<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

         (Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]
         For the fiscal year ended December 31, 2002

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
         For the transition period from _____________ to _______________.

                          Commission File Number 1-6336

                            PETROMINERALS CORPORATION
                 (Name of small business issuer in its charter)

             DELAWARE                                   95-2573652
-------------------------------------------------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

                970 CALLE NEGOCIO, SAN CLEMENTE, CALIFORNIA 92673
                -------------------------------------------------
                    (Address of principal executive offices)

                    Issuer's telephone number: (949) 366-3888
                                               --------------

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(G) of the Act:

COMMON STOCK, PAR VALUE $.80
----------------------------
(Title of Class)

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] yes [ ] no

Check if there is no disclosure of delinquent filers in response to Item 405 of
Registration S-B is not contained in this form and no disclosure be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

The issuer's revenues for its most recent fiscal year were approximately
$871,000.

Check whether the Issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] yes [X] no

Transitional small business disclosure format. [ ] yes [X] no

The number of shares of Registrant's common stock outstanding was 1,059,404 as
of December 31, 2002.

The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant was approximately $249,805

The total number of pages in this Form 10-KSB are 35.

The Index of Exhibits included in this Form 10-KSB is located at page 34



<PAGE>

                            PETROMINERALS CORPORATION
                                     PART I

ITEM 1.  BUSINESS

Petrominerals Corporation (Petrominerals or the Company), a Delaware Corporation
formed in 1966, has been engaged in oil and gas exploration, drilling,
production and other oil industry - related businesses. At various times in the
past, the Company has merged with and acquired several companies engaged in
similar activities. The common stock of Petrominerals is currently trading on
the OTC bulletin Board.

In April 1998 substantially all of the Company's oil and gas properties were
sold to an unrelated entity. In July, 1998 Hydro-Test International, a wholly
owned subsidiary acquired in 1993, ceased commercial operation and subsequently
filed a petition for Chapter 7 Bankruptcy. Petrominerals was released and
discharged in a final order which was entered in December, 2000.

In September 1989 and again in February 2000, the Company was advised by the
Environmental Protection Agency (EPA) that it was potentially responsible for
clean-up of waste disposal sites in Monterey Park, California, and Casmalia,
California, respectively. Both sites involved the permitted disposition of
non-hazardous drilling mud and oil field fluids. In 1973, 1975, and 1977 the
waste disposed of at the Monterey Park site was from drilling operation of
Century Oil Corporation, subsequently merged into Petrominerals and in 1980 and
1981 waste was disposed of at the Casmalia site from drilling operations in the
Santa Maria, California area. Following protracted negotiations, in 2001 the
Company settled both claims for future payments of approximately $725,000.
(See item 3 - Legal Proceedings.)

After reserving for the EPA liabilities discussed above, the Company's
shareholder equity at December 31, 2001 fell to $1.3 million. The Company
notified Nasdaq under the terms of its Nasdaq SmallCap Market Listing Agreement
that required the Company to maintain a minimum shareholder equity of $2.0
million. On May 30, 2002, the Company announced that Company's representatives
appeared before the Nasdaq Hearing Panel to request additional time to return to
compliance. The Hearing Panel rejected the Company's request and delisted the
Company's securities effective July 9, 2002. The Company's securities, however,
were immediately eligible and are currently trading on the OTC Bulletin Board.

BUSINESS STRATEGY

Following the sale of most of our oil and gas properties in 1998 Petrominerals
has attempted to re-deploy its assets both by acquiring oil and gas producing
properties and by merger with another company.

In September 1999 we completed the acquisition of a 25% interest in the 6,000
acre Smith Ranch field in southwest Wyoming for $102,000 in cash and a
commitment to participate in the drilling of two wells. Following an evaluation
of the coal bed methane potential on the acreage, the Company and its partners
have concluded that they lack the resources to develop the property and it has
been placed on the market for sale. (See Item 2 - Properties.)

In general, the Company's efforts to acquire oil and gas properties, borrow
money and/or merge with another company have been significantly hampered by the
uncertain nature of the potential EPA liabilities discussed above. While this
issue has now been settled and the extent of the liability has been quantified,
our cash resources will be substantially reduced as a result of the settlement;
and we may not be able to carry out our growth plan on the scale originally
contemplated. Nevertheless, management is actively pursuing a number of
potential business opportunities.

                                                                               2



<PAGE>

OPERATING HAZARDS

Our operations are subject to all of the operating hazards and risks associated
with producing oil and gas including, but not limited to, environmental
pollution and personal injury. The Company carries general liability insurance.

GOVERNMENTAL REGULATIONS

Federal, state and local governments impose numerous laws and regulations on the
production and sale of oil and gas. In addition, state and Federal regulations
have been adopted which pertain to the spacing of wells, prevention of waste of
oil and gas, limiting rates of production, prorating of productions, handling of
waste water and similar matters. All such laws and regulations are subject to
change at any time, and there is no way to ascertain either the likelihood or
potential effect of such future changes.

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local requirements regulating the
discharge of materials into the environment, the handling and disposal of solid
and hazardous wastes, and protection of health and the environment generally
(collectively "Environmental Laws"). Governmental authorities have the power to
require compliance with these Environmental Laws, and violators may be subject
to civil or criminal penalties, injunctions or both. Third parties may also have
the right to sue for damages and/or enforce compliance and to require
remediation for contamination.

The Company is also subject to Environmental Laws that impose liability for
costs of cleaning up contamination resulting from past spills, disposal and
other releases of substances. In particular, an entity may be subject to
liability under the Federal Comprehensive Environmental Response, Compensation
and Liability Act and similar state laws that impose liability - without a
showing of fault, negligence or regulatory violations - for the generation,
transportation or disposal of hazardous substances that have caused or may cause
environmental contamination. In addition, an entity could be liable for cleanup
of property it owns or operates even if it did not contribute to contamination
of such property.

As discussed above, in 2001 we settled certain EPA claims against the Company
and predecessor companies and reserved $725,000 for this expense. (See
Financial Statements, Item 7 for further information).

EMPLOYEES

As of December 31, 2002, the Company employed a total of two individuals, both
part time.

SEGMENTS

The Company considers its principal business to fall within one industry. All
revenues are derived from the Production of oil and gas.

                                                                               3



<PAGE>

ITEM 2.  PROPERTIES

The Company owns varying interests in oil producing properties in southern
California, gas producing properties in southwestern Wyoming and a production
payment resulting from the 1998 sale of producing properties.

CALIFORNIA OIL PROPERTIES

Under terms of the 1998 sale, we retained a 53% working interest in the Castaic
Hills Unit, a 100% working interest in a single oil well and an 83.3% working
interest in two oil wells in the Hasley Canyon field. All of these properties
are in close proximity and are located near Santa Clarita, California. During
the year Management initiated abandonment procedures for the two wells in the
Hasley Canyon field. For the year ended December 31, 2002, the operating
expenses and abandonment costs for these interests exceeded the oil revenues.
Management is attempting to dispose of these properties which have been written
off.

WYOMING GAS PROPERTIES

In 1999 the Company acquired a 25% working interest in natural gas properties
and prospects on approximately 6,000 acres in Sweetwater and Carbon counties,
Wyoming. The property included a limited amount of conventional gas production
and an extensive coal bed methane gas prospect. As a part of the consideration
for the purchase, the Company participated in the cost of drilling two wells.
Efforts to increase the production of conventional gas have been disappointing;
however test work in the coal beds indicates the presence of substantial gas
reserves. Company and its partners have concluded that they lack the financial
resources to develop these reserves and the property is being offered for sale.
Management believes that its share of the proceeds of a sale will be sufficient
to cover the carrying value of this asset.

PRODUCTION PAYMENT

As additional consideration for the 1998 sale of its producing properties, we
retained a production payment in the amount of $931,000. Company receives
payments from the buyer in any month the posted price for the oil produced
exceeds $13.50 per barrel. As of December 31, 2002 cumulative production
payments to the Company totaled $747,686.

                                                                               4



<PAGE>

OIL AND GAS RESERVE INFORMATION

The tables located in Note 13 of Item 7 located elsewhere herein set forth
information with respect to the engineering estimates of proved oil and gas
reserves owned by the Company. The reserves are shown in barrels of oil
equivalent (boe). Except as set forth in this report, Company has not
filed any estimates of proved reserves with any federal authority or agency
during the last fiscal year. The Company's net interest in proved reserves and
related valuations for the California properties for the year ended December
31, 2002 was prepared by Babson & Sheppard, an independent petroleum
engineering firm in Long Beach, California. The Company's net interest in proved
reserves and related valuations for its Wyoming properties for the year ended
December 31, 2001 have been prepared by McCartney Engineering, an independent
petroleum engineering firm in Denver, Colorado. No reserve report for the
Wyoming properties was obtained as the sale of the interest is scheduled to be
completed in April of 2003.

Reserve estimate are based upon detailed engineering and geological studies.
Where an adequate production trend has been established, extrapolation of
production performance is used. If insufficient well data is available for
performance calculations, the initial gas or oil in place volumes are estimated
from geological interpretation of reservoirs, analysis of production from wells
in similar surrounding areas, or other techniques. Petroleum engineering is not
an exact science, and it involves estimates based upon numerous factors, many of
which are inherently variable and uncertain. Such factors include the price of
oil and gas and estimates of oil and gas production and costs. Estimates of
reserves and future net revenue costs involve projecting future results by
estimating future events. Therefore, there are no assurances that actual
productions, revenues, taxes, development expenditures and operating expenses
will occur as estimated.

The Company periodically evaluates its oil and gas properties for impairment by
determining if the carrying value of the properties exceeds the present value of
their estimated future net cash inflows. Current accounting standards do not
allow the Company to reinstate previous impairment write-offs.

PRODUCTION INFORMATION

The following table sets forth the Company's net production of oil and gas for
the years ended December 31 (in thousands). Net production represents production
owned by Petrominerals and produced to its interest, less royalty and other
similar interests.

