U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB


(Mark One)
[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the fiscal year ended December 31, 2001

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

         For the transition period from _____ to _______

                         Commission file number 0-25579

                              HADRO RESOURCES, INC.
                              ---------------------
        (Exact name of small business issuer as specified in its charter)

         NEVADA                                                 87-0571853
         ------                                                 ----------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation of organization)                              Identification No.)

                            50 West Liberty, Suite 880
                               Reno, Nevada 89501
                    -----------------------------------------
                    (Address of Principal Executive Offices)

                                 (702) 433-5250
                                 --------------
                           (Issuer's telephone number)


                                      N/A
              (Former name, former address and former fiscal year,
                          if changed since last report)


     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
                                 -------      -------

<PAGE>


     Check here if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B 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 the issuer's revenues for its more recent fiscal year (ending
December 31, 2001): $83,978.

     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of January 31, 2002: $8,389,972.

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

Class                                    Outstanding as of March 25, 2002

Common Stock, $.001 par value            16,353,973


<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

History of Business Development

     Hadro Resources, Inc. is a natural resource company engaged in the
acquisition, exploration and development of oil and natural gas properties.
Hadro Resources, Inc., which currently trades on the OTC Bulletin Board under
the symbol "HDRS" (referred to in this Form 10-KSB as "HDRS") and on the
Frankfurt Stock Exchange (FWB) in Germany under the symbol "HD1", was
incorporated under the laws of the State of Nevada on December 3, 1997 under the
name "Hadrosaurus Resources, Inc.". On January 20, 1998, HDRS filed an amendment
to its articles of incorporation changing its name to "Hadro Resources, Inc." As
of the date of this Annual Report, HDRS is primarily engaged in the business of
acquiring oil and natural gas properties for exploration and production within
the United States and internationally.

     During fiscal year ended December 31, 2001, HDRS generated revenues from
consolidated operations. During fiscal year ended December 31, 2001, HDRS
generated $83,978 in oil and gas revenue. During the prior fiscal years, HDRS
did not generate any revenues from operations and focused primarily on the
exploration of potential oil and gas projects. During those prior fiscal years,
HDRS relied upon internally generated funds from advances, the sale of shares of
stock, and loans from its shareholders and private investors to finance its
operations and growth. As of the date of this Annual Report, management is in
the process of identifying certain business opportunities that it plans to
pursue pertaining to oil and gas exploration and development. Management intends
to continue its search for other business opportunities in any geographical area
involving oil and gas exploration and development. See "Item 6. Management's
Discussion and Analysis or Plan of Operation".

Business Operations

     U. S. Oil & Gas Resources, Inc.

     On May 31, 2001, HDRS, U.S. Oil & Gas Resources, Inc., a corporation
organized under the laws of British Columbia, Canada (U.S. Oil & Gas"), and
Oakhills Energy, Inc., Thor Energy, Inc. and O.J. Oil & Gas, Inc., corporations
organized under the laws of the State of Oklahoma and the wholly-owned
subsidiaries of U.S. Oil & Gas (the "Subsidiaries"), entered into a share
purchase and sale agreement (the "Purchase Agreement"). On August 29, 2001, the
Purchase Agreement was consummated resulting in the acquisition of the
Subsidiaries by HDRS from U.S. Oil & Gas. In accordance with the terms of the
Purchase Agreement, HDRS (i) issued to U.S. Oil & Gas 10,000,000 shares of its
restricted common stock as consideration for the acquisition of the
Subsidiaries; (ii) assumed a loan on behalf of U.S. Oil & Gas of approximately
$78,203; and (iii) issued an additional 500,000 shares of its restricted common
stock as a finder's fee.

     Subsequently, management of HDRS engaged in an analysis of the existing
corporate structure of the Subsidiaries and operations planning. Management
believed that the corporate consolidation of the Subsidiaries into one operating
entity would streamline existing operations, provide for the restructure of
existing debt of U.S. Oil & Gas, and establish operating lines of credit.
Effective December 31, 2001, a Certificate of Merger was issued by the Nevada
Secretary of State pursuant to which two of the subsidiaries, Thor Energy Inc.
and O.J. Oil & Gas Inc. were merged into the third and surviving subsidiary,
Oakhills Energy Inc. As of the date of this Annual Report, the Subsidiaries now
operate as one entity, and HDRS has one wholly-owned subsidiary, Oakhills Energy
Inc.

     After detailed review of all leases, wells and assets, HDRS engaged in
negotiations with U.S. Oil & Gas regarding the sale by HDRS to U.S. Oil & Gas of
twenty-eight oil and gas properties in combination with the redemption of
8,000,000 shares of the 10,000,000 shares of restricted common stock previously
issued by HDRS to U.S. Oil & Gas pursuant to the terms of the Purchase
Agreement. On January 1, 2002, effective March 22, 2002, HDRS and U.S. Oil & Gas
entered into a share redemption and asset sale agreement (the "Agreement"). The
Agreement was consummated in conjunction with a HDRS initiative to divest itself
of properties deemed by HDRS management to represent higher risk to obtain
desired production for the anticipated well capital costs required. In
accordance with the terms of the Agreement, (i) HDRS sold to U.S. Oil & Gas
certain oil and gas properties previously acquired pursuant to the terms of the
Purchase Agreement that did not form part of HDRS' overall development strategy;
(ii) HDRS continues to own 100% of Oakhills Energy, Inc. that provides necessary
oil and gas management and operating infrastructure for further acquisitions and
projects; (iii) HDRS owns a 100% interest in the Comanche, Neida Cassel, Lone
Wolf, Jolly and Ingle oil and gas properties held by Oakhills Energy, Inc. that
provide the majority of existing revenues to Oakhills Energy, Inc.; (iv) U.S.
Oil & Gas returned to HDRS 8,000,000 shares of the 10,000,000 shares of
restricted common stock previously issued to U.S. Oil & Gas pursuant to the
terms of the Purchase Agreement; (v) the 400,000 shares of restricted common
stock issued as a finders' fee pursuant to the Purchase Agreement were returned;
and (vi) HDRS retains an option to acquire from U.S. Oil & Gas the 1,500,000
shares of restricted common stock and may redeem from U.S. Oil & Gas the
remaining 500,000 shares of restricted common stock in exchange for minority
participation in future oil and gas acquisitions with mutual consent. See "Item
11. Security Ownership of Certain Beneficial Owners and Management".

     As of the date of this Annual Report, HDRS' wholly-owned subsidiary,
Oakhills Energy Inc., currently retains certain oil and gas leases, including
four producing and one shut-in well, all located within the State of Oklahoma.
Management of HDRS believes that the future possible exercise of the option to
acquire 1,500,000 shares of its restricted common stock from U.S. Oil & Gas may
allow HDRS to further reduce its issued and outstanding shares of common stock.

<PAGE>


     Rubicon Oil & Gas, Inc.

     On March 15, 2002, HDRS and Rubicon Oil & Gas, Inc. ("Rubicon") entered
into a letter of intent (the "Letter of Intent"), pursuant to which HDRS would
purchase certain interests in certain oil and gas leases held by Rubicon, which
are located in six separate prospects in the Uinta Basin of Utah and the Douglas
Creek Arch area in Colorado (the "Prospects"). In accordance with the terms of
the Letter of Intent, HDRS would (i) acquire approximately 75% of Rubicon's
working interests in certain oil and gas leases (which range from 21% to 100% in
gross acreage in excess of 16,000 acres and net acreage in excess of 7,000
acres); (ii) issue 500,000 shares of its restricted common stock to Rubicon,
plus $500,000 in cash; and (iii) invest $2,000,000 in property development
expenditures before December 31, 2002, carrying Rubicon for its minority
interest until the completion of the first $2,000,000 in property development
expenditures. As of the date of this Annual Report, HDRS is conducting its due
diligence and final negotiations for execution of a definitive agreement with
Rubicon.

