<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-QSB


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM _________ TO ___________

                         COMMISSION FILE NUMBER: 0-12185

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

                            DAUGHERTY RESOURCES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            PROVINCE OF BRITISH COLUMBIA                   NOT APPLICABLE
  (State or other jurisdiction of incorporation or        (I.R.S. EMPLOYER
                    organization)                         IDENTIFICATION NO.)

           120 PROSPEROUS PLACE, SUITE 201
                 LEXINGTON, KENTUCKY                         40509-1844
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)               (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (859) 263-3948

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

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X    No    .
                                              ---      ---

         THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF MARCH 31, 2002, WAS 5,346,600.

Transitional Small Business Disclosure Format (check one): Yes       No  X.
                                                               ---      ---

================================================================================

<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         The information required by this Item 1 appears on pages I through
XVIII of this Report, and is incorporated herein by reference.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF GENERAL OPERATIONS.

         The following is a discussion of Daugherty Resources' financial
condition and results of operations. This discussion should be read in
conjunction with the Financial Statements of Daugherty Resources described in
Item 1 of this report. Reliance upon such information involves risks and
uncertainties, including those created by general market conditions, competition
and the possibility that events may occur which could limit the ability of
Daugherty Resources to maintain or improve its operating results or execute its
primary growth strategy. Although management believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could be inaccurate, and there can be no assurances that the forward-looking
statements included herein will prove to be accurate. The inclusion of such
information should not be regarded as a representation by management or any
other person that the objectives and plans of Daugherty Resources will be
achieved. Moreover, such forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date hereof. Statements
contained in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations," which are not historical facts may be
forward-looking statements (See "Forward-Looking Statements" herein at page 8).

         Daugherty Resources, Inc. ("Daugherty Resources"), formerly Alaska
Apollo Resources Inc., is a diversified natural resources company with assets in
oil and gas, and gold and silver prospects. Originally formed in 1979 to develop
gold properties, Daugherty Resources in the fourth quarter of 1993, acquired its
wholly owned subsidiary, Daugherty Petroleum, Inc. ("Daugherty Petroleum"). The
purchase of Daugherty Petroleum has given Daugherty Resources a diversified
revenue and asset base that is primarily located in Appalachia.

         Since acquiring Daugherty Petroleum, Inc., Daugherty Resources has
increased its reserves through the acquisition of oil and gas properties in the
Appalachian and Illinois Basins, and the drilling of wells in the Appalachian
Basin through joint venture and turnkey drilling programs, where Daugherty
Petroleum, Inc. is the primary decision maker. The Company continues to
aggressively seek acquisitions and drilling programs.

LIQUIDITY

         For the three months ending March 31, 2002, Daugherty Resources drilled
seventeen (17) natural gas wells (4.45 net wells), all of which were capable of
producing natural gas. By comparison, for the same period of 2001, Daugherty
Resources drilled eleven (11) natural gas wells (2.8175 net wells). Drilling
operations for the first three months of 2002 were primarily related to three
year-end private placement drilling programs on Daugherty Resources' farm out
acreage acquired from Equitable Resources Energy Corporation and two joint
venture drilling partnerships.

         Daugherty Resources funds its operations through a combination of cash
flow from operations, capital raised through drilling partnerships and the sale
of stock. Operational cash flow is generated by sales of natural gas and oil
from interests Daugherty Resources owns in wells, well operations of partnership
wells, well drilling and completions for partnerships sponsored by Daugherty
Petroleum, and gas distributed by Sentra Corporation, a wholly owned subsidiary
of Daugherty Petroleum.

         Daugherty Resources continues to review additional opportunities for
acquisitions of oil and gas properties. Previous acquisitions have been
completed using Daugherty Resources stock, in whole or part, to pay for the
acquisitions. Generally, acquisitions include interests in the wells and the
right to operate the wells. Daugherty



                                       2
<PAGE>

Resources generally participates in less than a majority interest in those wells
drilled by programs or joint ventures sponsored by Daugherty Petroleum.

         During the fourth quarter of 2001 Daugherty Petroleum finalized three
(3) private placement drilling programs and two (2) joint venture partnerships
totaling $5.8 million that allowed Daugherty Petroleum to drill twenty-three
(23) natural gas wells during the last quarter of 2001 and the first quarter of
2002. Daugherty Petroleum participated for a 26% interest in the partnership
drilling programs and a 50% interest in a one (1) well joint venture partnership
and a 20% interest in another one (1) well joint venture partnership.

         Daugherty Resources has primarily concentrated in drilling wells on
prospects it generates in the Appalachian Basin. Historically, a major portion
of Daugherty Resources' revenues has been from its activities as "turnkey
driller" and operator of drilling programs and joint ventures in the Appalachian
Basin sponsored by Daugherty Petroleum.

         Daugherty Resources plans to drill 30 additional wells during the last
three quarters of 2002 and first quarter of 2003 and retain interests ranging
from 25% to 33% of each well it drills. This estimate is based upon two planned
private placement drilling programs covering the drilling and completion of up
to 30 wells. Discussion with potential joint venture partners could result in
additional wells being drilled.

          Working capital as of March 31, 2002 was a negative $1,253,976
compared to December 31, 2001, when working capital was negative $2,003,165.

         Current assets as of March 31, 2002 were $1,345,927 compared to
$2,900,470 as of December 31, 2001. During the three-month period ending March
31, 2002, as compared to December 31 2001, the changes in the composition of
Daugherty Resources' current assets were: cash balances decreased $1,486,640
from $2,244,420 to $757,780; accounts receivable balances decreased $69,538 from
$423,359 to $353,821. Other current assets such as pre-paids, and notes
receivable increased $1,635 from $232,691 to $234,326. Overall, current assets
decreased by $1,554,543 to $1,345,927 from $2,900,470.

         Current liabilities as of March 31, 2001 were $2,599,903 compared to
$4,903,635 as of December 31, 2001. During the three- month period ending March
31, 2001, as compared to December 31, 2001, the changes in the composition of
current liabilities were: short-term loans and current portion of long-term debt
decreased $320 from $379,847 to $379,527 customer drilling deposits decreased
$2,703,000 from $2,854,700 to $151,700, accounts payable and accrued liabilities
increased $399,588 from $1,669,088 to $2,068,676. Overall, current liabilities
decreased by $2,307,732.

         Management does not believe that its working capital deficit will have
a material or substantial negative impact on Daugherty Resources' financial
position, result of operations or liquidity in future periods due to the
following:

         -        The drilling activity in 2001 and first quarter 2002 will
                  result in substantially more oil and gas production to our
                  Company. In the last quarter 2001 and the first quarter 2002
                  Daugherty Petroleum drilled a total of twenty-three (23)
                  successful wells. At the end of the year 2001 gas prices had
                  decreased, however, as of March 29, 2002, prices have
                  rebounded to reflect higher market demand and these increased
                  prices will positively affect oil and gas revenue.

         -        Procurement of additional reserves by drilling and
                  acquisitions is expected to enhance the ability of Daugherty
                  Resources to secure long term financing, increased lines of
                  credit, and equity participation with industry partners.
                  However, significant decreases in the price of natural gas may
                  result in a decrease in drilling activity, resulting in fewer
                  reserves being acquired and may lessen the ability of
                  Daugherty Resources to attract and secure financing, lines of
                  credit or equity partners.

         The production, revenue, profitability and future rate of growth of
Daugherty Resources are substantially dependent upon the prevailing prices of,
and demand for natural gas and oil. The ability of Daugherty Resources to
maintain or increase its borrowing capacity and to obtain additional capital on
attractive terms is also substantially



                                       3
<PAGE>

dependent upon oil and gas prices. Prices for oil and natural gas are subject to
wide fluctuation in response to relatively minor changes in supply of, and
demand for, gas, market uncertainty and a variety of other factors that are
beyond the control of Daugherty Resources.

