**SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549****FORM 10-KSB/A
Amendment No. 2** **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

**FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001**
**Commission File Number 0-6580** (Name of small business issuer as specified in its charter)



Nevada(State or other jurisdiction of
        incorporation or organization)
      87-0285520(I.R.S. Employer
        Identification Number)


**743 Horizon Court, Suite 333Grand Junction, Colorado 81506**(Address of principal executive offices)

**(970) 245-5917**(Issuer's telephone number, including area code)
**Securities registered pursuant to Section 12(b) of the Act:  NoneSecurities registered pursuant to Section 12(g) of the Act:Common Stock (Par Value $.10 Per Share)**

Check whether the issuer (1) has 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.YesX   
 No___
       
Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is notcontained in this form, and no disclosure will be contained, to the best of registrant's knowledge, indefinitive proxy or information statements incorporated by reference in Part III of this Form 10-KSBor any amendment to this Form 10-KSB.  [   ]
       
The issuer's revenues for its most recent fiscal year were $2,390,580.       
As of February 28, 2002 the issuer had 6,339,815 shares of its $0.10 par value Common Stockissued and outstanding.  Based upon the closing sale price of $.25 per share on February 28, 2002, theaggregate market value of the common stock, the Registrant's only class of voting stock, held bynon-affiliates was $457,000.
       
The following documents are incorporated by reference into Part III of this Form 10-KSB:Registrant's definitive Proxy Statement to be filed on or before April 30, 2002, pursuant to Regulation14A in connection with Registrant's annual meeting of stockholders to be held in June 2002.
       
Transitional Small Business Issuer Disclosure Format     Yes __   No X



**TABLE OF CONTENTS**

|**PART I**                                                                                                                                                                                                                         | **PAGE**
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|ITEM 1.  BUSINESS                                                                                                                                                                                                                  | 1       
|History and Overview                                                                                                                                                                                                               | 1       
|Recent Developments                                                                                                                                                                                                                | 1       
|Operations                                                                                                                                                                                                                         | 2       
|Competition                                                                                                                                                                                                                        | 2       
|Markets                                                                                                                                                                                                                            | 2       
|Regulations                                                                                                                                                                                                                        | 3       
|Operational Hazards and Insurance                                                                                                                                                                                                  | 4       
|Business Risks                                                                                                                                                                                                                     | 4       
|Administration                                                                                                                                                                                                                     | 9       
|ITEM 2.  PROPERTIES                                                                                                                                                                                                                | 9       
|Principal Oil and Gas Interests                                                                                                                                                                                                    | 9       
|Gulf Coast Properties and Prospects                                                                                                                                                                                                | 10      
|Utah Properties and Prospects                                                                                                                                                                                                      | 10      
|Title to Properties                                                                                                                                                                                                                | 11      
|Estimated Proved Reserves                                                                                                                                                                                                          | 11      
|Net Quantities of Oil and Gas Produced                                                                                                                                                                                             | 11      
|Drilling Activity                                                                                                                                                                                                                  | 12      
|ITEM 3.  LEGAL PROCEEDINGS                                                                                                                                                                                                         | 12      
|ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                                                                                                       | 12      
|**PART II**                                                                                                                                                                                                                        |         
|ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                       STOCKHOLDER MATTERS                                                                                                                              | 13      
|Stockholders                                                                                                                                                                                                                       | 13      
|Dividends                                                                                                                                                                                                                          | 13      
|Recent Sales of Unregistered Securities                                                                                                                                                                                            | 13      
|ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS                                                                                                                                                                                      | 13      
|Liquidity and Capital Resources                                                                                                                                                                                                    | 13      
|Proposed Sale of Substantially All Assets                                                                                                                                                                                          | 14      
|Future Plans                                                                                                                                                                                                                       | 15      
|Future Contingency Plans                                                                                                                                                                                                           | 15      
|Results of Operations                                                                                                                                                                                                              | 16      
|Overview                                                                                                                                                                                                                           | 16      
|Oil and
      Gas                                                                                                                                                                                                                  | 16      
|Depreciation, Depletion and Amortization                                                                                                                                                                                           | 18      
|Impairment                                                                                                                                                                                                                         | 18      
|Abandoned Merger Settlement                                                                                                                                                                                                        | 18      
|Interest Expense                                                                                                                                                                                                                   | 18      
|Other Matters                                                                                                                                                                                                                      | 19      
|ITEM 7.  FINANCIAL STATEMENTS                                                                                                                                                                                                      | 20      
|ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                 
      ON ACCOUNTING AND FINANCIAL DISCLOSURE                                                                                                               | 39      
|**PART III**                                                                                                                                                                                                                       |         
|Incorporated by reference to Registrant's definitive Proxy Statement to be filed on or before  April 30, 2002, pursuant to Regulation 14A in connection with Registrant's annual meeting  of stockholders to be held in June 2002. | 40      
|**PART IV**                                                                                                                                                                                                                        |         
|ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K                                                                                                                                                                                         | 40      

**PART I**

**ITEM 1 - BUSINESS
HISTORY AND OVERVIEW** Republic Resources, Inc. (the "Company") was incorporated in the state of Nevada on September 11,1968 to engage in the oil and gas acquisition, development and production business.  Prior to 1993, theCompany conducted business primarily in Western Colorado and Eastern Utah. In August 1993, theCompany acquired privately owned oil and gas assets and commenced operating in theDenver-Julesburg
Basin ("DJ Basin") of northeastern Colorado. In the years following the acquisition,the Company
invested
several million dollars in an effort to exploit the assets acquired and experiencedmarginal success. 
Substantially all of the DJ Basin and other Rocky Mountain oil and gas assets weresold in 1998 for
approximately $3.2 million.  Beginning in 1996, the Company began investing as anon-operator in various
acquisitions and exploration projects in the Gulf Coast region of southernLouisiana and Texas.  In 2001,
the Company acquired over 9,500 net acres in two separate wildcatexploration
prospects in the state of Utah. **RECENT DEVELOPMENTS** *Sale of Assets, Planned Exchange of Debt, Preferred Stock Exchange, and Change in FutureCorporate Strategy*
On February 8, 2002, the Company announced it had agreed to sell all of its oil and natural gas
properties located in the states of Louisiana and Texas to Harken Energy Corporation ("Harken")
pursuant to a Purchase and Sale Agreement dated January 31, 2002 (the "Asset Sale
Agreement").  In exchange for these assets Harken has agreed to convey: a) up to 2,645,500 shares
of  Harken Common Stock as consideration for the proved assets; and b) make a Contingent
Payment in 2004 depending on the results of future exploration and development of the exploratory
prospects, included in the assets being sold.  The
Company intends to use the consideration received
from the sale of these assets, along with the issuance
of 4.4 million additional shares, to pay off the
entire balance of its $2,645,500 Convertible Debentures (the
"Debentures") and to exchange all of
its $5.1 million Series C Preferred Stock ("Preferred Stock") for
common stock of the Company.
These transactions are significant and meaningful to the Company when considering over $7.7 million
of future obligations will be eliminated.  Upon closing the Asset Sale, the Company will have no
significant debt or other long term obligations.  Although the sale includes all of the Company's
revenue generating assets, the Company  will retain its interest in two undeveloped prospect areas in
Utah.  In addition, Republic will focus its future corporate strategy in seeking an appropriate
acquisition or merger candidate in one or more businesses which have no material debt obligations
or other liabilities, which have a prospect for
immediate or near-term cash flow, and which offer a
significant opportunity for future growth and return to
our common stockholders.  Although there are
no firm commitments, the Company has  commenced an
informal search for an appropriate merger
candidate.  These efforts has resulted in preliminary conversations
with two possible candidates.
The number of shares of Harken Common Stock to be issued at the Closing of the Asset Sale will bedetermined by dividing the total principal amount of the Company's outstanding Debentures by the
average reported closing price for Harken's Common Stock for the 20 trading days ending on the day
before the Closing (hereafter referred to as the "Common Stock Value Per Share").  However, under
no circumstances shall the Common Stock Value Per Share be less than $1.00.  The Company has
offered the Debenture Holders all of the Harken Common Stock plus an additional 1.0 million shares
of the Company common stock to fully satisfy the principal balance of the Debentures (the "Exchange
Offer").  Acceptance of the Exchange Offer by the holders of at least 90% of the outstanding principal
amount of the Debentures is a condition to Closing of the Asset Sale to Harken.
The Company also reached an agreement with its Preferred Stockholders whereby all of the issued andoutstanding Series C Preferred Stock, with a face value of $5.1 million (including dividends in arrears),
have been exchanged for 3.4 million shares of Republic common stock plus an assignment of the
Contingent Payment Agreement associated with the Asset Sale to Harken.  The assets associated with
Contingent Payment Agreement include most of the exploratory prospects or "prospect inventory"
located in Jackson County, Texas.  The unproved assets have not been given any initial value in the
contemplated transaction with Harken, but will be evaluated for additional value at the end of 2003 using
a "Lookback Formula" as defined in the Contingent Payment Agreement.  If warranted, an additional
payment of either cash and/or Harken Common Stock will be made by Harken in 2004.  In the event the
Asset Sale is not completed, the Company is committed to convey to the former preferred stockholders
an interest in the exploratory properties equivalent to what such stockholders would have received from
Harken had the Asset Sale closed.
The Closing of the Asset Sale is contingent upon: (a) Holders representing at least 90% of the Debentureprincipal balance approving the Exchange Offer (as described above); and (b) the approval of the AssetSale Agreement by at least a majority of Republic's Common Stockholders.  The Asset Sale is required
to be completed by April 15, 2002.  The Company has informally discussed the terms of the Exchange
Offer with individuals representing over 30% of the principal balance of the outstanding Debentures.
These individuals have tentatively agreed to the proposed terms and the Company initiated the formal
solicitation to its Debenture holders on February 22, 2002. It is anticipated that the requisite majority of
holders of Debentures will accept the Exchange Offer.
The Company intends to hold a special meeting of its stockholders on or after March 25, 2002 to
consider approval of the Asset Sale.  It is anticipated that stockholders will approve the Asset Sale at
the stockholders meeting, as the six former holders of the Company's Series C Preferred Stock, who
now hold over 68% of the outstanding common stock, agreed to attend and vote in favor of approval in
connection with the exchange of the Preferred Stock for Republic common stock which was completed
February 11, 2002.
The Company expects to complete the Asset Sale immediately following its special meeting of
stockholders.