     As of the date of this Annual Report, the Prospects have been the subject
of planned development by Rubicon, including a preliminary engineering study,
and contain shut-in wells that require development of and connection to
pipelines and probable drilling locations. The Prospects emphasize gas
production potential. Management of HDRS estimates that gas located on the
Prospects could provide HDRS with preliminary estimates of proven reserves of
2.5 BCF and probable and possible reserves of 6.5 BCF, without considering
planned drilling on certain other areas included in the Prospects.

     The Leasehold Interests

     During June 1999, HDRS entered into an assignment agreement with Ibis
Petroleum, Inc. ("Ibis") whereby Ibis sold, assigned, transferred and conveyed
all of its right, title and interest in and to a total of thirty-five (35) oil
and gas leases located in the Hadrosaurus Area of Union County, New Mexico to
HDRS (the "Leasehold Interests"). The Leasehold Interests were as follows: (i)
twenty-eight (28) State of New Mexico leases covering an approximate total of
6,174.23 acres, with an annual rental rate of $0.25 per acre until 2002, at
which time the rate increases to $0.50 per acre; (ii) two (2) Federal leases
covering an approximate total of 2,323.33 acres, with an annual rental rate of
$1.50 per acre; and (iii) five (5) State of New Mexico leases covering an
approximate total of 1,252.04 acres, with an annual rental rate of $0.25 per
acre until 2004, at which time the rate increases to $0.50 per acre through
expiration.

     As of the date of this Annual Report, management of HDRS does not intend to
renew the Leasehold Interests nor has it carried out any exploration activities
on the Leasehold Interests. HDRS has conducted ongoing due diligence regarding
the Leasehold Interests, and has deemed that exploration initiatives represent
higher degrees of risk than HDRS' management currently wishes to participate. As
a result, management is concentrating on obtaining producing assets and
exploration initiatives that are deemed by management as lower in risk. As of
December 31, 2001, HDRS decided not to renew any of the leases, and all leases
will terminate during the next twelve months.

     The Buttonwillow Leases

     On March 26, 2001, HDRS and Clearview Mineral Resources Corp., a British
Columbia public company ("Clearview") entered into a memorandum of understanding
pursuant to which HDRS would acquire, subject to due diligence, an approximate
70% net revenue interest in approximately 224 acres of oil and gas leases in the
Buttonwillow gas field located in the southern San Joaquin Valley, California
(the "Buttonwillow Leases") in consideration of $150,000 and a 5% overriding
royalty interest.

     On May 31, 2001, the board of directors of HDRS determined that it does not
consider the acquisition by HDRS from Clearview of a working interest and a net
revenue interest in the Buttonwillow Leases a probable event based upon the
results of HDRS' due diligence, which involved review and further analysis of
seismic data and other documentation. Therefore, as of the date of this Annual
Report, HDRS has terminated negotiations with Clearview regarding such
acquisition and has abandoned its interest in the property.

<PAGE>


     The Moffat Ranch Leases

     On April 24, 2001, HDRS and Northwest Petroleum, Inc., a California
corporation ("Northwest") entered into the Moffat Ranch exploration agreement
(the "Exploration Agreement") pursuant to which HDRS would acquire, subject to
financing and due diligence, certain percentages of a working interest and
certain percentages of a net revenue interest in oil and gas lease mineral
interests and oil and gas lease options held by Northwest, which comprised
approximately 5,282 acres of the Moffat Ranch Gas Field in Madera County,
California (the "Moffat Ranch Leases"). The terms of the Exploration Agreement
provided that in consideration for the percentage interests, HDRS would (i) upon
execution, pay to Northwest $2,500, (ii) on or before July 2, 2001, fund a 3-D
seismic survey program in the amount of $280,000 for the Moffat Ranch Leases,
(iii) pay Northwest for land and leasing rentals in the approximate amount of
$131,500 for the Moffat Ranch Leases, and (iv) on or before August 15, 2001,
execute an operating agreement to provide drilling funds of $500,000 (subject to
the independent interpretation of the 3-D seismic survey). In the event HDRS
elected not to drill on the Moffat Ranch Leases, there would be no fault or
penalty under the Exploration Agreement, however, Northwest would retain all
rights to the Moffat Ranch Leases.

     On May 31, 2001, the board of directors of HDRS determined that it does not
consider the acquisition by HDRS from Northwest of the percentage interests in
the Moffat Ranch Leases a probable event based upon lack of agreement regarding
total project funding by all parties. Therefore, as of the date of this Annual
Report, HDRS has terminated negotiations with Northwest regarding such
acquisition with no further obligations to HDRS.

     Investment in Other Oil and Gas Prospects

     As of the date of this Annual Report, management is developing an oil and
gas exploration, development and production program. Management intends to focus
HDRS' business activities on the operational and production aspects of oil and
gas projects through its operating subsidiary, Oakhills Energy Inc., and further
proposed acquisitions and projects currently under review. Management is
currently in the process of identifying further business opportunities that it
plans to pursue pertaining to oil and gas exploration and development.

ITEM 2. PROPERTIES

     Except as described above, HDRS does not own any real estate or other
properties. HDRS leases office space and its offices are located at 50 West
Liberty, Suite 880, Reno, Nevada 89501. HDRS' wholly owned subsidiary, Oakhills
Energy, Inc. leases offices and workyard located at 3218 North 372 Road,
Holdenville, Oklahoma 74848.

ITEM 3. LEGAL PROCEEDINGS

     Management is not aware of any legal proceedings contemplated by any
governmental authority or any other party involving HDRS or its properties. No
director, officer or affiliate of HDRS (i) is a party adverse to HDRS in any
legal proceedings, or (ii) has an adverse interest to HDRS in any legal
proceedings. Management is not aware of any other legal proceedings pending or
that have been threatened against HDRS or its properties.

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

     No matters were submitted to a vote of HDRS' shareholders through the
solicitation of proxies or otherwise during fiscal year ended December 31, 2001.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

     Hadro Resources, Inc.'s common stock is traded on the OTC Bulletin Board
under the symbol "HDRS". The market for HDRS' common stock is limited, and may
be at times volatile or sporadic. The following table sets forth the high and
low sales prices relating to HDRS' common stock for the last two fiscal years
commencing with the second quarter of fiscal year 2000. These quotations reflect
inter-dealer prices without retail mark-up, mark-down, or commissions, and do
not reflect actual transactions.

                                      FISCAL YEARS ENDED
                  ------------------------------------------------------------
                  DECEMBER 31, 2001                  DECEMBER 31, 2000
                  ------------------------------------------------------------
                  HIGH BID          LOW BID          HIGH BID         LOW BID
                  ------------------------------------------------------------

First Quarter     $2.500            $0.156              --               --
Second Quarter    $0.900            $0.130           $0.620           $0.120
Third Quarter     $0.710            $0.250           $1.370           $0.250
Fourth Quarter    $1.850            $0.350           $1.680           $0.280


Holders

     As of March 25, 2002, the Company had approximately 52 shareholders of
record.

Dividends

     No dividends have ever been declared by the board of directors of HDRS on
its common stock. HDRS' assets and net worth do not currently indicate the
ability to pay any cash dividends, and HDRS management does not indicate the
intention of paying cash dividends on its common stock within the next twelve
months.

<PAGE>


Transfer Agent

     HDRS' transfer agent is Global Stock Transfer, Inc., 191 University Blvd.,
Suite 410, Denver, Colorado 80206, telephone (303) 355-4646, and facsimile (303)
355-5532.

