<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-QSB


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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                           (I.R.S. Employer
     incorporation or 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 NOVEMBER 7, 2002, WAS 5,475,670.

         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 XV
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 General Operations," which are not historical facts may be
forward-looking statements (See "Forward-Looking Statements" herein at page 9).

         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 nine-month period ending September 30, 2002, Daugherty
Resources drilled nineteen (19) natural gas wells (5.0125 net wells), all of
which were capable of producing natural gas. By comparison, for the same period
of 2001, Daugherty Resources drilled sixteen (16) natural gas wells (4.2975 net
wells). Drilling operations for the first nine months of 2002 were primarily
related to three (3) year-end private placement drilling programs for 2001 and
two (2) joint venture drilling partnerships for 2001.

         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.



                                       2
<PAGE>

         Daugherty Resources has primarily concentrated in drilling wells on
prospects it generates in the Appalachian Basin. Historically, a major portion
of Daugherty Resources' revenue 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 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 a total 23
natural gas wells during the last quarter of 2001 and the first quarter of 2002,
with 17 of those wells being drilled in the first quarter of 2002. Daugherty
Petroleum participated for a 25.75% interest in the partnership drilling
programs and a 45% interest in a one (1) well joint venture partnership and a
20% interest in another one (1) well joint venture partnership.

         During the second quarter of 2002, Daugherty Petroleum entered into a
joint venture drilling program whereby Daugherty Petroleum will receive a 25%
interest in up to 15 natural gas wells. In addition, Daugherty Petroleum began a
15 well private placement partnership drilling program during the second quarter
of 2002 and will participate for a 25.75% interest in up to 15 natural gas
wells. As of November 12, 2002, drilling operations have begun on six (6) of the
program wells. Therefore, Daugherty Resources anticipates that it will drill 24
additional wells by March 31, 2003 and retain interests ranging from 25% to
25.75% of each well it drills. This estimate is based upon the two (2) current
private placement drilling programs covering the drilling and completion of up
to 30 wells. Discussion with potential joint venture partners, and formation of
additional year-end programs, could result in additional wells being drilled.

         Working capital as of September 30, 2002 was negative $1,774,801
compared to December 31, 2001, when working capital was negative $2,003,165.

         Current assets as of September 30, 2002 were $1,068,098 compared to
$2,900,470 as of December 31, 2001. During the nine-month period ending
September 30, 2002, as compared to December 31 2001, the changes in the
composition of Daugherty Resources' current assets were: cash balances decreased
$1,942,003 from $2,244,420 to $302,417; accounts receivable balances decreased
$232,054 from $423,359 to $191,305. Other current assets such as pre-paids, and
notes receivable increased $341,685 from $232,691 to $574,376. Overall, current
assets decreased by $1,832,372 to $1,068,098 from $2,900,470.

         Current liabilities as of September 30, 2002 were $2,842,899 compared
to $4,903,635 as of December 31, 2001. During the nine-month period ending
September 30, 2002, 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 $31,939 from $379,847 to $347,908, customer drilling
deposits decreased $2,334,250 from $2,854,700 to $520,450, accounts payable and
accrued liabilities increased $305,453 from $1,669,088 to $1,974,541. Overall,
current liabilities decreased by $2,060,736.

         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 conducted during 2001 and the first three
           quarters of 2002 will result in substantially more oil and gas
           production to our Company. In the last quarter of 2001 and the first
           quarter of 2002 Daugherty Petroleum drilled a total of 23 successful
           wells. For the nine-month period ending September 30, 2002, the
           Company drilled a total of 19 wells, with an additional six (6) wells
           drilled through November 12, 2002. At the end of the year 2001, gas
           prices had decreased, however, as of September 30, 2002, prices have
           rebounded to reflect higher market demand and these increased prices
           will positively affect oil and gas revenue. If the maximum
           subscriptions are received and accepted for the two (2) current
           drilling programs Daugherty will receive contract drilling revenue
           from 30 wells and will receive a minimum 25% interest in each well
           drilled.



                                       3
<PAGE>

         - 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.

         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 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, increasing to 40% upon return of partners' investment. For
2001, Daugherty Petroleum sponsored a total of three (3) drilling programs and
two (2) joint ventures that raised a total of $5.8 million that allowed
Daugherty Petroleum to drill a total of 23 wells by March 31, 2002. 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 ownership in each well, together with revenue associated with the
transmission and/or compression of the natural gas. The compression for
approximately 3.1% of the natural gas operated by Daugherty Petroleum is
provided 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 on an arm's length basis, the transactions involve related
parties and are not negotiated with independent third parties.

         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 2002
to meet the financial obligations of Daugherty Resources. This strategy
includes:

         - INCREASING PARTNERSHIP AND JOINT VENTURE DRILLING. Although natural
           gas prices decreased significantly in early 2001, during the first
           nine months 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



                                       4
<PAGE>

           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 a 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.

