===============================================================================
                                  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 July 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 September 12, 2002 there were 74,256,449 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-11 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 $ 6,942,667.
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.

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.

                                       -1-
<PAGE>

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 amended its credit agreement to reduce its
indebtedness by $3,000,000, reschedule principle payments, and remove all
financial covenants. Under the terms of the amended credit agreement, the
indebtedness was payable in three monthly installments of $31,250 beginning on
January 15, 2001, seven monthly installments of $125,000 beginning on April 15,
2001, and a final installment of $2,400,846 due on November 14, 2001. No further
borrowings are available. As part of the amended credit agreement, the Company
issued 3,000 shares of Class A-1 Cumulative Convertible Preferred Stock to the
bank in exchange for $3,000,000 in outstanding indebtedness and pledged its
interest in the Mustang Island properties as additional collateral under the
loan.

On November 15, 2001, the Company amended its credit agreement to change the
repayment schedule to $125,000 due on December 15, 2001 and the balance of
principal and accrued but unpaid interest due on January 15, 2002.

On January 1, 2002, the Company amended its credit agreement to change the
repayment schedule to $25,000 per month in principal and interest beginning on
January 31, 2002 with the balance of principal and accrued but unpaid interest
due on April 15, 2002. In addition, the Company agreed to either sell, or have
entered into binding agreements to sell, certain of its oil and gas properties
by February 20, 2002 or to enter into a binding agreement with a nationally
recognized oil and gas auction house by March 28, 2002 for the sale of such
properties. All of the proceeds from the sale of such properties would be used
to reduce the Company's indebtedness.

On April 1, 2002, the Company amended its credit agreement to extend the final
due date of principal and accrued but unpaid interest to June 24, 2002. In
addition, the date by which the Company had to enter into a binding contract
with an auction house was extended to April 30, 2002.

On June 24, 2002, the Company amended its credit agreement to extend the final
due date of principal and accrued but unpaid interest to July 24, 2002.

On July 24, 2002, the Company amended its credit agreement to remove the $25,000
per month payment and to extend the final due date of principal and accrued but
unpaid interest to August 24, 2002.

                                       -2-
<PAGE>

In accordance with the terms of the credit agreement, as amended, the Company
entered into a binding contract with an auction house on two separate occasions
for the sale of certain of its producing properties. On June 6, 2002, the
Company closed a sale of certain of its producing properties for total cash
consideration of $600,100. Net proceeds received from the sale, which totaled
$481,027, were used to pay down the Company's bank debt.

On September 10, 2002, the Company renegotiated the terms of its indebtedness.
Under the terms of the new agreement, the Company will pay $300,000 to its
lender by September 30, 2002. The Company will then be relieved of all payments
until December 2, 2002. The Company has the option on or before December 2, 2002
to pay the lender either an additional #300,000 in cash or $150,000 in cash and
$200,000 in production payments in exchange for the forgiveness of the remainder
of its indebtedness amounting to approximately $1.6 million. In addition, the
lender has agreed to convert all of its $3 million preferred stock into common
stock eauivalent to a 45% ownership position in the Company.

On August 30, 2002, the Company closed a sale of certain of its producing oil
and gas properties for total cash consideration of $301,600. Net proceeds
received from the sale, which totatled $276,697, were paid to the Company's
lender as part of the $300,000 payment due by September 30, 2002.

For the past three months, the Company's oil and gas revenues have been
sufficient to satisfy its oil and gas operating expenses and interest payments.
The Company's general and administrative expenses, development costs and debt
principal payments have been funded primarily from the proceeds from the sale of
stock. 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. 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 or financing, the company will not be able to
meet its financial obligations

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.