Recent Sales of Unregistered Securities and Changes in Control of HDRS

     (a) On December 20, 2000, January 30, 2001, and January 31, 2001, Alexander
W. Cox, an individual ("Cox") purchased 100,000 shares, 1,1750,000 shares and
400,000 shares, respectively, of the common stock of HDRS. The purchases by Cox
resulted in an acquisition of an aggregate 2,250,000 shares of common stock. The
transactions are as follows:

          (i)  On December 20, 2000, Sparten Asset Group ("Sparten") sold
               100,000 shares of common stock to Cox at $0.30 per share for an
               aggregate consideration of approximately $30,000. There was no
               written documentation between the parties involving the sale and
               purchase of the securities. On December 20, 2000, Sparten held of
               record 190,000 shares of free trading common stock and,
               therefore, was not deemed an affiliate of HDRS. The 100,000
               shares acquired by Cox were free trading.

          (ii) On January 30, 2001, pursuant to a private transaction not
               involving a public offering, Tri Star Financial Group, Inc. ("Tri
               Star") sold 1,750,000 shares of restricted common stock to Cox at
               a price of $0.001 per share for an aggregate consideration of
               approximately $1,750. On January 30, 2001, Tri Star held of
               record 7,000,000 shares of restricted common stock and,
               therefore, was deemed an affiliate of HDRS. The 1,750,000 shares
               of common stock acquired by Cox are restricted securities. Cox
               executed a purchase and sale of securities agreement in which Cox
               acknowledged that the securities had not been registered under
               the Securities Act of 1933, as amended, that he understood the
               economic risk of an investment in the securities, and that he had
               the opportunity to ask questions of and receive answers from
               HDRS' management concerning any and all matters related to the
               acquisition of securities. No underwriter was involved in the
               transaction, and no commissions or other remuneration were paid
               in connection with the sale and purchase of the securities.

          (iii)On January 31, 2001, Rising Sun Capital Corp. ("Rising Sun") sold
               400,000 shares of common stock to Cox at $0.30 per share for an
               aggregate consideration of approximately $120,000. There was no
               written documentation between the parties involving the sale and
               purchase of the securities. On January 31, 2001, Rising Sun held
               of record 490,000 shares of free trading common stock and,
               therefore, was not deemed an affiliate of HDRS. The 400,000
               shares of common stock acquired by Cox were free trading. As the
               date of this Annual Report, Cox holds of record 2,177,300 shares
               of common stock, representing a 13.31% equity interest.

     (b) On August 29, 2001, in accordance with the terms and provisions of the
Purchase Agreement, the board of directors of HDRS unanimously authorized and
approved the issuance to U.S. Oil & Gas an aggregate of 10,000,000 shares of its
restricted common stock at $0.33 per share for an aggregate consideration of
$3,300,000. HDRS issued the securities pursuant to the exemption available under
Rule 504 of Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"). No underwriter was involved in the transaction. A finders'
fee was due and owing pursuant to which HDRS subsequently issued on November 7,
2001, 500,000 shares of its restricted common stock at $0.33 per share, for an
aggregate payment of $165,000.00. No other commissions or remuneration were paid
in connection with the transaction.

     (c) On March 14, 2001, the board of directors of HDRS authorized the
execution of a settlement agreement between HDRS and Investor Communications
International, Inc. ("ICI") and the subsequent issuance of 1,000,000 shares of
its restricted common stock. HDRS had incurred debt inclusive of accrued
interest in the aggregate amount of $320,000.00 with ICI pursuant to past
financial, administrative and managerial services performed by ICI on behalf of
HDRS and/or advances made by ICI to HDRS. Therefore, HDRS entered into a
settlement agreement dated October 2, 2001 with ICI, whereby ICI agreed to
settle the debt owed to it by HDRS and accept the issuance of restricted common
shares of HDRS as settlement for all interest and principle due and outstanding
as of the date of the settlement agreement. During the last quarter of 2001,
HDRS issued 1,000,000 shares of its restricted common stock to ICI at $0.32 per
share. HDRS issued the securities pursuant to the exemption available under Rule
504 of Regulation D of the Securities Act. No underwriter was involved in the
transaction.

<PAGE>


     (d) HDRS has received subscriptions and issued shares pursuant to its
current offering in which it raised $49,943 under Rule 506 of Regulation D. It
sold 66,591 Units at $0.75 per Unit. Each Unit consists of three shares of
restricted common stock and one warrant entitling the holder to acquire an
additional share of restricted common stock at $1.00 per share. The per share
price of the Units was arbitrarily determined by the Board of Directors based
upon potential future earnings, assets and net worth of HDRS. During fiscal year
ended December 31, 2001, HDRS issued an aggregate of 199,773 shares of
restricted common stock and 66,591 warrants to 23 investors. Of the 23
investors, all were accredited investors as that term is defined under
Regulation D. The investors executed subscription agreements and acknowledged
that the securities to be issued have not been registered under the Securities
Act, that the investors understood the economic risk of an investment in the
securities, and that the investors had the opportunity to ask questions of and
receive answers from HDRS' management concerning any and all matters related to
the acquisition of securities. No underwriter was involved in the transaction,
and no commissions or other remuneration were paid in connection with the offer
and sale of the securities. See "Item 6. Management's Discussion and Analysis or
Plan of Operation."

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

     The following discussions of the results of operations and financial
position of HDRS should be read in conjunction with the financial statements and
notes pertaining to them that appear elsewhere in this Form 10-KSB.

For Fiscal Year Ended December 31, 2001 compared with Fiscal Year Ended December
31, 2000

     Results of Operation

     HDRS' net losses for fiscal year ended December 31, 2001 were approximately
$2,707,578 compared to a net loss of approximately $111,428 for fiscal year
ended December 31, 2000. During fiscal year ended December 31, 2001, HDRS
recorded oil and gas revenue of $83,978 compared to no revenue recorded during
fiscal year ended December 31, 2000.

     During fiscal year ended December 31, 2001, HDRS recorded operating
expenses of approximately $2,144,325 compared to $17,885 of operating expenses
recorded in the same period for 2000. Depletion expenses of approximately
$2,078,063 were incurred during fiscal year ended December 31, 2001 as compared
to $-0- incurred during fiscal year ended December 31, 2000. Such depletion
expenses were the result of an evaluation of HDRS' proven recoverable oil and
gas reserves and revaluation from significantly lower oil and gas prices
experienced during the past year. Due primarily to repricing of reserves due to
lower world oil and gas prices, the discounted net present value of reserves
decreased for the fiscal year ended December 31, 2001. Therefore, HDRS has
written down the carrying value of such oil and gas properties at December 31,
2001 to the revised evaluation, resulting in the depletion expense of
$2,078,325. Oil and gas production expenses of approximately $66,262 were
incurred during fiscal year ended December 31, 2001 as compared to $-0- of oil
and gas production expenses incurred during fiscal year ended December 31, 2000.

     General and administrative expenses increased by approximately $551,688
during fiscal year ended December 31, 2001 from $93,543 incurred during fiscal
year ended December 31, 2000 to $647,231 incurred during fiscal year ended
December 31, 2001. This increase in general and administrative expenses was due
primarily to an increase in overhead and administrative expenses resulting from
the increased scale and scope of overall corporate activity pertaining to review
and due diligence of prospective acquisitions, the acquisition and
reorganization and amalgamation of the Subsidiaries, and the exploration,
reorganization, and development of oil and natural gas properties. General and
administrative expenses generally include corporate overhead, administrative
management, consulting costs and professional fees.

     Of the $647,231 incurred as general and administrative expenses during
fiscal year ended December 31, 2001, an aggregate of $423,383 was incurred by
HDRS due and owing to Investor Communications International, Inc. ("ICI") as
follows: (i) $387,575 for services rendered by ICI to HDRS including, but not
limited to, financial, administrative, investor relations and oil and gas
management; (ii) $20,100 in principal amount for advances made by ICI to HDRS;
and (iii) $15,708 in accrued interest. During fiscal year ended December 31,
2001, HDRS paid $12,500 to ICI towards the aggregate amount of $423,383 due and
owing ICI, which is without specific repayment terms. During fiscal year ended
December 31, 2001, HDRS settled a portion of the debt in the amount of
$320,000.00 by issuance of 1,000,000 shares of its restricted common stock at
$0.32 per share. One of the directors of HDRS is contracted by ICI and is part
of the management team provided by ICI to HDRS. See "Item 9. Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act."