         - 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. Since Daugherty Resources does not have
           current plans to develop the properties itself, 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 September 30, 2002, Daugherty
Resources' gross revenues decreased $445,032 to $1,068,548 from $1,513,580 for
the same period in 2001. For the nine-month period ending September 30, 2002,
Daugherty Resources' gross revenue increased $352,939 to $5,434,873 from
$5,081,934 for the same period in 2001. Daugherty Resources experienced a net
loss before taxes of $319,392 for the three-month period ending September 30,
2002 compared to a net loss before taxes of $207,629 for the same period in
2001. For the nine-month period ending September 30, 2002, Daugherty Resources
experienced net income before taxes of $265,797 compared to net loss before
taxes of $190,742 for the same period in 2001.

         Daugherty Resources' gross revenues for the nine-month period ending
September 30, 2002 were derived from drilling contract revenues of $4,040,733
(74.35%), natural gas and oil operations and production revenues of $678,534
(12.48%), and natural gas transmission and compression revenues of $715,606
(13.17%).

         The nine-month increase in total gross revenues of $352,939 was
primarily attributable to an increase in contract drilling revenue in the first
quarter of 2002, an increase in gas transmission and compression revenue during
the first and second quarters of 2002 and increased oil and gas production
revenue in the third quarter of 2002. Revenues from oil and gas production
activities increased $183,403 to $291,472 for the three-month period ending
September 30, 2002, from $108,069 for the same period in 2001. Partially
offsetting this increase was a decrease in the Company's equity share in
earnings from undivided interest in oil and gas properties of $30,549, from
$59,530 for the three-month period ending September 30, 2001 to $28,981 for the
same period in 2002. For the nine-month period ending September 30, 2002, gross
revenue from oil and gas production increased $89,826 to $678,534 from $588,708
for the same period in 2001, partially offset by a $79,225 decrease in the
Company's equity share in earnings from undivided interest in oil and gas
properties compared to the same period in 2001. The overall increase in revenue
from oil and gas production activities was primarily attributable to increased
oil and gas production in the first nine months of 2002 as compared to the same
period for 2001. Net oil and gas production for the third quarter of 2002 was
107,846 Mcfe (Mcf equivalents), compared to 80,488 Mcfe for the third quarter of
2001.

         During the three-month period ending September 30, 2002, total direct
expenses decreased by $117,619 to $774,721 compared to $892,340 in 2001. For the
nine-month period ending September 30, 2002, total direct expenses increased
$376,836 to $3,297,533 from $2,920,697 for the same period in 2001. Contract
drilling expenses decreased $160,383 from $637,414 for the quarter ending
September 30, 2001 compared to $477,031 for the quarter ending September 30,
2002. Oil and gas production expenses increased $79,022 from $146,540 for the



                                       5
<PAGE>

quarter ending September 30, 2001 compared to $225,562 for the quarter ending
September 30, 2002. Gas transmission and compression expenses decreased $36,258
from $108,386 for the quarter ending September 30, 2001, compared to $72,128 for
the quarter ending September 30, 2002. The increase in overall direct expenses
for the nine months ended September 30, 2002 and 2001 was primarily due to the
drilling and related costs for nineteen (19) natural gas wells in 2002 compared
to sixteen (16) in the same period of 2001.

         During the three-month period ending September 30, 2002, other expenses
decreased by $246,199 to $642,200 compared to $888,399 in 2001. For the
nine-month period ending September 30, 2002, other expenses decreased $559,661
to $1,970,908 from $2,530,569 for the same period in 2001. Selling, general and
administrative expenses decreased $158,225 from $613,211 for the quarter ending
September 30, 2001 compared to $454,986 for the quarter ending September 30,
2002. Depreciation, depletion and amortization decreased $79,238 from $218,618
for the quarter ending September 30, 2001 compared to $139,380 for the quarter
ending September 30, 2002. Net interest expense decreased $8,736 from $56,570
for the quarter ending September 30, 2001, compared to $47,834 for the quarter
ended September 30, 2002. Overall, the decreases in other expenses for the three
and nine-month periods ended September 30, 2002, compared to the same periods in
2001, were driven by the Company's ability to contain corporate costs and the
lack of amortization expense relating to goodwill, in accordance with the
adoption of CICA Handbook Section 3062, "Goodwill and Other Intangible Assets"
on January 1, 2002.

