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 JUNE 30, 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.

16,471,272 as of July 31, 2001

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

---

PART I FINANCIAL INFORMATION

ITEM 1.    Financial Statements

FORTUNE NATURAL RESOURCES CORPORATION
BALANCE SHEETS

ASSETS

`June 30,     December 31,
                                                         2001          2000
                                                     ------------  ------------
                                                     (Unaudited)     (Audited)
CURRENT ASSETS:
   Cash and cash equivalents.......................  $  1,112,000  $  1,028,000
   Accounts receivable.............................       328,000       647,000
   Prepaid expenses................................        25,000        25,000
                                                     ------------  ------------
      Total Current Assets.........................     1,465,000     1,700,000
                                                     ------------  ------------
PROPERTY AND EQUIPMENT:
   Oil and gas properties, accounted for
     using the full cost method....................    28,288,000    27,848,000
   Office and other................................       395,000       392,000
                                                     ------------  ------------
                                                       28,683,000    28,240,000
   Less--accumulated depletion, depreciation
    and amortization...............................   (22,820,000)  (22,511,000)
                                                     ------------  ------------
                                                        5,863,000     5,729,000
                                                     ------------  ------------
TOTAL ASSETS.......................................  $  7,328,000  $  7,429,000
                                                     ============  ============`

LIABILITIES AND STOCKHOLDERS EQUITY

`June 30,     December 31,
                                                         2001           2000
                                                     ------------  ------------
                                                     (Unaudited)     (Audited)
CURRENT LIABILITIES:
   Current portion of long-term debt...............  $          -  $     10,000
   Accounts payable................................        50,000        64,000
   Accrued expenses................................        80,000        73,000
   Royalties and working interests payable.........        56,000        60,000
   Accrued interest................................        69,000        69,000
                                                     ------------  ------------
      Total Current Liabilities....................       255,000       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 16,462,578 and
        16,413,806 at June 30, 2001 and
        December 31, 2000, respectively............       164,000       164,000
   Capital in excess of par value..................    32,141,000    32,117,000
   Accumulated deficit.............................   (27,527,000)  (27,423,000)
                                                     ------------  ------------
NET STOCKHOLDERS' EQUITY...........................     4,778,000     4,858,000
                                                     ------------  ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........  $  7,328,000  $  7,429,000
                                                     ============  ============`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF OPERATIONS

`For the Six months Ended
                                                     --------------------------
                                                        June 30,     June 30,
                                                         2001          2000
                                                     ------------  ------------
                                                             (Unaudited)
REVENUES
   Sales of oil and gas, net of royalties..........  $  1,315,000  $  1,016,000
   Other income....................................        25,000        11,000
                                                     ------------  ------------
                                                        1,340,000     1,027,000
                                                     ------------  ------------

COSTS AND EXPENSE
   Production and operating........................       323,000       285,000
   Provision for depletion, depreciation and
     amortization..................................       309,000       419,000
   General and administrative......................       673,000       564,000
   Interest........................................       139,000       138,000
                                                     ------------  ------------
                                                        1,444,000     1,406,000
                                                     ------------  ------------

LOSS BEFORE EXTRAORDINARY ITEM.....................      (104,000)     (379,000)
   Extraordinary loss on early
     extinguishments of debt.......................             -      (118,000)
                                                     ------------  ------------

NET LOSS...........................................  $   (104,000) $   (497,000)
                                                     ============  ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.........    16,454,226    15,328,499
                                                     ============  ============

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

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF OPERATIONS

`For the Three Months Ended
                                                     --------------------------
                                                        June 30,     June 30,
                                                         2001         2000
                                                     ------------  ------------
                                                           (Unaudited)
REVENUES
   Sales of oil and gas, net of royalties..........  $    471,000  $    657,000
   Other income....................................        11,000         5,000                                                     ------------  ------------
                                                     ------------  ------------
                                                          482,000       662,000
                                                     ------------  ------------
COSTS AND EXPENSES
   Production and operating........................       155,000       162,000
   Provision for depletion, depreciation
     and amortization..............................       142,000       269,000
   General and administrative......................       315,000       297,000
   Interest........................................        69,000        69,000
                                                     ------------  ------------
                                                          681,000       797,000
                                                     ------------  ------------