                                                  2002                     2001
                                                  ----                     ----
Net annual production Gas (Mmcf)                     4                       13
Net annual production Oil (MBbl)                    10                        9

The following table sets forth the average sales price and average production
(lifting) cost per unit of oil produced by the Company for the years ended
December 31,
                                                  2002                    2001
                                                  ----                    ----
Average sales price of gas per Mcf               $ 4.75                  $ 2.93
Average sales price of oil per barrel            $21.50                  $19.45
Average production cost per barrel equivalent    $21.21                  $21.21

PRODUCTIVE WELLS AND ACREAGE

Proved developed oil and gas properties are properties on which wells have been
drilled, and are capable of producing crude oil or natural gas in commercial
quantities. Undeveloped oil and gas properties are properties on which wells
have not been drilled. Information on the retained properties and the Wyoming
acquisition is shown below. (See Note 1 to the consolidated financial statement
located in Item 7 herein for additional details.)

                                                 Gross                    Net
                                                 -----                    ---
Producing Wells                                     74                     13
Developed acreage (acres)                          860                    346
Undeveloped acreage (acres)                      7,150                  1,300

COALBED METHANE POTENTIAL
-------------------------

The Stateline Field has significant coalbed methane production potential. A Fort
Union formation coal seam up to 30 ft thick is present at a depth of
approximately 2,900 ft. This coal exhibited good gas content of about 250
SCF/ton, resulting in sufficient in-place reserves. Petrominerals and its
partners have concluded that they lack the financial resources to develop these
reserves and the property is being offered for sale.

ITEM 3 - LEGAL PROCEEDINGS

The Company is not a party to nor is its property the subject of any material
legal proceedings other than ordinary routine litigation incidental to its
business, or which is covered by insurance, except as set forth below:

                                                                               5



<PAGE>

ITEM 3 - LEGAL PROCEEDINGS (CONTINUED)

In December 1989, the Company was notified by the United States Environmental
Protection Agency (EPA) that, under the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the
Company was considered a potentially responsible party (PRP) in the clean-up of
the Operating Industries, Inc. (OII) waste disposal site located in Monterey
Park, California. Century Oil Corporation, a company that merged into
Petrominerals Corporation in 1979, disposed of drilling mud and water at the OII
disposal site, at various times from 1975 to 1977.

On December 20, 2001, the Company agreed to a settlement option for liabilities
related to the OII site in which the Company will pay $483,333 plus interest in
three installments, the first of which was made in July 2002 and the remaining
two are due over the next two years (see Item 7, Note 9 - Environmental
Matters).

On February 7, 2000, the Environmental Protection Agency (EPA) advised the
Company that it had been identified as having disposed of waste material at the
Casmalia Disposal site in Santa Barbara County, California, and that the Company
is potentially liable per certain costs associated with site cleanup. Records
supplied by the EPA indicate that the Company disposed of allowable
non-hazardous drilling mud and other oil field fluids at the site at various
times between 1980 and 1985.

On December 20, 2001, the Company agreed to a settlement option for liabilities
related to the Casmalia Disposal site in which the Company will pay $241,667 in
three installments over the next two to three years (see Item 7, Note 9 -
Environmental Matters).

         An action was filed against the Company in California, along with
Morris V. Hodges, Daniel H. Silverman ("Silverman" a former officer of the
Company), Nevadacor Energy, Inc. ("Nevadacor"), Kaymor Petroleum Products, and
Hillcrest Beverly Oil Corporation ("HBOC"), as defendants by Sole Energy Company
("Sole") as plaintiff. The complaint alleges that the defendants, and each of
them, interfered with Sole's contractual relationship and prospective economic
advantage. The crux of this matter issued out of a non-binding letter of intent
negotiations between Sole and Nevadacor on the purchase of HBOC. Nevadacor
terminated these negotiations with Sole in writing prior to Company's offer to
purchase HBOC from Nevadacor. However, and notwithstanding the termination by
Nevadacor, Sole joined the Company and Silverman as defendants in this suit. As
the Company had been assured that negotiations between Sole and Nevadacor were
over, the Company entered into a letter of intent agreement with Nevadacor for
the purchase of HBOC. These negotiations were interrupted by the lawsuit filed
by Sole and the Company terminated its agreement with Nevadacor. The Company
believes that the allegations against the Company and Silverman had no substance
or merit; however, it has produced a legal quagmire resulting in a Judgment
against the Company for $19,257,416.29 as previously announced by the Company.
The current progress of the lawsuit is that the Post-Trial Motions Eliminated
the Huge $19,257,416.29 Jury Verdict and granted Company a new trial because the
evidence received at trial as a matter of law did not support the Verdict.
Plaintiffs appealed and Petrominerals and Silverman filed a protective cross
appeal. This appeal and cross-appeal is Appellate Case No. G031877. This appeal
will review the various post-trial motions (i.e., JNOVs and Motion for New
Trial) and, if necessary, the underlying jury trial and the judgment based upon
the jury's verdict. Because of the legal quagmire resulting in two appeals by
Company and two other appeals by other defendants and one appeal by the
Plaintiff this litigation has been material to the Company's financial
condition. Further because of the damage caused to Company's economic advantage
because of interference by Sole in the Company's agreement for purchase, the
Company intends to pursue all remedies available to it from Sole and its
principals.

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

During the fourth quarter of 2002, no matters were submitted to a vote of
security holders through the solicitation of proxies or otherwise.

                                                                               6



<PAGE>

                                     PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS

The Company's common stock is currently traded in the OTCBB under the symbol
PTRO. The following table sets forth the range of high and low sales prices on
the OTCBB for the Company's common stock, for the fiscal years ended December
31, by fiscal quarters as indicated:

                                                High                 Low
                                                ----                 ---
2001
     First quarter                           $     1.53           $    0.97
     Second quarter                                1.25                0.87
     Third quarter                                 1.85                0.92
     Fourth quarter                                1.28                0.75

2002
     First quarter                           $     1.49           $   0.94
     Second quarter                                1.80               0.43
     Third quarter                                 1.00               0.65
     Fourth quarter                                 .56               0.26

The Company has approximately 843 shareholders of record of its common stock as
of December 31, 2002.

No regular dividends for Petrominerals' stock have been declared since 1986. The
Board of Directors has no current intention to declare or pay dividends in the
foreseeable future. The Board of Directors periodically reviews the financial
position of the Company and evaluates whether or not it will declare dividends.

ITEM 6 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion should assist in an understanding of the Company's
financial position and results of operations for each of the two years in the
period ended December 31, 2002. The Notes to Financial Statements
as of December 31, 2002, included elsewhere herein, contain detailed information
that should be referred to in conjunction with this discussion.

BUSINESS REVIEW

The current President and CEO of the Company was appointed to his position on
July 1, 2002. He continued efforts to cut corporate overhead, disposing of
unproductive assets and to locate suitable acquisition and merger opportunities
for the Company. The Company has reviewed opportunities and remains actively
involved in the process of identifying and reviewing acquisition and merger
candidates. The primary goal of management remains to ensure future profitable
growth for the Company and to create and maximize value for the shareholders.

The Company has two primary assets. First, as a result of the sale of
substantially all its California oil and gas producing assets, an agreement was
signed on February 4, 1998, effective April 1, 1998, that provided an additional
reserve production payment of $931,000. This payment is paid in installments in
any month which certain posted prices for oil produced exceeds $13.50 per
barrel. The monthly payment is equal to one-half of the difference between the
weighted average price and $13.50, multiplied by the number of barrels produced.
There is no stated interest associated with the payment.

                                                                               7



<PAGE>

BUSINESS REVIEW (CONTINUED)

Second, the Company has ownership in oil and gas production. As noted in Item 2,
the Company retained an interest in several leases in California as part of the
April 1998 sale. The Company has determined that it is no longer economically
feasible to continue production operations at these wells. At some point in the
future, the Company may be responsible for an abandonment liability, the amount
of which is unknown at this time; however, management believes that it will not
have a material adverse effect on the financial position of the Company.

In September of 1999, the Company entered into a purchase and joint venture
participation agreement with Thorofare Resources, Inc., a Wyoming Corporation.
Under this contract, HAT, LLC, a Nevada Limited Liability Company, Nevadacor
Energy, Inc., a Nevada corporation, and Petrominerals purchased a fifty percent
interest in sixteen wells together with the accompanying lease acreage
(Petrominerals' Group). In addition, two new wells were drilled on the acreage.
Currently the Company is considering sale of its coal seam activities with the
Wyoming Project and anticipates the completion of a sale before May 1, 2003.

During 2002 and 2001, the Company determined that the decline in estimated oil
and gas reserves due to the depletion of the wells currently being pumped in
Wyoming indicated impairment of the Company's remaining oil and gas properties.
These impairment write downs resulted in charges to income of $300,000 in 2002
and $32,000 in 2001.

2002 COMPARED WITH 2001

The Company had a net loss of approximately $892,000 compared to a net loss of
$1,113,000 in the prior year. The current year loss was due to the loss from
continuing operations of the Company's oil and gas operations and expense
related to costs of litigation. (see Item 7, Note 10 Contingencies)

The Company's other income increased by approximately $6,000 during 2002, due
primarily to collections received on the 1998 production payment that exceeded
its carrying value. (See Item 7, Note 3 - Disposition/Acquisition of Assets).