         A significant amount of revenue is received from related party
transactions whereby Daugherty Petroleum sponsors and conducts development
drilling programs for its own account and for others. Generally, most of the
revenue from contract drilling activity is received from drilling partnerships
formed and managed by Daugherty Petroleum as managing general partner.
Typically, the investor partners own a 75% interest in the partnerships and
Daugherty Petroleum retains a 25% interest for its equity contribution to each
drilling program. Daugherty Petroleum may also enter into joint venture
arrangements with industry partners or a small group of investor partners and
retain up to a 50% working interest in any wells drilled. As a result, Daugherty
Petroleum is subject to substantial cash commitments at the closing of the
partnership or joint ventures.

         Upon the closing of a drilling partnership or joint venture each
program will execute a Turnkey Drilling Contract and Operating Agreement with
Daugherty Petroleum to drill and operate the partnership wells at costs and fees
comparable to those of other independent oil and gas companies drilling and
operating similar wells in the same geographical area. Most of the drilling and
development funds are received by Daugherty Petroleum under the Turnkey Drilling
Contract upon partnership funding but because the wells produce for a number of
years Daugherty Petroleum will continue in a fiduciary relationship as the
managing or co-managing general partner and as operator of the wells.

         In addition, Daugherty Petroleum also receives production revenue from
its equity position in each well together with revenue associated with the
transmission and compression of the natural gas. A portion the natural gas
production is handled by Knox Compression, a limited liability company owned by
the management of Daugherty Petroleum.

         Although Daugherty Petroleum believes that all transactions involving
or related to the drilling partnerships, including the costs, expenses and fees
charged by Daugherty Petroleum, are comparable with the transactions of
companies similarly situated and represent the conditions of competitive free
market dealings the transactions involve related parties and cannot be presumed
to be carried out on an arm's length basis.

         To a large extent, the level of the drilling and development activity
of Daugherty Petroleum is dependent upon the amount of subscriptions in its
drilling partnerships and the level of participation with other joint venture
partners. Daugherty Petroleum benefits through such arrangements by its receipt
of revenue from the contract drilling activities and through its share in the
revenues produced by the developed properties. No assurance can be given that
Daugherty Resources will continue to have access to funds generated through
these financing vehicles.

         Daugherty Resources believes its cash flow resulting in operating
revenues will contribute significantly to its short-term financial commitments
and operating costs, and has continued to refine its long-term strategy in 2001
to meet the financial obligations of Daugherty Resources. This strategy
includes:

         -        INCREASING PARTNERSHIP AND JOINT VENTURE DRILLING. Although
                  natural gas prices decreased significantly in 2001 during the
                  first quarter of 2002 there has been a continued increase in
                  oil and gas prices and this, together with the public
                  awareness of possible natural gas shortages, has sparked an
                  increased interest in partnership drilling. Daugherty
                  Petroleum plans to increase its sponsorship of drilling
                  programs to increase drilling revenue, cash flow from sale of
                  production and increase its natural gas and oil reserves. A
                  decrease in the price of natural gas and/or surplus of natural
                  gas could result in a decrease in the interest and investment
                  in drilling programs sponsored by Daugherty Petroleum with a
                  resulting decrease in contract drilling revenue and cash flow
                  from the sale of production. However, Daugherty Resources
                  believes that investments in drilling programs are, in part,
                  influenced by favorable tax treatment under the federal income
                  tax laws and will continue to be a source of funds to
                  Daugherty Resources.



                                       4
<PAGE>

         -        ACQUISITION OF REVENUE PRODUCING PROPERTIES. Daugherty
                  Resources continues to review existing oil and gas properties
                  for acquisition in its areas of interest.

         -        GOLD AND SILVER PROPERTIES. It is the objective of Daugherty
                  Resources to realize the value of its gold and silver
                  properties by 1) obtaining a joint venture partner to provide
                  funds for additional exploration on its prospects or 2)
                  divesting of its gold and silver properties. Subsequent to
                  obtaining reports from two independent consultants management
                  prepared and distributed summary material to various
                  individuals and firms associated with the gold and silver
                  mining sector with the intent of soliciting an interest in
                  acquiring part or all of the property or providing capital as
                  a joint venture partner. Daugherty Resources has had several
                  discussions with the principals of those responding to the
                  summary material and Daugherty Resources continues to solicit
                  interest from those in the gold and silver industry.


RESULTS OF OPERATIONS

         For the three-month period ending March 31, 2002, Daugherty Resources'
gross revenues increased $744,578 to $3,962,525 from $3,217,947 for the same
period in 2001. Daugherty Resources experienced net income before taxes from
continuous operations of $963,192 for the three-month period ending March 31,
2002 compared to net income of $985,916 for the same period in 2001.

         Daugherty Resources' gross revenues were derived from drilling contract
revenues of $3,484,000 (87.92%), natural gas and oil operations and production
revenues of $194,148 (5.57%), and natural gas distribution revenues of $284,377
(7.10%).

         The increase in gross revenues of $744,578 was primarily attributable
to an increase in contract drilling revenue and an increase in gas transmission
and compression revenue during the first quarter of 2002. Revenues from oil and
gas production activities decreased $62,013 to $194,148 for the three-month
period ending March 31, 2002 from $256,161 for the same period in 2001. The
decrease in revenues from oil and gas production activities was primarily
attributable to lower oil and gas prices in the first quarter of 2002.

         Net gas and oil production for the first quarter of 2002 was 80,759
Mcfe (Mcf equivalents), compared to 73,547 Mcfe for the first quarter of 2001.
The average price of gas and oil for the first quarter of 2002 was $2.52/Mcf and
$19.50/barrel, respectively, compared to $5.49/Mcf and $25.66/barrel for the
first quarter of 2001.

         During the three-month period ended March 31, 2002, total direct costs
increased by $739,623 to $2,257,792 compared to $1,518,169 in 2001. Contract
drilling expenses increased $560,916 from $1,345,204 for the quarter ending
March 31, 2001 compared to $1,906,120 for the quarter ending March 31, 2002. Oil
and gas production expenses increased $23,327 from $105,030 for the quarter
ending March 31, 2001 compared to $128,357 for the quarter ending March 31,
2002. Gas transmission and compression costs increased $155,380 from $67,935 for
the quarter ending March 31,2001, compared to $223,315 for the quarter ended
March 31, 2002. The increase in overall direct costs was primarily due to the
drilling and related costs for seventeen (17) natural gas wells in the first
quarter of 2001 compared to eleven (11) in the same period of 2001 and
additional transmission and marketing expenses related to Sentra Corporation.

         For the period ending March 31, 2002, Sentra Corporation, Daugherty
Resources' natural gas utility subsidiary, had sales of $65,289 compared with
sales of $42,916 for the first three months of 2001. In the first quarter of
2002, Sentra installed approximately 1,675 feet of transmission line and 1,285
feet of distribution line. As of March 31, 2002, Sentra has 134 customers, 41 of
which are commercial and agri-business accounts. In addition, Sentra has 53
applications from customers requesting service. Sentra expects high demand for
natural gas service because of the ease of usage, economy and reliability of
natural gas. Further, demand is expected to increase because of continued growth
and acceptance of natural gas by the chicken industry that is a major segment
the economy in Sentra's service areas.