Upon completion of the Asset Sale the Company expects to incur a non-cash
charge estimated at of
approximately $1.4 million.  This amount, to be reflected as a "loss on sale of
assets", is a result of the
carrying value of the corresponding assets will exceed the anticipated fair value of the Harken
common stock on  to be received in the transaction.**OPERATIONS**As of December 31, 2001, we had varying ownership interests in 17 gross (1.98 net) non-operated wellslocated in Southern Louisiana and Texas.
The following table presents a summary of our oil and gas reserve information as of December 31, 2001(all of our reserves are located onshore in the states of Louisiana and Texas):

|**Net Proved Reserves**
|-----------------------
|**Bbls**               
|237,000                

**OIL**
    **GAS****Fields**
    State
    **GrossWells(1)**
    **Net(2)Wells**
    **GrossWells(1)**
    **Net(2)Wells**
    **Developed Acreage  Gross     
      Net(2)**East Bayou Sorrel
    Louisiana
    3
    .48
    -
    -
    368
    59South Lake Arthur
    Louisiana
    -
    -
    1
    .20
    349
    73Maurice
    Louisiana
    -
    -
    2
    .16
    258
    22Ganado
    Texas
    -
    -
    3
    .38
    350
    44Texana
    Texas
    -
    -
    3
    .23
    383
    48Formosa
    Texas
    -
    -
    4
    .50
    938
    117Big 12/Tortuga
    Texas
    -
    -
    1
    .03
    320
    10Grand Total
    
    3
    .48
    14
    1.50
    2,966
    373




Footnotes         (1)    
Wells which produce both gas and oil in commercial quantities are classified as "oil" wells                 
for disclosure purposes.       
(2)    
"Net" wells and "net" acres refer to our fractional working interests multiplied by the number                 
of wells or number of acres. Substantially all of our producing oil and gas properties are located on leases held by us for as long asproduction is maintained.
**Undeveloped Acreage -** Our gross and net working interests on undeveloped acreage as of December31, 2001 is as follows:
**Assets Subject
to Harken Sale**

**Undeveloped Acreage**
    **Expiration of Net Acreage(1)****Prospect Description**
    **State**
    **Gross**
    **Net**
    **2002**
    **2003**
    **2004**East Bayou Sorrel
    Louisiana
    90
    14
    14
    -
    -Maurice
    Louisiana
    189
    42
    5
    11
    -Formosa
    Texas
    3,394
    1,424
    278
    103
    43Texana
    Texas
    13,138
    1,106
    366
    650
    -Big 12/Tortuga
    Texas
    2,890
    90
    33
    53
    4Totals
    
    19,701
    1,560
    696
    817
    47




Footnotes         (1)    
Substantially all of these leases had original terms of 2 or 3 years.  The table illustrates the                 
year the
net acres will expire unless production has been obtained.
**Assets To Be Retained**

|                         |           | **Undeveloped Acreage**
|------------------------ | --------- | -----------------------
|**Prospect Description** | **State** | **Gross**              
|Thompson Canyon          | Utah      | 13,524                 
|Cactus Rose              | Utah      | 10,906                 
|Other                    | Utah      | 1,020                  
|Totals                   |           | 25,450                 



Footnotes         (1)    
All of the leases will expire in 2011 unless production has been obtained.       
(2)    
Substantially all of the leases will expire in 2002 unless production has been obtained.       
(3)    
Substantially all of the leases will expire in 2003 unless production has been obtained.
**GULF COAST PROPERTIES AND PROSPECTS**
**Overview -** The three primary areas where the Company has participated as a non-operating, minorityinterest partner, are described below.  These properties and prospects are those assets "held for sale"and are subject to the Asset Sale Transaction with Harken.
**East Bayou Sorrel -** During 1997, the Company acquired a working interest and an after prospectpayout ("APPO") leasehold interest in the 1996 discovery of a new oil and gas field, East Bayou SorrelField located in Iberville Parish, Louisiana.  The production from the three producing wells in this fieldrepresented approximately 41% of the Company's production (on an equivalent unit basis) in 2001.Most of the production is being drawn from the CIB Haz 2 sand formation. The prospect "paid out"effective November 15, 1999 and our working interest increased from 8.9% to 15.6% as a result ofowning the APPO.
**Maurice Field -** In 1997, the Company joined Amerada Hess Corporation to drill a discovery well atMaurice Field, Vermilion Parish, Louisiana.  Since then, three additional wells have been drilled andcompleted, of which two wells have been lost due to downhole mechanical problems.  Production fromthis field represented approximately 9% of the Company's production (on an equivalent unit basis) in2001 and is being drawn from the Bol Mex III, Marg Tex and Camerina sand formations. Our workinginterests in this field range from 6.9% to 9.5%.
**Formosa, Texana and Ganado 3-D Exploration Prospects -** During 1997, the Company secured a12.5% working interest in three on-shore upper Gulf Coast 3-D seismic survey projects located in andaround Jackson County, Texas. The 3-D surveys cover over 200 square miles (approximately 130,000acres).  The Company had eight wells in these prospect areas in 2001 which produced approximately47% of the Company's total production (on an equivalent unit basis) in 2001.  All theses wells producefrom either the Miocene, Frio or Yegua sand intervals
**UTAH PROPERTIES AND PROSPECTS** **Overview -** The following paragraphs describe the two primary prospect areas that are not included inthe "assets held for sale" and will be retained by the Company.
**Cactus Rose -**The Cactus Rose prospect area is located in Grand County, Utah, approximately 75miles west of Grand Junction, Colorado.  Geologically, this prospect area is on the northwest end of asalt valley anticline in the Paradox Basin.  There are four prospects that have been identified by
integrating seismic data, well control, dipmeters, mudlogs, surface maps and air photo interpretation.Maps have
been prepared on four potential oil producing horizons and a series of structural cross
sections have been constructed.  The Cactus Rose prospect area and the underlying geologic work hasbeen generated by
Tidewater Oil and Gas, LLC ("Tidewater"), a private company located in Denver,Colorado.  The primary
objectives are in the Jurassic age sandstones of the Navajo, Entrada and MoabTongue with relatively
modest drilling depths of 5,000' or less.  The Company owns a 31.25% workinginterest in this prospect
area and estimates its proportionate share of costs for the first exploratory wellwould be approximately
$100,000.
**Thompson Canyon -**The Thompson Canyon prospect area is also located in Grand County, Utah, nearthe small town of Thompson and is approximately 5 miles east of the Cactus Rose prospect area.Geologically, this prospect is within the Paradox Fold and Fault Belt province in the northeastern part ofthe Paradox Basin.  Although this prospect area has several potential oil and gas prospects with drillingdepths of 6,000' or less, of particular interest to the Company is the possibility of a large gas play atdepths below 13,000'.  Tidewater is also the generator of this prospect area and has gathered seismic andother geologic data that supports the possibility of a large hydrocarbon accumulation at deeper intervals.The Company currently owns a 37.50% working interest in this prospect area and, in conjunction withTidewater, intends to farm-out the drilling of the deeper prospects.
**TITLE TO PROPERTIES**
Only a limited perfunctory title examination is conducted at the time we acquire interests in oil and gasleases. This practice is customary in the oil and gas industry. Prior to the commencement of drillingoperations, a thorough title examination is conducted. We believe that title to our properties is good anddefensible in accordance with standards generally accepted in the oil and gas industry.  We also believethat any title exceptions are not so material as to detract substantially from the property economics.  Inaddition, some prospects may be burdened by customary royalty interests, liens incident to oil and gasoperations and liens for taxes and other governmental charges as well as encumbrances, easements andrestrictions. We do not believe that any of these burdens will materially interfere with our use of theproperties.
**ESTIMATED PROVED RESERVES** Our oil and gas reserve and reserve value information is included in footnote 13 of the consolidatedfinancial statements, titled "Oil and Gas Producing Activities." This information is prepared pursuant toStatement of Financial Accounting Standards No. 69, which includes the estimated net quantities of our"proved" oil and gas reserves and the standardized measure of discounted future net cash flows.  Theestimated proved reserves information is based upon an engineering evaluation by Netherland, Sewell &Associates, Inc. The estimated proved reserves represent forward-looking statements and should be readin connection with the disclosure on forward-looking statements set forth elsewhere in this report.
We have not filed any reports containing oil and gas reserve estimates with any federal authority or
agency other than the Securities and Exchange Commission and the Department of Energy. There were
no differences in the reserve estimates reported to these two agencies.
All of our oil and gas reserves are located in the Continental United States. The table below sets forth
our estimated quantities of proved reserves, and the present value of estimated future net revenues
discounted by 10% per year using prices we were receiving at the end of each of the two fiscal yearsending 2001 and
2000 on a non-escalated basis.

|                                               | **Year Ended December 31,**
|---------------------------------------------- | ---------------------------
|                                               | **2001**                   
|Estimated Proved Oil Reserves (bbls)           | 237,000                    
|Estimated Proved Gas Reserves (Mcf)            | 1,263,000                  
|Estimated Future Net Revenues                  | $5,018,000                 
|Present Value of Estimated Future Net Revenues | $3,825,000                 
|Prices used to determined reserves:            |                            
|Oil (per Bbl)                                  | $       18.51              
|Gas (per Mcf)                                  | $         2.95             

|         | **Year Ended December 31,**
|-------- | ---------------------------
|**2001** | **2000**                   
|Oil      | 38,000                     
|Gas      | 311,000                    

|**Year Ended**  | **Average Sales Prices** | **AverageProduction**
|--------------- | ------------------------ | ---------------------
|**December 31** | **Oil (Bbls)**           | **Gas (Mcf)**        
|2001            | $     24.76              | $      4.67          
|2000            | $     29.12              | $      4.59          

|                  | **2001**  | **2000**
|----------------- | --------- | --------
|**Wells Drilled** | **Gross** | **Net** 
|Exploratory       |           |         
|Oil               | -         | -       
|Gas               | 2         | .16     
|Non-Productive    | 6         | .60     
|Total             | 8         | .76     
|Development       |           |         
|Oil               | -         | -       
|Gas               | -         | -       
|Non-Productive    | -         | -       
|Total             | -         | -       

**Part II**

**ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATEDSTOCKHOLDER MATTERS**
Our common stock is traded on the OTC Bulletin Board market under the symbol "RPRS."  UntilJanuary 14, 1999, the Company common stock was traded in the Nasdaq Small Cap Market.  Thefollowing table sets forth the high and low reported closing prices per share of the Company's commonstock for the quarterly periods indicated, which correspond to the fiscal quarters for financial reportingpurposes.

|               | **Common Stock**
|-------------- | ----------------
|               | **High**        
|2000:          |                 
|First quarter  | 0.75            
|Second quarter | 0.44            
|Third quarter  | 0.63            
|Fourth quarter | 0.88            
|2001:          |                 
|First quarter  | 2.31            
|Second quarter | 2.60            
|Third quarter  | 1.45            
|Fourth quarter | 0.90            

|Cash balance at December 31, 2000                      | $ 1,407,769 
|------------------------------------------------------ | ------------
|Sources of Cash:                                       |             
|Cash provided by operating activities                  | 1,832,907   
|Proceeds from exercise of warrants and options         | 507,708     
|Proceeds from the sale of property plant and equipment | 105,006     
|Total sources of cash                                  | 2,445,621   
|Uses of Cash:                                          |             
|Capital expenditures for oil and gas activities        | (2,808,027) 
|Repayment of convertible debentures and long term debt | (143,890)   
|Debt restructuring costs                               | (92,044)    
|Preferred stock dividends                              | (62,189)    
|Other capital expenditures                             | (4,451)     
|Purchase of certificate of deposit                     | (3,333)     
|Total uses of cash                                     | (3,113,934) 
|Cash balance at December 31, 2001                      | $    739,456

**Category:**
    **Program Operator**
    **Internal**
    ******NEG**
    **Parallel**
    **AHC**
    **Costs**
    **Total**
    **%**Acquisition of Unproved   
      Properties
    $    3,817
    $   143,021
    $  11,297
    $152,327
    $   310,462
    11%Exploration costs
    -
    1,199,111
    487,072
    142,289
    1,828,472
    68%Workovers
    274,028
    4,737
    -
    -
    278,765
    10%Capitalized interest
    -
    -
    -
    287,048
    287,048
    11%Total
    $277,845
    $1,346,869
    $498,369
    $581,664
    $2,704,747
    100%Percent
    10 %
    50 %
    18 %
    22 %
    100%


Our largest source of operating revenue has been from the sale of produced oil, natural gas, and natural
gas liquids.  Therefore, the level of our revenues and earnings are effected by prices at which natural
gas, oil and
natural gas liquids are sold. Therefore, our operating results for any prior period are not
necessarily indicative
of future operating results because of the fluctuations in price and
production
levels.  The Asset Sale
Agreement with Harken previously discussed includes,  among other things,
all of the Company's proved and
producing reserves with an effective date of January 1, 2002.
Accordingly, should this transaction ultimately
close, the Company will not have a source of
future
revenue or cash flows.
**Oil and Gas**