     As discussed above, although HDRS recorded oil and gas revenue of $83,978
during fiscal year ended December 31, 2001, the increase in net loss during
fiscal year ended December 31, 2001 as compared to fiscal year ended December
31, 2000 is attributable primarily to the recording of the depletion expense and
to a much lesser extent, an increase in general and administrative expenses.
HDRS' net losses during fiscal year ended December 31, 2001 were ($2,707,578) or
($0.16) per share compared to a net loss of approximately ($111,428) or ($0.01)
per share during fiscal year ended December 31, 2000. The weighted average
number of shares outstanding was 16,915,463 for fiscal year ended December 31,
2001 as compared to 13,054,200 for fiscal year ended December 31, 2000.

<PAGE>


     Liquidity and Capital Resources

     HDRS' financial statements have been prepared assuming that it will
continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should HDRS be unable to continue in
operation.

     As of fiscal year ended December 31, 2001, HDRS' total assets were
$2,016,667 consisting of $95,565 in current assets and a $1,921,102 carrying
value (net of depletion) of the oil and gas properties acquired pursuant to
acquisition of the Subsidiaries. As of the fiscal year ended December 31, 2000,
HDRS' total assets were $26,070 consisting of current assets. This increase in
total assets from the fiscal year ended December 31, 2000 was due primarily to
the acquisition of the Subsidiaries' oil and gas properties.

     As of fiscal year ended December 31, 2001, HDRS' total liabilities were
$997,281 compared to total liabilities of $134,049 for fiscal year ended
December 31, 2000. This increase in liabilities from fiscal year ended December
31, 2000 was due primarily to the consolidation of the Subsidiaries resulting in
(i) an increase of $242,988 in accounts payable and accrued liabilities from
$52,808 recorded as of December 31, 2000 to $295,796 recorded as of December 31,
2001; (ii) an increase of $169,673 due to financial, management, and
administrative services provided by related parties from $81,241 recorded as of
December 31, 2000 to $250,914 recorded as of December 31, 2001; and (iii)
$450,571 in loans payable incurred during fiscal year ended December 31, 2001.

     The increase in accounts payable and accrued liabilities resulted from
accounts payable assumed by HDRS on acquisition of the Subsidiaries. The
increase in amounts due to related parties resulted from the fees incurred and
advances payable to ICI. The $450,571 in loans payable results from loans
assumed on acquisition of the Subsidiaries.

     Stockholders' deficit decreased from ($107,979) for the fiscal year ended
December 31, 2000 to $1,019,386 for fiscal year ended December 31, 2001.

     HDRS has not generated positive cash flows from operating activities. For
fiscal year ended December 31, 2001, net cash used in operating activities was
$800,071 compared to $18,156 of net cash used in operating activities for fiscal
year ended December 31, 2000 (an increase of $781,915). As noted above, the main
increase was comprised of a net loss of $2,707,578 for fiscal year ended
December 31, 2001 ($2,078,063 of which was due to repricing of oil and gas
reserves from decreased current world oil and gas prices)compared to a net loss
of $111,428 for fiscal year ended December 31, 2000 (an increase of $2,596,150).
Non-cash working capital items changed to $171,889 for fiscal year ended
December 31, 2001 compared to ($93,272) for fiscal year ended December 31, 2000.

     HDRS' cash flow used in investing activities during fiscal year ended
December 31, 2001 was $56,490 compared to $-0- used in investing activities
during fiscal year ended December 31, 2000, which consisted of acquisition of
Subsidiaries.

     Net cash from financing activities was $858,888 for fiscal year ended
December 31, 2001 compared to cash flow from investing activities of $35,029 for
fiscal year ended December 31, 2000. Net cash provided by financing activities
during fiscal year ended December 31, 2001 resulted primarily from (i) advances
in the amount of $478,673; (ii) net loan advances of $330,272; and (iii) the
issuance of common stock in the amount of $49,943. Net cash used in financing
activities was $35,029 for fiscal year ended December 31, 2000 resulting
primarily from advances in the amount of $35,029.

     Management of HDRS anticipates a possible increase in operating expenses
and capital expenditures relating to oil and gas operating properties and
acquisitions. HDRS terminated its offering during the last quarter of 2001 in
which it raised an aggregate of $49,943 pursuant to the offer and sale of 66,591
Units at $0.75 per Unit. Each Unit consisted of three restricted shares of
common stock and one warrant entitling the holding to acquire an additional
share of restricted common stock at $1.00 per share. The warrants expire April
6, 2003. The securities were not registered under the Securities Act and
therefore were offered pursuant to an exemption from registration provided by
Section 4(2) and Regulation D, Rule 506, of the Securities Act. Management
intents to use net proceeds received from the offering for HDRS' capital
requirements, which consist primarily of oil and gas expenses.

     HDRS may finance these expenditures with further issuance of common stock
of HDRS. HDRS believes that any private placements of equity capital and debt
financing, if successful, may be adequate to fund HDRS' operations over the next
year. HDRS may encounter business endeavors that require significant cash
commitments or unanticipated problems or expenses that could result in a
requirement for additional cash before that time. If HDRS raises additional
funds through the issuance of equity or convertible debt securities other than
to current shareholders, the percentage ownership of its current shareholders
would be reduced, and such securities might have rights, preferences or
privileges senior to its common stock. Additional financing may not be available
upon acceptable terms, or at all. If adequate funds are not available or are not
available on acceptable terms, HDRS may not be able to take advantage of
prospective new oil and gas acquisitions or opportunities, which could
significantly and materially restrict HDRS' business operations.

<PAGE>


Audit Committee

     As of the date of this Annual Report, HDRS has not appointed members to an
audit committee and, therefore, the respective role of an audit committee has
been conducted by the board of directors of HDRS. When established, the audit
committee's primary function will be to provide advice with respect to HDRS'
financial matters and to assist the board of directors in fulfilling its
oversight responsibilities regarding finance, accounting, tax and legal
compliance. The audit committee's primary duties and responsibilities will be
to: (i) serve as an independent and objective party to monitor HDRS' financial
reporting process and internal control system; (ii) review and appraise the
audit efforts of HDRS' independent accountants; (iii) evaluate HDRS' quarterly
financial performance as well as its compliance with laws and regulations; (iv)
oversee management's establishment and enforcement of financial policies and
business practices; and (v) provide an open avenue of communication among the
independent accountants, management and the board of directors.

     The board of directors has considered whether the regulatory provision of
non-audit services is compatible with maintaining the principal independent
accountant's independence.

     Audit Fees

     As of the date of this Annual Report, HDRS has incurred approximately
$4,280 in fees during fiscal year ended December 31, 2001 to its principal
independent accountant for professional services rendered in connection with
preparation of HDRS' audited financial statements. During fiscal year ended
December 31, 2001, HDRS incurred approximately $9,416 in fees to its principal
independent accountant for all other non-audit services (including reviews of
HDRS' quarterly financial statements).

ITEM 7. FINANCIAL STATEMENTS

     The information required under Item 310(a) of Regulation S-B is included in
this report as set forth in the "Index to Financial Statement".

Index to Financial Statements

         Auditor's Report dated February 19, 2002
         Consolidated Balance Sheets
         Consolidated Statements of Operations
         Consolidated Statement of Stockholders' Equity
         Consolidated Statements of Cash Flow
         Notes to Consolidated Financial Statements


                              HADRO RESOURCES, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001



AUDITORS' REPORT

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>



             LABONTE & CO.                        1205 - 1095 West Pender Street
-----------------------------------------         Vancouver, BC  Canada
C H A R T E R E D   A C C O U N T A N T S         V6E 2M6
-----------------------------------------         Telephone       (604) 682-2778
                                                  Facsimile       (604) 689-2778
                                                  Email        rjl@labonteco.com



                                AUDITORS' REPORT
--------------------------------------------------------------------------------


To the Stockholders and Board of Directors of Hadro Resources, Inc.

