SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-QSB

|[X]   | QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGEACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001        
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                              
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGEACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________

Commission File No. 1-12334

FORTUNE NATURAL RESOURCES CORPORATION(Exact Name of
Registrant as specified in its charter)

|Delaware(State or other jurisdiction ofincorporation or organization) | 95-4114732(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

|One Commerce Green, 515 W. Greens Rd.,Suite 720, Houston, Texas(Address of principal Executive Offices) | 77067(Zip Code)
|------------------------------------------------------------------------------------------------------- | ---------------

281-872-1170Issuer's telephone number

N/A(Former name or former address, 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

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.

16,462,579 as of April 30, 2001

Transition small business disclosure format (check one)  Yes  
  No  X

PART I FINANCIAL INFORMATION

ITEM 1.  Financial Statements

FORTUNE NATURAL RESOURCES CORPORATIONBALANCE SHEETS

`ASSETS
                                                        March 31,   December 31,
                                                          2001         2000
                                                      ------------  ------------
                                                       (Unaudited)    (Audited)
CURRENT ASSETS:
   Cash and cash equivalents.......................   $  1,286,000  $ 1,028,000
   Accounts receivable.............................        514,000      647,000
   Prepaid expenses................................         25,000       25,000
                                                      ------------  -----------
      Total Current Assets.........................      1,825,000    1,700,000
                                                      ------------  -----------
PROPERTY AND EQUIPMENT:
   Oil and gas properties, accounted for
     using the full cost method....................     28,098,000   27,848,000
   Office and other................................        394,000      392,000
                                                      ------------  -----------
                                                        28,492,000   28,240,000
   Less--accumulated depletion, depreciation
    and amortization...............................    (22,678,000) (22,511,000)
                                                      ------------  -----------
                                                         5,814,000    5,729,000
                                                      ------------  -----------

TOTAL ASSETS.......................................   $  7,639,000  $ 7,429,000
                                                      ============  ==-========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                        March 31,   December 31,
                                                          2001         2000
                                                      ------------  ------------
                                                       (Unaudited)   (Audited)
CURRENT LIABILITIES:
   Current portion of long-term debt...............   $          -  $    10,000
   Accounts payable................................         78,000       64,000
   Accrued expenses................................        162,000       73,000
   Royalties and working interests payable.........         58,000       60,000
   Accrued interest................................         69,000       69,000
                                                      ------------  -----------
      Total Current Liabilities....................        367,000      276,000
                                                      ------------  -----------


LONG-TERM DEBT.....................................      2,295,000    2,295,000
                                                      ------------  -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $1.00 par value:
      Authorized--2,000,000 shares
      Issued and outstanding--None.................              -            -
   Common stock, $.01 par value:
      Authorized--40,000,000 shares
      Issued and outstanding 16,462,579 and
        16,413,806 at March 31, 2001 and
        December 31, 2000, respectively............        164,000      164,000
   Capital in excess of par value..................     32,141,000   32,117,000
   Accumulated deficit.............................    (27,328,000) (27,423,000)
                                                      ------------  -----------
NET STOCKHOLDERS' EQUITY...........................      4,977,000    4,858,000                                                 ------------  -----------
                                                      ------------  -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........   $  7,639,000  $ 7,429,000
                                                      ============  ===========`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF OPERATIONS

`For the
                                                          Three Months Ended
                                                         ----------------------
                                                          March 31,   March 31,
                                                            2001        2000
                                                         ----------  ----------
                                                              (Unaudited)
REVENUES
   Sales of oil and gas, net of royalties..............  $  844,000   $ 359,000
   Other income........................................      14,000       6,000
                                                         ----------  ----------
                                                            858,000     365,000
                                                         ----------  ----------

COSTS AND EXPENSES
   Production and operating............................     168,000     123,000
   Provision for depletion, depreciation
     and amortization..................................     167,000     150,000
   General and administrative..........................     358,000     267,000
   Interest............................................      70,000      69,000
                                                         ----------  ----------
                                                            763,000     609,000
                                                         ----------  ----------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................      95,000    (244,000)
   Extraordinary loss on early extinguishments
     of debt...........................................           -    (118,000)
                                                         ----------  ----------