General and administrative expenses increased by approximately 147% due to
increased legal fees from the Sole litigation. (See Item 3 - Legal Proceedings
and Item 7, Note 10 - Contingencies)

The Company had negative cash flows from operations of approximately $927,000
for the year ended December 31, 2002, as compared with a negative cash flow from
operations of $241,000 in the prior year. The decrease in cash flow from
operating activities was primarily the result of the Sole litigation. (See Item
3 - Legal Proceedings and Item 7, Note 10 - Contingencies)

After reserving for the EPA liabilities discussed above, the Company's
shareholder equity at December 31, 2001 fell to $1.3 million. The Company
notified Nasdaq under the terms of its Nasdaq SmallCap Market Listing Agreement
that required the Company to maintain a minimum shareholder equity of $2.0
million. On May 30, 2002, the Company announced that Company's representatives
appeared before the Nasdaq Hearing Panel to request additional time to return to
compliance. The Hearing Panel rejected the Company's request and delisted the
Company's securities effective July 9, 2002. The Company's securities, however,
were immediately eligible and are currently trading on the OTC Bulletin Board.
                                                                               8



<PAGE>

ITEM 7 - INDEPENDENT AUDITORS' REPORT AND
         FINANCIAL STATEMENTS FOR THE YEARS ENDED
         DECEMBER 31, 2002 AND 2001

                                TABLE OF CONTENTS

Independent Auditors' Report..............................................10

Balance Sheets............................................................11
Statements of Operations..................................................12

Statement of Ssareholders' Equity.........................................13
Statements of Cash Flows..................................................14
Notes to the Financial Statements.........................................15-26

                                                                               9



<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Petrominerals Corporation
San Clemente, California

We have audited the accompanying balance sheet of Petrominerals Corporation (a
Delaware corporation) as of December 31, 2002, and the related statements of
operations, shareholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Petrominerals Corporation as of December
31, 2001 were audited by other auditors, whose report dated March 19, 2002
expressed an unqualified opinion on those financial statements.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Petrominerals Corporation as of
December 31, 2002 and the results of its operations and cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.

Mendoza Berger & Company, LLP

Irvine, California
April 8, 2003

                                                                              10



<PAGE>
<TABLE>
                                    PETROMINERALS CORPORATION
                                          BALANCE SHEETS
                                    DECEMBER 31, 2002 AND 2001
(Dollars in thousands, except par value amounts)
-------------------------------------------------------------------------------------------------
                         <CAPTION>

                                              ASSETS

                                                                        2002             2001
                                                                    ------------     ------------
<S>                                                                 <C>              <C>
Current Assets
  Cash and cash equivalents                                         $       429      $     1,453
  Accounts receivable                                                        33               --
  Notes receivable                                                          100               --
  Prepaid expenses                                                           61               34
                                                                    ------------     ------------

     Total current assets                                                   623            1,487

Restricted cash                                                              25               25
Land held for resale                                                         --              212
Property and Equipment, net (including oil and gas properties
accounted for on the successful efforts method)                             131              436

Deposits                                                                    139               43
                                                                    ------------     ------------

    Total assets                                                    $       918      $     2,203
                                                                    ============     ============

                              LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Accounts payable                                                  $       231      $        76
  Accrued liabilities                                                       409              734
  Royalties payable                                                          --               11
                                                                    ------------     ------------

     Total current liabilities                                              640              821

Notes payable                                                                --              100
                                                                    ------------     ------------

     Total liabilities                                                      640              921
                                                                    ------------     ------------

Shareholders' equity
  Preferred stock:
    $.10 par value, 5,000,000 shares authorized;
      no shares issued and outstanding                                       --               --
  Common stock:
    $.80 par value, 25,000,000 shares authorized; 1,059,404 and
      1,159,404 shares issued and outstanding at December 31,
      2002 and 2001, respectively                                           848              928
Capital in excess of par value                                              563              633
Accumulated deficit                                                      (1,133)            (241)
Cumulative other comprehensive income                                        --              (38)
                                                                    ------------     ------------

     Total shareholders' equity                                             278            1,282
                                                                    ------------     ------------

    Total liabilities and shareholders' equity                      $       918      $     2,203
                                                                    ============     ============

            The accompanying notes are an integral part of these financial statements

                                                                                               11
</TABLE>



<PAGE>
<TABLE>
                               PETROMINERALS CORPORATION
                               STATEMENTS OF OPERATIONS
                    FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
                   (Dollars in thousands, except per share amounts)
--------------------------------------------------------------------------------------
<CAPTION>

                                                                2002           2001
                                                             ----------     ----------
<S>                                                          <C>            <C>
Revenues
  Oil and gas                                                $     211      $     272
  Other income                                                     233            227
  Insurance recoveries                                             427             --
                                                             ----------     ----------

    Total Revenues                                                 871            499
                                                             ----------     ----------

Costs and Expenses
  Oil and gas                                                      383            405
  Depreciation, depletion and amortization                           2              3
  General and administrative                                     1,078            436
  Environmental liability settlements                               --            725
  Impairment loss                                                  300             32
  Other expense                                                     --             11
                                                             ----------     ----------

    Total Costs and Expenses                                     1,763          1,612
                                                             ----------     ----------

Net Loss                                                     $    (892)     $  (1,113)
                                                             ==========     ==========

Other Comprehensive Income (Loss)
  Net loss                                                   $    (892)     $  (1,113)
  Unrealized holding gain (loss) on land held for resale            38            (38)
                                                             ----------     ----------

     Total Other Comprehensive Income (Loss)                 $    (854)     $  (1,151)
                                                             ==========     ==========

Net Loss per Share                                           $   (0.84)     $   (1.02)
                                                             ==========     ==========

Weighted Average Common Shares Outstanding                       1,059          1,086
                                                             ==========     ==========

       The accompanying notes are an integral part of these financial statements

                                                                                    12
</TABLE>



<PAGE>
<TABLE>
                                                   PETROMINERALS CORPORATION
                                              STATEMENTS OF SHAREHOLDERS' EQUITY
                                        FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
                                        (Dollars in thousands, except number of shares)
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                   CUMULATIVE
                                                                                                     OTHER
                                    NUMBER OF                      CAPITAL IN                       COMPRE-
                                     COMMON                         EXCESS OF      ACCUMULATED      HENSIVE
                                     SHARES          AMOUNT         PAR VALUE        DEFICIT      INCOME (LOSS)       TOTAL
                                   -----------     -----------     -----------     -----------     -----------     -----------
<S>                                 <C>            <C>             <C>             <C>             <C>             <C>
Balance, December 31, 2000          1,059,404      $      848      $      563      $      872      $       --      $    2,283

Shares Issued                         100,000              80              70              --              --             150

Net loss                                   --              --              --          (1,113)             --          (1,113)

Unrealized holding
  loss on land held for resale             --              --              --              --             (38)            (38)
                                   -----------     -----------     -----------     -----------     -----------     -----------

Balance, December 31, 2001          1,159,404             928             633            (241)            (38)          1,282

Retirement of shares issued
   in 2001                           (100,000)            (80)            (70)             --              --            (150)

Net loss                                   --              --              --            (892)             --            (892)

Reversal of unrealized
   holding loss on land held
   for sale                                --              --              --              --              38              38
                                   -----------     -----------     -----------     -----------     -----------     -----------

Balance, December 31, 2002          1,059,404      $      848      $      563      $   (1,133)     $       --      $      278
                                   ===========     ===========     ===========     ===========     ===========     ===========

                           The accompanying notes are an integral part of these financial statements

                                                                                                                            13
</TABLE>

<PAGE>

                            PETROMINERALS CORPORATION
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
                             (Dollars in thousands)
--------------------------------------------------------------------------------

                                                              2002        2001
                                                            --------    --------

Cash flows from operating activities:
   Net loss                                                 $  (892)    $(1,113)
   Adjustment to reconcile net loss to net cash
      used by operating activities:
      Depreciation, depletion and amortization                    2           3
      Impairment loss                                           300          32
   Changes in operating assets and liabilities:
      Accounts receivable                                       (33)         64
      Prepaid expenses                                          (27)         (4)
      Deposits                                                  (96)        (17)
      Accounts payable and accrued liabilities                 (181)        794
                                                            --------    --------

Net cash used by operating activities                          (927)       (241)
                                                            --------    --------

Cash flows from investing activities:
  Purchase of property and equipment                             (2)        (93)
  Proceeds from sale of assets                                    5          --
  Note receivable                                              (100)         --
                                                            --------    --------

Net cash used by investing activities                           (97)        (93)
                                                            --------    --------

Net decrease in cash and cash equivalents                    (1,024)       (334)

Cash and cash equivalents at beginning of year                1,453       1,787
                                                            --------    --------

Cash and cash equivalents at end of year                    $   429     $ 1,453
                                                            ========    ========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
   FINANCING ACTIVITIES:

Reversal in 2002 and purchase in 2001 of land held for
   resale through issuing $100 note payable and $150
   common stock (100,000 shares)                            $  (250)    $   250
                                                            ========    ========

Unrealized holding loss on land held for resale and
   reversal                                                 $    38     $   (38)
                                                            ========    ========

    The accompanying notes are an integral part of these financial statements

                                                                              14



<PAGE>

                            PETROMINERALS CORPORATION
                           NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
               (Dollars in thousands, except oil price per barrel,
               ---------------------------------------------------
                   par value amounts, and per share amounts)
                   -----------------------------------------

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ------------------------------------------

BUSINESS
--------

Petrominerals Corporation's (the Company's) principal business activities
consist of the production and sale of crude oil and natural gas within the
United States.

USE OF ESTIMATES
----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS
-------------------------

The Company considers all highly liquid investments purchased with an original
maturity of less than three months to be cash equivalents.

RESTRICTED CASH
---------------

The Company has a Certificate of Deposit ("CD") with a value of approximately
$25 at December 31, 2002 and 2001 that has been recorded as restricted cash. The
CD has been pledged to the Bureau of Land Management to cover environmental
costs.

REVENUE RECOGNITION
-------------------

Revenues from the sale of petroleum produced are recognized upon the passage of
title, net of royalties and non-company interests.