NET LOSS...........................................  $   (199,000) $   (135,000)
                                                     ============  ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.........    16,462,579    16,358,329
                                                     ============  ============

NET LOSS PER COMMON SHARE
   (BASIC AND DILUTED).............................  $      (0.01) $      (0.01)
                                                     ============  ============`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENT OF STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 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
Common stock returned to treasury...          (1)        -            -             -           -
Net loss............................           -         -            -      (104,000)   (104,000)
                                      ----------  --------  -----------  ------------  ----------
BALANCE, June 30, 2001
   (unaudited)......................  16,462,578  $164,000  $32,141,000  $(27,527,000) $4,778,000
                                      ==========  ========  ===========  ============  ==========`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS

`For the Six Months Ended
                                                          --------------------------
                                                           June 30,       June 30,
                                                              2001          2000
                                                          ------------  ------------
                                                                  (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss.............................................  $   (104,000) $   (497,000)
   Adjustments to reconcile net loss to net
     cash provided by (used) in operating activities:
      Depletion, depreciation and amortization..........       309,000       419,000
      Common stock issued for directors' fees...........             -        13,000
      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........................       229,000        53,000
   Changes in operating assets and liabilities:
      Accounts receivable...............................       319,000      (177,000)
      Prepaids..........................................             -        (3,000)
      Accounts payable and accrued expenses.............        (7,000)      (77,000)
      Royalties and working interests payable...........        (4,000)       46,000
      Accrued interest..................................             -       (28,000)
      Other.............................................             -        19,000
                                                          ------------  ------------
   Net cash provided by (used) in operating activities         537,000      (167,000)
                                                          ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Expenditures for oil and gas properties..............      (440,000)     (224,000)
   Expenditures for other property and equipment........        (3,000)            -
                                                          ------------  ------------
   Net cash used in investing activities................      (443,000)     (224,000)
                                                          ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of long-term debt..........................       (10,000)            -
   Proceeds from issuance of common stock...............             -       786,000
   Expenditures for offering costs......................             -       (23,000)
                                                          ------------  ------------
   Net cash provided by (used) in financing activites...       (10,000)      763,000
                                                          ------------  ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS...............        84,000       372,000

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..........     1,028,000       294,000
                                                          ------------  ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................  $  1,112,000  $    666,000
                                                          ============  ============

Supplemental information:
   Interest paid in cash................................  $    139,000  $    166,000
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 STATEMENTS
June 30, 2001

(1)      Line of
Business and Summary of Significant Accounting Policiesand Procedures

The
condensed financial statements at June 30, 2001, and for the periods 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
June 30, 2001, a summary of long-term debt is as follows:

`June 30,   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.
The $10,000 outstanding balance of this credit facility 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 six months ended June 30, 2001 and 2000.

At
June 30, 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 Loss Per Share

Basic
net loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding. Diluted loss per common share does
not differ from basic 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 Financial Condition and
Results of Operations

Financial Condition

At
June 30, 2001, Fortune reported working capital of $1,210,000, a cash balance of
$1,112,000 and no short-term debt. Fortune reported cash flow before changes in
operating assets and liabilities of $229,000 and $(57,000) for the six months
and three months ended June 30, 2001, respectively. Fortunes only debt is
its $2,295,000 of 12% subordinated convertible debentures, which are due
December 31, 2007. Although oil and gas prices have declined since the first
quarter of 2001, they generally remain strong by historical standards.

In
past years, Fortune realized significant net losses that have resulted in an
accumulated deficit of approximately $28 million at June 30, 2001. Fortune also
realized negative cash flows in calendar years 1999 and 1998. 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.