NET INCOME (LOSS)......................................  $   95,000  $ (362,000)
                                                         ==========  ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.............  16,446,000  14,299,000
                                                         ==========  ==========

NET INCOME (LOSS) PER COMMON SHARE (BASIC AND DILUTED)
   Net income (loss) before extraordinary item.........  $     0.01  $    (0.02)
   Extraordinary item..................................          -        (0.01)
                                                         ----------  ----------
      Net income (loss) per common share...............  $     0.01  $    (0.03)
                                                         ==========  ==========`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATIONSTATEMENT OF STOCKHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001

`Common Stock       Capital in                  Stock
                                  ---------------------   Excess of    Accumulated    holders'
                                     Shares     Amount    Par Value     Deficit       Equity
                                  ----------  ---------  -----------  ------------   ----------
BALANCE, December 31, 2000.....   16,413,806  $ 164,000  $32,117,000  $(27,423,000)  $4,858,000

Common stock contributed to
   401(k) Plan.................       48,773          -       24,000             -       24,000
Net income.....................            -          -            -        95,000       95,000
                                  ----------  ---------  -----------  ------------   ----------
BALANCE, March 31, 2001
   (unaudited).................   16,462,579  $ 164,000  $32,141,000  $(27,328,000)  $4,977,000
                                  ==========  =========  ===========  ============   ==========`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS

`For the
                                                           Three Months Ended
                                                         ----------------------
                                                          March 31,   March 31,
                                                            2001         2000
                                                         ----------  ----------
                                                              (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss).................................... $   95,000  $ (362,000)
   Adjustments to reconcile net income (loss) to net
     cash provided by (used) in operating activities:
      Depletion, depreciation and amortization..........    167,000     150,000
      Common stock issued for directors' fees...........          -       8,000
      Common stock issued for 401(k) Plan contribution..     24,000           -
      Common stock issued in connection with
        extraordinary loss on early
        extinguishment of debt..........................          -     118,000
                                                         ----------  ----------
        Cash flow before changes in operating
        assets and liabilities..........................    286,000     (86,000)
   Changes in operating assets and liabilities:
      Accounts receivable...............................    133,000     (27,000)
      Prepaids..........................................          -      13,000
      Accounts payable and accrued expenses.............    103,000     (80,000)
      Royalties and working interests payable...........     (2,000)     (3,000)
      Accrued interest..................................          -     (28,000)
      Other.............................................          -      19,000
                                                         ----------  ----------
   Net cash provided by (used) in operating activities..    520,000    (192,000)
                                                         ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Expenditures for oil and gas properties..............   (250,000)    (57,000)
   Expenditures for other property and equipment........     (2,000)          -
                                                         ----------  ----------
   Net cash used in investing activities................   (252,000)    (57,000)
                                                         ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of long-term debt..........................    (10,000)          -
   Proceeds from issuance of common stock...............          -     782,000
   Expenditures for offering costs......................          -     (23,000)                                                         ----------  ----------
                                                         ----------  ----------
   Net cash provided by (used) in financing activities..    (10,000)    759,000
                                                         ----------  ----------

NET INCREASE IN CASH AND CASH EQUIVALENTS...............    258,000     510,000

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..........  1,028,000     294,000
                                                         ----------  ----------

CASH AND CASH EQUIVALENTS, END OF PERIOD................ $1,286,000  $  804,000
                                                         ==========  ==========

Supplemental information:
   Interest paid in cash................................ $   70,000  $   69,000
Non-cash transactions
   Common stock issued for 401(k) Plan contribution.....          -      19,000
   Common stock issued for conversion of notes..........          -     930,000`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION

NOTES TO FINANCIAL STATEMENTSMarch 31, 2001

(1)     Line of
Business and Summary of Significant AccountingPolicies and Procedures

The condensed financial
statements at March 31, 2001, and
for the period then ended included herein have been prepared by
Fortune Natural Resources Corporation, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations.  However,
Fortune believes that the disclosures are adequate to make the
information presented not misleading.  These condensed financial
statements should be read in conjunction with the financial
statements and the notes thereto included in Fortune's latest
annual report on Form 10-KSB.  In Fortune's opinion, the
financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly its
financial position and the results of its operations and its cash
flows for the dates and periods presented.  The results of the
operations for these interim periods are not necessarily
indicative of the results for the full year.