We have audited the consolidated balance sheets of Hadro Resources, Inc. as at
December 31, 2001 and 2000 and the consolidated 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 audit.

We conducted our audits in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance 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, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2001
and 2000 and the results of its operations and its cash flows and the changes in
stockholders' equity for the years then ended in accordance with United States
generally accepted accounting principles.




                                                           CHARTERED ACCOUNTANTS


Vancouver, B.C.
February 19, 2002 (except as to Note 8 which is dated March 25, 2002)




          COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES
                             REPORTING DIFFERENCES
--------------------------------------------------------------------------------

In the United States, reporting standards for auditors would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by conditions and events that cast substantial
doubt on the Company's ability to continue as a going concern, such as those
described in Note 1. Our report to the stockholders and Board of Directors dated
February 19, 2002 (except as to Note 8 which is dated March 25, 2002) is
expressed in accordance with Canadian reporting standards which do not permit a
reference to such conditions and events in the auditors' report when these are
adequately disclosed in the financial statements.




                                                           CHARTERED ACCOUNTANTS



Vancouver, B.C.
February 19, 2002


<PAGE>
<TABLE>
<CAPTION>

                                        HADRO RESOURCES, INC.

                                     CONSOLIDATED BALANCE SHEETS



                                                                            December 31,    December 31,
                                                                                2001            2000
                                                                             -----------    -----------
<S>                                                                         <C>            <C>
                                              ASSETS

CURRENT ASSETS
   Cash                                                                     $    28,397    $    26,070
   Accounts receivable                                                           67,168           --
                                                                            -----------    -----------

                                                                                 95,565         26,070

OIL AND GAS PROPERTIES, net of depletion (Note 3)                             1,921,102           --
                                                                            -----------    -----------

                                                                            $ 2,016,667    $    26,070
                                                                            ===========    ===========


                                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued liabilities                                 $   295,796    $    52,808
   Current portion of bank loans (Note 4)                                       161,350           --
   Due to related parties (Note 5)                                              250,914         81,241
                                                                            -----------    -----------

                                                                                708,060        134,049

BANK LOANS (Note 4)                                                             289,221           --
                                                                            -----------    -----------

                                                                                997,281        134,049
                                                                            -----------    -----------

STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (Note 5)
   Common stock, $.001 par value, 100,000,000 shares authorized
      24,753,973 shares issued and outstanding (2000 - 13,054,200 shares)        24,754         13,054
   Additional paid-in capital                                                 3,950,038        126,795
   Deficit                                                                   (2,955,406)      (247,828)
                                                                            -----------    -----------

                                                                              1,019,386       (107,979)
                                                                            -----------    -----------

                                                                            $ 2,016,667    $    26,070
                                                                            ===========    ===========


                        The accompanying notes are an integral part of these
                                 consolidated financial statements


<PAGE>


                              HADRO RESOURCES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS




                                                  Year ended       Year ended
                                                  December 31,     December 31,
                                                      2001             2000
                                                  ------------     ------------


REVENUES
   Oil and gas revenue                            $     77,655     $       --
   Administration fees                                   6,323             --
                                                  ------------     ------------

                                                        83,978             --
                                                  ------------     ------------

OIL AND GAS EXPENSES
   Depletion (Note 3)                                2,078,063             --
   Oil and gas production expenses                      66,262             --
   Oil and gas lease costs                                --             17,885
                                                  ------------     ------------

                                                     2,144,325           17,885
                                                  ------------     ------------

OPERATING LOSS                                      (2,060,347)            --

GENERAL AND ADMINISTRATIVE EXPENSES                   (647,231)         (93,543)
                                                  ------------     ------------

NET LOSS FOR THE YEAR                             $ (2,707,578)    $   (111,428)
                                                  ============     ============




BASIC NET LOSS PER SHARE                          $      (0.16)    $      (0.01)
                                                  ============     ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING          16,915,463       13,054,200
                                                  ============     ============


              The accompanying notes are an integral part of these
                       consolidated financial statements


<PAGE>


                                                   HADRO RESOURCES, INC.

                                       CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                       FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


                                                                                       Additional
                                                            Number of                    Paid In
                                                              shares        Amount       Capital       Deficit         Total
                                                           -----------   -----------   -----------   -----------    -----------


Balance, December 31, 1999                                  13,054,200   $    13,054   $   126,795   $  (136,400)   $     3,449

Net loss for the year ended December 31, 2000                     --            --            --        (111,428)      (111,428)
                                                           -----------   -----------   -----------   -----------    -----------

Balance, December 31, 2000                                  13,054,200        13,054       126,795      (247,828)      (107,979)

Issuance of common stock for cash at $.25 per share            199,773           200        49,743          --           49,943

Issuance of common stock for acquisition of subsidiaries
  at per share $.30                                         10,500,000        10,500     3,454,500          --        3,465,000


Issuance of common stock for debt at $.32 per share          1,000,000         1,000       319,000          --          320,000

Net loss for the year ended December 31, 2001                     --            --            --      (2,707,578)    (2,707,578)
                                                           -----------   -----------   -----------   -----------    -----------

Balance December 31, 2001                                   24,753,973   $    24,754   $ 3,950,038   $(2,955,406)   $ 1,019,386
                                                           ===========   ===========   ===========   ===========    ===========


                  The accompanying notes are an integral part of these consolidated financial statements



<PAGE>


                                        HADRO RESOURCES, INC.

                                CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                             Year ended     Year ended
                                                                             December 31,   December 31,
                                                                                 2001           2000
                                                                             -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss for the year                                                      $(2,707,578)   $  (111,428)
  Adjustments to reconcile net loss to net cash from operating activities:
  - depletion                                                                  2,078,063           --
  - amortization                                                                   1,333           --
                                                                             -----------    -----------

                                                                                (628,182)      (111,498)
  - net changes in working capital items                                        (171,889)        93,272
                                                                             -----------    -----------

CASH USED IN OPERATING ACTIVITIES                                               (800,071)       (18,156)
                                                                             -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Cash acquired on acquisition of subsidiaries                                     1,453           --
  Oil and gas properties                                                         (57,943)          --
                                                                             -----------    -----------

CASH FLOWS USED IN INVESTING ACTIVITIES                                          (56,490)          --
                                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net loan advances                                                              330,272           --
  Net advances from related parties                                              478,673         35,029
  Net proceeds on sale of common stock                                            49,943           --
                                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES                                             858,888         35,029
                                                                             -----------    -----------

INCREASE IN CASH                                                                   2,327         16,873

CASH, BEGINNING OF YEAR                                                           26,070          9,197
                                                                             -----------    -----------

CASH, END OF YEAR                                                            $    28,397    $    26,070
                                                                             ===========    ===========



OTHER SIGNIFICANT NON-CASH TRANSACTIONS:

During 2001 the Company issued 1,000,000 common shares at a price of $.32 per
share in settlement of debt of $320,000.

See also Note 3


                The accompanying notes are an integral part of these consolidated financial statements


</TABLE>
<PAGE>


                             HADRO RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
================================================================================


NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
--------------------------------------------------------------------------------

The Company was incorporated as Hadrosaurus Resources, Inc. under the Laws of
the State of Nevada on December 2, 1997. The Company underwent a name change to
Hadro Resources, Inc. on January 12, 1998. During the year the Company acquired
three oil and gas companies with operations in the State of Oklahoma. In
December 2001, the Company merged these subsidiaries, Thor Energy Inc., O.J. Oil
and Gas Company, Inc. and Oak Hills Energy Inc. into one entity, Oak Hills
Energy, Inc. Refer to Note 3. As these subsidiaries own producing oil and gas
properties, the Company is no longer considered an exploration stage company.