PROPERTY AND EQUIPMENT
----------------------

Oil and gas properties are accounted for using the successful efforts method of
accounting. Costs of drilling and equipping successful exploratory and
developmental wells are capitalized. All other exploratory expenses are charged
to operations as incurred. The carrying value of oil and gas properties is
evaluated in relation to the estimated present value of the future net revenues.
Depletion, depreciation and amortization are calculated using the
units-of-production method based on recoverable reserves. The Company did not
incur any exploratory costs during the years ended December 31, 2002 and 2001.

In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and/or Long-Lived Assets to be Disposed of." In August
2001, FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". These statements require the review of long-lived assets for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. They established
guidelines for determining recoverability based on future net cash flows from
the use of the asset and for the measurement of the impairment loss.

                                                                              15



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
               (Dollars in thousands, except oil price per barrel,
               ---------------------------------------------------
                   par value amounts, and per share amounts)
                   -----------------------------------------

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
    ------------------------------------------

Impairment loss under SFAS No. 121 and 144 is calculated as the difference
between the carrying amount of the asset and its fair value. Any impairment loss
is recorded in the current period in which the recognition criteria are first
applied and met. Under the successful efforts method of accounting for oil and
gas operations, the Company periodically assesses its proved properties for
impairments by comparing the aggregate net book carrying amount of all proved
properties with their aggregate future net cash flows. The statements require
the impairment review to be performed on the lowest level of asset groupings for
which there are identifiable cash flows. In the case of the Company, this
results in an impairment review of the Santa Clarita, California, and Carbon
County, Wyoming, properties.

The Company adopted SFAS No. 121 in 1996 and SFAS No. 144 in 2002. The future
impairment loss on the oil and gas properties has been calculated as the
difference between the asset book carrying amounts and future discounted net
cash flow projections, giving consideration to recent prices, pricing trends and
estimated reserve quantities. These projections represent the Company's best
estimate of fair value based on the information available. At December 31, 2002
and 2001, due to the depletion of the wells currently being pumped at the
Wyoming properties, impairments were indicated.

Upon the sale of oil and gas reserves in place, costs less accumulated
amortization of such property are removed from the accounts and resulting gain
or loss on sale is reflected in operations. Upon abandonment of properties, the
reserves are deemed fully depleted and any unamortized costs are recorded in the
statement of operations under loss on leases.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------------------------

The carrying amount of cash and cash equivalents, restricted cash, accounts
receivable, other current assets, accounts payable and accrued expenses
approximates fair value because of the short-term maturity of these instruments.

LAND HELD FOR RESALE
--------------------

Land held for resale is recorded at the lower of cost or estimated realizable
value which is the estimated selling price in the normal course of business less
reasonably predictable costs of completion and disposal. The unrealized gains or
losses resulting from the application of this method are recorded as other
comprehensive income.

INCOME TAXES
------------

The provision for income taxes is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax basis of assets and
liabilities and the reported net amounts.

RECLASSIFICATIONS
-----------------

Certain prior year amounts have been reclassified to be consistent and
comparable from year to year. These reclassifications had no effect upon
reported net income.

                                                                              16



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
               (Dollars in thousands, except oil price per barrel,
               ---------------------------------------------------
                   par value amounts, and per share amounts)
                   -----------------------------------------

2 - PROPERTY AND EQUIPMENT
    ----------------------

Property and equipment, all of which is located in the United States, is stated
at cost or net realizable value and consists of the following at December 31 (in
thousands):

                                                           2002          2001
                                                        ----------    ----------

  Developed and Undeveloped Properties                  $     431     $     461
    Less: allowance for impairment                           (300)          (32)
                                                        ----------    ----------
  Net Developed and Undeveloped Properties                    131           429
                                                        ----------    ----------

  Other Property and Equipment
    Furniture, fixtures and equipment                         451           466
    Accumulated depreciation related to other property
      and equipment                                          (451)         (459)
                                                        ----------    ----------
  Net Other Property and Equipment
                                                               --             7
                                                        ----------    ----------

Property and Equipment, net                             $     131     $     436
                                                        ==========    ==========

Depreciation, depletion and amortization for the years ended December 31, 2002
and 2001 were $2 and $3, respectively.

During 2002 and 2001, the Company determined that the decline in estimated oil
and gas reserves due to the depletion of the wells currently being pumped in
Wyoming indicated impairment of the Company's remaining oil and gas properties.
The estimated undiscounted cash flows anticipated from operating the oil and gas
properties indicated that a write-down to fair market value was required under
SFAS 121 and 144. This write down resulted in a charge to income of $300 and
$32, respectively, for years ending December 31, 2002 and 2001 which are
included in the statements of operations as impairment losses.

3 - DISPOSITION/ACQUISITION OF ASSETS
    ---------------------------------

SALE OF OIL AND GAS OPERATING ASSETS (In thousands, except price per barrel)
------------------------------------

As a result of the 1998 sale of oil and gas operating assets, the Company
reserved a production payment of $931. The production payable was payable in
installments in any month in which certain postings for crude oil exceeds $13.50
per barrel. The monthly payment was equal to one-half of the difference between
the posted price and $13.50, multiplied by the barrels produced.

In the third quarter of 1998, persistent declines in the price of oil triggered
management to reevaluate both the recorded value and net realizable value of the
$931 production payment given in the exchange. Management determined that
approximately 40% ($372) of the stated value of the production payment will be
realized by the Company. Accordingly, the proceeds from the sale and the gain as
previously reported at June 30, 1998 were reduced by $559 to reflect
management's revised valuation of the production payment receivable. The
previously reported gain was also recalculated from June 30, 1998 to
re-capitalize certain assets previously expensed. During the year ended December
31, 1999, due to increase in crude oil prices, the Company received production
payments totaling $50, reducing the outstanding receivable to $322. Prices
continued to increase during the year ended December 30, 2000 resulting in
production payments which exceeded the face value of the receivable. The
outstanding receivable at December 31, 2000 was reduced to $0, $187 and $151 of
payments made during the years

                                                                              17



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

SALE OF OIL AND GAS OPERATING ASSETS (Continued)
------------------------------------

ended December 31, 2002 and 2001, respectively, in excess of the face value of
the production receivable are reported as other income.

The Company retained an interest in some of its properties. According to the
independent engineer's reserve report, the value of reserves related to the
remainder properties was $0 at December 31, 2002 and 2001. The Company had
determined that it is no longer economically feasible to continue production
operations at these wells. Effective November 2, 2001, the production function
was temporarily transferred to American Energy. During 2002, the Company
reassumed the production function and continued the operation of these wells.

PURCHASE OF OIL AND GAS OPERATING ASSETS
----------------------------------------

On September 20, 1999, the Company completed the acquisition of a 25% interest
in a natural gas field in southwest Wyoming. As part of the acquisition the
Company acquired a 25% interest in two producing gas wells with a current
production rate of 500 mcfd per day (100 mcfd net) and committed to participate
in the drilling of two additional test wells by May 2000. The acquisition also
included a field-wide gas gathering system.

The Company's acquisition of the 25% interest was concluded as a participant
with two other related companies (see Note 7 for detail of related party
transactions), HAT, LLC and Nevadacor Energy, Inc., which together acquired 50%
of Thorofare Energy, Inc.'s existing acreage position, existing wells, well
operating equipment and facilities together with production and pipelines and
prospective acreage acquisition in an area of interest negotiated between the
parties. The Purchase and Participation Agreement provides for leasehold
ownership as follows:

         Petrominerals Corporation                               25%
         HAT, LLC                                                14%
         Nevadacor Energy, Inc.                                  11%

LAND HELD FOR RESALE
--------------------

On September 20, 2001, the Company acquired a 49% interest in certain real
property located in Signal Hill, California. As of December 31, 2001 and 2002,
this land was being held for resale and in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF" and SFAS No. 144
"ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS" and carried at
the lower of cost or estimated realizable value. The estimated realizable value
was the estimated selling price in the normal course of business less reasonably
predictable costs of completion and disposal. Unrealized gains or losses are
excluded from earnings and reported in a separate component of stockholder's
equity as cumulative other comprehensive income (loss).

The carrying amount and estimated market value of the land at December 31 (in
thousands), was as follows:

                                                2002
                      ----------------------------------------------------------
                                        GROSS          GROSS
                        AMORTIZED     UNREALIZED     UNREALIZED
                          COST          GAINS          LOSSES       MARKET VALUE
                      ------------   ------------   ------------    ------------

Land held for resale  $        --    $        --    $       (38)    $        --
                      ============   ============   ============    ============

                                                                              18



<PAGE>

                            PETROMINERALS CORPORATION
                           NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

LAND HELD FOR RESALE              (Continued)
--------------------

                                                2001
                      ----------------------------------------------------------
                                        GROSS          GROSS
                        AMORTIZED     UNREALIZED     UNREALIZED
                          COST          GAINS          LOSSES       MARKET VALUE
                      ------------   ------------   ------------    ------------

Land held for resale  $       250    $        --    $        38     $       212
                      ============   ============   ============    ============

On October 11, 2002, the Company exercised its rescission rights per the
acquisition agreement and rescinded the purchase. A rescission and mutual
release agreement was executed in conjunction with the rescission. The Company
effectively reversed the recording of the purchase transaction as of December
31, 2002 and retired the 100,000 shares and cancelled the note payable.

4 - INCOME TAXES
    ------------

The provision for income tax was $0 for the years ended December 31, 2002 and
2001.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. The following table
summarizes the significant components of the Company's deferred tax assets and
liabilities as of December 31 (in thousands):

                                                           2002           2001
                                                         --------       --------
Deferred Tax Assets:
  Net operating loss carryforwards                       $ 2,852        $ 2,652
  Impairment loss
Valuation reserve for deferred tax assets                    102             --
                                                          (2,954)        (2,652)
                                                         --------       --------
     Net Deferred Tax Assets                             $    --        $    --
                                                         ========       ========

At December 31, 2002, the Company had net operating loss carryforwards of
approximately $8,388 for Federal income tax purposes that will expire beginning
in the year 2003. For financial reporting purposes, a valuation allowance of
$2,954 and $2,652 have been recorded to offset the deferred tax asset related
primarily to these carryforwards as of December 31, 2002 and 2001, respectively.