         Sentra Corporation, Daugherty Resources' natural gas utility
subsidiary, had revenue for the three and nine-months ended September 30, 2002
of $18,342 and $107,848, compared with $23,242 and $95,030 for the three and
nine-months ended September 30, 2001. In the third quarter of 2002, Sentra
installed an additional 6,555 feet of transmission line and 621 feet of
distribution line for a cumulative total of 100,595 and 30,260 feet,
respectively, at September 30, 2002. As of September 30, 2002, Sentra had 159
customers, 49 of which were commercial and agri-business accounts. 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 152 customers, including 27 industrial, commercial and agri-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 three quarters 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.
            -----------------------------------------



                                       6
<PAGE>

                                                                           PAGE
                                                                           ----

       (1) Condensed Consolidated Balance Sheet as of September 30, 2002  II-III

           Condensed Consolidated Statement of Operations and Deficit
             for the three and nine months ended September 30, 2002         IV

           Condensed Consolidated Statement of Cash Flows for the three
             and nine months ended September 30, 2002                       V

           Notes to Condensed Consolidated Financial Statements            VI-XV


         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.

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).



                                       7
<PAGE>

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 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).

24           Powers of Attorney.

(b)          Reports on Form 8-K.
               None



                                       8
<PAGE>

FORWARD-LOOKING STATEMENTS

         This Form 10-QSB 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.



                                       9
<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 & CEO


Dated: November 12, 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.


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


/s/ William S. Daugherty   Chairman of the Board, President,   November 12, 2002
------------------------      Director of the Registrant
William S. Daugherty


/s/ James K. Klyman *         Director of the Registrant       November 12, 2002
---------------------
James K. Klyman


/s/ Charles L. Cotterell *    Director of the Registrant       November 12, 2002
--------------------------
Charles L. Cotterell




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



                                       10
<PAGE>

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

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

                               SEPTEMBER 30, 2002
<PAGE>

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

                               SEPTEMBER 30, 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-XV
<PAGE>

                            REVIEW ENGAGEMENT REPORT


To the Directors of
DAUGHERTY RESOURCES, INC.

We have reviewed the condensed consolidated balance sheet of DAUGHERTY
RESOURCES, INC. as at September 30, 2002 and the condensed consolidated
statements of operations and deficit, and cash flows for the nine months ended
September 30, 2002 and for the three months ended September 30, 2002. 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
November 7, 2002
<PAGE>

                                                                              II



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

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (U. S. FUNDS)
                                   (UNAUDITED)

                               SEPTEMBER 30, 2002


                                     ASSETS

                                      September 30, 2002     December 31, 2001
                                      ------------------     -----------------
                                         (Unaudited)
CURRENT
   Cash and term deposits                 $   302,417          $ 2,244,420
   Accounts receivable                        191,305              423,359
   Prepaid expenses and other assets          557,625              202,015
   Loans to related parties (Note 4)           16,751               30,676
                                          -----------          -----------
                                            1,068,098            2,900,470

BONDS AND DEPOSITS                             41,000               41,000

OIL AND GAS PROPERTIES (Note 2)             9,115,921            8,834,087

PROPERTY AND EQUIPMENT (Note 3)               980,178              820,769

LOANS TO RELATED PARTIES (Note 4)             733,577              533,051

INVESTMENT                                     69,347              109,254

DEFERRED FINANCING COSTS                       50,426               71,066

GOODWILL (Note 5)                             313,177              313,177
                                          -----------          -----------
                                          $12,371,724          $13,622,874
                                          ===========          ===========


          The accompanying Notes to Condensed Consolidated Statements
              are an integral part of these financial statements.

<PAGE>

                                                                             III



                            DAUGHERTY RESOURCES, INC.
            (INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (U. S. FUNDS)
                                   (UNAUDITED)

                               SEPTEMBER 30, 2002


                                   LIABILITIES


                                      September 30, 2002      December 31, 2001
                                      ------------------      -----------------
                                          (Unaudited)
CURRENT
   Bank loans (Note 6)                    $  134,162        $  146,067
   Accounts payable                        1,108,540           875,953
   Accrued liabilities                       866,001           793,135
   Customers' drilling deposits              520,450         2,854,700
   Current portion of long-term
     debt (Note 7)                           213,746           233,780
                                          ----------        ----------
                                           2,842,899         4,903,635

LONG-TERM DEBT (NOTE 7)                    3,632,281         3,455,642
                                          ----------        ----------
                                           6,475,180         8,359,277
                                          ----------        ----------


                           SHAREHOLDERS' EQUITY

<TABLE>
<S>              <C>                                        <C>             <C>
CAPITAL STOCK (NOTE 8)
AUTHORIZED

    5,000,000    Preferred shares, non-voting, non-cumulative,
                 convertible
  100,000,000    Common Shares

ISSUED
      558,476    Preferred shares (2001 - 563,249)             1,784,493       1,802,542
    5,475,670    Common shares (2001 - 4,959,112)             24,569,397      24,184,198
       21,100    Common shares held in treasury, at cost         (23,630)        (23,630)