As at December 31, 2001, the Company had a working capital deficiency of
$612,495 and has realized operating losses from its existing oil and gas
operations. The Company's continuance of operations and realization of the
carrying value of oil and gas properties are contingent on raising additional
capital, settling its outstanding debts and on the future development of the
Company's oil and gas properties. Accordingly, these factors raise substantial
doubt about the Company's ability to continue as a going concern. Advances from
certain significant shareholders and funding from private placements will form
the primary source of short-term funding for the Company during the next twelve
months.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------

Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Oak Hills Energy, Inc. which is the continuing
company resulting from the merger of Thor Energy, Inc., O.J. Oil and Gas, Inc.,
and Oak Hills Energy, Inc. which were acquired by purchase on August 29, 2001.
The acquisition has been accounted for by the purchase method of accounting. All
significant intercompany transactions and account balances have been eliminated.

Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.

Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.

Net Loss per Common Share
Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflects the potential
dilution of securities that could share in the earnings of the Company. Because
the Company does not have any potentially dilutive securities, the accompanying
presentation is only of basic loss per share.

Stock-Based Compensation
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted for
using the fair value method in accordance with SFAS No. 123. In addition, with
respect to stock options granted to employees, the Company provides pro-forma
information as required by SFAS No. 123 showing the results of applying the fair
value method using the Black-Scholes option pricing model.

<PAGE>


                             HADRO RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
--------------------------------------------------------------------------------

The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.

Oil and Gas Properties
The Company follows the full cost method of accounting for its oil and gas
operations whereby all cost related to the acquisition of petroleum and natural
gas interests are capitalized. Such costs include land and lease acquisition
costs, annual carrying charges of non-producing properties, geological and
geophysical costs, costs of drilling and equipping productive and non-productive
wells, and direct exploration salaries and related benefits. Proceeds from the
disposal of capital assets are recorded as a reduction of the related
expenditures without recognition of a gain or loss unless the disposal would
result in a change of 20 percent or more in the depletion rate. The Company
operates in one cost center, being the U.S.A.

Depletion and depreciation of the capitalized costs are computed using the
unit-of-production method based on the estimated proven reserves of oil and gas
determined by independent consultants.

The Company applies a ceiling test to capitalized costs to ensure that such
costs do not exceed estimated future net revenues from production of proven
reserves at year end market prices less future production, administrative,
financing, site restoration, and income tax costs plus the lower of cost or
estimated market value of unproved properties.

Income Taxes
The Company follows the liability method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are recognized for the
estimated tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The effect on deferred income tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Recent Accounting Pronouncements
On March 31, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No.44, Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which
provides guidance as to certain applications of APB 25. FIN 44 is generally
effective July 1, 2000 with the exception of certain events occurring after
December 15, 1998. The Company has determined that the implementation of this
standard does not have a material impact on its financial statements.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations",
which eliminates the pooling method of accounting for business combinations
initiated after June 30, 2001. In addition, SFAS 141 addresses the accounting
for intangible assets and goodwill acquired in a business combination. This
portion of SFAS 141 is effective for business combinations completed after June
30, 2001. The Company does not expect SFAS 141 will have a material impact on
the Company's financial position or results of operations.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises the accounting
for purchased goodwill and intangible assets. Under SFAS 142, goodwill and
intangible assets with indefinite lives will no longer be amortized and will be
tested for impairment annually. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption permitted. The Company does not
expect SFAS 142 will have a material impact on the Company's financial position
or results of operations.

<PAGE>


                             HADRO RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
================================================================================


NOTE 3 - OIL AND GAS PROPERTIES
--------------------------------------------------------------------------------

1.   By agreement dated May 31, 2001 and effective August 29, 2001 between the
     Company and U.S. Oil and Gas Resources Inc. ("US Oil and Gas"), a British
     Columbia public company trading on the CDNX, the Company acquired three
     State of Oklahoma registered operating subsidiaries as follows: a 100%
     interest in Oakhills Energy Inc., a 100% interest in Thor Energy Inc. and a
     100% interest in O.J. Oil & Gas Inc. ("Operating Subsidiaries). In
     consideration for these acquisitions, the Company issued 10,000,000
     restricted shares of common stock to US Oil and Gas, assumed a loan on
     behalf of US Oil and Gas of $78,203 and issued 500,000 restricted shares of
     common stock as a finder's fee. The Operating Subsidiaries hold
     approximately 3,000 acres of oil and gas leases located in the State of
     Oklahoma and approximately 14 gas and 35 producing and non-producing oil
     wells in addition to untapped areas for future development.

     This business combination has been accounted for using the purchase method
     of accounting. The purchase price has been allocated as follows:

<TABLE>
<CAPTION>
<S>                                                                        <C>
            Assets acquired at fair value
                 Current assets                                          $   102,553
                 Oil and gas properties                                    3,941,222
                                                                         -----------

                                                                           4,043,775
            Less: liabilities acquired at fair value
                 Current liabilities                                        (458,476)
                 Loans payable                                               (42,096)
                                                                         -----------

            Purchase price                                               $ 3,543,203
                                                                         ===========

The purchase price is made up as follows

            10,000,000 shares paid to US Oil and Gas at $.33 per share   $ 3,300,000
            500,000 shares paid as a finder's fee at $.33 per share          165,000
            Loan assumed on behalf of US Oil and Gas                          78,203
                                                                         -----------

                                                                         $ 3,543,203
                                                                         ===========
</TABLE>


     The Company's independent petroleum engineer revised the economic
     evaluation of the Company's proven recoverable oil and gas reserves based
     on current market prices. As a result of lower oil and gas prices the net
     present value of reserves decreased significantly and the Company has
     written down the carrying value of oil and gas properties at December 31,
     2001 to the revised evaluation resulting in a depletion provision of
     $2,078,063.

2.   The Company entered into and agreement dated April 24, 2001 providing the
     right to acquire an initial 50% working interest and an initial 37.5% net
     revenue interest in certain oil and gas lease mineral interests and oil,
     gas and seismic lease options (the "Moffat Ranch leases") located in Madera
     County, California from Northwest Petroleum, Inc. ("NPI"). The Company paid
     $2,500 on signing, and was required to pay for land and leasing costs
     (approximately $131,500) on or by June 5, 2001 and provide funding for a
     seismic survey program ($280,000 by July 2, 2001) and a drilling program
     ($500,000 by August 15, 2001). In June 2001 the Company decided not to
     proceed with the acquisition. Under the provisions of the agreement with
     NPI, the contract has been terminated with no further obligations to the
     Company.

3.   By letter of intent dated March 26, 2001, as amended, between the Company
     and Clearview Mineral Resources Corp. ("Clearview"), the Company agreed to
     acquire a 70% net royalty interest in certain oil and gas leases (the
     "Button Willow Leases") from Clearview in consideration for $150,000. The
     Company intended to assign the rights to two drill funding options to third
     parties to provide $750,000 towards the drilling of the first well in
     exchange for a 52.5% net royalty interest. The agreement was subject to due
     diligence and the signing of a definitive agreement on or before May 31,
     2001. The Company decided not to proceed with this acquisition.