Operating statistics for oil and gas production for the periods presented are as follows:

|                                         | **For the Year EndedDecember 31,**
|---------------------------------------- | ----------------------------------
|                                         | **2001**                          
|**Production:**                          |                                   
|Oil (bbls)                               | 37,817                            
|Gas (Mcf)                                | 311,100                           
|BOE (6:1)                                | 89,667                            
|**Average Collected Price:**             |                                   
|Oil (per bbl)                            | $         24.76                   
|Gas (per Mcf)                            | $           4.67                  
|Per BOE (6:1)                            | $         26.66                   
|**Operating Margins:**                   |                                   
|**Revenue**                              |                                   
|Oil                                      | $     936,245                     
|Gas                                      | 1,454,335                         
|Total Revenue                            | 2,390,580                         
|**Costs**                                |                                   
|Lifting Costs                            | (255,221)                         
|Production taxes                         | (195,823)                         
|Total Costs                              | (451,044)                         
|**Operating Margin**                     | $  1,939,536                      
|**Operating Margin Percent**             | 81%                               
|**Production Costs per BOE before DD&A** | $           5.03                  
|**Change in Revenue Attributable to:**   |                                   
|Production                               | $ (1,055,750)                     
|Price                                    | (138,915)                         
|Total decrease in revenue                | $ (1,194,665)                     

Depreciation, Depletion and Amortization ("DD&A") for the periods presented by cost center consisted
of the following:

|                                              | **For the Year EndedDecember 31,**
|--------------------------------------------- | ----------------------------------
|                                              | **2001**                          
|Oil and Gas Properties                        | $1,109,405                        
|Furniture and Fixtures                        | 15,243                            
|Total                                         | $1,124,648                        
|DD&A for the oil and gas properties, per BOE: | $       12.37                     

We use the full cost method of accounting for our oil and gas activities.  The full cost method regards
all costs of acquisition, exploration, and development activities as being necessary for the ultimateproduction of
reserves.  All of those costs are incurred with the knowledge that many of them relate toactivities that do
not result directly in finding and developing reserves.  However, the benefits obtainedfrom the prospects that
do prove successful, together with the benefits fro past discoveries, mayultimately recover the costs of all
activities, both successful and unsuccessful.  Thus, all costs incurred in those activities are regarded as integral
to the acquisition, discover, and development of reservesthat ultimately result from the efforts as a whole and
are thereby associated whit Republic's proved
reserves.  Establishing a direct cause-and-effect relationship
between costs incurred and specific
reserves discovered, which is the premise under the successful efforts
accounting method, is not
relevant to the full cost concept.  However, the costs accumulated in our full cost
pool are subjectto a "ceiling", as defined by Regulation SX Rule 4-10(e)(4).  
Our ceiling at December 31, 2001 of approximately $3.8 million
was substantially lower than our net accumulated costs.  Accordingly, we incurred an
impairment charge of $3,875,048 in 2001
of which$2,947,048 was recorded in the fourth quarter.  No impairment charge was incurred in 2000 since our
ceiling at
the end of that period was greater than our net accumulated costs.
**ABANDONED MERGER SETTLEMENT** On November 8, 2000, the Company announced that its proposed merger with Carpatsky Petroleum, Inc.("Carpatsky") had been terminated.  Pursuant to the terms of the Termination Agreement, as amended,Carpatsky: a) paid the Company $82,411 in cash (in November 2000) for certain accounting andadministrative services provided to Carpatsky by the Company between October 1, 1999 and the date oftermination; and b) paid the Company an additional $160,000 in 2001 for compensation associated with
the failed merger.  For financial statements recording purposes, the total amount of these payments,aggregating
$242,411, were recorded as "other income" in 2000.
**INTEREST EXPENSE** Total interest incurred, and its allocation, for the periods presented is as follows:

|                                                | **For the Year EndedDecember 31,**
|----------------------------------------------- | ----------------------------------
|**2001**                                        | **2000**                          
|Interest paid or accrued                        | $   288,186                       
|Amortization of debt discount                   | 73,113                            
|Amortization of debt issuance costs             | 46,078                            
|Amortization of debt restructuring costs        | 30,681                            
|Total interest incurred                         | 438,058                           
|Interest capitalized for exploration activities | (287,048)                         
|Interest expense                                | $   151,010                       

> In June 2001, the FASB also approved for issuance SFAS 143
>   "Asset Retirement Obligations". SFAS 143 establishes accounting requirements
>   for retirement obligations associated with tangible long-lived assets,
>   including (1) the timing of the liability recognition, (2) initial measurement
>   of liability, (3) allocation of asset retirement cost to expense, (4)
>   subsequent measurement of the liability and (5) financial statement
>   disclosures. SFAS 143 requires that an asset retirement cost should be
>   capitalized as part of the cost of the related long-lived asset and
>   subsequently allocated to expense using a systematic and rational method. The
>   Company will adopt the statement effective no later than January 1, 2003, as
>   required. The transition adjustment resulting from the adoption of SFAS 143
>   will be reported as a cumulative effect of the adoption of this statement on
>   its financial position, results of operations, or cash flows.
>   In August 2001, the FASB also approved SFAS 144, Accounting
>   for the Impairment or Disposal of Long-Lived Assets. SFAS 144 replaces
>   SFAS 121, Accounting for the Impairment of Long-Lived Assets and for
>   Long-Lived Assets to Be Disposed Of. The new accounting model for
>   long-lived Assets to be disposed of by sale applies to all long-lived assets,
>   including discontinued operations, and replaces the provisions of APB Opinion
>   No. 30, Reporting Results of Operations-Reporting the Effects of Disposal
>   of a Segment of a Business, for the disposal of segments of a business.
>   Statement 144 requires that those long-lived assets be measured at the lower
>   of carrying amount or fair value less cost to sell, whether reported in
>   continuing operations or in discontinued operations. Therefore, discontinued
>   operations will no longer be measured at net realizable value or include
>   amounts for operating losses that have not yet occurred. Statement 144 also
>   broadens the reporting of discontinued operations to include all components of
>   an entity with operations that can be distinguished from the rest of the
>   entity and that will be eliminated from the ongoing operations of the entity
>   in a disposal transaction. The provisions of Statement 144 are effective for
>   financial statements issued for fiscal years beginning after December 15, 2001
>   and, generally, are to be applied prospectively. The Company does not believe
>   that the adoption of this statement will have a material effect on its
>   financial position, results of operations, or cash
> flows.

**OTHER MATTERS** **Disclosure Regarding Forward-Looking Statements**

This report on Form 10-KSB includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of theSecurities Exchange
Act of 1934, as amended (the "Exchange Act").  All statements other thanstatements of historical facts
included in this report, including, without limitation, statements under"Management's Discussion and Analysis
of Financial Condition and Results of Operations" regardingour financial position, reserve quantities, plans
and objectives of the Company's management forfuture operations and capital expenditures are
forward-looking statements and the assumptionsupon which such forward-looking statements are based are
believed to be reasonable.  We can give
no assurance that such expectations and assumptions will prove to
be correct.  Reserve estimatesof oil and gas properties are generally different from the quantities of oil and
natural gas that  areultimately recovered or found.  This is particularly true for estimates applied to exploratory
prospects. Additionally, any statements contained in this report regarding forward-looking statements aresubject to various known and unknown risks, uncertainties and contingencies, many of which are beyond
our control.  Such risks and uncertainties may cause actual results, performance, achievements orexpectations to
differ materially from the anticipated results, performance, achievements or
expectations.  Factors that may
affect such forward-looking statements include, but are not limited
to: our ability to generate sufficient cash flow from operations to complete our planned
drilling
and exploration activities; risks inherent in oil and gas
acquisitions, exploration, drilling, development
and production; price volatility of oil and gas; competition;
shortages of equipment, services and
supplies; government regulation; environmental matters; financial
condition of the other companies
participating in the
exploration, development and production of oil and gas 
programs; and other
matters beyond our control.  In addition, since all of the prospects in the Gulf Coast area
are
currently operated by other parties, we
will not be in a position to control costs, safety and timeliness
of
work as well as other critical factors affecting a producing well or exploration and
development activities.  All
written and oral forward-looking statements attributable to our Company
or persons acting on our behalf
subsequent to the date of this report are expressly qualified in
their entirety by this disclosure.
**ITEM 7 - FINANCIAL STATEMENTS**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                    | **Page**
|------------------------------------------------------------------------------------------------------------------- | --------
|Independent Auditor's Report                                                                                        | 23      
|Consolidated Balance Sheet - December 31, 2001                                                                      | 24      
|Consolidated Statements of Operations - For the Years Ended December 31,   
      2001 and 2000                     | 25      
|Consolidated Statements of Stockholders' Equity (Deficit) - For the Years Ended December 31,   
      2001 and 2000 | 26      
|Consolidated Statements of Cash Flows - For the Years Ended December 31,   
      2001 and 2000                     | 27      
|Notes to Consolidated Financial Statements                                                                          | 28-39   



Board of DirectorsRepublic Resources, Inc.Grand Junction, Colorado

We have audited the accompanying consolidated balance sheet of Republic
Resources, Inc. andsubsidiaries as of  December 31, 2001, and the related consolidated statements of operations, redeemablepreferred stock and other stockholders' equity (deficit) and cash flows for the years ended December 31,2001 and 2000.  These financial statements are the responsibility of the Company's management.  Ourresponsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America.  Those standards require that we plan and perform the audit to obtain reasonable
assurance
about 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 audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Republic Resources, Inc. and subsidiaries as of December 31, 2001,and the results of
their operations and their cash flows for the years ended December 31, 2001 and2000 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a
going concern, which contemplates the realization of assets and the liquidation of liabilities in the
normal course of
business.  As discussed in Note 12 to the financial statements, subsequent to
December 31, 2001, the company
entered into an agreement to sell all of its revenue generating
assets and distribute the consideration to the
convertible debenture holders.  These facts raise
substantial doubt about the Company's ability to continue as
a going concern.  The financial
statements do not include any adjustments that might result from this uncertainty.