TO BE ISSUED
       24,887    Common shares to be issued                       55,226          55,226
                                                            -------------  --------------
                                                              26,385,486      26,018,336
DEFICIT                                                      (20,488,942)    (20,754,739)
                                                            -------------  --------------
                                                               5,896,544       5,263,597
                                                            -------------  --------------
                                                            $ 12,371,724   $  13,622,874
                                                            =============  ==============
</TABLE>


          The accompanying Notes to Condensed Consolidated Statements
              are an integral part of these financial statements.
<PAGE>
                                                                             IV

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

           CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
                                  (U. S. FUNDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                        Three Months Ended September 30,      Nine Months Ended September 30,
                                                        ---------------------------------    -------------------------------
                                                             2002               2001               2002            2001
                                                        -------------    ----------------    --------------    --------------
<S>                                                     <C>               <C>                <C>               <C>
REVENUE
Contract drilling (not less than 95%
   attributable to related party transactions)          $     556,733     $    1,206,600     $   4,040,733     $   3,916,096
Oil and gas production                                        291,472            108,069           678,534           588,708
Gas transmission and compression                              220,343            198,911           715,606           577,130
                                                        --------------   ----------------    --------------    --------------
                                                            1,068,548          1,513,580         5,434,873         5,081,934
                                                        --------------   ----------------    --------------    --------------

DIRECT EXPENSES
Contract drilling                                             477,031            637,414         2,383,151         1,887,368
Oil and gas production                                        225,562            146,540           506,421           638,655
Gas transmission and compression                               72,128            108,386           407,961           394,674
                                                        --------------   ----------------    --------------    --------------
                                                              774,721            892,340         3,297,533         2,920,697
                                                        --------------   ----------------    --------------    --------------

GROSS PROFIT                                                  293,827            621,240         2,137,340         2,161,237
                                                        --------------   ----------------    --------------    --------------

EXPENSES
Selling, general and administrative                           454,986            613,211         1,407,465         1,723,784
Depreciation, depletion and amortization                      139,380            218,618           418,140           655,854
Interest, net                                                  47,834             56,570           145,303           150,931
                                                        --------------   ----------------    --------------    --------------
                                                              642,200            888,399         1,970,908         2,530,569
                                                        --------------   ----------------    --------------    --------------

INCOME (LOSS) BEFORE THE FOLLOWING                           (348,373)          (267,159)          166,432          (369,332)

Equity share in earnings from undivided
   interest in oil and gas properties                          28,981             59,530            99,365           178,590
                                                        --------------   ----------------    --------------    --------------

NET INCOME (LOSS) FOR THE PERIOD                             (319,392)          (207,629)          265,797          (190,742)

DEFICIT, BEGINNING OF PERIOD                              (20,169,550)       (20,410,594)      (20,754,739)      (20,427,481)
                                                        --------------   ----------------    --------------    --------------

DEFICIT, END OF PERIOD                                  $ (20,488,942)    $  (20,618,223)    $ (20,488,942)    $ (20,618,223)
                                                        ==============   ================    ==============    ==============

NET INCOME (LOSS) PER SHARE
BASIC                                                   $       (0.06)    $        (0.05)    $        0.05     $       (0.05)
                                                        --------------   ----------------    --------------    --------------
FULLY DILUTED                                           $       (0.06)    $        (0.05)    $        0.05     $       (0.05)
                                                        --------------   ----------------    --------------    --------------
</TABLE>


  The accompanying Notes to Condensed Consolidated Statements are an integral
                           part of these statements.

<PAGE>



                                                                             V

                           DAUGHERTY RESOURCES, INC.
            (Incorporated under the Company Act of British Columbia)

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (U. S. Funds)
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                          Three Months Ended September 30,    Nine Months Ended September 30,
                                                                2002             2001             2002                2001
                                                           -------------    -------------    ---------------   ---------------
<S>                                                          <C>            <C>              <C>               <C>
OPERATING ACTIVITIES
    Net income (loss) for the period                        $  (319,392)     $  (207,629)     $     265,797     $    (190,742)
    Adjustments to reconcile net income to net cash
         provided by (used in) operating activities:

      Depreciation, depletion, and amortization                 139,380          218,618            418,140           655,854
      Equity share in earnings from undivided interest
      in oil and gas properties                                 (28,981)         (59,530)           (99,365)         (178,590)
      Incentive bonus paid by common shares                           -                -            109,620           235,500
      Changes in assets and liabilities:
         Accounts receivable                                    147,983          (55,797)           232,054           (10,639)
         Prepaid expenses and other assets                     (268,770)        (281,017)          (355,610)         (359,395)
         Accounts payable                                       359,511          (85,263)           387,617             5,882
         Accrued liabilities                                   (281,159)        (208,475)            72,866          (104,269)
         Customers' drilling deposits                           368,750          573,500         (2,334,250)         (122,417)
                                                           -------------    -------------    ---------------   ---------------
              Net cash provided by (used in)
                   operating activities                         117,322         (105,593)        (1,303,131)          (68,816)
                                                           -------------    -------------    ---------------   ---------------