5 - NOTES PAYABLE
    -------------

On September 20, 2001, the Company entered into a Purchase and Sale Agreement to
acquire a forty-nine percent (49%) interest in real property located in Signal
Hill, California. As part of this acquisition, the Company pledged to pay to the
seller the sum of $100,000, in the form of a Promissory Note, and $150,000 in
common stock of the Company. The Promissory Note was due and payable on or
before September 20, 2004. Interest only was due and payable at 6% per annum
commencing September 20, 2002.

On October 11, 2002, the Company exercised its rescission rights per the
acquisition agreement and rescinded the purchase and cancelled the note payable,
see Note 3, Land Held for Resale.

                                       19



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

6 - COMMON STOCK (In thousands, except par value and per share amounts)
    ------------

On February 8, 1993, the Board of Directors adopted the 1993 Incentive Stock
Option Plan and the 1993 Non-Statutory Stock Option Plan (the Plans). The Plans
provide for the granting of options to purchase up to a maximum of 150,000
shares of the Company's common stock to officers, key employees and directors
who are not otherwise employed by the Company. Under the Plans, options granted
to non-employee directors are limited to a maximum of 7,500 shares of the
Company's common stock. The Plans expire on February 8, 2003.

On March 6, 1997, the Board adopted a resolution granting stock options to
purchase up to 5,000 shares of common stock to the then CEO, and up to 2,500
shares of common stock to each of the three non-employee directors. Under the
terms of the resolution, the former CEO and each of the directors can purchase
shares of common stock for the average price that the Company's stock was
trading before and after March 6, 1997. This average is $3.00 per share. The
Company has not yet issued these options.

In September 1999, the Company entered into an agreement with a key employee.
Under this agreement, the Company granted stock options to purchase up to 60,000
shares of common stock to the key employee. Under the terms of the agreement,
the employee can purchase 20,000 shares of common stock at a price of $3.00 per
share vesting upon execution of the engagement agreement; another 20,000 shares
of common stock at a price of $3.00 per share vesting in six months from the
execution date of the engagement agreement; and another 20,000 shares of common
stock at a price of $5.00 per share vesting in eighteen months from the
execution date of the engagement agreement. These options have a five year life
and expire in September 2004.

On October 5, 1999, the Board of Directors adopted a resolution to award stock
options to purchase up to 20,000 shares of common stock to its employee
directors, 11,000 shares of common stock to its non-employee directors, and
10,000 shares to its corporate counsel. Under the terms of the resolution of
common stock. These stock options can be exercised at a price fixed to average
market price of shares traded during the month of October 1999. This average
price is approximately $2.72 per share.

No stock options were exercised during the years ended December 31, 2002 and
2001.

In 2001 in conjunction with the purchase of the Signal Hill property, the
Company issued 100,000 shares of common stock valued at $150,000. On October 11,
2002, the Company retired the shares issued in 2001 in connection with
rescission of the land purchase, see Note 3, Land Held for Resale.

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which is effective for the Company beginning December 31, 1998. SFAS 128
replaced the presentation of primary earnings per share with a presentation of
basic earnings per share based upon the weighted average number of common shares
for the period. It also requires dual presentation of basic and diluted earnings
per share for companies with complex capital structures. Basic and diluted
earnings per share for the twelve months ended December 31, 2002 and 2001 are as
follows:

                                                                              20



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

6 - COMMON STOCK (Continued)
    ------------

                                2002                           2001
                                ----                           ----
                      Weighted                       Weighted
                   Average Shares   Income (Loss)  Average Shares  Income (Loss)
                   (in thousands)     Per Share    (in thousands)    Per Share
                   --------------   -------------  --------------  -------------
Basic
  Net loss               1,059        $  (0.84)         1,086        $  (1.02)
                     ==========       =========      =========       =========
Diluted
  Net loss               1,059        $  (0.84)         1,086        $  (1.02)
                     ==========       =========      =========       =========

Basic and diluted earnings per share are the same, as any impact from the
exercise of stock options would be anti-dilutive.

7 - RELATED PARTIES AND RELATED PARTY TRANSACTIONS
    ----------------------------------------------

During the periods covered by the financial statements, the Company was involved
in various transactions with related parties. These related parties consist
primarily of corporations and joint ventures in which officers, directors, and
shareholders of the Company, directly and/or indirectly, own varying ownership
interest and/or are officers and directors thereof. Related party transactions
involving rent paid by the Company (in thousands) were approximately $18 for
2002 and 2001, respectively.

As mentioned in Note 3, during 1999, the Company entered into an agreement to
gain working interest in certain wells and leases in the state of Wyoming. Two
participating entities with Petrominerals Corporation in the acquisition are
HAT, LLC and Nevadacor Energy, Inc. Nevadacor is acting as agent for Kaymor
Energy, LLC (a Nevada limited liability company), the members of which are HBOC
Energy Marketing, Inc. ("HBOC"), a California corporation, and Morris V. Hodges,
individually. HBOC is controlled by Morris V. Hodges and was formerly known as
Kaymor Petroleum Products, Inc. Morris V. Hodges was Petrominerals Corporation's
President and CEO until July 1, 2002.

On July 17, 2002, the Company issued a note receivable to Nevadacor Energy, Inc.
in the amount of $100. The note bears interest at 7% per annum commencing on
January 1, 2003. The due date on the note is June 30, 2003 and the note is
secured by Nevadacor's interest in the Wyoming property.

In August 2002, the Company entered into a lease agreement for office space with
an entity owned by an officer of the Company. The term of the lease is one year.
Total minimum lease payments due for the year ended December 31, 2003 are $12.

                                                                              21



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

8 - UNAUDITED QUARTERLY FINANCIAL DATA (In thousands, except per share amounts)
    ----------------------------------

<TABLE>
<CAPTION>
                                  FIRST         SECOND          THIRD         FOURTH
                                 QUARTER        QUARTER        QUARTER        QUARTER          YEAR
                                ----------     ----------     ----------     ----------     ----------
            2002
            ----
<S>                             <C>            <C>            <C>            <C>            <C>
Revenues                        $     216      $     257      $     257      $     141      $     871
Costs and expenses                    153            462            411            737          1,763
                                ----------     ----------     ----------     ----------     ----------

Net income (loss)               $      63      $    (205)     $    (154)     $    (596)     $    (892)
                                ==========     ==========     ==========     ==========     ==========

Net income (loss) per share     $    0.05      $   (0.18)     $   (0.15)     $   (0.56)     $   (0.84)
                                ==========     ==========     ==========     ==========     ==========

            2001
            ----
Revenues                        $     155      $     156      $     148      $      40      $     499
Costs and expenses                    261            273            238            840          1,612
                                ----------     ----------     ----------     ----------     ----------

Net income (loss)               $    (106)     $    (117)     $     (90)     $    (800)     $  (1,113)
                                ==========     ==========     ==========     ==========     ==========

Net income (loss) per share     $   (0.10)     $   (0.11)     $   (0.08)     $   (0.73)     $   (1.02)
                                ==========     ==========     ==========     ==========     ==========
</TABLE>

9 - ENVIRONMENTAL MATTERS
    ---------------------

MONTEREY PARK, CALIFORNIA
-------------------------

On December 6, 1989, the Company was notified by the United States Environmental
Protection Agency ("EPA") that, under provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the
Company was considered a potentially responsible party ("PRP") in the clean-up
of the Operating Industries, Inc. ("OII") waste disposal site, located in
Monterey Park, California. The EPA has also contacted approximately 270 other
PRPs who disposed of liquid waste at this site. The Company is in the fourth
tier of PRPs notified by the EPA, regarding this site.

On December 20, 2001, the Company agreed to a settlement option for liabilities
related to the OII site in which the Company will pay $483 plus interest in
three installments as follows: The first installment of $317 was due and paid
within thirty (30) days following receipt of notice of entry of the Consent
Decree (June 7, 2002). The second installment of $86 (which amount includes
interest of $3 at the Superfund rate of 3.35% to the due date) will be due one
year after the due date of the first installment. The third installment of $89
(which amount includes interest of $6 at the Superfund rate of 3.35% compounded
annually to the due date) will be due two years after the due date of the first
installment. As a result, the Company has included in accrued liabilities $166
and $483 at December 31, 2002 and 2001, respectively and recorded $483 as
settlement expense in its December 31, 2001 statement of operations.

SANTA BARBARA, CALIFORNIA
-------------------------

On February 7, 2000, the Environmental Protection Agency ("EPA") advised the
Company that it had been identified as having disposed of waste material at the
Casmalia Disposal site in Santa Barbara County, California, and that the Company
is potentially liable for certain costs associated with site cleanup.

                                                                              22



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

9 - ENVIRONMENTAL MATTERS (Continued)
    ---------------------

On December 20, 2001 the Company agreed to a settlement option for liabilities
related to Casmalia disposal site in which the Company will pay $242 in three
installments as follows: The first installment in the amount of $158 is due
within 30 days of notice of entry of the Consent Decree. At the present time the
Consent Decree has not been entered. The second installment of $42 will be due
one year from the due date of the first installment. The third installment of
$42 will be due two years from the due date of the first installment. The
Company has accrued $243 in liabilities at December 31, 2002 and 2001 and
recorded $242 as settlement expense in its December 31, 2001 statement of
operations.

10 - CONTINGENCIES
     -------------

An action was filed against the Company (the Defendant) and a former officer
alleging interference with contractual negotiations in the potential purchase of
property. A motion for summary judgment in favor of the Company was granted;
then reversed and appealed. A judgment of $19,257 was entered against the
Company, which was then overturned. The plaintiffs appealed this judgment. The
Company filed a protective cross appeal. A motion for a new trial has been
granted. The Company believes that the allegations against it have no substance
or merit and will vigorously defend its position. For the years ended December
31, 2002 and 2001 $807 and $254, respectively, in litigation expenses have been
incurred and are included in general and administrative expenses in the
Company's statements of operations. The Company has recovered $427 in 2002 from
insurance coverage and estimates $459 in potential recoveries to be received in
the future.