The consolidated financial statements as
of December 31, 2001 and the year then ended have been
restated to reflect the oil and gas properties, which are under contract for sale, at
their cost basis rather
than their estimated net realizable value.  This change resulted in a decrease in net
loss for fiscal 2001
of approximately $1,400,000and a decrease in the net loss per share of $.56.Hein + Associates LLP Denver, ColoradoFebruary 14, 2002



**Republic Resources,
Inc.CONSOLIDATED BALANCE SHEETDecember 31, 2001**

|**ASSETS**                                                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**CURRENT ASSETS:**                                                                                                                                                                                     
|Cash and equivalents                                                                                                                                                                                    
|Trade receivables, net of allowance for bad debts of $7,599                                                                                                                                             
|Prepaid expenses and other                                                                                                                                                                              
|*Total current assets*                                                                                                                                                                                  
|**OIL AND GAS PROPERTIES,**at cost (full cost method)                                                                                                                                                   
|Unevaluated properties                                                                                                                                                                                  
|Costs being amortized                                                                                                                                                                                   
|Total oil and
      gas properties                                                                                                                                                                      
|Less accumulated amortization and impairment                                                                                                                                                            
|Net oil and gas
      properties                                                                                                                                                                        
|**OTHER ASSETS:**                                                                                                                                                                                       
|Office equipment and vehicle                                                                                                                                                                            
|Less accumulated depreciation                                                                                                                                                                           
|*Net office equipment and vehicle*                                                                                                                                                                      
|Deferred debt restructuring                                                                                                                                                                             
|Deposits and other                                                                                                                                                                                      
|*Total other assets*                                                                                                                                                                                    
|**TOTAL ASSETS**                                                                                                                                                                                        
|**LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                                      
|**CURRENT LIABILITIES:**                                                                                                                                                                                
|Current maturities of long-term debt                                                                                                                                                                    
|Dividends payable                                                                                                                                                                                       
|Accounts payable, trade                                                                                                                                                                                 
|Accrued expenses                                                                                                                                                                                        
|*Total current liabilities*                                                                                                                                                                             
|**LONG-TERM DEBT,**less current maturities                                                                                                                                                              
|*Total liabilities*                                                                                                                                                                                     
|**COMMITMENTS AND
      CONTINGENCIES**(See Note 4)                                                                                                                                                     
|**REDEEMABLE PREFERRED STOCK:**                                                                                                                                                                         
|Series C Preferred Stock, par value $0.01 per share, 99,503 shares    authorized, issued and outstanding. (Redeemable for $3,316,767 and a    Liquidation preference of $4,975,150 at December 31, 2001)
|**OTHER STOCKHOLDERS' EQUITY (DEFICIT):**                                                                                                                                                               
|Undesignated Preferred Stock, par value $0.01 per share, 505,497 shares    remain authorized.                                                                                                           
|Common Stock, par value $0.10 per share, 10,000,000 shares authorized,    2,939,815 shares issued and outstanding.                                                                                      
|Additional paid-in capital                                                                                                                                                                              
|Accumulated deficit                                                                                                                                                                                     
|*Total Other Stockholders' deficit*                                                                                                                                                                     
|**TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                                

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



**Republic Resources,
Inc.CONSOLIDATED STATEMENTS OF OPERATIONSFor the Years Ended December 31, 2001 and 2000**

|                                                         | **2001**         | **2000**       
|-------------------------------------------------------- | ---------------- | ---------------
|**REVENUE:**                                             |                  |                
|Oil and gas sales                                        | $ 2,390,580      | $ 3,585,245    
|**OPERATING COSTS AND EXPENSES:**                        |                  |                
|Oil and gas production costs                             | 451,044          | 565,441        
|General and administrative                               | 719,550          | 754,268        
|Depreciation, depletion and amortization                 | 1,124,648        | 1,017,744      
|Impairment of oil and gas properties                     | 3,875,048        | -              
|*Total operating costs and expenses*                     | 6,170,290        | 2,337,453      
|**INCOME (LOSS) FROM OPERATIONS**                        | (3,779,710)      | 1,247,792      
|**OTHER INCOME (EXPENSES):**                             |                  |                
|Abandoned merger settlement                              | -                | 242,411        
|Interest and other income, net                           | 34,131           | 57,793         
|Interest expense                                         | (151,010)        | (359,479)      
|**NET INCOME (LOSS)**                                    | $(3,896,589)     | $ 1,188,517    
|Preferred Stock Dividends                                | (186,568)        | -              
|**NET INCOME (LOSS) AVAILABLE TO  COMMON  STOCKHOLDERS** | $(4,083,157)     | $ 1,188,517    
|**BASIC:**                                               |                  |                
|Earnings (Loss) Per Share                                | $         (1.64) | $          0.68
|Weighted Average Shares Outstanding                      | 2,492,000        | 1,755,000      
|**DILUTED:**                                             |                  |                
|Earnings (Loss) Per Share                                | $         (1.64) | $          0.66
|Weighted Average Shares Outstanding                      | 2,492,000        | 1,813,000      

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



Republic Resources, Inc.**CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND
OTHERSTOCKHOLDERS' EQUITY (DEFICIT)For the Years Ended December 31, 2001 and 2000**

|                                                             |                                       | ******Other Stockholders' Equity (Deficit)**
|------------------------------------------------------------ | ------------------------------------- | --------------------------------------------
|                                                             | **Series CRedeemablePreferred Stock** | **Series B ConvertiblePreferred Stock**     
|**Shares**                                                   | **Amount**                            | **Shares**                                  
|**BALANCES,  January 1, 2000**                               | -                                     | $        -                                  
|Purchase and retirement of   
      Series B preferred stock |                                       |                                             
|Preferred Stock Exchange                                     | 99,503                                | 4,975,150                                   
|Issuance of common stock for:                                |                                       |                                             
|Bonuses to officer and   
      employees in lieu of cash    | -                                     | -                                           
|Services of Directors in lieu   
      of cash               | -                                     | -                                           
|Net Income                                                   | -                                     | -                                           
|**BALANCES,   
      December 31, 2000**                     | 99,503                                | 4,975,150                                   
|Preferred Stock Dividends                                    | -                                     | -                                           
|Exercise of stock options and   warrants                     | -                                     | -                                           
|Net Loss                                                     | -                                     | -                                           
|**BALANCES,   
      December 31, 2001**                     | 99,503                                | $4,975,150                                  

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





**Republic Resources, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended December 31, 2001 and 2000**

**2001**
    **2000****CASH FLOWS FROM OPERATING ACTIVITIES:**Net Income (loss)
    $(3,896,589)
    $  1,188,517Adjustments to reconcile net income (loss) to net cash provided by    (used in) operating activities:Depreciation, depletion and amortization
    1,124,648
    1,017,744Impairment
    3,875,048
    -Amortization of debt discount and issuance costs
    149,873
    357,573Bad debt expense
    4,131
    -Loss on sale of assets
    4,223
    -Issuance of common stock for services
    -
    87,813Changes in operating assets and liabilities:(Increase) decrease in:Note and other receivable for abandonment of merger
    160,000
    (160,000)Trade receivables
    353,436
    (161,260)Prepaid expenses and other
    5,846
    3,703Increase (decrease) in:Accounts payable
    50,142
    6,836Accrued expenses
    2,149
    (56,657)Net cash provided by operating activities
    1,832,907
    2,284,269**CASH FLOWS FROM INVESTING ACTIVITIES:**Capital expenditures for property, plant and equipment
    (2,812,478)
    (1,398,899)Redemption (purchase) of certificate of deposit
    (3,333)
    15,000Proceeds from sale of property, plant and equipment
    105,006
    -Net cash used in investing activities
    (2,710,805)
    (1,383,899)**CASH FLOWS FROM FINANCING ACTIVITIES:**Proceeds from exercise of warrants and options
    507,708
    -Deferred debt restructuring costs
    (92,044)
    -Preferred stock dividends
    (62,189)
    -Purchase and retirement of Series B preferred stock
    -
    (210,833)Repayment of convertible debentures
    (137,000)
    -Repayment of long-term debt
    (6,890)
    (6,122)Net cash provided by (used in) financing activities
    209,585
    (216,955)**NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS**
    (668,313)
    683,415**CASH AND EQUIVALENTS, beginning of year**
    1,407,769
    724,354**CASH AND EQUIVALENTS, end of year**
    $     739,456
    $  1,407,769**SUPPLEMENTAL DISCLOSURE OF CASH FLOW   
      INFORMATION:**Cash paid for interest
    $     284,330
    $     280,156Cash paid for income taxes
    $           -
    $           -**SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING   
      AND FINANCING ACTIVITIES:**(Decrease) increase in accounts payable for oil and gas activities
    $    (103,280)
    $     181,347


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



Republic Resources, Inc.NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

1.   **NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT        
ACCOUNTING POLICIES:***Nature of Operations* - At December 31, 2001 the principal business of Republic Resources, Inc. (the   
"Company") is to participate as a non-operating, minority interest owner in exploration, development,
   
production and sale of oil, natural gas and natural gas liquids.  In July 2001 the Company changed it's
    name from Pease Oil and Gas Company to Republic Resources, Inc.  The Company was previously   
engaged in the processing and marketing of natural gas at a gas processing plant, the sale of oil and
    gas production equipment
and oilfield supplies, and oil and gas well completion and operational
    services.  However, during 1998, the
Company's gas processing plant and the oilfield service
    and supply businesses were sold.  The Company
conducted its operations through the following
    wholly-owned subsidiaries: Loveland Gas Processing
Company,
Ltd.; Pease Oil Field Services,
    Inc.; Pease Oil Field Supply, Inc.; and Pease Operating Company, Inc.  All the subsidiaries are
    currently inactive. **
*Principles of Consolidation* - The accompanying financial statements include the accounts of the
    Company and its wholly-owned subsidiaries.  All material intercompany transactions and accounts
    have been eliminated in consolidation. **
*Cash and Equivalents* - The Company considers all highly liquid investments purchased with an
    original maturity of three months or less to be cash equivalents.
**
*Oil and Gas Properties* - The Company's oil and gas producing activities are accounted for using
    the full
cost method of accounting, as prescribed by the Securities and
Exchange Commission.
    The Company has one cost center (full cost pool) since all
of  its oil and gas
producing activities are    conducted in the United States.  Under the full cost
method, all costs associated with
the acquisition,    development and exploration of oil and gas properties are
capitalized, including payroll and other    internal costs that are directly attributable to these activities. 
Any internal costs that are capitalized    are
limited to those costs that can be directly identified with
the acquisition, exploration, and
    development
activities undertaken by the Company for its own
account, and do not include any    costs related to
production, general corporate overhead, or similar activities.  The total  amount  
 of internal costs capitalized in
unevaluated oil and gas properties as of 
December 31, 2001 is    $129,292, consisting only of interest.  The
Company capitalizes interest on its unevaluated oil and
    gas properties in accordance with FASB
Interpretation No. 33.  Accordingly, interest is capitalized   
on oil and gas assets that have been excluded
from the full cost amortization pool.  The interest    that is capitalized becomes part of the related projects or
properties and will be subject to    amortization when the costs of those corresponding assets are transferred to
the amortization pool.    For the years ended December 31, 2001 and 2000, capital expenditures include
other internal    costs of $12,224 and $16,127, respectively.
   
Proceeds from sales of oil and gas properties are credited to the full cost pool with no gain or loss   
recognized unless such adjustments would significantly alter the relationship between capitalized
    costs
and proved oil and gas reserves.  Furthermore,
oil and gas properties, which are held for
    sale under the full cost method and expected to be sold at a loss,
cannot be reduced to their
    estimated net realizable value.  Such losses are recorded only upon
the sale of the property.    
Acquisition costs of unproved properties and costs related to exploratory drilling and seismic
    activities
are initially excluded from amortization.  These costs are evaluated at least annually for
    impairment and transferred to properties being amortized when either proved reserves are
    established or the costs are
determined to be impaired. When evaluating unproved properties for
    impairment, the Company considers,
among other factors, historical experience, primary lease
    terms, the terms of the exploration agreement(s)
within an area of mutual interest and the
    quality of a particular 3-D data set.
   
At December 31, 2001, the Company owned approximately 11,060 net (45,154 gross) undeveloped   
acres, of which, 1,560 net (19,701 gross) were included in the "assets held for sale".  The remaining   
properties, consisting of 9,500 net (25,450 gross) acres are in the state of Utah and were acquired with   
lease terms ranging from 1 to 10 years.  Unless production has been obtained through exploratory
    drilling, 3,408 of the net acres will expire in 2002, 1,020 net acres will expire in 2003, and 5,072 net
    acres will
expire in 2011.  Substantially all of the undeveloped acreage contain identified exploratory   
prospects or
leads.  Should the leases expire prior to an exploratory well being drilled, the value   
of these properties may be negatively affected.  This in turn may have a negative material impact on
    the Company's future results
of operations and/or its financial condition.  The carrying value of the    undeveloped acreage at
December
31, 2001 was $129,292.  At December 31, 2001, the Company  
 also owned approximately 373 net
(2,966 gross) developed acres which are also included in  
 the "assets held for sale".   Substantially all of the
developed acres have terms that allow the    Company to hold the lease as long as production is maintained.   
The capitalized costs related to all evaluated oil and gas properties are amortized using the units of   
production method based upon production and estimates of proved reserve quantities.  Future costs
    to develop proved reserves, as well as site restoration, dismantlement and abandonment costs, are   
estimated based on current costs and are also amortized to expense using the units of production
    method.