INVESTING ACTIVITIES
    Change in oil and gas properties                           (133,215)        (233,010)          (512,469)         (258,339)
    Change in property and equipment                           (157,057)        (133,500)          (226,909)         (216,762)
    Change in loans to related parties                           13,197          (28,947)          (186,601)         (211,859)
    Change in bonds and other deposits                                -         (109,254)            39,907          (109,254)
                                                           -------------    -------------    ---------------   ---------------

              Net cash used in investing activities            (277,075)        (504,711)          (886,072)         (796,214)
                                                           -------------    -------------    ---------------   ---------------

FINANCING ACTIVITIES
    Issuance of common stock                                    102,500          145,285            102,500           211,216
    Decrease in bank loans                                            -         (972,165)           (11,905)         (976,441)
    Change in long-term liabilities                             194,488        1,607,871            156,605         1,621,725
    Purchase of treasury stock                                        -          (23,630)                 -           (23,630)
                                                           -------------    -------------    ---------------   ---------------

              Net cash provided by financing activities         296,988          757,361            247,200           832,870
                                                           -------------    -------------    ---------------   ---------------

CHANGE IN CASH AND CASH EQUIVALENTS                             137,235          147,057         (1,942,003)          (32,160)

CASH AND CASH EQUIVALENTS
Beginning of period                                             165,182          247,443          2,244,420           426,660
                                                           -------------    -------------    ---------------   ---------------

CASH AND CASH EQUIVALENTS
End of period                                               $   302,417      $   394,500      $     302,417     $     394,500
                                                           =============    =============    ===============   ===============

SUPPLEMENTAL DISCLOSURE
Interest paid                                               $    79,665      $    66,990      $     196,960     $     183,445
                                                           -------------    -------------    ---------------   ---------------

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


  The accompanying Notes to Condensed Consolidated Statements are an integral
                           part of these statements.

<PAGE>

                                                                              VI

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

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

                               SEPTEMBER 30, 2002

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         These condensed consolidated financial statements have been prepared in
         accordance with generally accepted accounting principles in Canada,
         which except as described in Note 11, confirm, 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 condensed consolidated financial position as at
                  September 30, 2002 and condensed consolidated results of
                  operations and cash flows for the three and nine-month periods
                  ended September 30, 2002 and 2001.

                  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 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 on 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>


                                                                            VII

                            DAUGHERTY RESOURCES, INC.
            (Incorporated under the Company Act of British Columbia)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (U. S. Funds)
                                   (Unaudited)

                               September 30, 2002

2. OIL AND GAS PROPERTIES
<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30, 2002                           DECEMBER 31, 2001
                                                --------------------------------------------------------     -------------------
                                                                      ACCUMULATED
                                                      COST           AMORTIZATION              NET                   NET
                                                ---------------    ------------------    ---------------         -------------
<S>                                               <C>                 <C>                  <C>                    <C>
Proved properties                                 $  7,610,036        $  1,669,806         $  5,940,230           $  6,146,723
Wells and related equipment                            785,809             144,445              641,364                563,695
                                                ---------------     ---------------      ---------------         --------------
                                                     8,395,845           1,814,251            6,581,594              6,710,418
                                                ---------------     ---------------      ---------------         --------------

Equity in oil and gas partnership
  Equity, beginning of period                                                                 2,123,669              1,283,769
  Additional investment                                                                         410,658                933,002
  Withdrawals                                                                                   (99,365)              (331,221)
  Share in partnership's income                                                                  99,365                238,119
                                                                                         ---------------         --------------

  Equity, end of period                                                                       2,534,327              2,123,669
                                                                                          --------------         --------------

Total Oil and Gas Properties                                                               $  9,115,921           $  8,834,087
                                                                                          ==============         ==============
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>


                                                                 SEPTEMBER 30, 2002                           DECEMBER 31, 2001
                                                --------------------------------------------------------     -------------------
                                                                      ACCUMULATED
                                                      COST           AMORTIZATION              NET                   NET
                                                ---------------    ------------------    ---------------         -------------
<S>                                               <C>                 <C>                  <C>                    <C>
Land                                              $     12,908        $          -         $     12,908           $     12,908
Buildings                                                6,239               1,664                4,575                  4,887
Machinery and equipment                                721,764             115,973              605,791                550,499
Office furniture, fixtures and equipment               102,588              83,502               19,086                 17,406
Aircraft                                               125,000               7,293              117,707                122,396
Vehicles                                               365,533             145,422              220,111                112,673
                                                ---------------     ---------------       --------------         --------------