         On March 8, 2001 Sentra entered into an agreement with Clay Gas Utility
District of Celina, Tennessee to manage its business, which currently consists
of 157 customers, including 28 industrial, commercial and agri-



                                       5
<PAGE>

business connections. Sentra also reads Clay Gas' meters, issue its bills and
collects its receivables. On February 1, 2001, Daugherty Petroleum entered into
agreements with Sentra and Clay Gas Utility District to supply natural gas to
the two utilities. Daugherty purchases the natural gas it sells to the utilities
from a gas marketing company that delivers the gas to the utilities sales meter
on the Texas Eastern Transmission line in Monroe County, Kentucky. The two
contracts have subsequently been extended and are scheduled to expire July 31,
2003.

         Daugherty Resources believes there are several factors that will
increase revenues in the year 2002, including increased oil and gas production
from its interests in the wells drilled in 2001 and the first quarter of 2002,
and the resulting expansion of its gas gathering system to allow more gas
production to be transported to market. In addition, increased natural gas
prices should create more interest in Daugherty Resources drilling programs,
which would increase turnkey drilling revenues.


                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         None.

ITEM 5.  OTHER INFORMATION.

         Not Applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)  LIST OF DOCUMENTS FILED WITH THIS REPORT.
              -----------------------------------------
                                                                          PAGE
                                                                          ----
         (1)  Balance Sheet for the Period Ended March 31, 2002.........II-III
              Income Statement for the Period Ended March 31, 2002........... V
              Segmented Information.........................................XIV
              Computation of Per Share Earnings..............................IV

         All schedules have been omitted since the information required to be
submitted has been included in the financial statements or notes or has been
omitted as not applicable or not required.

         (2)  Exhibits--

              The exhibits indicated by an asterisk (*) are incorporated by
              reference.

         EXHIBIT
         NUMBER   DESCRIPTION OF EXHIBIT
         ------   ----------------------

          3(a)*   Memorandum and Articles for Catalina Energy & Resources Ltd.,
                  a British Columbia corporation, dated January 31, 1979, filed
                  as an exhibit to Form 10 Registration Statement filed May 25,
                  1984. File No. 0-12185.

          3(b)*   Certificate for Catalina Energy & Resources Ltd., a British
                  Columbia corporation, dated November 27, 1981, changing the
                  name of Catalina Energy & Resources Ltd. to Alaska Apollo Gold
                  Mines Ltd., and further changing the authorized capital of the
                  Company from 5,000,000 shares of common stock, without par
                  value per share, to 20,000,000 shares of common stock, without
                  par value per share, filed as an exhibit to Form 10
                  Registration Statement filed May 25, 1984. File No. 0-12185.



                                       6
<PAGE>


          3(c)*   Certificate of Change of Name for Alaska Apollo Gold Mines
                  Ltd., a British Columbia corporation, dated October 14, 1992,
                  changing the name of Alaska Apollo Gold Mines Ltd. to Alaska
                  Apollo Resources Inc., and further changing the authorized
                  capital of the Company from 20,000,000 shares of common stock,
                  without par value per share, to 6,000,000 shares of common
                  stock, without par value per share.

          3(d)*   Altered Memorandum of Alaska Apollo Resources Inc., a British
                  Columbia corporation, dated September 9, 1994, changing the
                  authorized capital of the Company from 6,000,000 shares of
                  common stock, without par value per share, to 20,000,000
                  shares of common stock, without par value per share.

          3(e)*   Certificate of Change of Name for Alaska Apollo Resources
                  Inc., a British Columbia corporation, dated June 24, 1998,
                  changing the name of Alaska Apollo Resources Inc. to Daugherty
                  Resources, Inc. and further changing the authorized capital of
                  the Registrant from 20,000,000 shares of common stock, without
                  par value per share, to 50,000,000 shares of common stock,
                  without par value, and authorizing the creation of 6,000,000
                  shares of preferred stock, without par value per share. (File
                  No.0-12185).

          3(f)*   Altered Memorandum of Daugherty Resources, Inc., a British
                  Columbia corporation, dated June 24, 1998, changing the
                  authorized common stock of the Registrant from 50,000,000
                  shares of common stock, without par value per share, to
                  10,000,000 shares of common stock, without par value. (File
                  No.0-12185).

          3(g)*   Altered Memorandum of Daugherty Resources, Inc., a British
                  Columbia corporation, dated June 25, 1998, changing the
                  authorized preferred stock of the Registrant from 6,000,000
                  shares of preferred stock, without par value per share, to
                  1,200,000 shares of preferred stock, without par value. Filed
                  as an exhibit to Form 8-K, by the Company for reporting an
                  event on June 29, 1998. (File No.0-12185).

          3(h)*   Special Resolution of Daugherty Resources, Inc., a British
                  Columbia corporation, dated June 30, 1999, changing the
                  authorized capital of the Registration from 10,000,000 shares
                  of common stock, without par value per share, to 100,000,000
                  shares of common stock, without par value per share, and from
                  1,200,000 shares of preferred stock, without par value per
                  share, to 5,000,000 shares of preferred stock, without par
                  value per share. Altered Memorandum of Daugherty Resources,
                  Inc., dated June 30, 1999, changing the authorized capital of
                  the Company to 105,000,000 shares divided into 5,000,000
                  shares of preferred stock, without par value and 100,000,000
                  common shares without par value. Special Resolution of
                  Daugherty Resources, Inc., a British Columbia corporation,
                  dated June 30, 1999, altering Article 23.1(b) of the Company
                  Articles by substituting a new Article 23.1(b) that sets forth
                  the conditions and terms upon which the preferred shares can
                  be converted to common stock. Filed as an exhibit to Form 8-K,
                  for the Company for reporting an event on October 25, 1999.
                  (File No.0-12185)


          4*      See Exhibit No. 3(a), (b). (c), (d), (e), (f), (g) and (h)

         10(a)*   Alaska Apollo Resources Inc. 1997 Stock Option Plan, filed as
                  Exhibit 10(a) to Form 10-K for the Company for the fiscal year
                  ended December 31, 1996. (File No. 0-12185).

         10(b)*   Incentive Stock Option Agreement by and between Alaska Apollo
                  Resources Inc. and William S. Daugherty dated March 7, 1997,
                  filed as Exhibit 10(b) to Form 10-K for the Company for the
                  fiscal year ended December 31, 1996. (File No. 0-12185).

         10(c)*   Agreement of Purchase and Sale by and between Environmental
                  Energy Partners I, Ltd., Environmental Energy Partners II,
                  Ltd, Environmental Operating Partners, Ltd., Environmental
                  Holding, LLC, Environmental Processing Partners, Ltd.,
                  Environmental Energy, Inc., and



                                       7
<PAGE>

                  Environmental Operating, Inc., as Sellers and Daugherty
                  Petroleum, Inc., as Buyer, and Daugherty Resources, Inc. as
                  Accommodating Party, dated as of January 26, 1999, filed as an
                  Exhibit to Form 8-K by the Company for reporting an event on
                  May 25, 1999 (File No. 0-12185).

          10(d)*  Agreement for the Purchase and Sale by and between H&S Lumber,
                  Inc., Buyer, and Daugherty Petroleum, Inc., Seller, for the
                  sale of Red River Hardwoods, Inc., an 80% subsidiary of
                  Daugherty Petroleum, Inc., which was effective June 30, 1999,
                  and closed December 1, 1999, filed as Exhibit 10.1 to Form 8-K
                  by the Company for reporting an event on December 9, 1999
                  (File No. 0-12185).

          11      Computation of Per Share Earnings.

          24      Powers of Attorney.

          (b)*    Reports on Form 8-K.
                  None

          (c)     Financial Statement Schedules.

                  No schedules are required, as all information required has
                  been presented in the unaudited financial statements.