As discussed above, substantially all the capitalized internal cost were impaired at December 31,
    2001.
   
As described in note 12, the Company has decided to sell substantially all of its oil and gas assets.
   
The capitalized costs of evaluated oil and gas properties (net of accumulated amortization and related   
deferred income taxes) are not permitted to exceed the full cost ceiling.  The full cost ceiling involves
    a
quarterly calculation of the estimated future net cash flows from proved oil and gas properties,    using
current prices and costs and an annual discount factor of 10%.  Accordingly, the full cost    ceiling may
be particularly sensitive in the near term due to changes in oil and gas prices or    production rates.  The Company recorded impairments in 2001 to reduce its oil and gas
    properties to the full
cost ceiling value.  This impairment totaled $3,875,048. **
*Office Equipment and Vehicle* -The office equipment and vehicle are stated at cost.  Depreciation   
for these assets is calculated using the straight-line method over 4 to 7 years which represents the   
estimated useful lives of the corresponding assets.  Depreciation expense related to the office   
equipment and the one vehicle amounted to $15,243 and $19,495 for the years ended December   
31, 2001 and 2000, respectively.    
The costs of normal maintenance and repairs are charged to operating expenses as incurred.   
Material expenditures which increase the life of an asset are capitalized and depreciated over the   
estimated remaining useful life of the asset.  The cost of assets sold, or otherwise disposed of, and the   
related accumulated depreciation or amortization are removed from the accounts, and any gains or   
losses are reflected in current operations. **
*Debt Issuance Costs* - Debt issuance costs are
related to the restructuring of convertible debentures   
discussed in Note 2.  These costs are being amortized using the straight-line method.
**
*Accounting Estimates* - The preparation of financial statements in conformity with generally   
accepted accounting principles requires management to make estimates and assumptions that effect   
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the   
date of the financial statements and the reported amounts of revenue and expenses during the
    reporting
period.  The actual results could differ from those estimates.   
The Company's financial statements are based on a number of significant estimates including the   
allowance for doubtful accounts, assumptions effecting the fair value of stock options and warrants,   
estimated proceeds from the sale of the oil and gas assets, and oil and gas reserve quantities which are   
the basis for the calculation of amortization and impairment of oil and gas properties.  Management   
emphasizes that reserve estimates are inherently imprecise and that estimates of more recent
    discoveries
are more imprecise than those for properties with long production histories.   **
*Income Taxes* - Deferred tax assets and liabilities are recognized for the future tax consequences   
attributable to differences between financial statement carrying amounts of existing assets and
    liabilities
and their respective tax bases.  Deferred tax assets and liabilities are measured using    enacted tax rates
expected to apply to taxable income in the years in which those temporary    differences are expected to
be recovered or settled.  The effect on previously recorded deferred     tax
assets and liabilities resulting from a change in tax rates is recognized in earnings in the period   
in which the change is enacted.
**
*Revenue Recognition* - The Company recognizes revenues for oil and gas sales upon delivery to the   
purchaser.  Gas imbalances, if they occur, are accounted for using the "sales" method.  However, gas   
imbalances have not been significant in the past and are not expected to be in the foreseeable future.
**
*Net Income (Loss)  Per Common Share* -Net income (loss) per common share is presented in   
accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128,*Earnings Per Share*, which requires disclosure of basic and diluted earnings per share ("EPS").   
Basic EPS excludes dilution for potential common shares and is computed by dividing the net (loss)   
applicable to common shareholders by the weighted average number of common shares outstanding
   
for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other
    contracts to issue common stock were exercised or converted into common stock.
**
*Stock-Based Compensation* - For employees, the Company accounts for stock-based compensation
   
using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,** *Accounting 
for Stock Issued to Employees*, and related interpretations.  Accordingly, compensation
    cost for stock
options granted to employees is measured as the excess, if any, of the quoted market    price of the
Company's common stock at the measurement date (generally, the date of grant) over   
the amount an employee must pay to acquire the stock.    
For non-employees, the Company accounts for stock-based compensation as prescribed by SFAS   
No. 123titled *Accounting for Stock-Based Compensation*.  This pronouncement requires that all   
options, warrants and similar instruments which are granted to non-employees for goods and services   
be recorded at fair value on the measurement date and pro forma information be provided as to the
    fair
value effects of transactions with employees.  Fair value is generally determined under an option    pricing
model using the criteria set forth in SFAS No. 123.  The measurement date is generally the    earlier of: a)
the date in which the performance of the goods or services is fully committed; or b) the   
date in which the
performance is substantially complete. **
*Hedging Activities*- In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS   
No. 133, "Accounting for Derivative Instruments and Hedging Activities."  SFAS No. 133 establishes   
accounting and reporting standards requiring that derivative instruments (including certain derivative   
instruments embedded in other contracts), as defined,  be recorded in the balance sheet as either an   
asset or liability measured at fair value, and requires that changes in fair value be recognized currently
    in
earnings unless specific hedge accounting criteria are met.  Special accounting for qualifying
    hedges
allows unrealized gains and losses to be deferred in other comprehensive income for the    effective  portion
of the hedge) until such time as the hedged transaction occurs, and requires that
    a company formally
document, designate, and assess the effectiveness of derivative instruments  
 that receive hedge accounting
treatment.  The Company currently does not engage in any activities  
 that would be covered by SFAS 133. New Accounting Pronouncements- In June
2001, the Financial Accounting Standards Board
    ("FASB")
issued Statements of Financial Accounting Standards No. 141 "Business
Combinations"    ("SFAS 141") and No. 142 "Goodwill and Other
Intangible Assets" ( SFAS 142").  SFAS 141
    requires all
business combinations initiated after June 30, 2001 to be
accounted for under the    purchase method. For all  business
combinations for which the date of acquisition is after June 30,
    2001, SFAS 141
also establishes specific criteria for the recognition of
intangible assets separately
    from goodwill and requires
unallocated specific criteria for the recognition of
intangible assets
    separately from goodwill  specific criteria for the recognition of
intangible assets separately from
    goodwill gain, rather than deferred
and amortized. SFAS 142 changes the accounting for
goodwill
    and other intangible assets after an acquisition.  The
most significant changes made by SFAS 142    are: 1) goodwill and intangible assets with indefinite lives will
no longer be amortized; 2) goodwill 
    and intangible assets with indefinite lives
must be tested for impairment at least annually; and 3)    the amortization period for intangible assets with finite lives will
no longer be limited to forty years.    The Company does not
believe that the adoption of these statements will have a
material effect on    its financial position, results of operations, or cash
flows.

In June 2001, the FASB also approved for
issuance SFAS 143 "Asset Retirement Obligations". SFAS    143
establishes accounting requirements for retirement obligations associated with
tangible long-lived    assets, including (1) the timing of
the liability recognition, (2) initial measurement of liability,
(3)    allocation of asset retirement cost to expense, (4)
subsequent measurement of the liability and (5)
    financial
statement disclosures. SFAS 143 requires that an asset retirement cost should be
capitalized    as part of the cost of the related long-lived
asset and subsequently allocated to expense using a    systematic
and rational method. The Company will adopt the statement
effective no later than January    1, 2003, as required. The
transition adjustment resulting from the adoption of SFAS 143 will be   
reported
as a cumulative effect of a change in accounting
principle.  At this time, the Company    cannot reasonably estimate the effect of the adoption of this statement
on its financial position,
    results of operations, or cash
flows.

In August 2001, the FASB also approved SFAS
144, Accounting for the Impairment or Disposal of   
Long-Lived Assets. SFAS 144 replaces SFAS 121, Accounting for the
Impairment of Long-Lived    Assets and for Long-Lived Assets
to Be Disposed Of. The new accounting model for long-lived
Assets    to be disposed of by sale applies to all long-lived
assets, including discontinued operations, and
    replaces
the provisions of APB Opinion No. 30, Reporting Results of
Operations-Reporting the    Effects of Disposal of a Segment
of a Business, for the disposal of segments of a business. Statement  
144 requires that those long-lived assets be measured at
the lower of carrying amount or fair value
    less  cost to
sell, whether reported in continuing operations or in discontinued operations.
Therefore,    discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses
that have not yet occurred. Statement 144 also broadens
the reporting of discontinued    operations to include all
components of an entity with operations that can be distinguished from the
    rest of the entity and that will be eliminated from the ongoing
operations of the entity in a disposal
    transaction.  The provisions of
Statement 144 are effective for financial statements
issued for fiscal    years beginning after December 15, 2001
and, generally, are to be applied prospectively. The
    Company does not believe that the adoption of this statement will have a material effect on its   
financial position, results of
operations, or cash flows.

2.   **DEBT FINANCING ARRANGEMENTS:**
**
*Long-Term Debt* - Long-term debt at December 31, 2001 consists of the following:

|Convertible debentures, interest at 11%,   due April 2003, unsecured                                           | $ 2,645,500
|-------------------------------------------------------------------------------------------------------------- | -----------
|Note payable to bank, interest at 8.5%, monthly payments  of $669, due March 2003, collateralized by a vehicle | 9,508      
|Total long-term debt                                                                                           | 2,655,008  
|Less current maturities                                                                                        | (7,496)    
|Long-term debt, less current maturities                                                                        | $ 2,647,512

|Year EndingDecember 31: |            
|----------------------- | -----------
|2002                    | 7,496      
|2003                    | 2,647,512  
|Total                   | $ 2,655,008

|                                               | **2001**      
|---------------------------------------------- | --------------
|Long-term Assets:                              |               
|The effect of net operating loss carryforwards | $ 10,300,000  
|Property, plant and equipment                  | 2,900,000     
|Tax credit carryforwards                       | 600,000       
|Total                                          | 13,800,000    
|Less valuation allowance                       | (13,800,000)  
|Net long-term asset                            | $            -

During the years ended December 31, 2001 and 2000, the Company increased the valuation   
allowance by approximately $2,550,000 and $174,000
respectively, primarily due to an increase   
in the net operating loss
carryforwards which are not likely to be realizable.  The Company   
has provided a valuation
allowance for the net operating loss and credit carryforwards based   
upon the various expiration
dates and the significant limitations which exist under IRS
Sections    382 and 384.    
At December 31, 2001, the Company had net operating loss carryforwards for income tax   
purposes of approximately $27.0 million, which expire primarily in 2008 through 2021.  The   
majority of these net operating losses either may be or are subject to limitations under IRS   
Sections 382 and 384.  Additionally, the Company has tax credit carryforwards at December   
31, 2001, of approximately $290,000 and percentage depletion carryforwards of approximately   
$800,000. 4.   **COMMITMENTS AND CONTINGENCIES:**
**
*Employment Agreement* - During 1994, the Board of Directors approved an employment   
agreement with the Company's current President/CFO.  As more thoroughly discussed in Note 6,   
the President's employment agreement was amended in November 2000.  The agreement , as   
amended, may be terminated by the officer upon 90 days notice or by the Company without cause   
upon 30 days notice.  In the event of a termination by the Company without cause, the Company   
would be required to pay the officer one year's salary.  If the termination occurs following a change   
in control, which includes a merger, the Company would be required to make a lump sum payment   
equivalent to $150,000. **
*Profit Sharing Plan* - The Company has established a 401(k) profit sharing plan (the "Plan") that   
covers all employees with six months of service who elect to participate in the Plan.  The Plan   
provides that the employees may elect to contribute up to 15% of their salary to the Plan.  All of the   
Company's contributions are discretionary and amounted to $842 and $962 for the years ended   
December 31, 2001 and 2000, respectively. **
*Environmental* - The Company is subject to extensive Federal, state and local environmental laws   
and regulations.  These laws, which are constantly changing, regulate the discharge of materials into   
the environment and may require the Company to remove or mitigate the environmental effects of the   
disposal or release of petroleum or chemical substances at various sites.  Environmental expenditures   
are expensed or capitalized depending on their future economic benefit.  Expenditures that relate to   
an existing condition caused by past operations and that have no future economic benefits are   
expensed.  Liabilities for expenditures of a noncapital nature are recorded when environmental   
assessment and/or remediation is probable, and the costs can be reasonably estimated.
**
*Contingencies* - The Company may from time to time be involved in various claims, lawsuits,   
disputes with third parties, actions involving allegations of discrimination, or breach of contract   
incidental to the operations of its business.  The Company is not currently involved in any such   
incidental litigation which it believes could have a materially adverse effect on its financial conditions   
or results of operations. 5.   **ABANDONED MERGER:**    
On November 8, 2000 the Company announced that its proposed merger with Carpatsky Petroleum,Inc. ("Carpatsky") had been terminated.  Concurrently, the Company also exchanged its outstanding SeriesB Convertible Preferred Stock for a new series of Preferred to eliminate the Series B's hyper-dilutive
"death spiral" conversion feature.  The preferred stock restructuring is more thoroughly discussed in
Note 6.
   