(2)     Long-Term Debt

At March 31,
2001, a summary of long-term debt is as follows:

`March 31,  December 31,
                                                                  2001        2000
                                                               ----------  ----------
    Convertible Subordinated Notes due December 31, 2007....   $2,295,000  $2,295,000

    Credit Lyonnais credit facility due January 11, 2001....            -      10,000
                                                               ----------  ----------
    Total long-term debt....................................    2,295,000   2,305,000
    Less current installments...............................            -      10,000
                                                               ----------  ----------

    Long-term debt, excluding current installments..........   $2,295,000  $2,295,000
                                                               ==========  ==========`

Fortune's
subordinated notes are convertible by the holders
into common stock at $0.75 per share and/or redeemable by Fortune
at par.  The notes are unsecured and can be subordinated to any
secured debt.  The notes bear interest at a rate of 12% per year,
payable quarterly.  The cost incurred to issue the original notes
has been amortized as additional interest expense over the
18-month period ended May 1, 1999, the first date that the notes
were convertible.  As a result of this amortization of issuance
costs, the effective interest rate of the notes over this
18-month period was 21.2%.  If any notes are held to maturity, the
effective interest rate to maturity on those notes will be 13.4%.

---

In February
and March 2000, holders of $930,000 of Fortune's
12% notes that were convertible at approximately $0.33 per share,
converted those notes into 2,821,162 shares of common stock.
Fortune paid the noteholders who converted a premium equal to one
year's prepaid interest plus certain accrued interest.  This
premium was paid in Fortune common stock valued at $0.75 per
share, resulting in the issuance of an additional 158,132 shares
to the noteholders who converted.  This premium was expensed
during the first quarter of 2000 as an extraordinary loss on
early extinguishment of debt.  As a result of this note
conversion, Fortune's annual cash interest expense was reduced by
$111,600.

Fortune's
credit  facility  with  Credit  Lyonnais  New York
Branch  expired  January  11,  2001.  On March  31,  1998,  Fortune
repaid  all but  $10,000 of the  outstanding  balance of the credit
facility  with a  portion  of  the  proceeds  from  the  sale  of a
producing  property.  The remaining  $10,000  balance was repaid in
the first  quarter of 2001.  The interest  rate on the facility was
1.25% above Credit Lyonnais' base rate.

(3)     Income Tax Expense

No provision
for income taxes was required for the three
months ended March 31, 2001 and 2000.

At March 31,
2001, Fortune estimates it had cumulative net
operating loss carryforwards for federal income tax purposes of
approximately $23 million, of which approximately $7 million is
subject to restrictions under I.R.C. 382.  These loss
carryforwards are available to offset future federal taxable
income, if any.  The net operating losses expire from 2002
through 2020.  Fortune is uncertain as to the recoverability of
the above deferred tax assets and has therefore applied a 100%
valuation allowance.

(4)     Legal Proceedings

There are
no material pending legal proceedings involving
any of Fortune's properties or which involve a claim for damages
which exceed 10% of Fortune's current assets.

(5)     Computation of Income and Loss Per Share

Basic net
income and loss per common share is computed by
dividing net income or loss, as applicable, by the weighted
average number of common shares outstanding.  Diluted income and
loss per common share does not differ from basic income and loss
per common share because the issuance or conversion of additional
securities would have an antidilutive effect.

---

ITEM 2.     Managements Discussion and
Analysis of FinancialCondition and Results of Operations

Financial Condition

At March 31,
2001, Fortune reported working capital of
$1,458,000, a cash balance of $1,286,000 and positive cash flow
before changes in operating assets and liabilities of $286,000
for the three months then ended.  Fortune also realized net
income of $95,000 for the quarter ended March 31, 2001.  This is
the third consecutive quarter that Fortune has reported net
income and the fourth consecutive quarter of positive cash flow
before changes in operating assets and liabilities.  Fortune has
no debt due currently and our long-term debt is comprised of
$2,295,000 of 12% subordinated convertible debentures which are
due December 31, 2007.  These results reflect a significant
improvement in Fortune's financial position, cash flow and
operating results from December 31, 1999 and prior years.