Total Property and Equipment                       $ 1,334,032        $    353,854         $    980,178           $    820,769
                                                ===============     ===============       ==============         ==============
</TABLE>

<PAGE>
                                                                            VIII

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

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

                               SEPTEMBER 30, 2002

4.   LOANS TO RELATED PARTIES

          The loans to related parties represent loans receivable from officers
          of the Company and certain shareholders totaling $582,387 and $430,643
          at September 30, 2002 and December 31, 2001, respectively, bearing
          interest at 6% per annum, 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 related parties ownership interest
          in drilling partnerships with DPI. The loans receivable from the
          officers of DPI totaling $167,941 and $133,084 are non-interest
          bearing and unsecured.

5.  GOODWILL

          In conjunction with Daugherty Resources' 1993 acquisition of its
          wholly-owned subsidiary, Daugherty Petroleum, the Company recorded
          goodwill of $1,789,564, which was recorded at cost and amortized over
          10 years on a straight-line basis. Unamortized goodwill as of December
          31, 2001 was $313,177. On January 1, 2002, the Company adopted CICA
          Handbook Section 3062, "Goodwill and Other Intangible Assets", which
          is the Canadian equivalent of Statement of Financial Accounting
          Standards No. 142 for accounting principles generally accepted in the
          United States (see Note 12). In accordance with this pronouncement,
          goodwill amortization ceased upon adoption.

          For the three and nine-month periods ended September 30, 2001, net
          loss as reported was $207,629 and $190,742, respectively. Had Section
          3062 been in effect in the prior year, net loss would have decreased
          by $44,739 and $134,217 for the three and nine-month periods ended
          September 30, 2001, to $162,890 and $56,525, respectively. Basic and
          fully diluted loss per share would have been $0.04 and $0.02 for the
          three and nine-months ended September 30, 2001, as compared to net
          loss per share of $0.05 for each period, as reported.

6.  BANK LOANS

<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30, 2002       DECEMBER 31, 2001
                                                                                   --------------------     -------------------
<S>                                                                                <C>                      <C>
            NOTE PAYABLE bearing interest at 4.71% per annum, maturing January
            15, 2003, is collateralized by 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, collateralized by 200,000 shares
            of stock owned by a director of the Company.                                             -                  11,905
                                                                                   --------------------     -------------------
                                                                                     $         134,162         $       146,067
                                                                                   ====================     ===================
</TABLE>

<PAGE>
                                                                             IX

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

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

                               SEPTEMBER 30, 2002

7.  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.

          The obligation is stated at its remaining face value of $444,818 at
          September 30, 2002 ($462,818 at December 31, 2001) and has not been
          discounted.
<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30, 2002     DECEMBER 31, 2001
                                                                                       ------------------     ------------------

<S>                                                                                     <C>                   <C>
          NOTE PAYABLE as outlined above                                                    $   444,818         $   462,818

          10% CONVERTIBLE NOTES, maturing July 31, 2004, collateralized by DPI's
          gold and silver 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 interest and a premium equal to 25% of
          principal, payable in put shares. After the maturity date of the puts,
          the Company may redeem the note in whole or in part at 100% of
          principal amount plus accrued interest.                                               850,000             850,000

          NOTE PAYABLE TO KEYBANK NATIONAL ASSOCIATION, bearing interest at the
          bank's prime rate plus 1.25% payable monthly. The interest rate at
          September 20, 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 determined
          semi-annually. The borrowing base at September 30, 2002 was
          $2,350,000. 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.                      2,247,984           2,006,734
                                                                                            -----------         -----------

                 Carried forward                                                            $ 3,542,802         $ 3,319,552
                                                                                            -----------         -----------
</TABLE>

<PAGE>


                                                                             X

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

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

                               SEPTEMBER 30, 2002

7.  LONG-TERM DEBT (continued)

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30, 2002     DECEMBER 31, 2001
                                                                                       ------------------     -----------------

<S>                                                                                     <C>                   <C>

                Brought forward...                                                         $ 3,542,802          $ 3,319,552

          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.                                               93,121              128,107

          NON-INTEREST BEARING NOTE, secured by 25% of production on 15 gas
          wells payable monthly at $2,796, maturing in 2003.                                       559               23,117

          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, collateralized by the assets and the corporate guarantee of a
          wholly-owned subsidiary, payable in quarterly payments of interest
          only. Principal is due currently.                                                     39,186               47,897

          LOANS PAYABLE TO VARIOUS BANKS with interest rates ranging from 8.45%
          to 11% annum, payable in 60 installments of $1,370, including
          interest, maturing on February 2005.                                                  80,930               81,320