Under terms of the original Termination Agreement, Carpatsky paid the Company $82,411 in cash forcertain accounting and administrative services provided to Carpatsky by the Company from October 1,1999 through November 2000; was obligated to issue 1.5 million shares of Carpatsky restricted commonstock on or before January 31, 2001; and both companies exchanged broad general releases.

The Carpatsky shares were never delivered and the Companies amended the Termination Agreement inApril 2001 to eliminate the obligation of Carpatsky to issue the shares and instead provide for an additionalcash payments of $160,000 which were made in 2001.
6.   **PREFERRED STOCK AND RESTRUCTURING:**
       
As of December 31, 2001, the Company has the authority to issue up to 605,000 shares of PreferredStock, which may be issued in such series and with such preferences as determined by the Board of
Directors.
       
On December 31, 1997, the Company issued 113,333 shares of Series B 5% PIK CumulativeConvertible Preferred Stock for $5,666,650 (the "Series B Preferred Stock").  The Series B Preferred
Stock was convertible into common stock at a 25% discount to the market price.
       
In November 2001, six institutional holders, holding approximately 94% of the Series B Preferred
stock with a stated value of over $4.97 million, exchanged their Series B for a new class of non-voting,non-convertible, preferred stock designated as the "Series C" Preferred Stock.  The Company redeemed
in cash the remaining 6% of the Series B Preferred at a 33% discount, or $210,833.  In connection with
this restructuring, all the holders of the Series B Preferred stock waived the payment of all unpaiddividends in
arrears. The Series C Preferred was mandatorily redeemable, at its stated value, onDecember 31, 2005, or
could have been redeemed at the Company's election at a 33% discount (or approximately $3.32 million if all
of it is redeemed), either in whole or in part, through December 31,
2003.
       
The Series C was to receive dividends at a rate of 5% per annum beginning in the second quarter of2001.  However, after receiving only one quarterly dividend, at the Company's request, the holders of theSeries C agreed to waive the payment of future dividends because of the deteriorating financial condition 
of the Company.  However, the amended certificate of designation for the Series C required the
dividends be accrued on a quarterly basis and ultimately be paid when the Series C was redeemed.
       
Subsequent to December 31, 2001 the Series C Preferred Stock holders agreed to exchange theirSeries C Preferred Stock, including all the accrued and unpaid dividends, into 3,400,000 shares of
common stock.
       
As an inducement for the Series B Preferred stockholders to restructure their investment and grant adiscounted redemption feature in 2000, the Company issued warrants to acquire up to 1,763,800 shares
of common stock exercisable at $0.50 per share. 1,005,417 of these warrants were exercised in 2001
and the remaining warrants will expire on December 31, 2003.
       
In conjunction with the restructuring of the outstanding preferred stock and the termination of the
merger with Carpatsky, the Board of Directors approved an amended employment agreement for
Patrick J. Duncan, the Company's President and CFO.  The amended terms of the agreement, which
became effective November 2, 2000, include provisions for: 1) a $50,000 cash bonus; 2) theissuance of 150,000 shares of restricted
common stock; and a warrant to purchase up to 600,000 shares of the Company's common stock at $0.50
per share, exercisable at the earlier of: (a) December31, 2004; or (b)
(i) as to 300,000 shares, if the Company's reported closing sales price for its commonstock is at least $1.50 for at least 80% of the trading
days in a one month period (these warrants vestedon March 5, 2000), and (ii) as to other 300,000 shares, if
the Company's reported closing sales price
for its common stock is at least $2.00 for at least 80% of the
trading days in a three month period or if
the Company entered into a reorganization or merger transaction in
which the deemed or actual value
received by the Company was equal to or greater than $2.00 per share
(these warrants have not yetvested as of the date of this report).  In consideration for the cash bonus, Mr.
Duncan agreed to reducehis total severance due upon change of control from $197,500 to $150,000.
       
For financial statement reporting purposes, in addition to the cash bonus, the Company  recognized anon-cash charge of $60,900 in the fourth quarter of 2000 which represents the fair value of the 150,000common shares on the date of grant (or $.41 per share).  There was no financial statement impact for thewarrants issued to Mr. Duncan since the exercise price was 18.75% higher than the market price on the
date of grant.

7.
**NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS'**
       
A reconciliation of net income to net income available to common stockholders is as follows:

**2001**
    **2000**Net Income (Loss)
    $(3,896,589)
    $ 1,188,517Fair value of warrants issued to preferred stockholders
    -
    (481,612)Dividends waived by preferred stockholders
    -
    376,196Gain on redemption of Series C Preferred Stock
    -
    105,416Dividends declared and paid for the Series C Preferred Stock
    (62,189)
    -Dividends in Arrears for the Series C Preferred Stock
    (124,379)
    -Net Income (Loss) available to common stockholders
    $(4,083,157)
    $ 1,188,517


|                                                                            | **2001**     | **2000**  
|--------------------------------------------------------------------------- | ------------ | ----------
|**BASIC**                                                                   | **Income**   | **Shares**
|Income (Loss) available to    common stockholders                           | $(4,083,157) | 2,492,202 
|**EFFECT OF DILUTIVE   
      SECURITIES**                                  |              |           
|Warrants and stock options                                                  | -            | -         
|**DILUTED**                                                                 |              |           
|Income (Loss) available to    common stock including    assumed conversions | $(4,083,157) | 2,492,202 

|                               | **2001**                    | **2000**     
|------------------------------ | --------------------------- | -------------
|**Number**                     | **WeightedAverageExercise** | **Number**   
|**Of Shares**                  | **Price**                   | **Of Shares**
|Outstanding, beginning of year | 67,515                      | $    10.92   
|Canceled                       | -                           | -            
|Expired                        | (16,515)                    | 10.61        
|Granted                        | -                           | -            
|Exercised                      | (10,000)                    | 0.50         
|Outstanding, end of year       | 41,000                      | $    13.58   

All options are currently exercisable and if not previously exercised, will expire as follows:

|**Year EndedDecember 31,** | **Range ofExercise Prices** | **WeightedAverageExercise** | **Number**   
|-------------------------- | --------------------------- | --------------------------- | -------------
|**Low**                    | **High**                    | **Price**                   | **Of Shares**
|2002                       | 29.70                       | 29.70                       | $   29.70    
|2003                       | 0.50                        | 0.50                        | 0.50         
|2007                       | 5.00                        | 17.50                       | 11.25        
|                           |                             |                             | $   13.58    

*Warrants and Non-Qualified Stock Options* - The Company has also granted warrants and       
non-qualified options which are summarized as follows for the years ended December 31, 2001       
and 2000:

|                                      | **2001**                         | **2000**           
|------------------------------------- | -------------------------------- | -------------------
|**NumberOf Shares**                   | **WeightedAverageExercisePrice** | **NumberOf Shares**
|Outstanding, beginning of year        | 2,527,480                        | $      1.45        
|Granted to the Preferred Stockholders | -                                | -                  
|Granted to the Company's President    | -                                | -                  
|Granted to the Company's Directors    | 200,000                          | 1.05               
|Expired                               | (98,900)                         | 10.79              
|Exercised                             | (1,005,417)                      | 0.50               
|Outstanding, end of year              | 1,623,163                        | $      1.43        

|**Year EndedDecember 31,** | **Range ofExercise Prices** | **WeightedAverageExercise** | **Number**   
|-------------------------- | --------------------------- | --------------------------- | -------------
|**Low**                    | **High**                    | **Price**                   | **Of Shares**
|2002                       | $17.50                      | $ 30.30                     | $   22.05    
|2003                       | 0.50                        | 1.05                        | 0.61         
|2005                       | 0.50                        | 0.50                        | 0.50         
|                           | $     1.43                  | 1,623,163                  

|                                                     | **Year Ended December 31,**
|---------------------------------------------------- | ---------------------------
|                                                     | **2001**                   
|Net Income (Loss) applicable to common stockholders: |                            
|As reported                                          | $(4,083,157)               
|Pro forma                                            | (4,157,995)                
|Net Income (Loss) per common share:                  |                            
|As reported                                          | $        (1.64)            
|Pro forma                                            | (1.67)                     

|                          | **For the Year EndedDecember 31,**
|------------------------- | ----------------------------------
|                          | **2001**                          
|Expected volatility       | 169.0%                            
|Risk-free interest rate   | 5.5%                              
|Expected dividends        | -                                 
|Expected terms (in years) | 2.5                               

|**Description**                    | **2001**    | **2000**    | **1999**  | **1998**  
|---------------------------------- | ----------- | ----------- | --------- | ----------
|Acquisition of proved properties   | $         - | $         - | $      -  | $        -
|Acquisition of unproved properties | 310,462     | 431,103     | 76,912    | 507,307   
|Exploration                        | 1,846,682   | 711,000     | 314,997   | 5,439,095 
|Development and workovers          | 260,555     | 159,489     | 239,276   | 13,468    
|Capitalized interest               | 287,048     | 278,250     | 278,250   | 852,980   
|Total                              | $2,704,747  | $1,579,842  | $ 909,435 | $6,812,850

|                           | **2001**  
|-------------------------- | ----------
|Property acquisition costs | $  105,925
|Exploration costs          | 23,367    
|Total                      | $  129,292

|                                                        | **2001**     | **2000**  
|------------------------------------------------------- | ------------ | ----------
|Oil and gas sales                                       | $ 2,390,580  | $3,585,245
|Production costs                                        | (451,044)    | (565,441) 
|Amortization expense                                    | (1,109,405)  | (998,249) 
|Impairment expense                                      | (3,875,048)  | -         
|Results of operations from oil/gas producing activities | $(3,044,917) | $2,021,555

|                                             | **2001**      | **2000**    
|-------------------------------------------- | ------------- | ------------
|                                             | **Oil(Bbls)** | **Gas(Mcf)**
|Proved reserves, beginning of year           | 377,000       | 1,498,000   
|Purchase of minerals in place                | -             | -           
|Sale of minerals in place                    | -             | -           
|Extensions, discoveries, and other additions | 10,000        | 447,000     
|Revisions of previous estimates              | (112,000)     | (371,000)   
|Production                                   | (38,000)      | (311,000)   
|Proved reserves, end of year                 | 237,000       | 1,263,000   
|Proved developed reserves, beginning of year | 352,000       | 695,000     
|Proved developed reserves, end of year       | 220,000       | 769,000     

The downward revisions of "previous estimates" in 2001 were primarily related to: a) the loss of
        one well in the Maurice field due to apparent down-hole mechanical failure; and b) the unexpected       
loss of a producing interval in one well in the East Bayou Sorrel field due to apparent formation       
damage and other geologic factors.  The downward revisions of "previous estimates" in 2000       
were primarily attributable to previously recorded "behind pipe" reserves in two wells in the
        Maurice field were removed after attempts
to recomplete those sand intervals in one of those wells       
failed due to poor porosity and other rock quality
factors.
**    
*Standardized Measure of Discounted Future Net Cash Flows (Unaudited)* - SFAS No. 69       
prescribes guidelines for computing a standardized measure of future net cash flows and changes       
therein relating to estimated proved reserves.  We have followed these guidelines which are briefly       
discussed below.        
Future cash inflows and future production and development costs are determined by applying year-
        end prices and costs to the estimated quantities of oil and gas to be produced.  Estimated future
        income taxes are computed using current statutory income tax rates including consideration for       
estimated future statutory depletion and tax credits and the utilization of net operating loss       
carryforwards.  The resulting future net cash flows are reduced to present value amounts by       
applying a 10% annual discount factor.
       