In past years,
Fortune realized net losses that have
resulted in an accumulated deficit of approximately $27 million
at March 31, 2001.  As a result of declining production in prior
years and the sale of Fortune's interest in East Bayou Sorrel in
March 1998, Fortune realized negative cash flows before changes
in operating assets and liabilities of $539,000 and $478,000 in
calendar years 1999 and 1998, respectively.  During February
through May 2000, Fortune took steps to improve its short term
liquidity by raising net proceeds of $763,000 through the sale of
common stock and the exercise of common stock warrants.  Also,
during February and March 2000, $930,000 of Fortune's 12%
convertible notes were converted to common stock.  The remaining
notes are convertible into common stock at $0.75 per share.

Also in
February 2000, the producing well at South Timbalier
Block 86 was recompleted and subsequently reached production
rates as high as 20 million cubic feet of gas per day and 100
barrels of condensate per day.  Fortune owned a 3.167% overriding
royalty interest in the well, which converted in May 2000 to an
after payout overriding royalty interest of 4%.  The well was a
significant contributor to Fortune's revenue and cash flow in
2000, but has recently gone off production.  See the discussion of
this well below.  Fortune has recently had other successful drilling and
workover results, including the Cut Off Field recompletion in
late September 2000 with initial production of 2 million cubic
feet of gas per day.  These wells are discussed below.  Gas
prices have increased significantly since year end 1999 and oil
prices have generally remained above $25 per barrel.
Consequently, Fortune is now realizing the positive operating
results discussed above.

Fortune has had
two recent drilling successes that have not
impacted its financial results as yet.  The Gamble Gully Koemel
#1 began producing in April 2001 and the Cadiz Brooks #3 is
currently being completed.  These projects are discussed below.

Results of Operations

Comparison of 2001 Operating Results to 2000

Quarter ended March 31, 2001 and 2000

Successful
drilling results from 2000 are generally
offsetting production declines from depletion.  Two successful
Cadiz prospect wells began producing in June 2000 and September
2000, respectively.  Two successful wells at La Rosa began
producing in April 2000 and July 2000.  A workover program at La
Rosa has resulted in production increases beginning in June
2000.  A successful Bacon well began producing in May 2000.

---

Fortune also
experienced significantly higher gas prices and
higher gas production in the first quarter 2001.  Consequently,
Fortune's oil and gas revenues for the quarter ended March 31,
2001 increased 135% to $844,000 compared to $359,000 reported
during the first quarter of 2000.  Fortune's reported net income
of $95,000 during the first quarter of 2001 compared to a net
loss of $362,000 for the same 2000 period.  The income reported
during the first quarter of 2001 is due primarily to the higher
gas prices and the higher gas production.

Analysis of
change in oil and gas revenues -

`Quarter Ended
                                           March 31,
                                     ------------------   Percent
                                        2001      2000    Change
                                     --------  --------  --------
           Production
             Oil  -  Bbl                2,200     3,300    (32)%
             Gas  -  Mcf              104,200    99,100      5 %
           Prices
             Oil  -  $/Bbl             $27.74    $27.44      1 %
             Gas  -  $/Mcf               7.50      2.70    177 %
           Revenues
             Oil                      $62,000   $91,000    (31)%
             Gas                      782,000   268,000    192 %`

In early 2000,
the South Timbalier 86 well was recompleted
and began producing at a significantly higher rate beginning in
February 2000.  During the first quarter of 2001, the well
averaged 3.9 million cubic feet of gas equivalent per day and
generated $121,000 of oil and gas revenue.  First quarter 2001
production was lower than expected because this well stopped
producing on March 13, 2001 and Fortune does not know when and if
production can be resumed.  Fortune currently owns a 4%
overriding royalty interest in this well.