          UNSECURED LOAN PAYABLE TO TRIO GROWTH, bearing interest at 10% per
          annum, principal and interest due currently.                                          24,650               24,650
                                                                                           -----------          ------------
                                                                                             3,846,027             3,689,422
                                                                                               213,746               233,780
                                                                                           -----------          ------------

          Less: Current portion                                                            $ 3,632,281          $  3,455,642
                                                                                           ===========          ============
</TABLE>



<PAGE>
                                                                             XI


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

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

                               SEPTEMBER 30, 2002

8.  CAPITAL STOCK
<TABLE>
<CAPTION>
         (a)  PREFERRED SHARES
                                                                                 SHARES            AMOUNT
                                                                            --------------   ---------------
                                                                                   #                 $
<S>                                                                             <C>                 <C>
                Balance, December 31, 2000                                      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                                         (4,773)          (18,048)
                                                                            --------------   ---------------

                Balance, September 30, 2002                                       558,476         1,784,493
                                                                            ==============   ===============


         (b)   COMMON SHARES ISSUED
                                                                                 SHARES            AMOUNT
                                                                            --------------   ---------------
                                                                                   #                 $

                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 stock options and warrants                  26,109            26,360
                Issued for conversion of preferred shares                       1,229,502           620,844
                Issued for settlement 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 for cash                                                   125,000           102,500
                Issued to employees as incentive bonus                            174,000           109,620
                Issued for conversion of preferred shares                           4,773            18,048
                Issued for settlement of accounts payable                         212,785           155,031
                                                                            --------------   ---------------

                Balance, September 30, 2002                                     5,475,670        24,569,397
                                                                            ==============   ===============


         (c)   SHARES TO BE ISSUED

                Common Shares to be issued in connection with the
                purchase of Ken-Tex oil and gas property in 1999                   24,887     $      55,226
                                                                            ==============   ===============
</TABLE>

<PAGE>



                                                                           XII

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

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

                               SEPTEMBER 30, 2002

8.  CAPITAL STOCK (continued)

     (d)  STOCK OPTIONS
<TABLE>
<CAPTION>
                                                                                       Weighted Average
                                                           Issued      Exercisable           Price        Expiry
                                                        -----------    -----------     ----------------  -------
<S>                                                     <C>            <C>             <C>                <C>
          Balance, December 31, 2000                     2,521,726      2,406,170         $       1.98
                                                                       ===========       ==============

          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                                         (474,000)                       $       1.54
                                                        -----------

          Balance, September 30, 2002                    2,012,960      2,012,960         $       2.07
                                                        ===========    ===========       ==============
</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>                <C>
          Balance, December 31, 2000                                       2,470,091       $        2.65

          Issued for acquisition of oil and gas property                     302,528         1.75 - 4.50       (i)
          Issued for consulting services                                     195,222         1.22 - 2.20       (ii)
          Exercised                                                             (320)      $        1.00
          Expired                                                            (23,800)      $        2.50
                                                                      ---------------     ---------------

          Balance, December 31, 2001                                       2,943,721       $         2.61

          Expired                                                           (500,000)      $   .65 - 2.50
                                                                      ---------------     ---------------

          Balance, September 30, 2002                                      2,443,721       $         2.76
                                                                      ===============     ===============
</TABLE>
          (i)  These warrants expire July 14, 2006
          (ii) These warrants expire December 31, 2004


<PAGE>



                                                                           XIII

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

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

                               SEPTEMBER 30, 2002

9.       INCOME (LOSS) PER SHARE

         (a)      BASIC

                  Income (loss) per share is calculated using the weighted
                  average number of shares outstanding during the period. The
                  weighted average of common shares outstanding amounted to
                  5,460,724 and 5,294,499 for the three and nine months ended
                  September 30, 2002, respectively, and 4,218,704 and 3,742,724
                  for the three and nine months ended September 30, 2001,
                  respectively.

         (b)      FULLY DILUTED INCOME (LOSS) PER SHARE

                  Fully diluted income (loss) per share is calculated on the
                  same basis with the weighted average number of shares
                  outstanding during the period totaling 5,294,499 for the nine
                  months ended September 30, 2002. The exercise of options and
                  the convertible notes had no dilutive effects on income (loss)
                  per share for other periods.

10.      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.

         (b)      LEASE OF GAS COMPRESSORS

                  A limited liability company owned by a director and two
                  officers of the Company has historically leased natural gas
                  compressors to Daugherty Petroleum. For the nine-month period
                  ended September 30, 2002, Daugherty Petroleum leased one
                  natural gas compressor for $12,000 from the related party. For
                  the nine-month period ended September 30, 2001, Daugherty
                  Petroleum leased two natural gas compressors for $11,550 from
                  the related party.