The assumptions used to compute the standardized measure are those prescribed by the FASB and,
        as such, do not necessarily reflect our expectations for actual revenues to be derived from those       
reserves nor their present worth.  The limitations inherent in the reserve quantity estimation       
process, as discussed previously, are equally applicable to the standardized measure
computations        since these estimates are the
basis for the valuation process.
       
The following summary sets forth the Company's future net cash flows relating to proved oil and
        gas
reserves as of December 31, 2001 and 2000 based on the standardized measure prescribed        in SFAS No. 69.

|                                                         | **2001**         | **2000**       
|-------------------------------------------------------- | ---------------- | ---------------
|Future cash inflows                                      | $  8,109,000     | $24,936,000    
|Future production costs                                  | (2,404,000)      | (3,343,000)    
|Future development costs                                 | (687,000)        | (1,164,000)    
|Future income tax expense                                | -                | -              
|Future net cash flows                                    | 5,018,000        | 20,429,000     
|10% annual discount for estimated timing of cash flow    | (1,193,000)      | (5,298,000)    
|Standardized Measure of Discounted Future Net Cash Flows | $  3,825,000     | $15,131,000    
|Average prices used to estimate the reserves:            |                  |                
|Oil (per bbl)                                            | $         18.51  | $         25.81
|Gas (per Mcf)                                            | $           2.95 | $         10.15

|                                                      | **2001**    | **2000**    
|----------------------------------------------------- | ----------- | ------------
|Standardized measure, beginning of year               | $15,131,000 | $  6,270,000
|Sale of oil and gas produced, net of production costs | (1,940,000) | (3,020,000) 
|Sale of minerals in place                             | -           | -           
|Net changes in prices and production costs            | (7,461,000) | 8,023,000   
|Net changes in estimated development costs            | 338,000     | (221,000)   
|Revisions of previous quantity estimates              | (3,330,000) | (235,000)   
|Discoveries, extensions and other additions           | 790,000     | 4,256,000   
|Accretion of discount                                 | 297,000     | 58,000      
|Standardized Measure, end of year                     | $ 3,825,000 | $15,131,000 

**PART II (Continued)**

**ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE**
This item is not applicable to the Registrant.

**PART III**

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

Directors and Executive OfficersThe following table sets forth the names and ages of the
current directors and executive officers of the Company, the principal offices
and positions with the Company held by each person and the date such person
became a director or executive officer of the Company. The executive officers of
the Company are elected annually by the Board of Directors. The Board of
Directors is divided into three approximately equal classes. The directors serve
three year terms and until their successors are elected. Each year the
stockholders elect one class of directors. The executive officers serve terms of
one year or until their death, resignation or removal by the Board of Directors.
There are no family relationships between any of the directors and executive
officers. In addition, there was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer.

The directors and executive officers of the Company are as
follows:

Name
    Age
    Position
    Served asDirector SincePatrick J. Duncan
      39
      President, Chief Financial
          Officer, and Director
      1995David A. Melman
      59
      Director
      2001Homer C. Osborne
      72
      Director
      1994J. Peter Koonce
      70
      Director
      2001


The
Company currently has one vacant seat on its board because Steve Antry resigned
as a director on March 12, 2002. The Company anticipates this board position
will be filled by appointment of the other directors when a qualified candidate
can be found.

The
Company's Board of Directors held nine (9) meetings during 2001. Five (5) of
these were actual meetings at which all of the above directors attended. The
other four(4) meetings were held by unanimous written consent.
        The Board of Directors does not have
an audit committee. However, the entire board reviews the Company's quarterly
and annual financial statements and meets with the Company's independent
auditors to review the results of the annual audit and address any accounting
matters or questions raised by the auditors.

The
Board of Directors does not have a compensation committee. The entire board
periodically reviews the compensation of the Company's officers and
administers the award of options under all the Company's stock option plans.Patrick J. Duncanhas been the
Company's President since November 1998, the Company's Chief Financial
Officer since September 1994, and the Company's Treasurer since March 1996. In
addition to managing the day-do-day activities of the Company, Mr. Duncan is
responsible for all the financial, accounting and administrative reporting and
compliance required by his individual job titles. Mr. Duncan was an Audit
Manager with HEIN + ASSOCIATES LLP, Certified Public Accountants, from 1991
until joining the Company as our Controller in April 1994. From 1988 until 1991,
Mr. Duncan was an Audit Supervisor with Coopers & Lybrand, Certified Public
Accountants. Mr. Duncan received a B.S. degree from the University of Wyoming in
1985.

David A. Melman
has served as a consultant and a director of Carpatsky Petroleum, Inc. from
October, 1998 until the present. He served as Executive Vice President and
Director of XCL, Ltd., a Louisiana based exploration and development company
with properties and operations in the People's Republic of China (1984-1997) and
as a consultant from 2000 until the present. From June 1997 until October 1998
Mr. Melman was an independent consultant to Cadiz Land Co. Inc. (NASDAQ) and
Saba Oil Company (AMEX). He has been a member of the boards of directors of oil
and gas companies listed on the American Stock Exchange, the London Stock
Exchange, the Canadian Venture Exchange and NASDAQ. Melman holds a B.S.
(Economics and accounting) from Queens College of the City University of New
York, a law degree from Brooklyn Law School (J.D.) and a Masters of Law-Taxation
from New York University Graduate School of Law (LLM).

J. Peter Koonce
has been a registered general securities principal with GBS Financial Corp., a
registered broker dealer, since 1988. Prior to that he was a senior investment
executive with Wedbush Morgan Securities, a NYSE firm. Mr. Koonce held various
positions in the oil and gas financing industry from 1982 through 1986 when he
was president of Argo Financial, a division of Argo Petroleum Inc. He holds a MS
in Operations Research from the Florida Institute of Technology.

Homer C. Osborne
is a registered petroleum engineer and holds a B.S. degree in Mechanical and
Petroleum Engineering from Texas A&M. Mr. Osborne has spent most of his
adult life in the oil and gas industry. After serving his country in the Korean
war, Mr. Osborne began his career in the oil and gas industry with the Superior
Oil Company in 1953. During the course of his career, Mr. Osborne has held
engineering positions with several domestic and international oil companies
evaluating, developing and supervising a variety of oil and gas projects - both
large and small. In 1976, Mr. Osborne organized and managed his own E & P
company, Osborne Oil Company, to develop and participate in domestic oil and gas
projects. Mr. Osborne sold the assets of Osborne Oil Company in 1998. Since then
he has participated in and provided various engineering and consulting services,
including the evaluation of potential acquisition, development and exploratory
prospects, in the U.S. and abroad, both onshore and offshore, for a variety of
oil and gas projects.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934

Section 16(a) of the Securities Exchange Act of 1934 requires
our officers and directors, and persons who own more than ten percent of our
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
us with copies of all Section 16(a) forms they file.
The following disclosure is based solely upon a review of the Forms 3 and 4 and
any amendments thereto furnished to the Company during our fiscal year ended
December 31, 2001, and Forms 5 and amendments thereto furnished to us with
respect to such fiscal year, or written representations that no Forms 5 were
required to be filed by such persons. Based on this review Messrs. Melman,
Osborne and Koonce filed one late report on Form 4 in connection with reporting
the issuance of warrants in July 2001. Our review found no other person who was
a director, officer or beneficial owner of more than 10% of the Company's
outstanding common stock during such fiscal year filed any late reports on Forms
3 and 4.

ITEM 10 - EXECUTIVE COMPENSATION

Summary Compensation TableThe Summary Compensation Table shows certain compensation information
for services rendered in all capacities during each of the last three fiscal
years by the Chief Executive Officer and those executive officers who received
salary, bonus or other compensation in excess of $100,000 (these individuals are
collectively referred to herein as the "Named Executive Officers").
The following information for the Named Executive Officers includes the dollar
value of base salaries, bonus awards, the number of stock options granted and
certain other compensation, if any, whether paid or deferred.



SUMMARY COMPENSATION TABLE

|                           |      | Annual
      Compensation | Long-TermCompensation Awards
|-------------------------- | ---- | ------------------------- | ----------------------------
|Name and PrinciplePosition | Year | Salary                    | Bonus                       
|Patrick J. Duncan          | 2001 | $97,500                   | $30,000                     
|President and CFO          | 2000 | $97,500                   | $50,000                     
|                           | 1999 | $97,957                   | None                        

> (1)    No
>     additional amounts have been shown as Other Annual
>             Compensation
>     because the aggregate incremental cost to us for
>             personal benefits
>     provided
>     to Mr. Duncan did not exceed the
>             lesser of $50,000 or 10%
>     of his annual salary in any given year.

Option Grants in the Last Fiscal YearThere were no option grants to the Named Executive Officer during the
fiscal year ended December
31, 2001.

Aggregated Option Exercises in the Last Fiscal Year and the
Fiscal Year-End Option Values

The table below provides information with respect to the
unexercised options to purchase the Company's common stock held by the Named
Executive Officer at December 31, 2001. No options were exercised
during fiscal
2001.

Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values

|Name              | Shares Acquired onExercise (#) | ValueRealized ($) | Number of
      Securities
      Underlying
      Unexercised
      Options/SARs
      at FY-End (#)
      Exercisable/Unexercisable | Value of
      Unexercised
      In-the-Money
      Options/SARs
      at FY-End ($)
      Exercisable/Unexercisable
|----------------- | ------------------------------ | ----------------- | ------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------
|Patrick J. Duncan | None                           | None              | 320,000/300,000                                                                                                                      | $ 0/0 (1)                                                                                                           
|President and CFO |                                |                   |                                                                                                                                      |                                                                                                                     

> (1)    The
>     value of the unexercised In-the-Money Options was determined by
>             multiplying the number of unexercised warrants or options (that were
>             in-the-money on December 31, 2001) by the closing sales of the
>             Company's
>     common stock on December 31, 2001 (as reported by
>             OTCBB) and from
>     that total, subtracting the total exercise price.  No
>             options were
>     in-the-money
>     of December 31, 2001.

Employment ContractThe Board of Directors have approved an Employment Agreement for Patrick
J. Duncan which, among other things, appoints Mr. Duncan as the Companys
President and Chief Financial Officer, provides for an annual salary of $97,500
and provides for a severance payment of $175,000 should he be terminated without
cause or in the event of a change of control of the Company.