<PAGE>


                             HADRO RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
================================================================================


NOTE 3 - OIL AND GAS PROPERTIES (con't)
--------------------------------------------------------------------------------

4.   During June 1999, the Company entered into an assignment agreement with
     Ibis Petroleum, Inc. ("Ibis") whereby Ibis sold, assigned, transferred and
     conveyed all of its right, title and interest in and to a total of
     thirty-five (35) oil and gas leases located in the Hadrosaurus Area of
     Union County, New Mexico to the Company (the "Leasehold Interests"). The
     Leasehold Interests were as follows: (i) twenty-eight (28) State of New
     Mexico leases covering an approximate total of 6,174.23 acres, with an
     annual rental rate of $0.25 per acre until 2002, at which time the rate
     increases to $0.50 per acre; (ii) two (2) Federal leases covering an
     approximate total of 2,323.33 acres, with an annual rental rate of $1.50
     per acre; and (iii) five (5) State of New Mexico leases covering an
     approximate total of 1,252.04 acres, with an annual rental rate of $0.25
     per acre until 2004, at which time the rate increases to $0.50 per acre
     through expiration. Management of the Company does not intend to renew the
     Leasehold Interests nor has it carried out any exploration activities on
     the Leasehold Interests. The Company has conducted ongoing due diligence
     regarding the Leasehold Interests, and has deemed that exploration
     initiatives represent higher degrees of risk than the Company's management
     currently wishes to participate. As of December 31, 2001, the Company has
     decided not to renew any of the leases, and all leases will be dropped
     within the next twelve months.


NOTE 4 - BANK LOANS
--------------------------------------------------------------------------------

During November 2001 Oakhills arranged for a term loan in the amount of $450,000
and an operating line of credit to a maximum amount of $50,000 with The Bank
N.A. in Oklahoma. The proceeds of the term loan were used to repay certain
outstanding debts to creditors, including $219,838 owed to a private company
controlled by a director and officer of Oakhills for production services and
equipment rentals, and retire all previous outstanding bank loans. The term loan
is repayable over three years with monthly principal payments of $12,500 plus
interest at 9.5% per annum. The line of credit is repayable on demand with
interest at 9.5% per annum. These loans are secured by a fixed charge over the
assets of Oakhills including assignment of oil and gas leases and are guaranteed
by the parent and a director.


NOTE 5 - CAPITAL STOCK
--------------------------------------------------------------------------------

The Company's capitalization is 100,000,000 common shares with a par value of
$0.001 per share.

During 2001, the Company issued 10,000,000 restricted common shares valued at
$3,300,000 to US Oil and Gas as consideration for the purchase of the interests
in the three operating subsidiaries. See Note 3.

The Company issued a finder's fee of 500,000 restricted common shares valued at
$165,000 per share with regards to the purchase of the three subsidiaries of
U.S. Oil & Gas.

During 2001 the Company, under an Offering Memorandum, sold 66,591 Units at $.75
per unit for proceeds of $49,943. Each unit consists of three restricted common
shares and one warrant entitling the holder to acquire an additional common
share at $1.00 per common share until April 6, 2003. The aggregate number of
common shares issued was 199,773 shares, with 66,591 warrants outstanding as of
December 31, 2001.

During 2001 the Company issued 1,000,000 shares of restricted common stock at
$0.32 per share in settlement of debt totaling $320,000.

Refer to Note 8.

<PAGE>


                             HADRO RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
================================================================================


NOTE 6 - RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

One of the directors of the Company has been contracted by Investor
Communications, Inc. ("ICI") and is part of the management team provided to
Hadro Resources, Inc. by ICI. During the year ended December 31, 2001 a total of
$387,575 was incurred to ICI for managerial, administrative and investor
relations services provided to the Company. In addition, net cash advances of
$20,100 were received from ICI and interest of $15,708 was accrued. Also during
the year, the Company issued 1,000,000 common shares at $.32 per share in
settlement of $320,000 of debt to ICI. At December 31, 2001 $134,675 is owing to
this company which accrues interest at 10% per annum and is without specific
repayment terms. Interest owing at December 31, 2001 amounted to $16,491.

A director of the Company received $12,500 from ICI for fees relating to work on
the Company.

At December 31, 2001 a total of $93,994 is owing to a related party and a
private company which is a significant shareholder. During the year ended
December 31, 2001 these parties advanced a total of $60,114. This amount accrues
interest at 10% per annum and is without specific repayment terms. Interest
owing at December 31, 2001 amounted to $5,734.

A director of Oakhills received $15,500 for remuneration in the year. At
December 31, 2001 $32,358 is owing to this director and his private company for
unpaid remuneration an production services.

Refer to Note 4.


NOTE 7 - INCOME TAXES
--------------------------------------------------------------------------------

The Company and its subsidiaries have tax losses of approximately $832,000 at
December 31, 2001, which may be available to reduce future year's taxable
income. These carryforwards will expire, if not utilized, beginning in 2014. The
potential tax benefit of these losses has not been recorded as a full-deferred
tax asset valuation allowance has been provided due to the uncertainty regarding
the realization of these losses.


NOTE 8 - SUBSEQUENT EVENTS
--------------------------------------------------------------------------------

By agreement dated March 22, 2002 the Company reacquired 8,00,000 of its shares
of common stock from US Oil & Gas in exchange for the transfer back to US Oil
and Gas of certain of its non-producing oil and gas properties acquired on
August 29, 2001. The Company also reacquired 400,000 shares of common stock
previously issued as a finder's fee in connection with the original transaction.
The 8,400,000 were returned to treasury and cancelled on March 25, 2002. US Oil
& Gas has agreed to grant the Company an option to repurchase a total of
1,500,000 common shares held as follows: 1,000,000 shares at a price of $.75 per
share exercisable in whole or in part until December 31, 2002 and 500,000 shares
at a price of $1.25 per share exercisable whole or in part until June 30, 2004.
Upon expiry of either option term any unexercised shares will be subject to a
monthly trading maximum equal to the lesser of 50,000 shares or $200,000 of
proceeds. The parties have agreed that US Oil & Gas will use the balance of
500,000 common shares to acquire interests in future oil and gas properties
purchased by the Company.

The Company entered into a letter of intent dated March 15, 2002 with Rubicon
Oil & Gas Inc. of Denver, Colorado ("Rubicon") to purchase 75% of Rubicon's
interests in oil and gas leases located in six separate prospects in the Uinta
Basin of Utah and the Douglas Creek Arch area in Colorado. Rubicon's working
interests range from 21% to 100% in gross acreage in excess of 16,000 acres, and
net acreage in excess of 7,000 acres. The prospects have been the subject of
planned development including a preliminary engineering study and include shut
in wells that require development of and connection to pipelines (PDNP's) in
addition to multiple PUD's and probable and possible drilling locations. The
consideration to be paid to Rubicon is 500,000 restricted common shares plus
$500,000 cash, and the Company has agreed to invest $2,000,000 in property
development expenditures before December 31, 2002. The Company is conducting its
due diligence and final negotiations for execution of a definitive agreement
with Rubicon.


<PAGE>


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

     On March 8, 2001, Andersen Andersen & Strong L.C. ("AAS"), the principal
independent accountant of HDRS resigned as the principal independent accountant.
AAS' resignation resulted from a mutual business decision made by the respective
management of AAS and HDRS that it would be in the best interests of HDRS to
engage the services of an independent auditing firm, which audits other
companies associated with HDRS' management. Therefore, on March 8, 2001, the
board of directors of HDRS authorized and approved the engagement of LaBonte &
Co. ("LaBonte"), Chartered Accountants, #1205 - 1095 West Pender Street,
Vancouver, British Columbia V6E 2M6 as the principal independent accountant for
HDRS.

     During HDRS' two most recent fiscal years and any subsequent interim period
preceding the resignation of AAS, there were no disagreements with either AAS or
LaBonte which were not resolved on any matter concerning accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of either AAS or
LaBonte, would have caused AAS or LaBonte to make reference to the subject
matter of the disagreements in connection with its respective reports. Neither
AAS nor LaBonte, as HDRS' principal independent accountant, provided an adverse
opinion or disclaimer of opinion to HDRS' financial statements, nor did AAS or
LaBonte modify its respective opinion as to uncertainty, audit scope or
accounting principles. The financial statements for fiscal year ended December
31, 2000 did contain the principal independent accountant's modification of its
opinion due to going concern uncertainties.