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-11 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: September 26, 2002


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

                                            Date: September 26, 2002

                                       -4-

<PAGE>






















                            Vector Energy Corporation

                              FINANCIAL STATEMENTS

                                  July 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-11









                                       F-2


<PAGE>


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






ASSETS

CURRENT ASSETS
  Cash                                                       $     14,686
  Certificates of deposit                                         100,000
  Revenue accounts receivable                                     114,922
  JIB accounts receivable                                          44,736
                                                             ------------
     Total current assets                                         274,344
                                                             ------------
PROVED OIL AND GAS PROPERTIES, USING THE
  FULL COST METHOD OF ACCOUNTING                               17,456,371


Less accumulated depreciation, depletion, amortization
  and impairment                                                1,034,413
                                                             ------------
Net oil and gas properties                                     16,421,958
                                                             ------------
OTHER ASSETS
  Other property and equipment, less accumulated
    depreciation of $66,309                                        40,352
  Long term accounts receivable                                   120,000
  Other assets                                                      9,353
                                                             ------------
     Total other assets                                           169,705
                                                             ------------
                                                                    $ 16,866,007
                                                             ============

    The accompanying notes are an integral part of the financial statements


                                       F-3

<PAGE>



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



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Line of Credit                                             $  2,740,170
  Notes payable                                                    32,289
  Production payments payable                                   1,184,518
  Accounts payable - trade                                      1,644,423
  Royalties payable                                               412,892
  Working interest revenues payable                               103,197
  Taxes payable                                                   177,779
  Advances from related party                                     260,598
  Accrued payroll                                                 106,883
  Accrued dividends payable                                       400,000
  Accrued interest                                                154,262
                                                             -------------
     Total current liabilities                                  7,217,011
                                                             -------------
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; 62,531,449 shares issued and
    outstanding at July 31, 2002                                2,791,583
  Additional paid-in capital                                   20,992,253
  Retained earnings                                           (17,184,840)
                                                             -------------
     Total stockholders' equity                                 9,648,996
                                                             -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 16,866,007
                                                             =============

    The accompanying notes are an integral part of the financial statements

                                       F-4


<PAGE>


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





REVENUES

  Oil sales                                                  $      51,540
  Gas sales                                                        124,420
  Production byproducts                                              4,577
  Interest Income                                                      522
                                                             --------------
      Total revenues                                               181,059
                                                             --------------
EXPENSES

  Production taxes                                                  11,584
  Lease operating expense                                          155,835
  Depletion of oil and gas properties                               71,893
  Interest expense                                                  58,192
  General and administrative expense                               656,625
                                                             --------------
      Total expenses                                               954,129
                                                             --------------
Net Loss                                                        (  773,070)

Preferred Dividend                                                  60,000
                                                             --------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS                    $  (  833,070)
                                                             ==============

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

 WEIGHTED AVERAGE NUMBER SHARES OUTSTANDING                     55,947,711
                                                             ==============


    The accompanying notes are an integral part of the financial statements

                                       F-5


<PAGE>


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





CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                   $  (   773,070)
  Adjustments to reconcile net loss to
    net cash used by operating activities:
      Depletion of oil and gas properties                            71,893
      Depreciation expense                                            3,776
      Stock issued for consulting fees                              495,500
      Increase in accounts receivable                           (     3,692)
      Increase in accounts payable                                  128,572
      Increase in royalties and revenues payable                     20,702
      Increase in accrued dividends payable                          60,000
      Increase in other current liabilities                          27,888
                                                             ---------------
         Net cash provided by operating activities                   31,569
                                                             ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Development Costs Incurred                                    (    61,803)
                                                             ---------------
         Net cash used by investing activities                  (    61,803)
                                                             ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment on Line of Credit                                     (    36,234)
  Note repayments                                               (    20,387)
                                                             ---------------
         Net cash used by financing activities                  (    56,621)
                                                             ---------------
NET DECREASE IN CASH
  AND CASH EQUIVALENTS                                          (    86,855)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                               101,541
                                                             ---------------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                              $       14,686
                                                             ===============


    The accompanying notes are an integral part of the financial statements

                                       F-6


<PAGE>


                            Vector Energy Corporation
              Notes to Unaudited Consolidated Financial Statements
                                  July 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, 2002.