Fortune
reported positive cash flow in 2000 and the first quarter of 2001 because of
higher oil and gas prices and increased production from successful drilling and
workover activity discussed below. Fortunes negative cash flow before
changes in operating assets and liabilities during the quarter ended June 30,
2001 results primarily from a recent significant decline in production. As
previously reported, the South Timbalier Block 86 well, which contributed
$300,000 of revenues during the second quarter of last year, stopped producing
in March 2001. Production from this well had been declining since reaching a
peak in May 2000. Drilling and completion delays have hindered our efforts to
add new production. Fortunes two recent drilling successes, contrary to
expectations, had not been completed by June 30, 2001. The Cadiz Brooks #3 began
producing in July 2001 and we have not yet completed the West Point Dill 13-1
well. The Gamble Gully Gas Unit # 5 was completed later than expected and its
rate of production is currently less than expected. Furthermore, shortages of
equipment and contractors have contributed to delays in spudding wells at
Espiritu Santo Bay and La Rosa. These projects are discussed below.

Fortune
has an active drilling program planned for the last half of 2001. From three to
five wells are planned for La Rosa, one shallow well is expected to spud very
soon at Espiritu Santo Bay, and other wells are expected at Espiritu Santo Bay
and Gamble Gully. We look for continued success of our drilling program to
reverse the second quarters negative trend in production and cash flow.

Results of Operations

Comparison of 2001 Operating Results to 2000

Quarter ended June 30, 2001 and 2000

Fortunes
gas prices increased 44% in the second quarter 2001 versus the same 2000 period.
However, oil and gas production each decreased 47% and oil prices decreased 13%.
Fortunes production gains that resulted from successful drilling and
workover operations over the past year at Cadiz, Cutoff Field, La Rosa and
Gamble Gully were not sufficient to offset the loss of our well at South Timbalier
Block 86 and declines from depletion. Delays in completing the Cadiz Brooks #3 and the
potential West Point discovery have also prevented those wells from contributing
to second quarter 2001 revenues. Consequently, Fortunes oil and gas
revenues for the quarter ended June 30, 2001 decreased 28% to $471,000 compared
to $657,000 reported during the first quarter of 2000. Fortunes reported
net loss increased 47% to $199,000 during the second quarter of 2001 compared to
a net loss of $135,000 for the same 2000 period.

---

Analysis of change in oil and gas revenues -

`Quarter Ended
                                                  June 30,         Percent
                                               ------------------  Change
                                                 2001     2000
                                               --------  --------  --------
       Production
         Oil  -  Bbl                              1,800     3,400     (47)%
         Gas  -  Mcf                             86,600   163,700     (47)%
       Prices
         Oil  -  $/Bbl                           $25.63    $29.40     (13)%
         Gas  -  $/Mcf                             4.91      3.41      44 %
       Revenues
         Oil                                   $ 46,000  $100,000     (54)%
         Gas                                    425,000   557,000     (24)%`

In
early 2000, the South Timbalier 86 well was recompleted and began producing at a
significantly higher rate beginning in February 2000. During the second quarter
of 2000, the well produced approximately 85,600 cubic feet of gas, 730 barrels
of oil and generated $300,000 of oil and gas revenue net to Fortunes
interest. This well stopped producing on March 13, 2001 and the operator of the
well has informed Fortune that it is unlikely that production will resume.
Fortune currently owns a 4% overriding royalty interest in this well.

The
Gamble Gully Gas Unit #5 discovery began producing in April 2001 and is
currently producing approximately 120 MCFD. Although we believe that the results
of this well are very positive for further drilling at Gamble Gully, production
is currently less than we expected. We are studying this well to determine if
production can be increased. Fortune has an approximate 24% net revenue interest
in this well.