FORWARD-LOOKING STATEMENTS

         This Form 10-KSB contains forward-looking statements within meaning of
section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934, including statements regarding, among other items, our
growth strategies, anticipated trends in our business and our future results of
operations, market conditions in the oil and gas industry, our ability to make
and integrate acquisitions and the outcome of litigation and the impact of
governmental regulation. These forward-looking statements are based largely on
our expectations and are subject to a number of risks and uncertainties, many of
which are beyond our control. Actual results could differ materially from these
forward-looking statements as a result of, among other things:

         -   A decline in oil and/or gas production or prices.
         -   Incorrect estimates of required capital expenditures.
         -   Increases in the cost of drilling, completion and gas collection
             or other costs of production and operations.
         -   An inability to meet growth projections.
         -   Government regulations.
         -   Other risk factors discussed or not discussed herein.

         In addition, the words "believe", "may", "will", "estimate",
"continue", "anticipate", "intend", "expect" and similar expressions, as they
relate to Daugherty Petroleum and/or Daugherty Resources, our business or our
management, are intended to identify forward-looking statements.

         Daugherty Resources believes that the expectations reflected in the
forward-looking statements and the basis of the assumptions of such
forward-looking statements are reasonable. However, in light of these risks and
uncertainties, the forward-looking events and circumstances discussed in this
report may not occur and actual results could differ materially from those
anticipated or implied in the forward-looking statements.

         Daugherty Resources claims the protection of the safe harbor for
forward-looking statements combined in the Private Securities Litigation Reform
Act of 1995 for these statements.



                                       8
<PAGE>

                                   SIGNATURES

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

                                           DAUGHERTY RESOURCES, INC.


                                           By:  /s/ William S. Daugherty
                                                ------------------------
                                                William S. Daugherty, President


Dated: May 15,2002.


         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 indicated.

<TABLE>
<CAPTION>

    SIGNATURE                               TITLE                               DATE
    ---------                               -----                               ----

<S>                               <C>                                       <C>
/s/ William S. Daugherty          Chairman of the Board, President,
---------------------------           Director of the Registrant            May 15, 2002
William S. Daugherty



/s/ James K. Klyman *
---------------------------           Director of the Registrant            May 15, 2002
James K. Klyman



/s/ Charles L. Cotterell
---------------------------           Director of the Registrant            May 15, 2002
Charles L. Cotterell



*By  /s/ William S. Daugherty
  ---------------------------
        William S. Daugherty
        Attorney-in-Fact
</TABLE>


                                       9
<PAGE>
                            DAUGHERTY RESOURCES INC.

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)
                                  (UNAUDITED)

                                 MARCH 31, 2002



<PAGE>






                            DAUGHERTY RESOURCES INC.



                                 MARCH 31, 2002


CONTENTS

                                                                   PAGE


REVIEW ENGAGEMENT REPORT                                             I


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      Balance Sheet                                              II-III

      Statement of Operations and Deficit                            IV

      Statement of Cash Flows                                         V

      Notes to Financial Statements                            VI-XVIII




<PAGE>
                                                                         PAGE I









                            REVIEW ENGAGEMENT REPORT


To the Directors of
DAUGHERTY RESOURCES INC.

We have reviewed the condensed consolidated balance sheet of DAUGHERTY RESOURCES
INC. as at March 31, 2002 and the condensed consolidated statements of
operations and deficit and cash flows for the three months ended. Our review was
made in accordance with Canadian generally accepted standards for review
engagements and accordingly consisted primarily of enquiry, analytical
procedures and discussion related to information supplied to us by the company.

A review does not constitute an audit and consequently we do not express an
audit opinion on these condensed consolidated financial statements.

Based on our review, nothing has come to our attention that causes us to believe
that these condensed consolidated financial statements are not, in all material
respects, in accordance with Canadian generally accepted accounting principles.

We have previously audited, in accordance with auditing standards generally
accepted in Canada, the balance sheet as at December 31, 2001 and the related
statements of operations and deficit and cash flows for the year then ended (not
presented herein) and, in our report dated March 28, 2002, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet, as of
December 31, 2001, is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.



         KRAFT, BERGER, GRILL, SCHWARTZ, COHEN & MARCH LLP
                              CHARTERED ACCOUNTANTS
Toronto, Ontario
May 8, 2002


<PAGE>
                                                                         PAGE II


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (U.S. FUNDS)

                                 MARCH 31, 2002



<TABLE>
<CAPTION>

                                  ASSETS
                                                MARCH 31,           DECEMBER 31,
                                                  2002                 2001
                                               -----------          -----------

<S>                                            <C>                  <C>
CURRENT
    Cash and cash equivalents                  $   757,780          $ 2,244,420
    Accounts receivable                            353,821              423,359
    Prepaid expense and other asset                203,650              202,015
    Loans to related parties (Note 4)               30,676               30,676
                                               -----------          -----------
                                                 1,345,927            2,900,470

BONDS AND DEPOSITS                                  41,000               41,000

OIL AND GAS PROPERTIES (Note 2)                  9,103,705            8,834,087

PROPERTY AND EQUIPMENT (Note 3)                    840,753              820,769

LOANS TO RELATED PARTIES (Note 4)                  731,348              533,051

INVESTMENT (Note 5)                                 69,347              109,254

DEFERRED FINANCING COSTS                            64,186               71,066

GOODWILL                                           313,177              313,177
                                               -----------          -----------


                                               $12,509,443          $13,622,874
                                               ===========          ===========
</TABLE>



See accompanying notes to condensed consolidated financial statements.

APPROVED ON BEHALF OF THE BOARD:


      /s/ William S. Daugherty                /s/ Charles L. Cotterell
------------------------------------    ------------------------------------
              Director                                 Director


<PAGE>
                                                                        PAGE III


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (U.S. FUNDS)

                                 MARCH 31, 2002

<TABLE>
<CAPTION>
                                                        LIABILITIES
                                                                                        MARCH 31,             DECEMBER 31,
                                                                                          2002                   2001
                                                                                      ------------           ------------

<S>                                                                                    <C>                    <C>
CURRENT
  Bank loans (Note 5)                                                                      141,247                146,067
  Accounts payable                                                                         714,573                875,953
  Accrued liabilities                                                                    1,354,103                793,135
  Customers' drilling deposits                                                             151,700              2,854,700
  Long-term debt (Note 6)                                                                  238,280                233,780
                                                                                      ------------           ------------
                                                                                         2,599,903              4,903,635

LONG-TERM DEBT (Note 6)                                                                  3,418,101              3,455,642
                                                                                      ------------           ------------
                                                                                         6,018,004              8,359,277
                                                                                      ------------           ------------

                                                   SHAREHOLDERS' EQUITY

CAPITAL STOCK (Note 7)
  AUTHORIZED
         5,000,000 Preferred shares, non-voting, non-cumulative, convertible
       100,000,000 Common shares

  ISSUED
           562,546 Preferred shares (2001 - 563,249)                                     1,801,245              1,802,542
         5,346,600 Common shares (2001 - 4,959,112)                                     24,450,145             24,184,198
            21,000 Common shares held in treasury, at cost                                 (23,630)               (23,630)
  Capital stock to be issued                                                                55,226                 55,226
                                                                                      ------------           ------------
                                                                                        26,282,986             26,018,336

DEFICIT                                                                                (19,791,547)           (20,754,739)
                                                                                      ------------           ------------
                                                                                         6,491,439              5,263,597
                                                                                      ------------           ------------

                                                                                      $ 12,509,443           $ 13,622,874
                                                                                      ============           ============
</TABLE>



See accompanying notes to condensed consolidated financial statements.