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 July 31, 2002, 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)
                                  July 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
July 31, 2002:

Noncash activities:
     Common stock issued for consulting fees                    $   495,500
     Common stock issued in settlement of payables                   39,000
Cash payments:
     Interest                                                   $    39,349

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)
                                  July 31, 2002


Line of Credit

The Company has a $10 million revolving credit note with a national bank, which
terminated on November 15, 2001. Interest on the note is payable monthly at a
floating rate, which was 5.75% at July 31, 2002. The borrowing base under the
note is determined periodically based upon the collateral value assigned to the
mortgaged properties, and was $2,740,170 at July 31, 2002. The borrowing base
may be redetermined at the Bank's sole discretion. The Company does not
anticipate that the borrowing base under the note can be increased without
incurring significant development costs.

On December 27, 2000, the Company amended its credit agreement to reduce its
indebtedness by $3,000,000, reschedule principle payments, and remove all
financial covenants. Under the terms of the amended credit agreement, the
indebtedness was payable in three monthly installments of $31,250 beginning on
January 15, 2001, seven monthly installments of $125,000 beginning on April 15,
2001, and a final installment of $2,400,846 due on November 14, 2001. No further
borrowings are available. As part of the amended credit agreement, the Company
issued 3,000 shares of Class A-1 Cumulative Convertible Preferred Stock to the
bank in exchange for $3,000,000 in outstanding indebtedness and pledged its
interest in the Mustang Island properties as additional collateral under the
loan.

On November 15, 2001, the Company amended its credit agreement to change the
repayment schedule to $125,000 due on December 15, 2001 and the balance of
principal and accrued but unpaid interest due on January 15, 2002.

On January 1, 2002, the Company amended its credit agreement to change the
repayment schedule to $25,000 per month in principal and interest beginning on
January 31, 2002 with the balance of principal and accrued but unpaid interest
due on April 15, 2002. In addition, the Company agreed to either sell, or have
entered into binding agreements to sell, certain of its oil and gas properties
by February 20, 2002 or to enter into a binding agreement with a nationally
recognized oil and gas auction house by March 28, 2002 for the sale of such
properties. All of the proceeds from the sale of such properties would be used
to reduce the Company's indebtedness.

On April 1, 2002, the Company amended its credit agreement to extend the final
due date of principal and accrued but unpaid interest to June 24, 2002. In
addition, the date by which the Company had to enter into a binding contract
with an auction house was extended to April 30, 2002.

On June 24, 2002, the Company amended its credit agreement to extend the final
due date of principal and accrued but unpaid interest to July 24, 2002.

On July 24, 2002, the Company amended its credit agreement to remove the $25,000
per month payment and to extend the final due date of principal and accrued but
unpaid interest to August 24, 2002.

In accordance with the terms of the credit agreement, as amended, the Company
entered into a binding contract with an auction house on two separate occasions
for the sale of certain of its producing properties. On June 6, 2002, the
Company closed a sale of certain of its producing properties for total cash
consideration of $600,100. Net proceeds received from the sale, which totaled
$481,027, were used to pay down the Company's bank debt.

                                       F-9
<PAGE>

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

On September 10, 2002, the Company renegotiated the terms of its indebtedness.
Under the terms of the new agreement, the Company will pay $300,000 to its
lender by September 30, 2002. The Company will then be relieved of all payments
until December 2, 2002. The Company has the option on or before December 2, 2002
to pay the lender either an additional #300,000 in cash or $150,000 in cash and
$200,000 in production payments in exchange for the forgiveness of the remainder
of its indebtedness amounting to approximately $1.6 million. In addition, the
lender has agreed to convert all of its $3 million preferred stock into common
stock eauivalent to a 45% ownership position in the Company.

On August 30, 2002, the Company closed a sale of certain of its producing oil
and gas properties for total cash consideration of $301,600. Net proceeds
received from the sale, which totatled $276,697, were paid to the Company's
lender as part of the $300,000 payment due by September 30, 2002.

Notes Payable

Other notes payable at July 31, 2002 consisted of $18,506 in unsecured 9% to
10.5% notes issued to vendors in settlement of accounts payable. The notes are
past their due dates and are due on demand. Also included is a $13,783 financing
obligation for insurance premiums, payable in monthly installments, with
interest at 6.76%, through March 2003.

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 $400,000 at
July 31, 2002

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<PAGE>

                            Vector Energy Corporation
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 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 July 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 July 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.

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