Compensation of DirectorsDirectors who are employees or otherwise receive compensation from us do
not receive additional compensation for service as directors. Outside directors
each receive a $2,500 annual retainer fee (prorated over the length of service
during the year), plus $50.00 per hour, up to $400.00 per day, for time devoted
to the Company's business including attending meetings or other matters. Each
director can elect to receive their fees in either cash or stock or a
combination thereof. All of the directors fees in 2001 were paid in cash.ITEM 11 - SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock, its only class of outstanding voting
securities as of April 15, 2002, by (i) each of the Company's directors and
officers, and (ii) each person or entity who is known to the Company to own
beneficially more than 5% of the outstanding common stock with the address of
each such person or entity. Beneficial owners listed have sole voting and
investment power with respect to the shares unless otherwise indicated. On April
15, 2002, there were 7,331,240 shares of our common stock issued and
outstanding.

|Name of Officer or Director                                                                                                              | Amount and Nature ofBeneficial Ownership(1) | Percent ofClass (12)
|---------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------
|Patrick J. Duncan                                                                                                                        | 471,564 Shares (2)                          | 6.16%               
|J. Peter Koonce                                                                                                                          | 55,000 Shares (3)                           | 0.75%               
|David A. Melman                                                                                                                          | 50,000 Shares (4)                           | 0.68%               
|Homer C. Osborne                                                                                                                         | 74,759 Shares (5)                           | 0.98%               
|All Officers and Directors as
        a group (six persons)                                                                              | 648,840 Shares (6)                          | 8.31%               
|Kayne Anderson, Investment
        Management, Inc.
        1800 Avenue of the Stars
        Second Floor
        Century City, CA 90067 | 3,001,590 Shares (7)                        | 37.26%              
|State Street, Research and
        Management Company
        One Financial Center
        38th Floor
        Boston, MA 02111           | 2,033,460 Shares (8)                        | 27.74%              

> (1)     Shares are owned directly and
>   beneficially unless stated otherwise.
>   (2)     Includes 151,564 shares owned
>   directly by Mr. Duncan, 20,000 shares underlying
>            presently ercisable options, and
>   300,000 shares underlying presently exercisable
>            warrants.  Does not include 300,000 shares
>   underlying warrants which are not
>            presently exercisable.
>   (3)     Includes 5,000 shares owned
>   directly by Mr. Koonce and 50,000 shares underlying
>            presently exercisable warrants.
>   (4)     Includes 50,000 shares underlying
>   presently exercisable warrants.
>   (5)     Includes 17,276 shares owned
>   directly by Mr. Osborne, 5,000 shares underlying
>            presently exercisable options, and
>   50,000 shares underlying presently exercisable
>            warrants.
>   (6)     Includes 173,840 shares owned
>   directly, 25,000 shares underlying presently
>            exercisable options, and 450,000 shares
>   underlying presently exercisable warrants.
>   (7)     Includes 2,276,540 shares and
>   725,050 shares underlying presently exercisable
>            warrants held by three entities which are
>   effectively controlled by Kayne Anderson
>            Investment Management, Inc., a registered investment
>   advisor. The entities which
>            beneficially own the shares and warrants are Arbco
>   Associates, L.P., Kayne
>            Anderson Non-Tradition Investments, L.P. and KAIFS, L.P.
>   (8)     Shares are beneficially owned by
>   two entities, Metropolitan Life Insurance Co.
>            Separate Account EN, and Bellsouth
>   Master Pension Trust that are controlled by
>            State Street Research and Management Company, a
>   registered investment advisor.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

There are no relationships or transactions reportable under this
item for the period covered by this report.

**PART IV**

**ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K**
**(a) Exhibits:**

|**Exhibit No.** | **Description and Method of Filing**                                                                                                                                                                                                                                                                                                                                                                                                       
|--------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1             | Articles of Incorporation. Incorporated by reference to Exhibit 3.1 of the Registrant's
      Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998.                                                                                                                                                                                                                                                                    
|3.2             | Certificate of Amendment to the Articles of Incorporation filed on June 23, 1993.Incorporated by reference to Exhibit 3.2 of the Registrant's Annual Report on Form10-KSB/A for the fiscal year ended December 31, 1999.                                                                                                                                                                                                                   
|3.3             | Certificate of Amendment to the Articles of Incorporation filed on June 29, 1993.Incorporated by reference to Exhibit 3.3 of the Registrant's Annual Report on Form10-KSB/A for the fiscal year ended December 31, 1999.                                                                                                                                                                                                                   
|3.4             | Plan of Recapitalization. Incorporated by reference to Exhibit 3.4 of the Registrant's
      Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 1999.                                                                                                                                                                                                                                                                   
|3.5             | Certificate of Amendment to the Articles of Incorporation filed on July 5, 1994.
      Incorporated by reference to Exhibit 3.5 of the Registrant's Annual Report on Form
      10-KSB/A for the fiscal year ended December 31, 1999.                                                                                                                                                                                                      
|3.6             | Certificate of Amendment to the Articles of Incorporation filed on December 19, 1994.Incorporated by reference to Exhibit 3.4 of the Registrant's Annual Report on Form
      10-KSB for the fiscal year ended December 31, 1998.                                                                                                                                                                                                          
|3.7             | Certificate of Amendment to Article IV of the Articles of Incorporation as filed with theNevada Secretary of State, increasing the authorized shares of common stock of Registrantto 40,000,000 shares, $0.10 par value. Incorporated by reference to Exhibit 3 of theRegistrant's Current Report on Form 8-K dated June 11, 1997.                                                                                                         
|3.8             | Certificate of Change in Number of Authorized Shares of Common Stock dated November18, 1998. Incorporated by reference to Exhibit 3.8 of the Registrant's Annual Report on
      Form 10-KSB for the fiscal year ended December 31, 1998.                                                                                                                                                                                                  
|3.9             | Amended and Restated Articles of Incorporation as filed July 11, 2001.  Incorporated byreference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed July 11, 2001.                                                                                                                                                                                                                                                            
|3.10            | Bylaws as amended and restated. Incorporated by reference to Exhibit 3.9 of the
      Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31,
      1998.                                                                                                                                                                                                                                                         
|4.1             | Certificate of Designation of Series C Redeemable 5% Cumulative Preferred Stock.Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-Kdated November 8, 2000.                                                                                                                                                                                                                                            
|4.2             | Certificate of Amendment to the Certificate of Designation of Series C Redeemable 5%Cumulative Preferred Stock.  Incorporated by reference to Exhibit 4.1 to Registrant's
      Quarterly Report on Form 10-QSB for quarter ended September 30, 2001.                                                                                                                                                                                      
|10.1            | 1993 Stock Option Plan. Incorporated by reference to Exhibit 10.1 of the Registrant's
      Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 1999.                                                                                                                                                                                                                                                                    
|10.2            | 1994 Employee Stock Option Plan.  Incorporated by reference to Exhibit 10.4 of theRegistrant's Annual Report on Form 10-KSB for the fiscal year ended December 31,
      1998.                                                                                                                                                                                                                                                             
|10.3            | Employment Agreement effective December 27, 1994 between Pease Oil and Gas
      Company and Patrick J. Duncan.  Incorporated by reference to Exhibit 10.5 of the
      Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31,
      1998.                                                                                                                                                                       
|10.6            | 1996 Stock Option Plan.  Incorporated by reference to 10.6 of the Registrant's Annual
      Report on Form 10-KSB/A for the fiscal year ended December 31, 1999.                                                                                                                                                                                                                                                                           
|10.7            | 1997 Long Term Incentive Option Plan.  Incorporated by reference to Exhibit 10.7 of theRegistrant's Annual Report on Form 10-KSB/A for the fiscal year ended December 31,
      1999.                                                                                                                                                                                                                                                      
|10.9            | Exploration Agreement dated 1/1/97 between Parallel Petroleum Corporation, Sue-AnnProduction Company, TAC Resources, Inc., Allegro Investments, Inc., Beta Oil and GasCompany, Pease Oil and Gas Company, Meyer Financial Services, Inc., Four-Way Texas,LLC regarding the Ganado Prospect.  Incorporated by reference to Exhibit 10.9 of theRegistrant's Annual Report on Form 10-KSB/A for the fiscal year ended December 31,
      1999.
|10.14           | Termination Agreement with Carpatsky Petroleum, Inc. dated November 7, 2000.
      Incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K
      dated November 8, 2000.                                                                                                                                                                                                                                      
|10.15           | Certificate of Designation of Series C Redeemable 5% Cumulative Preferred Stock of
      Republic Resources,
      Inc., as filed November 8, 2000.  Incorporated by reference to
      Exhibit 10.2 of Registrant's
      Current Report
      on Form 8-K dated November 8, 2000.                                                                                                                                                        
|10.16           | Preferred Stock Exchange Agreement, dated effective November 1, 2000. Incorporated
      by reference to
      Exhibit 10.3 of Registrant's Current Report on Form 8-K dated November
      8, 2000.                                                                                                                                                                                                                                       
|10.17           | Preferred Stock Surrender Agreement, dated effective November 1, 2000. Incorporated byreference to
      Exhibit 10.4 of Registrant's Current Report on Form 8-K dated November 8,
      2000.                                                                                                                                                                                                                                             
|10.18           | Form of Warrant issued in connection with surrender of Series B Preferred Stock.
      Incorporated by reference
      to Exhibit 10.5 of Registrant's Current Report on Form 8-K
      dated November 8, 2000.                                                                                                                                                                                                                            
|10.19           | Amended and Restated Termination Agreement with Carpatsky Petroleum, Inc. dated April
      3, 2001. 
      Incorporated by reference to Exhibit 10.19 of the Registrants Annual
      Report
      on Form 10-KSB for the fiscal year ended December 31,
    2000.                                                                                                                                                                        
|10.20           | Employment Agreement with Patrick J. Duncan dated November 2, 2000. 
      Incorporated by
      reference to Exhibit 10.20 of the Registrants Annual
      Report on Form 10-KSB for the fiscalyear ended December 31,
    2000.                                                                                                                                                                                                          
|10.21           | Form of Warrant issued to Patrick J. Duncan. 
      Incorporated by reference to Exhibit 10.21
      of the Registrants Annual
      Report on Form 10-KSB for the fiscal year ended December
      31,
  2000.                                                                                                                                                                                                                            
|10.22           | Promissory Note of Carpatsky Petroleum, Inc. dated April 3, 2001. 
      Incorporated by
      reference to Exhibit 10.22 of the Registrants Annual
      Report on Form 10-KSB for the fiscal
      year ended December 31,
  2000.                                                                                                                                                                                                       
|10.23           | Purchase and Sale Agreement dated January 31, 2002 with Harken Energy Corporation.Incorporated by
      reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filedFebruary 8, 2002.                                                                                                                                                                                                                                        
|10.24           | Form of Preferred Stock Exchange Agreement and Irrevocable Proxy, dated February 11,2002.                                                                                                                                                                                                                                                                                                                                                  

Item Reported         Date         
Financial Statements

(1)
1, 5, 7              
February 8, 2002         
None- Not Applicable





**SIGNATURES**

In accordance with Section 13 or 15 (d) of the Exchange Act, the Registrant caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.



**REPUBLIC RESOURCES, INC.**

Date: April 29, 2002                        
By: /s/ Patrick J. Duncan                                                        
Patrick J. Duncan                                                        
Principal Executive Officer and Principal Accounting Officer
        
        In accordance with the Exchange Act, this report has been signed below by the following personson behalf of the Registrant and in the capacities and on the dates indicated.Date: April 29, 2002                        
By:/s/ Patrick J. Duncan                                                        
Patrick J. Duncan                                                        
President, Chief Financial Officer, Director Date: April 29, 2002                        
By:/s/ David A. Melman                                                        
David A. Melman, Director Date: April 29, 2002                        
By:/s/ Homer C. Osborne                                                        
Homer C. Osborne, Director Date: April 29, 2002                        
By:/s/ J. Peter Koonce                                                        
J. Peter Koonce, Director