<PAGE>
                                                                         PAGE IV


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

           CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
                                  (U.S. FUNDS)

<TABLE>
<CAPTION>
                                                                                       FOR THE THREE MONTH
                                                                                       PERIOD ENDED MARCH 31
                                                                                     2002                  2001
                                                                                ------------           ------------
<S>                                                                                <C>                    <C>
REVENUE
  Contract drilling (Not less than 95% attributable to related
    party transactions)                                                            3,484,000              2,825,499
  Oil and gas production                                                             194,148                256,161
  Gas transmission and compression                                                   284,377                136,287
                                                                                ------------           ------------
                                                                                   3,962,525              3,217,947
                                                                                ------------           ------------
DIRECT EXPENSES
  Contract drilling                                                                1,906,120              1,345,204
  Oil and gas production                                                             128,357                105,030
  Gas transmission and compression                                                   223,315                 67,935
                                                                                ------------           ------------
                                                                                   2,257,792              1,518,169
                                                                                ------------           ------------

GROSS PROFIT                                                                       1,704,733              1,699,778
                                                                                ------------           ------------

EXPENSES
  Selling, general and administrative                                                585,025                502,332
  Depreciation, depletion and amortization                                           139,380                218,618
  Interest                                                                            58,539                 52,442
                                                                                ------------           ------------
                                                                                     782,944                773,392
                                                                                ------------           ------------

INCOME BEFORE THE FOLLOWING                                                          921,789                926,386

  Equity share in earnings from undivided interest in
    oil and gas properties                                                            41,403                 59,530
                                                                                ------------           ------------

NET INCOME FOR THE PERIOD                                                            963,192                985,916

DEFICIT, beginning of period                                                     (20,754,739)           (20,427,481)
                                                                                ------------           ------------

DEFICIT, end of period                                                          $(19,791,547)          $(19,441,565)
                                                                                ============           ============
NET INCOME PER SHARE (Note 8)
  Basic                                                                         $       0.19           $       0.29
                                                                                ============           ============

  Fully diluted                                                                 $       0.18           $       0.27
                                                                                ============           ============
</TABLE>


See accompanying notes to condensed consolidated financial statements


<PAGE>
                                                                          PAGE V


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (U.S. FUNDS)

<TABLE>
<CAPTION>
                                                                              FOR THE THREE MONTH
                                                                             PERIOD ENDED MARCH 31
                                                                          2002                  2001
                                                                       -----------           -----------
<S>                                                                    <C>                   <C>
OPERATING ACTIVITIES
    Net income for the period                                          $   963,192           $   985,916
    Equity share in earnings from undivided interest in oil
      and gas properties                                                   (41,403)              (59,530)
    Amortization and depletion                                             139,380               218,618
    Change in non-cash components of working capital
      (Increase) decrease in prepaid expenses and other asset               (1,635)                1,471
      Decrease in accounts receivable                                       69,538                40,889
      Increase (decrease) in accounts payable                             (161,380)              193,519
      Increase in accrued liabilities                                      560,968                98,269
      Decrease in customers' drilling deposits                          (2,703,000)           (1,185,165)
                                                                       -----------           -----------
                                                                        (1,174,340)              293,987
                                                                       -----------           -----------
FINANCING ACTIVITIES
    Decrease in long-term debt                                             (33,041)              (61,780)
    Issue of capital stock                                                 264,650                 1,694
    Decrease in bank loans                                                  (4,820)               (4,276)
                                                                       -----------           -----------
                                                                           226,789               (64,362)
                                                                       -----------           -----------

INVESTING ACTIVITIES
    Increase (decrease) in property and equipment                          (42,484)                2,954
    Increase in loans to related parties                                  (198,297)             (222,535)
    Additions to oil and gas properties, net                              (338,215)              (80,930)
    Decrease in investment                                                  39,907                     -
                                                                       -----------           -----------
                                                                          (539,089)             (300,511)
                                                                       -----------           -----------

CHANGE IN CASH AND CASH EQUIVALENTS                                     (1,486,640)              (70,886)

CASH AND CASH EQUIVALENTS, beginning of period                           2,244,420               426,660
                                                                       -----------           -----------

CASH AND CASH EQUIVALENTS, end of period                               $   757,780           $   355,774
                                                                       ===========           ===========

SUPPLEMENTAL DISCLOSURE
  Interest paid                                                        $    91,540           $    74,889
                                                                       ===========           ===========

  Income taxes paid                                                    $         -            $        -
                                                                       ===========           ===========
</TABLE>





See accompanying notes to condensed consolidated financial statements.


<PAGE>
                                                                         PAGE VI

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002



1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         These condensed consolidated financial statements have been prepared in
         accordance with Canadian generally accepted accounting principles,
         which conform in all material respects, with the accounting principles
         generally accepted in the United States.

         (a)      GENERAL

                  In the opinion of the company, the accompanying unaudited
                  condensed consolidated financial statements contain all
                  adjustments (consisting of only normal recurring adjustments)
                  which, in the opinion of management, are necessary to present
                  fairly the consolidated financial position as at March 31,
                  2002 and consolidated results of operations and deficit and
                  cash flows for the three months then ended.

                  While the company believes that the disclosures presented are
                  adequate to make the information not misleading, it is
                  suggested that these condensed consolidated financial
                  statements be read in conjunction with the consolidated
                  financial statements and the notes included in the company's
                  latest annual report on Form 20-F.


         (b)      BASIS OF CONSOLIDATION

                  The condensed consolidated financial statements include the
                  accounts of the company and its wholly-owned subsidiary,
                  Daugherty Petroleum Inc. ("DPI") and its 100% owned
                  subsidiary. All material inter-company accounts and
                  transactions have been eliminated in consolidation.

         (c)      ESTIMATES

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities and disclosures 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.

                  Material estimates are particularly significant as they relate
                  to the determination of the reserves of oil and gas
                  properties. In connection with the determination of these
                  carrying amounts, management must make estimates relating to
                  future production, future product prices and operating
                  expenses.


<PAGE>
                                                                        PAGE VII

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002



2.       OIL AND GAS PROPERTIES

<TABLE>
<CAPTION>
                                                                  MARCH 31,                        DECEMBER 31
                                                                    2002                              2001
                                                ---------------------------------------------         ----
                                                                ACCUMULATED
                                                    COST        AMORTIZATION          NET             NET
                                                -----------      -----------      -----------     -----------

<S>                                             <C>              <C>              <C>             <C>
          Proved properties                     $ 7,573,145      $ 1,458,606      $ 6,114,539     $ 6,146,723
          Wells and related equipment               683,252          124,955          558,297         563,695
                                                -----------      -----------      -----------     -----------
                                                  8,256,397        1,583,561        6,672,836       6,710,418
                                                -----------      -----------      -----------     -----------
          EQUITY IN OIL AND GAS PARTNERSHIP
            Equity, beginning of period                                             2,123,669       1,283,769
            Additional investment                                                     307,200         933,002
            Withdrawals                                                               (41,403)       (331,221)
            Share in partnership's earnings                                            41,403         238,119
                                                                                  -----------     -----------
            Equity, end of period                                                   2,430,869       2,123,669
                                                                                  -----------     -----------

          TOTAL OIL AND GAS PROPERTIES                                            $ 9,103,705     $ 8,834,087
                                                                                  ===========     ===========
</TABLE>




3.       PROPERTY AND EQUIPMENT


<TABLE>
<CAPTION>
                                                                     MARCH 31,                       DECEMBER 31,
                                                                       2002                             2001
                                                   --------------------------------------------         ----
                                                                   ACCUMULATED
                                                       COST        AMORTIZATION         NET              NET
                                                       ----        ------------         ---              ---
<S>                                                 <C>              <C>             <C>              <C>
          Land                                      $    12,908      $       -       $   12,908       $  12,908
          Buildings                                       6,239          1,456            4,783           4,887
          Machinery and equipment                       664,102         97,511          566,591         550,499
          Office furniture, fixtures and equipment       97,568         80,502           17,066          17,406
          Aircraft                                      125,000          4,167          120,833         122,396
          Vehicles                                      267,463        148,891          118,572         112,673
                                                    -----------      ---------       ----------       ---------

                                                    $ 1,173,280      $ 332,527       $  840,753       $ 820,769
                                                    ===========      =========       ==========       =========
</TABLE>



<PAGE>
                                                                       PAGE VIII


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002



4.       LOANS TO RELATED PARTIES

         The loans to related parties represent loans receivable from officers
         of the Company and certain shareholders totalling $353,951 and
         $240,560, respectively, bearing interest at 6% per annum and are
         payable monthly from production revenues for a period of five to ten
         years with a balloon payment at maturity date. The loans are
         collateralized by the officers' ownership interest in drilling
         partnerships with DPI. The loans receivable from the officers of DPI
         totalling $167,513 are non-interest bearing and unsecured.