Analysis of change in selected expenses -

`Quarter Ended
                                                  June 30,         Percent
                                               ------------------  Change
                                                 2001     2000
                                               --------  --------  --------

    Production and operating expense           $155,000  $162,000    (4)%
        -  per MCFE                                1.59      0.88    81 %
    Depreciation, depletion and amortization    142,000   269,000   (47)%
        -  per MCFE                                1.46      1.46     -`

Production
and operating expense decreased by $7,000 for the second quarter of 2001 versus
2000 because of lower production taxes that resulted from the lower revenues.
Lower production during the most recent quarter contributed to the higher per
MCFE operating cost this year.

---

Fortunes
provision for depletion, depreciation and amortization (DD&A) decreased by
$127,000 in the second quarter of 2001 as compared to 2000 because of
the lower production.

`Quarter Ended
                                                   June 30,
                                               ------------------   Percent
                                                 2001     2000      Change
                                               --------  --------  --------

      General and administrative expense       $315,000  $297,000    6%
      Interest expense                           69,000    69,000    -`

Six months ended June 30, 2001 and 2000

Significantly
higher gas prices are the primary contributors to higher oil and gas
revenues and a lower net loss for the first six months of 2001 compared to the
same 2000 period. Fortunes net loss decreased 79% to $104,000 during 2001
compared to a net loss of $497,000 for the same 2000 period.

Analysis of change in oil and gas revenues -

`Six Months Ended
                                                  June 30,
                                               ------------------   Percent
                                                 2001     2000      Change
                                               --------  --------  --------
       Production
         Oil  -  Bbl                              4,100     6,700    (40)%
         Gas  -  Mcf                            190,800   262,800    (27)%
       Prices
         Oil  -  $/Bbl                           $26.80    $28.43     (6)%
         Gas  -  $/Mcf                             6.32      3.14    101 %
       Revenues
         Oil                                  $ 109,000 $ 191,000    (43)%
         Gas                                  1,206,000   825,000     46 %`

The loss of our well at
South Timbalier Block 86 and depletion were the primary contributors to the
decrease in production. The $299,000 increase in oil and gas revenue from 2000
to 2001 is primarily attributable to the 101% increase in gas prices.

Analysis of change in selected expenses -

`Six Months Ended
                                                  June 30,
                                               ------------------   Percent
                                                 2001     2000      Change
                                               --------  --------  --------
       Production and operating expense        $323,000  $285,000    13 %
           -  per MCFE                             1.50      0.94    60 %
       Depreciation, depletion and
        amortization                            309,000   419,000   (26)%
           -  per MCFE                             1.44      1.38     4 %`

---

Production
and operating expense increased by $38,000 for the first six months of 2001
versus 2000 because of higher production taxes and more producing properties in
2001. These factors, along with lower production, also contributed to the higher
2001 operating cost per MCFE.

Fortune's provision
for DD&A decreased by $110,000 in the first six months of 2001 as compared to
2000 primarily because of lower production.

`Six Months Ended
                                                  June 30,
                                               ------------------   Percent
                                                 2001     2000      Change
                                               --------  --------  --------
       General and administrative expense      $673,000  $564,000    19%
       Interest expense                         139,000   138,000     1%`

General
and administrative expense increased $109,000 for the first six months of 2001
versus 2000 because of higher costs in most categories of overhead. Also during
2000, Fortune incurred a $118,000 non-cash extraordinary loss on early
extinguishments of debt in 2000 which represents a premium equal to one
years interest paid in common stock to noteholders who converted their 12%
convertible subordinated notes to common stock.

Liquidity and Capital Resources

Cash Balance,
Working Capital and Cash Flows from Operating Activities

Fortunes
liquidity and financial position remained very strong through the second quarter
of 2001. Fortune generated $17,000 of cash in its operating activities during
the second quarter of 2001 compared to $25,000 during the same 2000 period.
Before considering the effect of changes in operating assets and liabilities,
cash flow was a negative $57,000 during the second quarter of 2001 compared to a
positive $139,000 during the same 2000 period. As discussed above, lower
production accounts for this significant decrease in cash flow.