At the end of
September 2000, the Cut Off Field K. Pierce #1
well was recompleted and began producing 2 million cubic feet of
gas and 30 barrels of condensate per day.  Fortune has an
approximate 24% net revenue interest in this well.  During the
first quarter of 2001, the well averaged approximately 700
thousand cubic feet of gas equivalent per day.

Analysis of
change in selected expenses -

`Quarter Ended
                                               March 31,
                                         ------------------   Percent
                                            2001      2000    Change
                                         --------  --------  --------
    Production and operating expense     $168,000  $123,000     37%
       -  per MCFE                           1.43      1.03     38%
    Depreciation, depletion and
      amortization                        167,000   150,000     11%
       -  per MCFE                         $ 1.42    $ 1.26     13%`

Production and operating expense increased by $45,000 for
the first quarter of 2001 versus 2000 because of higher
production taxes, resulting from the higher gas revenues, and
more producing properties in 2000.  These factors contributed to
the higher per MCFE operating cost in 2000.

---

Fortune's provision
for depletion, depreciation and
amortization (DD&A) increased by $17,000 in the first quarter of
2001 as compared to 2000 primarily because of a higher depletable
oil and gas property balance in relation to estimated proved
reserves at March 31, 2001.

`March 31,
                                           --------------------    Percent
                                              2001       2000      Change
                                           ---------  ---------  ---------
      General and administrative expense   $ 358,000  $ 267,000       34%
      Interest expense                        70,000     69,000        1%`

General and
administrative expense increased $91,000 for the
first quarter of 2001 versus 2000 because of higher costs in most
categories of overhead.

Liquidity and Capital Resources

Cash Balance,
Working Capital and Cash Flows from Operating Activities

Fortune
generated $520,000 of cash in its operating
activities during the first quarter of 2001 compared to cash used
of $192,000 during the same 2000 period.  Before considering the
effect of changes in operating assets and liabilities, cash flow
was a positive $286,000 during 2001 compared to a negative
$86,000 during 2000.  As discussed above, higher gas prices and
higher gas production account for this significant increase in
cash flow.  Cash and working capital at March 31, 2001 increased
from December 31, 2000 because of the positive cash flow during
2001.

Analysis of
changes in selected liquidity measures -

`As of
                                        --------------------------
                                          March 31,   December 31,    Percent
                                            2001          2000         Change
                                        ------------  ------------  ------------
    Cash balance                        $  1,286,000  $  1,028,000       25%
    Net working capital                    1,458,000     1,424,000        2%
    Long-term debt                         2,295,000     2,295,000        0%`

`Quarter ended March 31,
                                        --------------------------
                                             2001         2000         Change
                                        ------------  ------------  ------------
    Cash flow from operations before
      changes in operating assets
      and liabilities                   $    286,000  $    (86,000)      N/A
    Adjustment for change in
      operating assets and liabilities       234,000      (106,000)      N/A
                                        ------------  ------------  ------------
    Cash flow from operating activities $    520,000  $   (192,000)      N/A
                                        ============  ============  ============`

---

Cash Used in
Investing Activities - Capital Expenditures

Expenditures for
oil and gas properties for the first
quarter of 2001 were $250,000 compared to $57,000 for the first
quarter of 2000.

The 2001
expenditures include primarily:

- drilling and completing the successful Gamble Gully Koemel
#1 sidetrack well;
- drilling and completing the successful Brooks #3 well at
Cadiz prospect;
- land, seismic and prospect fee for the West Point prospect;
- the multiple well recompletion program at La Rosa; and
- seismic interpretation costs and delay rentals at Espiritu
 Santo Bay and La Rosa.

The 2000 expenditures include primarily:

- additional leases at Espiritu Santo Bay;
- seismic interpretation at Espiritu Santo Bay and La Rosa;
- completing two wells at Espiritu Santo Bay, ST 216 #16 and
ST 210 #5; and
- completing the Bacon prospect Anderson 24-7 well.

The 2001
activities are discussed below.

Logging results
of the Brooks #3 well at the Cadiz 3-D
Seismic Prospect indicate that the well encountered approximately
55 feet of net pay in Slick sand and up to 160 feet of
prospective net pay in the Luling sand.  The well is currently
being completed.  Fortune owns a 6.5625% working interest in this
well.