5.       BANK LOANS

<TABLE>
<CAPTION>
                                                                                                MARCH 31,     DECEMBER 31
                                                                                                  2002             2001
                                                                                               ---------        ---------
<S>                                                                                            <C>              <C>
                   NOTE PAYABLE bearing interest at 4.71% per annum, maturing January 15,
                   2003 and is collateralized by a certificate of deposit amounting to
                   $135,367                                                                    $ 134,162        $ 134,162

                   NOTE PAYABLE bearing interest at prime plus 6% per annum, due on
                   September 22, 2002 and is collateralized by 200,000 shares of stock
                   owned by a director of the company                                              7,085           11,905
                                                                                               ---------        ---------

                                                                                               $ 141,247        $ 146,067
                                                                                               =========        =========
</TABLE>

6.       LONG-TERM DEBT

         On July 8, 1986, the company purchased the mineral property on Unga
         Island, Alaska for debt in the amount of $854,818. The debt is
         non-interest bearing, payable at $2,000 per month, until fully paid,
         and is secured by deeds of trust over the Unga Island mineral claims
         and certain buildings and equipment located thereon.

         The purchase agreement also provides for the payment of monthly
         royalties at 4% of net smelter returns or net revenue, as defined in
         the agreement. Any royalties paid reduce the amount of the purchase
         price payable above.




<PAGE>
                                                                         PAGE IX

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002


6.       LONG-TERM DEBT (Continued)

         The obligation is stated at its remaining face value of $458,818 and
         has not been discounted.

<TABLE>
<CAPTION>
                                                                                               MARCH 31,       DECEMBER 31
                                                                                                2002             2001
                                                                                             -----------       -----------

<S>                                                                                              <C>               <C>
         NOTE PAYABLE as outlined above                                                          458,818           462,818

         10% CONVERTIBLE NOTES mature July 31, 2004, collateralized by DPI's
         mining properties. Interest is payable semi-annually on February 1 and
         August 1, commencing on February 1, 2000. At the option of the holder,
         the note is convertible on or before July 31, 2004 to shares of common
         stock at the rate of 368.8132 shares per each $1,000 principal amount
         of the notes. In addition, the put rights are exercisable during the 10
         day period commencing 14 months after August 17, 2000 (closing date)
         requiring the company to redeem the notes 18 months (put date) after
         the closing date at a price equal to 100% of principal amount plus
         accrued interests and a premium equal to 25% of principal, payable in
         put shares. After the put date, the company may redeem the note in
         whole or part at 100% of principal amount plus accrued interest.                        850,000           850,000

         NOTE PAYABLE TO KEYBANK NATIONAL ASSOCIATION. Variable interest at the
         bank's prime rate plus 1.25%, which may vary based upon certain
         conditions in the credit agreement is payable monthly. The interest
         rate at March 31, 2002 was 6%. The total available credit under the
         terms of the note is $10,000,000. The maximum amount of funding
         available is limited to the Company's borrowing base, which is
         redetermined semi-annually. The borrowing base at March 31, 2002 was
         $2,050,123. The note is secured by a general lien on all corporate
         assets, a first mortgage on oil and gas interests and pipelines, and
         assignments of major oil and gas and transportation contracts.                        2,006,734         2,006,734

         VARIOUS NOTES PAYABLE, bearing interest ranging from 5.0% to 9.5% per
         annum, payable monthly in varying amounts up to 2005, collateralized
         by the equipment and vehicles acquired                                                  117,913           128,107

         NON-INTEREST BEARING NOTE, secured by 25% of production on 15
         gas wells payable monthly at $2,796, maturing in 2003                                    14,322            23,117
                                                                                             -----------       -----------

                           Carried forward.........                                          $ 3,447,787       $ 3,470,776
                                                                                             ===========       ===========

</TABLE>



<PAGE>
                                                                          PAGE X

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002


6.       LONG-TERM DEBT (Continued)


<TABLE>
<CAPTION>
                                                                                              MARCH 31,       DECEMBER 31,
                                                                                                2002             2001
                                                                                             -----------       -----------
<S>                                                                                          <C>               <C>
                                    Brought forward......                                    $ 3,447,787       $ 3,470,776

         LOAN PAYABLE TO NON-AFFILIATED COMPANY, bearing interest at 10% per
         annum, collateralized by the assets and the corporate guarantee of a
         wholly-owned subsidiary, payable in quarterly payments of
         interest only.  Principal is due currently.                                              64,779            64,779

         NOTE PAYABLE TO A CERTAIN INDIVIDUAL, bearing interest at 8% per annum,
         payable in 60 instalments of $1,370, including interest,
         maturing in February 2005                                                                45,763            47,898

         LOANS PAYABLE TO VARIOUS BANKS with interest rates ranging from 8.45%
         to 11% per annum, payable in total monthly instalments of $3,257 with
         maturities up to June 17, 2003, collateralized by
         receivables and various vehicles                                                         73,402            81,320

         UNSECURED LOAN PAYABLE TO TRIO GROWTH, bearing interest at 10%
         per annum, principal and interest due currently                                          24,650            24,650
                                                                                             -----------       -----------
                                                                                               3,656,381         3,689,423
           Less:  Current portion                                                                238,280           233,781
                                                                                             -----------       -----------

                                                                                             $ 3,418,101       $ 3,455,642
                                                                                             ===========       ===========
</TABLE>

         Principal repayments for the next five years are as follows:

         2002                                                      $  238,280
         2003                                                         115,536
         2004                                                       2,902,165
         2005                                                          33,460
         2006                                                          24,000
         Thereafter                                                   342,940
                                                                   ----------
                                                                   $3,656,381
                                                                   ==========



<PAGE>
                                                                         PAGE XI

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002



7.       CAPITAL STOCK

         (a)      PREFERRED SHARES ISSUED

<TABLE>
<CAPTION>
                                                                        SHARES            AMOUNT
                                                                      ----------         --------
                                                                           #           $

<S>                                                                  <C>                <C>
                  Balance, March 31, 2002                              1,100,672          620,844

                  Converted to common shares                          (1,100,672)        (620,844)
                  Issued for acquisition of oil and gas interest         563,249        1,802,541
                                                                      ----------        ---------

                  Balance, December 31, 2001                             563,249        1,802,541

                  Converted to common shares                                (703)          (1,296)
                                                                      ----------        ---------

                  Balance, December 31, 2001                             562,546        1,801,245
                                                                      ==========        =========
</TABLE>

         (b)      COMMON SHARES ISSUED

<TABLE>
<CAPTION>
                                                                        SHARES            AMOUNT
                                                                      ----------         --------
                                                                               #                $
<S>                                                                    <C>             <C>
                  Balance, December 31, 2000                           3,442,852       23,113,991