         (c)      COMPANY SPONSORED PARTNERSHIPS

                  Daugherty Petroleum 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 of 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 the three and
                  nine-month periods ended September 30, 2002, the Company
                  executed and performed turnkey drilling contracts with Company
                  sponsored partnerships totaling $556,733 and $4,040,733,
                  respectively. During the three and nine-month periods ended
                  September 30, 2001, the Company executed and performed turnkey
                  drilling contracts with Company sponsored partnerships
                  totaling $1,206,600 and $3,916,096, respectively. Not less
                  than 95% of these contracts were attributable to related party
                  transactions.


<PAGE>

                                                                            XIV

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

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

                               SEPTEMBER 30, 2002

11. SEGMENTED INFORMATION
<TABLE>
<CAPTION>
                                                                THREE MONTHS                        NINE MONTHS
                                                            ENDED SEPTEMBER 30                  ENDED SEPTEMBER 30
                                                           2002              2001             2002              2001
                                                     -----------------   --------------   --------------   ---------------
                                                             $                 $                $                 $
<S>                                                  <C>                 <C>              <C>              <C>
           REVENUE (NET)
           Oil and Gas                                      1,097,529        1,573,110        5,534,238         5,260,524
           Corporate                                                -                -                -                 -
                                                     -----------------   --------------   --------------   ---------------
                                                            1,097,529        1,573,110        5,534,238         5,260,524
                                                     =================   ==============   ==============   ===============

           INTEREST, DEPLETION AND DEPRECIATION
           Oil and Gas                                        167,851          222,717          505,488           631,368
           Corporate                                           19,363           52,471           57,955           175,417
                                                     -----------------   --------------   --------------   ---------------
                                                              187,214          275,188          563,443           806,785
                                                     =================   ==============   ==============   ===============

           INCOME (LOSS) BEFORE INCOME TAXES
           Oil and Gas                                       (123,566)         129,475        1,003,007           701,453
           Corporate                                         (195,826)        (337,104)        (737,210)         (892,195)
                                                     -----------------   --------------   --------------   ---------------
                                                             (319,392)        (207,629)         265,797          (190,742)
                                                     =================   ==============   ==============   ===============

           IDENTIFIABLE ASSETS
           Oil and Gas                                      9,115,921        8,140,186        9,115,921         8,140,186
           Corporate                                        3,255,803        2,763,412        3,255,803         2,763,412
                                                     -----------------   --------------   --------------   ---------------
                                                           12,371,724       10,903,598       12,371,724        10,903,598
                                                     =================   ==============   ==============   ===============

           CAPITAL EXPENDITURES
           Oil and Gas                                        162,196          292,540          611,834           436,929
           Corporate                                          157,057          133,500          226,909           216,762
                                                     -----------------   --------------   --------------   ---------------
                                                              319,253          426,040          838,743           653,691
                                                     =================   ==============   ==============   ===============
</TABLE>
<PAGE>
                                                                             XV

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

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

                               SEPTEMBER 30, 2002


12.      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)      COMPREHENSIVE INCOME

                  Statement of Financial Accounting Standards No. 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 periods ended
                  September 30, 2002 and 2001 the company's comprehensive income
                  was the same as net income.

         (b)      RECENT ACCOUNTING PRONOUNCEMENTS

                  (i)      STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142
                           (SFAS 142)

                           On January 1, 2002, the Company adopted Statement of
                           Financial Accounting Standards No. 142, "Goodwill and
                           Other Intangible Assets." Under the new standard,
                           goodwill is no longer amortized, but rather is tested
                           for impairment upon adoption and at least annually
                           thereafter. The annual test may be performed at
                           anytime during the fiscal year, but must be performed
                           at the same time each year. The Company will perform
                           its annual goodwill impairment test before the end of
                           the year. The Company does not expect the annual test
                           to indicate any impairment, however, any such future
                           impairment would be reflected in continuing
                           operations.

                  (ii)     STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 143
                           (SFAS 143)

                           In August 2001, the FASB issued Statement of
                           Financial Accounting Standards 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 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>

                                 CERTIFICATIONS

I, William S. Daugherty, certify that:

     1.   I have reviewed this quarterly report on Form 10-QSB of Daugherty
          Resources, Inc.;

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

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

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and have:

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

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

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

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

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

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

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


Date:  November 12, 2002



/s/ William S. Daugherty
---------------------------
William S. Daugherty
President & CEO

<PAGE>

                                 CERTIFICATIONS


I, Michael P. Windisch, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Daugherty
     Resources, Inc.;

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

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

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

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

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

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

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

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

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

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


Date:  November 12, 2002


/s/ Michael P. Windisch
---------------------------
Michael P. Windisch
Chief Financial Officer