     HDRS' principal independent accountant from March 2001 to the current date
is Labonte & Co., 1205 - 1095 West Pender Street, Vancouver, British Columbia,
Canada V6E 2M6.


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

Identification of Directors and Executive Officers

     The directors and executive officers of HDRS are as follows:

Name                      Age                 Position with HDRS
----                      ---                 ------------------

Grant Atkins              41                  Director and President/Secretary
                                              and Treasurer

Jurgen A. Wolf            66                  Director

     GRANT ATKINS has been a Director and the President of HDRS since September
15, 2000 and the Secretary and Treasurer of HDRS since December 14, 2000. For
the past five years, Mr. Atkins has been self-employed and has acted as a
financial and project coordination consultant to clients in government and
private industry. He has extensive multi-industry experience in the fields of
finance, administration and business development. During 1998 and 1999, Mr.
Atkins was a consultant through the private management consulting companies of
Tristar Financial Services, Inc. and Investor Communications International, Inc.
Mr. Atkins is also a member of the board of directors of Intergold Corporation,
a publicly traded corporation formerly engaged in the exploration of gold and
silver, a member of the board of directors and the president of Vega-Atlantic
Corporation, a publicly traded corporation engaged in the worldwide exploration
of oil and gas, gold, and other precious metals, and a member of the board of
directors and the president of Eduverse.com, a publicly traded corporation.

<PAGE>


     JURGEN A. WOLF has been a Director of HDRS since October 17, 2001. Mr. Wolf
has considerable experience in the oil and gas industry and in all operational
aspects of public companies. For the past five years, Mr. Wolf has been a
president of J.A. Wolf Projects Ltd., a construction company specializing in
commercial and industrial building and development projects, and a director of
Key Capital, a CDNX exchange public company involved in battery technology and
fast charger product development and sales. As of the date of this Report, Mr.
Wolf is a director of Hagensborg Canada Inc., which is a private company
involved in chocolate and confectionary manufacturing and sales, a director of
Tasty Fry Inc., a OTCBB public company involved in automated French fry machine
development and product sales, and a director of Shoreham Resources Ltd., a CDNX
exchange public company involved in oil and gas pipelines and mining
initiatives.

     The directors of HDRS serve until their respective successor takes office
or until death, resignation or removal. The executive officers serve at the
pleasure of the board of directors of HDRS.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires HDRS' directors and officers, and the persons who
beneficially own more than ten percent of the common stock of HDRS, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Copies of all filed reports are required to be furnished to HDRS
pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the
reports received by HDRS and on the representations of the reporting persons,
HDRS believes that these persons have complied with all applicable filing
requirements during the fiscal year ended December 31, 2001.

ITEM 10. EXECUTIVE COMPENSATION

Compensation of Officers and Directors

     As of the date of this Annual Report, none of the directors or officers of
HDRS are compensated for their roles as directors or executive officers as HDRS
is only in the exploration stage and has not yet fully commenced business
operations. Officers and directors of HDRS, however, are reimbursed for any
out-of-pocket expenses incurred by them on behalf of HDRS. None of HDRS'
directors or officers are party to employment agreements with HDRS. HDRS
presently has no pension, health, annuity, insurance, stock options, profit
sharing or similar benefit plans.

     Grant Atkins, the President of HDRS, derives remuneration from HDRS
indirectly through Investor Communications International, Inc. ("ICI"), which
provides a wide range of management, financial, consulting and administrative
services to HDRS on a month-to-month basis as needed. As of fiscal year ended
December 31, 2001, HDRS accrued approximately $423,383 and paid approximately
$12,500 to ICI for services rendered. Of the amounts accrued to ICI during
fiscal year 2001, Grant Atkins received approximately $18,500.

     Gene Wilson, a prior director of HDRS, derived remuneration from HDRS
pursuant to consulting services provided to HDRS. As of fiscal year ended
December 31, 2001, HDRS did not accrue any fees to Mr. Wilson for services
rendered. See "Summary Compensation Table" below.

<PAGE>


Summary Compensation Table
--------------------------

                               Annual Compensation           Awards    Payouts
                              ---------------------        ----------  -------
                                 $      $       $          $       #       $
Name and Position             Salary  Bonus   Other       RSA   Options  LTIP
Other
--------------                ------  -----   -----       ---   -------  ------

Frank W. Donis          1999     0      0       0          0       0       0
Pres./Director          2000     0      0       0          0       0       0
                        2001     0      0       0          0       0       0


Marilyn Rafter          1990     0      0       0          0       0       0
Secretary/Director      2000     0      0       0          0       0       0
                        2001     0      0       0          0       0       0

                                                 (1)
Gene D. Wilson          1999     0      0       0          0       0       0
Director                2000     0      0     $1,050       0       0       0
                        2001     0      0       0          0       0       0

                                                 (2)
Grant Atkins            2000     0      0       0          0       0       0
Director/President      2001     0      0     $18,500      0       0       0


Jurgen A. Wolf          2001     0      0       0          0       0       0
Director

----------
     (1)
     Received pursuant to contractual arrangement between HDRS and Gene D.
Wilson regarding the New Mexico Prospects.

     (2)
     Grant Atkins may indirectly receive compensation from HDRS through the
contractual relationship between HDRS and ICI.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     In conjunction with the Agreement between HDRS and U.S. Oil & Gas, certain
stock certificates evidencing an aggregate of 8,400,000 shares of common stock
were returned to HDRS for cancellation. The following table sets forth the name
and address, as of the date of this Annual Report, and the approximate number of
shares of common stock of HDRS owned of record or beneficially by each person
who owned of record, or was known by HDRS to own beneficially, more than five
percent (5%) of HDRS' common stock, and the name and shareholdings of each
officer and director, and all officers and directors as a group as of the date
of this Annual Report.

--------------------------------------------------------------------------------
Title of Class           Name and Address       Amount and Nature      Percent
                       of Beneficial Owner     of Beneficial Owner     of Class
--------------------------------------------------------------------------------
                                                            (1)
Common Stock      U.S. Oil & Gas Resources Inc.    2,000,000            12.23%
                  1055 Dunsmuir Street
                  Vancouver, British Columbia
                  Canada V7X 1G4
                                                            (1)
Common Stock      Alexander W. Cox                 2,177,300            13.31%
                  428 - 755 Burrard Street
                  Vancouver, British Columbia
                  Canada V6Z 1X6
                                                            (1)
Common Stock      Tri Star Financial Corp.         5,250,000            32.10%
                  435 Martin Street
                  Suite 2000
                  Blaine, Washington 98320
                                                             (1)
Common Stock      Investor Communications, Inc.    1,000,000             6.11%
                  435 Martin Street
                  Suite 2000
                  Blaine, Washington 98320
                                                             (1)
Common Stock      All officers and directors         250,000             0.02%
                  as a group (2 persons)
--------------------------------------------------------------------------------
   (1)
     These are restricted shares of Common Stock.

<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The officers/directors of HDRS are engaged in other businesses, either
individually or through partnerships and corporations in which they may have an
interest, hold an office or serve on the boards of directors. Certain conflicts
of interest, therefore, may arise between HDRS and the respective
officer/director. Such conflicts can be resolved through the exercise by such
officer/director of judgment consistent with his fiduciary duties to HDRS. The
officers/directors of HDRS intend to resolve such conflicts in the best
interests of HDRS. Moreover, the officers/directors will devote their time to
the affairs of HDRS as they deem necessary.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  The following exhibits are filed as part of this Annual Report: None.

     (b)  Reports on Form 8-K: Filed on April 1, 2002; Filed on December 26,
          2001; Filed on December 6, 2001 and amended on December 11, 2001; and
          Filed on October 23, 2001.


SIGNATURES

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

                                          HADRO RESOURCES, INC.

Dated: March 29, 2002                     By: /s/GRANT ATKINS
                                          ----------------------------------
                                          Grant Atkins, President