                  Issued for cash                                         62,500          125,000
                  Issued to employees as incentive bonus                 157,000          235,500
                  Issued for exercise of options and warrants             26,109           26,360
                  Issued for conversion of preferred shares            1,229,502          620,844
                  Issued for payment of accounts payable                  40,066           60,099
                  Issued for acquisition of oil and gas                    1,083            2,404
                                                                       ---------       ----------

                  Balance, December 31, 2001                           4,959,112       24,184,198

                  Issued to employees as incentive bonus                 174,000          109,620
                  Issued for payment of accounts payable                 212,785          155,031
                  Issued for conversion of preferred stock                   703            1,296
                                                                       ---------       ----------

                  Balance, March 31, 2002                              5,346,600       24,450,145
                                                                       =========       ==========

</TABLE>





<PAGE>
                                                                        PAGE XII

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002

7.       CAPITAL STOCK (Continued)

         (c)      SHARES TO BE ISSUED
<TABLE>

<S>                                                                                           <C>
                  24,887 COMMON SHARES to be issued in connection with the purchase of
                    Ken-tex oil and gas property in 1999                                      $ 55,226
                                                                                              ========

</TABLE>

         (d)      STOCK OPTIONS

<TABLE>
<CAPTION>
                                                                                               WEIGHTED
                                                                                                AVERAGE
                                                             ISSUED         EXERCISABLE          PRICE           EXPIRY
                                                             ------         -----------          -----           ------
                                                                                                 $
<S>                                                         <C>               <C>                <C>
                  Balance, December 31, 2000                2,521,726         2,406,170                 1.98
                                                                             ==========          ===========
                  2001 - issued for consulting services        65,607                                               (i)
                       - exercised                            (26,373)
                       - expired                              (74,000)                             0.38-1.25
                                                           ----------

                  Balance, December 31, 2001                2,486,960         2,442,515                 2.02
                                                                             ==========          ===========
                       - expired                             (415,000)                                  1.54
                                                           ----------

                  Balance, March 31, 2002                   2,071,960         2,071,960                 2.12
                                                           ==========         =========          ===========
</TABLE>


                  (i)      These options were granted to four individuals for
                           services performed on behalf of the Company. The
                           options, which were paid in addition to cash
                           compensation, were exercisable immediately, expire on
                           October 27, 2003 and have exercise prices ranging
                           from $1.50 to $2.13.

         (e)      WARRANTS

<TABLE>
<CAPTION>
                                                                                                 WEIGHTED
                                                                                                 AVERAGE
                                                                                ISSUED             PRICE        EXPIRY
                                                                                ------             -----        ------

                                                                                                   $

<S>                                                                           <C>                 <C>
                  Balance, December 31, 2000                                  2,470,091                 2.65
                       - issued for acquisition of oil and gas
                           property (Note 2a)                                   302,528            1.75-4.50       (i)
                       - issued for consulting services                         195,222            1.22-2.20      (ii)
                       - exercised                                                 (320)           1.00-1.75
                       - expired                                                (23,800)                2.50
                                                                            -----------           ----------
                  Balance, December 31, 2001 (Carried forward...)             2,943,721                 2.61
</TABLE>
<PAGE>
                                                                       PAGE XIII


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002


7.       CAPITAL STOCK (Continued)

         (e)      WARRANTS (Continued)

<TABLE>
<CAPTION>
                                                                                               WEIGHTED
                                                                                                AVERAGE
                                                                              ISSUED             PRICE           EXPIRY
                                                                              ------             -----           ------

                                                                                                   $

<S>                                                                        <C>                  <C>
                  Balance, December 31, 2001  (Brought forward...)         2,943,721                 2.61
                       - expired                                            (500,000)            .65-2.50
                                                                        ------------         ------------

                  Balance, March 31, 2002                                  2,443,721                 2.76
                                                                        ============         ============
</TABLE>

                  (i)      These warrants expire July 14, 2006
                  (ii)     These warrants expire December 31, 2004



8.       INCOME PER SHARE

         (a)      BASIC

                  Income per share is calculated using the weighted average
                  number of shares outstanding during the period. The weighted
                  average of common shares was 5,071,319 (2001 - 3,446,533).

         (b)      FULLY DILUTED INCOME PER SHARE

                  Fully diluted income per share have been calculated on the
                  same basis with the weighted average number of shares
                  outstanding during the period totalling 5,384,810 (2001 -
                  3,760,025) and potential common shares outstanding during the
                  period.

9.       RELATED PARTY TRANSACTIONS

         The company is party to certain agreements and transactions in the
         normal course of business. Significant related party transactions not
         disclosed elsewhere include the following.

         (a)      Shareholder Information

                  During 1993, a shareholder expended, on behalf of the company,
                  shareholder information expenses in the amount of $75,000. The
                  company has recorded a reserve provision against payment of
                  this amount until the company's mining operations commence
                  production.


<PAGE>
                                                                        PAGE XIV




                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002


9.       RELATED PARTY TRANSACTIONS (Continued)

         (b)      Lease of Gas Compressors

                  A limited liability company owned by a director and two
                  officers of the company leased two natural gas compressors for
                  $1,800 in 2002 (2001 - $3,850) to DPI.

         (c)      DPI invests in various company sponsored partnerships and
                  joint ventures by making capital contributions in exchange for
                  an equity interest typically represented by undivided working
                  interests up to 33% in the partnerships and up to 50% in a
                  joint venture. The portion of profit on drilling contracts
                  attributable to the company's ownership interest has been
                  eliminated. During period ended March 31, 2002, the company
                  executed and performed turnkey drilling contracts with company
                  sponsored partnerships totalling $3,484,000 (2001 -
                  $2,825,499), respectively, not less than 95% of which is
                  attributable to related party transactions.

10.      SEGMENTED INFORMATION


<TABLE>
<CAPTION>
                                                                            FOR THE THREE MONTH
                                          OIL AND                          PERIOD ENDED MARCH 31,
                                            GAS                             2002            2001
                                        DEVELOPMENT       CORPORATE         TOTAL           TOTAL
                                        -----------      ----------     ------------     -----------

<S>                                     <C>              <C>            <C>              <C>
         Revenue (net)                  $ 4,003,928      $        -     $  4,003,928     $ 3,277,477
                                        -----------      ----------     ------------     -----------

         Direct expenses                  2,257,792               -        2,257,792       1,518,169
         General corporate expenses               -         585,025          585,025         502,332
         Interest on long-term debt          41,387          17,152           58,539          52,442
         Amortization and depletion         132,500           6,880          139,380         218,618
                                        -----------      ----------     ------------     -----------
                                          2,431,679         609,057        3,040,736       2,291,561

         Income before income taxes       1,572,249        (609,057)         963,192         985,916
                                        ===========      ==========     ============     ===========

         Identifiable assets              9,482,447       3,026,996       12,509,443      11,195,828
                                        ===========      ==========     ============     ===========

         Capital expenditures               338,215               -          338,215          80,930
                                        ===========      ==========     ============     ===========
</TABLE>



<PAGE>
                                                                         PAGE XV
                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002

11.      UNITED STATES ACCOUNTING PRINCIPLES

         The company follows accounting principles generally accepted in Canada.
         Differences between generally accepted accounting principles in Canada
         and those applicable in the United States are summarized below.