The Company has certain contingent liabilities with respect to litigation,
claims, taxes, government regulations and contractual agreements arising from
the ordinary course of business.

While there are always risks inherent in resolution of any contingency, it is
the opinion of management that such contingent liabilities will not result in
any loss which would have an adverse material effect on the Company's financial
position.

The Company is subject to other possible loss contingencies pursuant to federal,
state and local environmental laws and regulations. These include existing and
potential obligations to investigate the effects of the release of certain
hydrocarbons or other substances at various sites; to remediate or restore these
sites; and to compensate others for damages and to make other payments as
required by law or regulation. These obligations relate to sites owned by the
Company or others, and are associated with past and present oil and gas
operations. The amount of such obligations is indeterminate and will depend on
such factors as the unknown nature and extent of contamination, the unknown
timing, extent and method of remedial actions which may be required, the
determination of the Company's liability in proportion to other responsible
parties, and the state of the law.

11 - CONCENTRATION OF BUSINESS AND CREDIT RISK
     -----------------------------------------

The Company sold substantially all of its oil and gas to Texaco Trading and
Transportation, Inc. (Texaco) in 2001 and to Pacific Marketing and
Transportation, LLC (Pacific) in 2002. In fiscal years 2002 and 2001, revenue
from sales to Texaco and Pacific was more than 50% of the Company's gross
revenue from continuing operations.

The Company maintains most cash and cash equivalents in short-term money market
accounts which exceed Federal Insurance limits. At December 31, 2002 and 2001,
unsecured cash and cash equivalents were $283 and $1,504, respectively.

                                                                              23



<PAGE>

                            PETROMINERALS CORPORATION
                           NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

12 - SUBSEQUENT EVENTS
     -----------------

In April of 2003, the Company agreed to sell its interest in the Wyoming
gas field. The Company will receive $125 in proceeds for its twenty-five
percent interest. All terms have been agreed to by all of the parties.
The closing documents have not been executed as of the date of the
report on these financial statements.

13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED RESERVES (UNAUDITED)
     --------------------------------------------------------------------

RESULTS OF OPERATIONS
---------------------

Selected financial information for oil and gas operations accounted for under
the successful efforts methods for the years ended December 31, is summarized
below (in thousands):
                                                                 2002      2001
                                                                 ----      ----

Produced oil and gas sales                                      $ 211     $ 272
Less:
  Operating expenses                                              383       405
  Depreciation, depletion and amortization                          2         3
                                                                ------    ------
Results of operations from oil and gas producing activities,
  excluding corporate overhead and interest costs               $(174)    $(136)
                                                                ------    ------

ESTIMATED QUANTITIES OF OIL AND GAS RESERVES
--------------------------------------------

The following table presents the Company's estimates of its proved oil
equivalent (in thousands of barrels equivalent*) reserves, which are all located
in the United States. All reserve estimates have been prepared by independent
petroleum engineers. The Company emphasizes that reserve estimates are
inherently imprecise and are expected to change as future information becomes
available. Estimates of its proved oil reserves for the years ended December 31,
are as follows:

ESTIMATED QUANTITIES OF OIL AND GAS RESERVES
--------------------------------------------

                                                           2002            2001
                                                          ------          ------

Proved developed and undeveloped reserves: (Mboe)
  Beginning of period                                         2              87
  Purchase of minerals in place                              --              --
  Revision of previous estimates                             71             (71)
  Production                                                (10)            (14)
                                                          ------          ------

End of period                                                63               2

Proved developed reserves:
  Beginning of period                                         2              87
  End of period                                              63               2

* (Six mcf of natural gas has been converted to one barrel of crude oil).

                                                                              24



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED RESERVES (UNAUDITED)
     --------------------------------------------------------------------
     (Continued)

DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES
------------------------------------------------------------------------

A standardized measure of discounted future net cash flows is presented below
for each of the years ended December 31, 2002 and 2001. Future cash inflows are
computed by applying year-end prices of oil and gas relating to the Company's
proved reserves to year-end quantities of those reserves.

Future development and production costs are computed by estimating the
expenditures to be incurred for developing and producing proved oil and gas
reserves, based on year-end costs and assuming continuation of existing economic
conditions.

Future income tax expense is computed by applying year-end statutory rates
(adjusted for permanent differences) to the future pretax net cash flows
relating to the Company's proved oil and gas reserves, less the tax basis at
each year-end of the properties involved.

A 10% annual discount rate is used to reflect the timing of future net cash
flows relating to proved oil and gas reserves.

The projections should not be viewed as realistic estimates of future cash
flows, nor should the "standardized measure" be interpreted as representing
current value to the Company. Material revisions to estimates of proved reserves
may occur in the future; development and production of the reserves may not
occur in the periods assumed; and actual prices realized and actual costs
incurred may vary significantly from those used.

The following reserve estimates and resulting future net cash flows were
developed in accordance with Securities and Exchange Commission rules, using
selling prices in effect at the end of the years indicated. Both the quantity
estimates and "cash flow" of reserves are sensitive to sales prices in effect at
the year end quantification date.

During periods of rapidly changing prices, reserve information must be examined
with this understanding. Reserve estimates and resulting future net cash flows
for the years ended December 31, are as follows (in thousands):

                                                             2002          2001
                                                           --------     --------

Future cash inflows                                        $ 1,692      $    28
Future production and development costs                     (1,217)         (25)
                                                           --------     --------

Future net cash flows                                          475            3
10% annual discount for estimated timing of cash flows        (120)          --
                                                           --------     --------

Standardized measure of discounted future net cash flows   $   355      $     3
                                                           ========     ========

                                                                              25



<PAGE>

                            PETROMINERALS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
              (Dollars in thousands, except oil price per barrel,
              ---------------------------------------------------
                    par value amounts, and per share amounts
                    ----------------------------------------

13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED RESERVES (UNAUDITED)
     --------------------------------------------------------------------
     (Continued)

DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES
------------------------------------------------------------------------
(Continued)

Following are the principal sources of change in the standardized measure of
discounted future cash flows for the years ended December 31, (in thousands):

                                                    2002           2001
                                                 ----------     ----------

Beginning balance                                $       3      $     379
Sales and transfers of oil and gas produced,
  net of production cost                               172            133
Net changes in prices and production costs,
  based on beginning of year barrels                   493            (40)
Revisions to previous estimates                       (124)          (612)
Accretion of discount                                   --             38
Net change in income taxes                            (189)            --
Other                                                   --            105
                                                 ----------     ----------
Ending balance                                   $     355      $       3
                                                 ==========     ==========

                                                                              26



<PAGE>

                                    PART III

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

The Company's certifying accountant was terminated in March 2003 for reasons
unrelated to the finance and accounting of the Company. There were no
disagreements with the accountants on accounting and/or financial disclosures.
New auditors, Mendoza Berger & Company, LLP were appointed for the year ended
December 31, 2002 audit.

ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, COMPLIANCE WITH SECTION 16(A) OF THE
         -------------------------------------------------------------------
         SECURITIES EXCHANGE ACT OF 1934
         -------------------------------

The Executive Officers of Petrominerals, together with the years in which such
Officers were named to their present offices are as follows:

                                                                 Year Named to
        Name                   Position with Company           Present Position
        ----                   ---------------------           ----------------
 Everett L. Hodges*            President, Chief
                               Executive Officer, Chief
                               Financial Officer and
                               Director                               2002
 John A. Erickson              Secretary and Treasurer                2002

Each of the Executive Officers serves at the pleasure of the Board of Directors.

     *Mr. Everett L. Hodges was elected President and Chief Executive Officer on
July 1, 2002.

BIOGRAPHICAL INFORMATION

The following table sets forth the name, principal occupation, age and the year
in which the individual first became a director, and business experience during
the last five years:

MORRIS V. HODGES                  68           Director                  1979

Mr. Morris V. Hodges was appointed President and Chief Executive Officer on
December 30, 1998. Mr. Morris Hodges has served as a director and officer of the
following companies for more than the past ten years: Hillcrest Beverly Oil
Corporation; Kaymor Petroleum Products,Inc.; Sunset Pipeline and Terminalling,
Inc.; Coastal Petroleum Refiners, Inc.;and Hydraulic Rod Pumps, International.
Certain of the foregoing companies have been affiliated with the Company in
various transactions. See Item 7 - "Certain Relationships and Related
Transactions.") Morris V. Hodges resigned as a Director and Officer of all of
the named companies on July 1, 2002 because of ill health.

EVERETT L. HODGES                 70          Director                  1979

Mr. Everett L. Hodges served as President of the Company from September 1987
through February 1992. For more than the past ten years, Mr. Hodges has held a
controlling interest in and has served as a director and officer of Energy
Production & Sales Co.; California Oil Independents, Inc.; Coastal Petroleum
Refiners, Inc.; and has served as a director and officer of St. James Oil
Corporation since 1988. Mr. Hodges has also served as the President of the
Violence Research Foundation, a non-profit foundation, since its inception in
1991. Certain of the foregoing companies have been affiliated with the Company
in various transactions. See Item 7 - "Certain Relationships and Related
Transactions." Everett L. Hodges and Morris V. Hodges, as a group, may be deemed
to be controlling persons.