The well was
drilled on a 3-D seismic anomaly generated from
3-D seismic licensed by Fortune and farmed-out to Prime Energy
Corporation.

The Koemel #1
(renamed the Gamble Gully Gas Unit #5) was
completed during the first quarter of 2001.  The well originally
tested at approximately 200 mcf a day, un-stimulated, and
pressures were near original reservoir levels.  A sales line has
been constructed and sales commenced in April 2001 at a rate of
115 mcf a day.  Fortune and its partner believe this initial
well's results are quite positive and are planning two additional
wells to move further away from existing wellbores.  Fortune has
a 30% working interest in this project.

In response to
historically high oil and gas prices, the
partners in the La Rosa field are continuing a re-completion
program to increase production.  Recompletions of wells have
resulted in additional production and further activity is planned.

Oil and Gas Prices

Conditions
outside of our control influence the prices we
receive for oil and gas.  As of May 3, 2001, Fortune was
receiving an average of approximately $25.40 per barrel for its
oil production and $5.20 per Mcf for its gas production.  These
prices are significantly higher than historical averages and
could decrease in the near future.

---

Forward Looking Statements

This Form 10-QSB
contains forward-looking statements.
Forward-looking statements include statements regarding future
oil and gas production and prices, future cash flow and cash
requirements, future exploration and development spending, future
drilling and operating plans and results, reserve and production
potential of Fortune's properties and prospects, Fortune's
business strategy, and management's plans and expectations.
Actual events or results could differ materially from those
discussed in the forward-looking statements as a result of
various risk factors including the factors described below.

Fortune's
reliance on exploratory projects increases the
risks inherent in the oil and gas industry.  Our current
investments are primarily in exploration projects, where the
risks are substantially greater than projects involving already
producing formations.  We anticipate that one or more of our next
wells will be designed to test formations that are deeper than
known production in Espiritu Santo Bay.  These formations have
not been extensively tested to date.  The exploration risks,
therefore, are higher on this project than they might be where a
greater number of underground references exist.  Fortune has
realized less success than originally anticipated in drilling
some of its recent prospects and a substantial number of our
future projects could experience similar results.

Fortune has
incurred net losses for each of the last several
years.  Fortune has incurred substantial net losses in prior
years and a smaller net loss in 2000.  Although Fortune recorded
net income in each of the last three quarters due to higher
prices, lower costs and higher production, there is no assurance
that this favorable trend will continue.  See also Managements'
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity.

Oil and gas
reserves are depleting assets.  Fortune's future
cash flow and income are highly dependent on our ability to find
or acquire additional reserves to replace those currently
producing.  Although Fortune increased its reserves from 1999 to
2000, reserves had been declining in prior years.  Without adding
additional reserves in the future, our oil and gas reserves and
production will decline.

Our revenue
is dependent upon a limited number of producing
wells.  In 1999, Fortune's well at South Timbalier Block 76 was
our most prolific producer accounting for over 30% of our oil and
gas revenues.  In early 2000, a recompletion of a well at South
Timbalier Block 86 resulted in that well becoming our most
prolific producer, accounting for approximately 28% of our oil
and gas revenues in 2000.  On September 28, 2000, the Cut Off
field recompletion resulted in that well becoming our most
prolific producer, accounting for approximately 25% of our fourth
quarter 2000 oil and gas revenues.  During the first quarter of
2001, these three wells combined accounted for 41% of Fortune oil
and gas revenues.  Because the South Timbalier Block 86 well and
the Cut Off field wells have a limited production history, it is
difficult to predict accurately their production decline rates or
ultimate reserves.  The South Timbalier Block 86 well is
currently shut in and we do not know when and if production can
be resumed.  This well accounted for 14% of Fortune's first
quarter 2001 oil and gas revenues.  A significant curtailment or
loss of production from an individually significant well for a
prolonged period before we could replace that well could have a
material adverse effect on our projected operating results and
financial condition.