Analysis of changes
in selected liquidity measures -

`As of
                                   ----------------------
                                    June 30,  December 31,  Percent
                                     2001       2000        Change
                                   ----------  ----------  ----------
       Cash balance                $1,112,000  $1,028,000      8 %
       Net working capital          1,210,000   1,424,000    (15)%
       Long-term debt               2,295,000   2,295,000      -`

---

Lower
production during the most recent quarter contributed to the recent decline in
cash flow:

`Three months ended June 30,
                                                       ---------------------------      Percent
                                                           2001           2000          Change
                                                       ------------   ------------   ------------

     Cash flow from operations before
        changes in operating assets and liabilities    $    (57,000)  $    139,000        N/A
     Adjustment for change in operating
        assets and liabilities                               74,000       (114,000)       N/A
                                                       ------------   ------------
     Cash flow from operating activities               $     17,000   $     25,000       (32)%
                                                       ============   ============`

Higher average gas
prices for the first six months of 2001 contributed to the higher cash flow
during the period versus the same 2000 period.

`Six months ended June 30,
                                                       ---------------------------      Percent
                                                           2001           2000          Change
                                                       ------------   ------------   -----------
     Cash flow from operations before
       changes in operating assets and liabilities     $    229,000   $     53,000         332%
     Adjustment for change in operating
       assets and liabilities                               308,000       (220,000)        N/A
                                                       ------------   ------------
     Cash flow from operating activities               $    537,000   $   (167,000)       N/A
                                                       ============   ============`

Cash Used in Investing
Activities - Capital Expenditures

Expenditures for oil
and gas properties for the first six months of 2001 were $440,000 compared to
$224,000 for the same period in 2000.

The 2001 expenditures
include primarily:

- drilling and completing the successful Brooks #3 well at Cadiz prospect;
- drilling and completing the successful Brooks #3 well at Cadiz prospect;
- drilling and completing the successful Gamble Gully Koemel #1 sidetrack well;
- land, seismic and well cost for the West Point prospect which Fortune is attempting to complete;
- 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:

- expenditures for the unsuccessful completion attempt at the Espiritu Santo Bay 210 #6.
- drilling and completion expenditures for the successful Brook #1 well at Cadiz prospect;
- drilling and completion expenditures for the successful Bacon prospect Ivy 24-11;
- drilling and completion for the successful La Rosa Rooke C-6 and C-7 wells;
- expenditures for the multiple well recompletion program at La Rosa; and
- expenditures for the attempted recompletion at Estherwood prospect in Louisiana that was abandoned in January 2000.

---

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 began producing in early July 2001 at
approximately 1.5 million cubic feet of gas per day.  Fortune owns a
5.25% net revenue 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 Gamble Gully
Gas Unit #5 (previously called the Koemel #1)
was completed in the first quarter of 2001 and began producing in April
2001.  Fortune has a 30% working interest in this project.

Logging results
of the West Point Dill #13-9 well, the initial
exploratory well at the West Point Prospect, indicate that the well
encountered apparent pay in three principal exploration formation
objectives, the Upper Lewis, Sanders and Carter sands totaling 161
feet.  Starting from the bottom, potentially productive intervals
include two lobes of sand in the Upper Lewis formation of approximately
12 feet, approximately 62 feet in the Sanders and approximately 87 feet
in the Carter.  Shortly after completion operations commenced in July
2001, they were suspended pending an evaluation of a
cement bond log in the well that appeared to be inconclusive.  The
partners have evaluated the cement bond log and have concluded that
completion operations should be resumed with no change in procedures.
We expect operations to resume the week of August 13.  Fortune incurred
approximately $149,000 through June 30, 2001 to acquire and drill this
well.  Fortune owns a 20% working interest in the West Point Prospect.