WILLIAM N. HAGLER               69          Director                   1998

Mr. William N. Hagler is Chairman of the Board of Directors, CEO and President
of Intermountain Refining Co., Inc., a company he founded in 1984. Intermountain
Refining is or has been engaged in petroleum refining and marketing,
co-generation of electric power and natural gas production. Since 1955, Mr.
Hagler has been continuously employed in various phases of the petroleum
industry with Exxon, Cities

                                                                              27



<PAGE>

ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, COMPLIANCE WITH SECTION 16(A) OF THE
         SECURITIES EXCHANGE ACT OF 1934 (Continued)

BIOGRAPHICAL INFORMATION (Continued)

Service Oil Company, Riffe Petroleum Company, Plateau, Inc., and Unico, Inc. Mr.
Hagler is a President of Red Hills Manufacturing Company and Hagler Oil and Gas
Company. Mr. Hagler serves on the Public Utility Commission for the City of
Farmington, New Mexico. Mr. Hagler served on the Company's audit committee until
he resigned as a Director. This vacancy on the Board of Directors and the audit
committee was filled by the appointment of Donald R. Clem on March 18, 2003.

JOHN C. MCMAHON                 56           Director                    1999

Mr. John C. McMahon has been employed as Vice President of Koch Oil's West Coast
crude oil operations from January 1978 - December 1998. This was a privately
held company engaging in the crude oil marketing, gathering and trading of both
domestic and foreign crude oil. Mr. McMahon resigned from the Board of Directors
on October 16, 2002 and was replaced by the appointment of Fred Rhyme on March
18, 2003.

JOHN A. ERICKSON                  79           Director                    2000

Mr. John A. Erickson, for more than the past ten years, has served as a director
and officer of St. James Oil Corporation, County Water Company, La Fortuna
Associates and OSCA Development Company and has recently retired as a director
of Weybrun Security Company. Mr. Erickson is currently sitting on the Company's
audit committee.

DONALD R. CLEM                    70           Director                    2003

Mr. Donald R. Clem is a retired Certified Public Accountant and has had
extensive experience for more than 32 years as a CPA, owning his own accounting
Company for most of that time and serving clients heavily involved in the oil
and gas and real estate industries. He is a member of the audit committee.

FRED RHYME                        78           Director                    2003

Mr. Fred Rhyme has been the owner and President of Rainbow Mealworms Company
since its inception in 1958. Rainbow Mealworms is now the "World's Largest"
mealworm grower and employs 48. The company has over 45,000 customers which
include major colleges, universities, research labs, zoo's, bird, mammal and
reptile lovers, fisherman and the movie industry.

*The Board of Directors has not filled one vacancy on the Board; thus is
currently operating with Four (4) Directors.

STANDING COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

Standing Committees
-------------------

The Company has certain standing committees, each of which is described below:

AD-HOC COMMITTEE - This committee consists of Messrs. Everett L. Hodges and John
A. Erickson. This committee evaluates proposed acquisitions, mergers or other
pertinent negotiations which may come before the Board. This committee held no
meetings during the last fiscal year, as all discussions and decisions were made
by the full Board of Directors, which includes the Ad-Hoc Committee membership.

AUDIT COMMITTEE - This committee consists of Mr. Hagler and Mr. Erickson and
with the resignation of Mr. Hagler the committee will include Donald R. Clem.
The Audit Committee is responsible for reviewing the scope and procedures of
internal auditing work, the results of independent audits, the accounting
policies of management, and recommends to the Board the appointment of the
Company's outside auditors. This committee did not hold any meetings during the
last fiscal year, as all discussions and decisions were made by the full Board
of Directors, which includes the Audit Committee membership.

                                                                              28



<PAGE>

ATTENDANCE AT BOARD MEETINGS

During the last fiscal year, the Board of Directors of the Company held seven
special meetings and no regular meetings. Attendance at all such meetings of the
Board except one was 100%.

ITEM 10 - EXECUTIVE COMPENSATION

The following Summary Annual Compensation Table sets forth all cash compensation
paid, distributed or accrued for services, including salary and bonus amounts
rendered in all capacities for the Company during the fiscal year ended December
31, 2002, whose annual cash compensation exceeded $100,000 or served as Chief
Executive Officer. All other tables required to be reported have been omitted as
there has been no compensation awarded to, earned by or paid to any of the
Company's executives in any fiscal year covered by the table except the
$6,000.00 paid to Everett L. Hodges as President, representing $2000 each month
for October, November and December.

SUMMARY ANNUAL COMPENSATION TABLE
                                                               Year     Salary
                                                               ----     ------
Morris V. Hodges, President, Chief Executive
  Officer and Chief Financial Officer until July 1, 2002.      2002     $   00

Everett L. Hodges, President, Chief Executive Officer and
  Chief Financial Officer after July 1, 2002.                  2002     $6,000

OTHER COMPENSATION OF EXECUTIVE OFFICERS

The Company provided travel and entertainment expenses to its executive officers
and key employees. The aggregate amount of such compensation, as to any other
executive officer or key employee, did not exceed the lesser of $25,000 or 10%
of the cash compensation paid to such executive officer or key employee, nor did
the aggregate amount of such other compensation exceeded 10% of the cash
compensation paid to all executive officers or key employees as a group.

TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS

In July 1993, the Board of Directors adopted a severance plan for executive
officers providing that, in the event of termination of employment as a result
of a change in control of the corporation, that such executive officer would
receive severance in the amount of one year's base salary. The Plan does not
provide for any severance in the event of the resignation, retirement or
termination of any Executive Officer's employment with the Company for reasons
other than a change in control of the Company.

COMPENSATION OF DIRECTORS

During the year ended December 31, 2002, each of the two employee directors who
held office received no compensation up to July 1, 2002 and commencing October
2002, the President received $2, 000.00 per month. The non-employee directors
who held office were paid $500 per meeting for a total of $2,000.00 in
compensation paid to directors of the Company. In addition, the non-employee
directors are reimbursed for reasonable expenses incurred in connection with any
meetings attended.

The Company did not pay any additional fees to directors for serving as members
of the Audit or Ad-Hoc Committees during the last fiscal year.

                                                                              29



<PAGE>

ITEM 11 - SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

The following table lists the beneficial ownership as of April 12, 2003, of the
Company's common stock with respect to all directors and officers as a group, to
the extent that it is known to the Company, either through Securities Exchange
Act filings or information supplied by the persons named in the table.

Name of Director                    Number of Shares
or Number of                        and Nature of                      Percent
Persons in Group                    Beneficial Ownership               of Class
----------------                    --------------------               --------

John A. Erickson                          9,555                          .82%
Everett L. Hodges                        88,060 (1)(2)                  7.60%
Fred Rhyme                                1,000                          .00%

All directors and officers as a group,
including the persons named above
 (3 Persons                              98,615                          9.00%
                                                                   computations)

_____________

         (1)      Everett L. Hodges and Morris V. Hodges were each granted 3,125
                  shares of the Company's common stock under the Directors Stock
                  Compensation Plan in 1994 in lieu of cash directors fees for
                  the period from May 1, 1992 to June 1, 1994. See "Directors
                  Stock Compensation Plan"

         (2)      The 88,060 shares beneficially held by Everett L. Hodges
                  include 73,487 shares held of record jointly in the Everett L.
                  Hodges and Mary M. Hodges Trust. This amount also includes
                  4,175 shares held directly by Everett L. Hodges, and 10,398
                  shares held of record by Energy Production & Sales Co., Inc.
                  (EPS). The 88,060 shares do not include 10,052 shares held in
                  trust for the children and grandchild of Everett L. and Mary
                  M. Hodges, as to which Mr. and Mrs. Everett L. Hodges disclaim
                  any beneficial ownership. Everett L. Hodges and Morris V.
                  Hodges, as a group, may be deemed to be a controlling person
                  of Petrominerals by virtue of their share ownership, which
                  together represents share ownership of 8.60 % of the Company's
                  common stock. .

         (3)      The 12,162 shares beneficially held by Morris V. Hodges
                  includes 1,764 shares held jointly in a family trust by Morris
                  V. and Kathryn M. Hodges. This amount also includes 10,398
                  shares held of record by Sunset Pipeline and Terminalling,
                  Inc., a company controlled by the adult children of Mr.
                  Hodges. The 12,162 shares does not include 88,525 shares held
                  by the adult children of Morris V. Hodges and Kathryn M.
                  Hodges, as to which Mr. and Mrs. Morris V. Hodges disclaim any
                  beneficial ownership. Everett L. Hodges and Morris V. Hodges,
                  as a group, may be deemed to be a controlling person of
                  Petrominerals by virtue of their share ownership, which
                  together represents share ownership of 8.60 % of the Company's
                  common stock.

1993 INCENTIVE STOCK OPTION PLAN AND 1993 NON-STATUTORY STOCK OPTION PLAN

The Company has in effect two stock option plans - the 1993 Incentive Stock
Option Plan (the Incentive Plan) and the 1993 Non-Statutory Stock Option Plan
(the Non-Statutory Plan) (the Incentive Plan and the Non-Statutory Plan are
sometimes collectively referred to herein as the Plans), which were adopted by
the Board of Directors and approved by the shareholders of the Company in 1993.
The Plans in the aggregate provide for the granting of options to purchase a
maximum of 150,000 shares of the Company's common stock to employees and
directors of the Company and its affiliates (as defined herein); however,
options which may be granted to non-employee directors are limited to a maximum
of 7,500 shares. The Plans expire on February 8, 2003.

Any of the Company's current or future employees who render, in the opinion of
the Board of Directors, the type of services which tend to contribute materially
to the success of the Company or an affiliate of the Company are eligible to
participate in the Incentive Plan. Any of the Company's current or future
employees or directors (whether or not otherwise employed by the Company) who

                                                                              30



<PAGE>

ITEM 11 - SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT (Continued)

1993 INCENTIVE STOCK OPTION PLAN AND 1993 NON-STATUTORY STOCK OPTION PLAN
(Continued)

render, in the opinion of the Board of Directors, the type of services which
tend to contribute materially to the success of the Company or an affiliate of
the Company are eligible to participate in the Non-Statutory Plan.

