installment notes, which were issued to
various  vendors in  settlement  of  accounts  payable.  The  notes,  which bear
interest at rates ranging from 9.0% to 10.5%, call for monthly payments totaling
$9,609 at January 31, 2002. The outstanding  principal  balances totaled $22,018
at January 31, 2002.


                                      F-9
<PAGE>
                           Vector Energy Corporation
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                January 31, 2002

Stockholder's Equity

Preferred Stock

The Company has 20,000,000 authorized shares of preferred stock.

The  Company  is  authorized  to issue  3,000  shares  of Class  A-1  Cumulative
Convertible  Preferred  Stock (Class A-1 Preferred  Stock).  Class A-1 Preferred
Stock was issued for $1,000 per share and is entitled to receive cumulative cash
dividends  at the annual  rate of 8%  payable  annually  in  arrears  commencing
December 1, 2001 when and as declared by the Board of  Directors.  All shares of
Class A-1  Preferred  Stock  were  issued  to the  Company's  secured  lender on
December 27, 2000 as  consideration  for the reduction in the Company's  secured
indebtedness by $3,000,000.00  and remain  outstanding.  The Class A-1 Preferred
Stock will convert to common stock upon the effective date of this registration.
Each  share of Class  A-1  Preferred  Stock  will  convert  into  shares  of the
Company's  number of shares of common  stock equal to $100.00 per share plus all
accumulated and unpaid dividends (the "Liquidation Value") divided by the lesser
of $0.50 or 90% of the average of the highest bid and lowest asked prices of the
Common Stock over a period of twenty-one  consecutive Trading Days ending on the
Trading Day  immediately  prior to the date of conversion.  In addition,  on the
first  anniversary  of the  conversion,  each  holder may be entitled to receive
additional shares  ("Contingent  Shares") equal to 110% of the Liquidation Value
divided by the average of the highest bid and lowest  asked prices of the Common
Stock over a period of twenty-one consecutive Trading Days ending on the Trading
Day immediately prior to the first anniversary date of such conversion minus the
shares  received by such  holder  upon the  conversion.  If the  computation  of
Contingent  Shares results in a negative number then no Contingent  Shares shall
be issued.  Each share of Class A-1 Preferred Stock is entitled to cast a number
of votes equal to the number of shares of common  stock into which the Class A-1
Preferred Stock is convertible. Accrued and unpaid dividends totaled $280,000 at
January 31, 2002

The Company is authorized to issue  500,000  shares of Class B Preferred  Stock,
par value $1.00 per share. Class B Preferred Stock is subordinate to Class AA 6%
Preferred  Stock in  priority,  both of which are senior to any and all  capital
stock.  The holders of Class B Preferred  Stock are not  entitled to receive any
dividends.  As of January 31, 2002 500,000 shares of the Class B Preferred Stock
were issued and outstanding. The Class B Preferred Stock is redeemable in whole,
but  not in  part,  at  the  option  of the  Corporation  by  resolution  of the
Corporation's  Board of Directors  at anytime at $1.00 per share.  Each share of
Class B  Preferred  Stock  has the  voting  rights  equal to 100  shares  of the
Company's  common stock.  The holders of Class B shares are entitled to elect at
least two directors to the Board of Directors of the Corporation. The holders of
Class B Preferred  Stock voting as a class will have the right to remove without
cause at any time and replace any director such holders have elected.

Stock Options and Warrants

The Company has granted  options to certain key employees to purchase  2,080,000
shares of the Company's  common stock at purchase  prices  ranging from $0.15 to
$0.23 per share.  These options  expire on dates ranging from August 25, 2005 to
March 1, 2006 and are  non-transferable.  The  options,  which were  issued at a
price equal to or exceeding the market value of the underlying stock on the date
of the grant,  are not  intended to qualify as  incentive  stock  options  under
Internal  Revenue  Code  Section  422.  The Company  follows the  provisions  of
Statement of Financial  Accounting Standards No. 123, Accounting for Stock Based
Compensation (SFAS No. 123) using a Black Scholes option pricing model.

Also  outstanding  at January 31, 2002 are  warrants for the purchase of 950,595
shares of the Company's common stock at a purchase price of $0.50 per share. The
warrants expire on October 19, 2003 and are transferable.

                                      F-10
<PAGE>