         (a)      ACCOUNTING FOR STOCK OPTIONS AND PRO-FORMA DISCLOSURES
                  REQUIRED UNDER SFAS 123

                  Issued by the Financial Accounting Standards Board in October,
                  1995, SFAS 123 established financial accounting and reporting
                  standards for stock-based employee compensation plans as well
                  as transactions in which an entity issues its equity
                  instruments to acquire goods or services from non-employees.
                  This statement defines a fair value based method of accounting
                  for employee stock option or similar equity instruments, and
                  encourages all entities to adopt that method of accounting for
                  all their employee stock compensation plans. However, it also
                  allows an entity to continue to measure compensation cost of
                  those plans using the intrinsic value based method of
                  accounting prescribed by APB Opinion No. 25, Accounting for
                  Stock Issued to Employees.

                  Entities electing to remain with the accounting in Opinion 25
                  must make pro-forma disclosures of net income and, if
                  presented, earnings per share, as if the fair value based
                  methods of accounting defined by SFAS 123 had been applied.
                  SFAS 123 is applicable to fiscal years beginning after
                  December 15, 1995.

                  The company accounts for its stock options under Canadian
                  GAAP, which, in the company's circumstances are not materially
                  different from the amounts that would be determined under the
                  provisions of the Accounting Principles Board Opinion No. 25
                  "Accounting for Stock Issued to Employees" ("APB 25") and
                  related interpretations in accounting for its stock option
                  plan. There were no options issued during both quarters.

         (b)      COMPREHENSIVE INCOME

                  Statement of Financial Accounting Standards No. 130 (SFAS 130)
                  "Reporting Comprehensive Income" establishes standards for the
                  reporting and display of comprehensive income and its
                  components and requires restatement of all previously reported
                  information for comparative purposes. For the years ended
                  December 31, 2001, 2000 and 1999, the company's comprehensive
                  income was the same as net earnings.



<PAGE>
                                                                        PAGE XVI

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002

11.      UNITED STATES ACCOUNTING PRINCIPLES (Continued)

         (c)      RECENT ACCOUNTING PRONOUNCEMENTS

                  (i)      STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 133
                           (SFAS 133)

                           The company is currently reviewing SFAS 133 and
                           subsequent release SFAS 137 and SFAS 138, "Accounting
                           for Derivative Instruments and Hedging Activities".
                           The statement establishes accounting and reporting
                           standards for derivative instruments including
                           certain derivative instruments embedded in other
                           contracts and for hedging activities. SFAS 133
                           becomes effective for all fiscal quarters of fiscal
                           years beginning after June 18, 2000 and earlier
                           application is permitted as of the beginning of any
                           fiscal quarter subsequent to June 15, 2000.

                           The company intends to adopt the provisions of this
                           statement as of January 1, 2001. The company does not
                           anticipate any material impact to its results of
                           operations, financial position or cash flows upon the
                           adoption of SFAS No. 133.

                  (ii)     FASB INTERPRETATION NO. 44

                           In March 2000, the FASB issued Interpretation No. 44,
                           Accounting for Certain Transactions Involving Stock
                           Compensation - an Interpretation of APB Opinion No.
                           25. This interpretation provides guidance on the
                           application of APB Opinion No. 25, including (i) the
                           definition of an employee, (ii) the criteria for
                           determining whether a plan qualifies as a
                           non-compensatory plan, (iii) the accounting
                           consequence of various modifications to the terms of
                           a previously fixed stock option or award and (iv) the
                           accounting for an exchange of stock compensation
                           awards in a business combination. This interpretation
                           is effective July 1, 2000 and the effects of applying
                           the interpretation are recognized on a prospective
                           basis. The adoption of this interpretation are
                           recognized on a prospective basis. The adoption of
                           this interpretation did not have a material impact on
                           the company's results of operations or financial
                           condition.

                  (iii)    STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 140
                           (SFAS 140)

                           In September 2000, the FASB issued SFAS No. 140,
                           Accounting for Transfers and Servicing of Financial
                           Assets and Extinguishments of Liabilities, a
                           replacement of SFAS No. 125. This statement provides
                           accounting and reporting standards for transfers and
                           servicing of financial assets and extinguishments of
                           liabilities. The statement provides consistent
                           standards for distinguishing transfers of financial
                           assets that are sales from transfers that are secured
                           borrowings. The statement is effective for transfers
                           and servicing of financial assets and extinguishments
                           of liabilities occurring after March 31, 2001. The
                           statement is effective for recognition and
                           reclassification of collateral and for disclosures
                           relating to securitization transactions and
                           collateral for fiscal years ended after December 15,
                           2000. The adoption of SFAS No. 140 did not have a
                           material impact on the results of its operations or
                           financial position.


<PAGE>
                                                                       PAGE XVII


                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002

11.      UNITED STATES ACCOUNTING PRINCIPLES (Continued)

         (c)      RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

                  (iv)     STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 141
                           (SFAS 141) (Continued)

                           Statement 141 requires that (1) all business
                           combinations be accounted for by a single method -
                           the purchase method, (2) all intangible assets
                           acquired in a business combination are to be
                           recognized as assets apart from goodwill if they meet
                           one of two criteria - the contractual-legal criterion
                           or the separability criterion and (3) in addition to
                           the disclosure requirements in Opinion 16, disclosure
                           of the primary reasons for a business combination and
                           the allocation of the purchase price paid to the
                           assets acquired and liabilities assumed by major
                           balance sheet caption. When the amounts of goodwill
                           and intangible assets acquired are significant in
                           relation to the purchase price paid, disclosure of
                           other information about those assets is required,
                           such as the amount of goodwill by reportable segment
                           and the amount of the purchase price assigned to each
                           major intangible asset class. The provisions of
                           Statement 141 apply to all business combinations
                           initiated after June 30, 2001. The Company adopted
                           the provisions of Statement 1441 as of July 30, 2001
                           for all of its future acquisitions.

                  (v)      STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 142
                           (SFAS 142)

                           In July 2001, the FASB issued Statement of Financial
                           Accounting Standards No. 142, "Goodwill and Other
                           Intangibles" ("Statement 142"). Under Statement 142,
                           goodwill and indefinite lived intangible assets are
                           no longer amortized but are reviewed annually (or
                           more frequently if impairment indicators arise) for
                           impairment. Separable intangible assets that are not
                           deemed to have an indefinite life will continue to be
                           amortized over their estimated useful lives. The
                           adoption of this statement as of January 1, 2002 will
                           not have a material impact on the Company's results
                           of operations or financial condition.

                  (vi)     STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 143
                           (SFAS 143)

                           In August 2001, the FASB issued SFAS No. 143,
                           "Accounting for Asset Retirement Obligations," which
                           addresses financial accounting and reporting for
                           obligations associated with the retirement of
                           tangible long-lived assets and related asset
                           retirement costs. SFAS No. 143 is effective for
                           financial statements with fiscal years beginning
                           after June 15, 2002. This Statement is not expected
                           to have a material impact on the Company's financial
                           statements.


<PAGE>
                                                                      PAGE XVIII

                            DAUGHERTY RESOURCES INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U.S. FUNDS)

                                 MARCH 31, 2002



11.      UNITED STATES ACCOUNTING PRINCIPLES (Continued)

         (e)      RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

                  (vii)    STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 144
                           (SFAS 144)

                           In October 2001, the Financial Accounting Standards
                           Board issued Statement of Financial Accounting
                           Standards No. 144, "Accounting for the Impairment or
                           Disposal of Long-Lived Assets" ("Statement 144"),
                           which addresses financial accounting and reporting
                           for the impairment or disposal of long-lived assets.
                           Statement 144 is effective for fiscal years beginning
                           after January 1, 2002. The Company will adopt
                           Statement 144 as of January 1, 2002 and it does not
                           expect that the adoption of the Statement will have a
                           significant impact on the Company's financial
                           position and results of operations.