The Plans are administered by the Board of Directors of the Company which has
the authority to determine the employees and directors to whom options are to be
granted, the number of shares subject to each option price of outstanding
options (but not below the fair market value of the shares subject thereto), to
enter into agreements relating to the value of the option at the date of grant,
and to make all other determinations necessary or advisable to the
administration of the Plan. With the consent of the optionee, the Board of
Directors will also have the power to substitute options with different terms
for previously granted options, or to amend the terms of any option.

The Board of Directors may delegate administration of the Plan to a committee
composed of not less than three members of the Board of Directors.
Administration of the Plan with respect to committee members, however, just
remain vested in the Board. With respect to options granted to a director, the
Board of Directors shall take action by a vote sufficient without counting the
vote of the interested director. Interested directors may be counted in
determining the presence of quorum at a meeting of the Board of Directors which
authorized the granting of options to such directors.

1993 STOCK BONUS PLAN

In February 1993, the Board of Directors adopted the Company's 1993 Stock Bonus
Plan (Bonus Plan). The Bonus Plan provides the awarding of up to 6,250 shares of
the Company's common stock to officers and key employees of the Company. The
Plan is administered by the Board of Directors which has the authority to
determine the officers and key employees to whom stock bonuses are to be
awarded, the time or times at which stock bonuses will be awarded, and, subject
to the limits discussed below, the number of shares to be granted under each
award. The Board of Directors has the power to delegate the administration of
the Bonus Plan to a committee of the Board appointed in accordance with the
Company's Bylaws. The aggregate fair market value (determined as of the date of
grant) of the shares of common stock awarded to any officer or key employee
under the Bonus Plan in any one calendar year cannot exceed one-sixth of the
officer's or key employee's salary (excluding bonuses and awards under other
incentive plans maintained by the Company) for such calendar year. The Bonus
Plan terminated on February 8, 1998.

DIRECTORS STOCK COMPENSATION PLAN

On April 16, 1992, as part of its cost containment program, the Board of
Directors of the Company adopted the Directors Stock Compensation Plan (the
Stock Compensation Plan). The Stock Compensation Plan provides for the granting
of stock to non-employee directors of the Company in lieu of paying director's
fees in cash. The purpose of the Stock Compensation Plan is to minimize cash
outflow from the Company by compensating non-employee directors for their
services to the Company in stock rather than in cash. The maximum number of
shares provides for the Stock Compensation Plan is 18,750. Only non-employee
directors of the Company are eligible to participate in the Stock Compensation
Plan. In February 1994 and February 1993, a distribution of 2,075 shares and
1,050 shares was made to each of the non-employee directors under this Plan,
respectively. This Plan terminated on February 10, 1995, at which time all of
the shares issued under this Plan were distributed to non-employee directors.
The Stock Compensation Plan is administered by the disinterested members of the
Board, or, in the event there are none such, the President and Chief Executive
Officer and the Secretary of the Company. The granting of stock under the Stock
Compensation Plan is according to a pre-set formula. Directors fees payable to
non-employee directors of the Company under this plan were set by the Board at
$700 per month. Under the Stock Compensation Plan, the eligible directors
received stock at a value of $700 per month, determined by the average trading
price as quoted on the NASDAQ Small Cap System for the calendar month
immediately preceding the month in which the directors fees is earned; provided,
however, that the valuation of the stock shall not be less than the net book
value of the Company expressed on a per share basis. Any shares issued under
this plan shall be restricted shares, subject to a two year holding period.

                                                                              31



<PAGE>

ITEM 11 - SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT (Continued)

REPORTABLE TRANSACTIONS

To the knowledge of the Company, as of April 12, 2003, all reporting persons
have properly filed the appropriate forms on all reportable transactions and all
forms were timely filed in compliance with Section 16(a) of the Exchange Act.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

On March 6, 1997, the Board adopted a resolution granting stock options to
purchase up to 5,000 shares of common stock to the CEO, and up to 2,500 shares
of common stock to each of the three non-employee directors. Under the terms of
the resolution, the CEO and each of the directors can purchase shares of common
stock for the average price that the Company's stock was trading before and
after March 6, 1997. This average is $3.00 per share. The Company has not yet
issued these options.

No stock options were exercised during the years ended December 31, 2002 and
2001.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT AND OTHERS

As mentioned in Note 3, during 1999, the Company entered into an agreement to
gain working interest in certain wells and leases in the state of Wyoming. Two
participating entities with Petrominerals Corporation in the acquisition are
HAT, LLC and Nevadacor Energy, Inc. Nevadacor is acting as agent for Kaymor
Energy, LLC (a Nevada limited liability company), the members of which are HBOC
Energy Marketing, Inc. ("HBOC"), a California corporation, and Morris V. Hodges,
individually. HBOC is controlled by Morris V. Hodges and was formerly known as
Kaymor Petroleum Products, Inc. Morris V. Hodges was Petrominerals Corporation's
president and CEO until July 1, 2002, and is a shareholder.

INDEBTEDNESS OF MANAGEMENT

During the Company's last fiscal year, no executive officer, director, any
member of the immediate family or any of those persons, any corporation or
organization for which any of those persons serve as an executive officer or
partner or which they own directly or indirectly 10% or more of its equity
securities, or any trust or other estate in which any of the Company's executive
officers or directors have a substantial beneficial interest or for which they
serve as a trustee or in a similar capacity, has owed the Company at any time
since the beginning of its last fiscal year more than $60,000.

                                                                              32



<PAGE>

                                     PART IV
                                     -------

ITEM 13 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

                                                                        Page(s)

A. LIST OF DOCUMENTS
   -----------------
         1.   Report of Mendoza Berger & Company, LLP                      10
              Balance Sheets at December 31, 2002 and 2001                 11
              Statements of Operations for the Years Ended
                December 31, 2002 and 2001                                 12
              Statements of Shareholders' Equity for the Years Ended
                December 31, 2002 and 2001                                 13
              Statements of Cash Flows for the Years Ended
                December 31, 2002 and 2001                                 14
              Notes to Financial Statements                              15-26

                                       33



<PAGE>

ITEM 13 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
          (Continued)

2.   Reports on Form 8-K
     -------------------

     A Form 8-K was filed on May 31, 2002;
     A Form 8-K was filed on November 7, 2002;
     A Form 8-K was filed on March 18, 2003; and
     A Form 8-K/A was filed on March 28, 2002

3.   Exhibits
     --------
     (3)(a)    Certificate of Incorporation** (3)(a)(I) Amendment of Certificate
               of Incorporation***
     (3)(b)    Bylaws, as Amended***
     (10)(a)   Petrominerals Corporation 1993 Incentive Stock Option Plan and
               1993 Non-Statutory Stock Option Plan Incorporation****
     (10)(b)   Form of Petrominerals Corporation Employee Stock Option
               Agreement****
     (10)(c)   Petrominerals Corporation 1993 Employee Stock Bonus Plan*****
     (10)(d)   Petrominerals Corporation Directors Stock Compensation
               Plan******

**         Incorporated herein by reference to Exhibit of same number in
           Registrant's Annual Report on Form 10-K for the year ended December
           31, 1981.

***        Incorporated herein by reference to Exhibit of same number in
           Registrant's Annual Report on Form 10-K for the year ended December
           31, 1987.

****       Incorporated herein by reference to Form S-8 Registration No.
           33-70690, as filed with the Securities and Exchange Commission on
           October 22, 1993.

*****      Incorporated herein by reference to Form S-8 Registration No.
           33-70688, as filed with the Securities and Exchange Commission on
           October 22, 1993.

******     Incorporated herein by reference to Form S-8 Registration No.
           33-70692, as filed with the Securities and Exchange Commission on
           October 22, 1993.

                                                                              34



<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

PETROMINERALS CORPORATION
(Registrant)

By:  /s/ Everett L. Hodges
     --------------------------------------------------------
     Everett L. Hodges, President and Chief Executive Officer

Dated:  April 12, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates included:

Dated: April 12, 2003               By:   /s/ Everett L. Hodges
                                          -------------------------------------
                                          Everett L. Hodges
                                          President, Chief Executive Officer
                                          Chief Financial Officer, and Director

Dated: April 12, 2003               By:   /s/ John A. Erickson
                                          -------------------------------------
                                          John A. Erickson, Director

Dated: April 12, 2003               By:   /s/ Fred Rhyme
                                          -------------------------------------
                                          Fred Rhyme, Director

                                                                              35



<PAGE>

CERTIFICATION

I, Everett L. Hodges, President, Chief Executive officer and Chief Financial
officer of Petrominerals Corporation certify that:

1.   I have reviewed this annual report on Form 10-KSB of, Petrominerals
     Corporation;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant, as of, and for, the periods presented in this annual
     report;

4.   I am responsible for establishing and maintaining disclosure controls
 and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
 for the registrant and have:

    a) designed such disclosure controls and procedures to ensure that material
    information relating to the registrant is made known to us by others within
    those entities, particularly during the period in which this annual report
    is being prepared;

    b) evaluated the effectiveness of the registrant's disclosure controls and
    procedures as of a date within 90 days prior to the filing date of this
    annual report (the "Evaluation Date"); and

    c) presented in this annual report our conclusions about the effectiveness
    of the disclosure controls and procedures based on our evaluation as of the
    Evaluation Date;

5. I have disclosed, based on our most recent evaluation, to the registrant's
   auditors and the audit committee of the registrant's board of directors
   (or persons performing the equivalent functions):

    a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

    b) any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal controls;
    and

6. I have indicated in this annual report whether there were significant changes
   in internal controls or in other factors that could significantly affect
   internal controls subsequent to the date of our most recent evaluation,
   including any corrective actions with regard to significant deficiencies
   and material weaknesses.

Date: April 12, 2003                     /s/ Everett L. Hodges
                                         -----------------------------
                                         Everett L. Hodges
                                         President, Chief Executive Officer
                                         Chief Financial Officer, and Director