Our need for
working capital may affect our level of
participation in various projects.  Investment in oil and gas
exploration requires the commitment of substantial amounts of
capital over significant periods of time.  We may not have
sufficient liquid capital resources to participate at our
existing working interest level if the operators of any of our
properties accelerate the drilling and development schedule or if
we incur unexpected significant expenditures or reduced
production.  If we do not participate in the capital expenditures
for any project, our interest in that project will be
substantially reduced or lost entirely.

---

Fortune has
substantial debt due in 2007.  At March 31,
2001, Fortune had $2,295,000 of 12% subordinated convertible
notes outstanding that are due December 31, 2007.  All of these
notes are convertible by the holder at $0.75 per share or
redeemable by Fortune at par.  Based on historical operating
results, historical fluctuating oil and gas prices and the
uncertainties of projecting long term production and cash flows
from current oil and gas prices and reserves, Fortune's cash flow
could decrease and there is risk that we would not be able to
repay the convertible subordinated notes when they become due in
2007.

In
the event that Fortunes cash flow decreases unexpectedly, drilling is
unsuccessful or management determines to accelerate the growth plans for
Fortune, we may require additional equity and/or debt financing to repay our
notes if they are not converted to equity. Fortunes projections of
production, cash flow and capital requirements are based upon numerous
assumptions about the future, including: oil and gas prices, production decline
rates, estimates of oil and gas reserves, costs, absence of major operating
disruptions and catastrophes, timing of projects and markets for our production.
See the other risk factors herein for a discussion of risks associated with
Fortune and future projections made by us. If we experience significant
unexpected decreases in cash flow or increases in capital requirements, and we
are unable to raise capital, we may need to take other steps to maintain our
ability to repay the notes if they becomes due. Those steps might include
reducing overhead further, foregoing our participation in projects or selling
assets.

Fortune is
dependent on operators, consultants and partners
over whom it has little control.  Since we do not operate our
projects, we are dependent on other oil and gas companies to
conduct operations in a prudent, competent, and timely manner.

Additional factors.
Additional risks that apply to Fortune
in the oil and gas industry in general but that could cause
actual events to vary from those discussed in this annual report
include, among others:  impairment write-downs under full cost
accounting; material uninsured losses; dependence on key
personnel; limited market for Fortune stock; potential stock
dilution by exercise or conversion of common stock equivalent;
adverse change in governmental regulation; inability to obtain
critical supplies and equipment, personnel and consultants; and
inability to access capital to pursue our plans.

ITEM 3.  Quantitative and Qualitative Disclosures about MarketRisk

Not applicable
to small business filer.

---

PART II OTHER INFORMATION

ITEM 1.    Legal Proceedings

See note 4
of the footnotes to the financial statements in
Part I herein for a description of legal proceedings.

ITEM 2.    Change in Securities

None

ITEM 3.    Defaults Upon Senior Securities

None

ITEM 4.    Submission of Matters to a Vote of Securities Holders

None

ITEM 5.    Other Information

None

ITEM 6.    Exhibits and Reports on Form 8-K

(a)    EXHIBITS

| | Exhibit No. | Description                                                                           
| | ----------- | --------------------------------------------------------------------------------------
| | 10.1*       | First Amendment to Office Lease Agreement for 515 W. Greens Road,
Houston, Texas 77067

(b)    REPORTS ON FORM 8-K / 8K-A

A report on Form 8-K was filed with the Securities and
Exchange Commission on April 18, 2001 to report Fortune's press
release providing an exploration program update.

A report on Form 8-K was filed with the Securities and
Exchange Commission on May 9, 2001 to report Fortune's press
release of its first quarter 2001 financial results.

*Filed herewith.

---

SIGNATURES

Pursuant to the
requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

| | FORTUNE NATURAL RESOURCES CORPORATION
| | -------------------------------------

| | By:    /s/ Tyrone J. Fairbanks                                     
| | -------------------------------------------------------------------
| | Tyrone J. Fairbanks     
     President and Chief Executive Officer

| | By:    /s/ J. Michael Urban                                                                        
| | ---------------------------------------------------------------------------------------------------
| | J. Michael Urban     
     Vice President and Chief Financial
               and Accounting Officer

Date:      May 9, 2001