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.  Fortune and its partners
recently reprocessed their 24-square mile proprietary 3-D seismic using
pre-stack time migration.  Fortune believes this reprocessing has
significantly enhanced the data.  The operator has proposed five new
wells from this data.  The first well spud in late July and was plugged
and abandoned in early August.  The second well was spud subsequent to
plugging the first.  The third well is expected to be spud after the
second is evaluated.  The operator has reserved the right to keep the
rig for two additional exploration wells depending upon the logging
results of the first three.  Fortune owns an 18.75% working interest in
the five new prospects in the La Rosa Field and will spend
approximately $38,000 for each well.

Fortune expects
to spud a shallow well at Espiritu Santo Bay as
soon as a rig is available.  The operator has proposed another Espititu
Santo Bay shallow well, which is expected to commence some time after
the next well is drilled.  Fortune and its partners are also continuing
to work the 3-D seismic data and refine our shallow and deep prospects
in the bay.  The operator and another partner are continuing their
efforts to farmout a portion of their interest in certain of their deep
rights in the bay.  We do not expect a deep well to be spud until after
the operator and that partner have farmed out at least a portion of
their interest.

Oil and Gas Prices

Conditions
outside of our control influence the prices we receive
for oil and gas.  As of August 7, 2001, Fortune was receiving an
average of approximately $26.50 per barrel for its oil production and
$3.20 per MCF for its gas production.  These 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
recent prior quarters due to higher prices, lower costs and higher
production, there is no assurance that this favorable trend will
continue.

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.

Fortune's
estimates of proved reserves and future net revenue may
not be accurate.  Fortune's proved reserve data represent estimates
which may prove to be incorrect over time.  The accuracy of any reserve
estimate is a function of available data and of engineering and
geological interpretation and judgment.  The estimates are based upon
certain assumptions about future production levels, future oil and gas
prices and future operating costs, some or all of which will likely
change over time. Estimates and classifications of the economically
recoverable oil and gas reserves by different engineers or by the same
engineers at different times may vary substantially.  Certain of
Fortune's proved reserves have a short production history and
approximately 52% of Fortune's proved reserves as of December 31, 2000
were undeveloped.  Undeveloped reserves require significant
expenditures of capital before production can commence.  Estimates of
undeveloped reserves and those with a short production history are
inherently more uncertain than estimates of producing reserves with a
long production history.

---

Our revenue
may be 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 second
quarter of 2001, these wells combined accounted for 21% 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 expect production to be resumed.  This well accounted for 14%
of Fortune's first quarter 2001 oil and gas revenues.  Although the
concentration of production in a few well bores has been reduced
recently, Fortune has historically been reliant on individually
significant wells and that reliance may return.  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 June 30, 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, 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 Market Risk

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

The annual meeting of shareholders of the
Company was held June 19, 2001.  The following matters were voted on at that meeting:

`Votes           Votes                       Broker
            Matter                    In Favor        Opposed       Abstain       Non-Votes
------------------------------      ------------   ------------   ------------   ------------

Election of Martin Lacoff
  to Board of Directors              15,072,237               0        49,889           0

Election of John E. McConnaughy
  to Board of Directors              15,069,008               0        53,118           0

Ratification of Grant Thornton LLP
  as Company Auditors                15,077,722          32,476        11,928           0`

ITEM 5.    Other Information

None

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ITEM 6.    Exhibits and Reports on Form 8-K

(a)    EXHIBITS

| | Exhibit No. | Description                                                                              
| | ----------- | -----------------------------------------------------------------------------------------
| | 10.1*       | Employment Agreement dated July 1, 2001 by and between
Registrant and Tyrone J. Fairbanks

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

A report on
Form 8-K was filed with the Securities and Exchange
Commission on June 29, 2001 to report exploration program update and
results of annual meeting.

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

*Filed herewith.

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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:      August 9, 2001