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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KSB

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(Mark One)

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

For the fiscal year ended December 31,
1999

| | [   ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
      THE SECURITIES EXCHANGE ACT OF 1934
| | ----- | ----------------------------------------------------------------------------------------

For the transition period from ________ to
_________

0-20915
(Commission file number)

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GEO PETROLEUM, INC.(Name of small business issuer in its charter)

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| | California
      (State or other jurisdiction of
      incorporation or organization) |  | 33-0328958
      (I.R.S. Employer Identification No.) | 
| | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------- | 

| | 18281 Lemon Drive,Yorba Linda, California
      (Address of principal executive offices) |  | 92886
      (Zip Code) | 
| | ---------------------------------------------------------------------------------------- |  | ---------------------- | 

(714) 779-9897
(Issuers telephone number)

Securities registered under Section 12(b)
of the Exchange Act:

Name of each exchange on which registered

Securities registered under Section 12(g)
of the Exchange Act:
Common Stock, no par value

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

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

The
registrants revenues for its fiscal year ended December 31, 1999 were
$162,401. At October 16, 2000, 16,090,047 shares of common stock (the
registrants only class of voting stock) were outstanding. The aggregate market
value of the common stock on that date (based upon the closing price on the
over-the-counter market on October 16, 2000 of $0.80) held by
non-affiliates was approximately $9,917,764.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING
DURING THE PAST FIVE YEARS)

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

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State
the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date 16,090,047 shares as of
October 15, 2000.

DOCUMENTS INCORPORATED BY REFERENCE
None.

Transitional
Small Business Disclosure Format (check one): Yes [  ] No [x]

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GEO PETROLEUM, INC.

Index

|          |  |                                                                                                                                    | Page
|--------- |  | ---------------------------------------------------------------------------------------------------------------------------------- | ----
|PART I.   |  | BUSINESS INFORMATION                                                                                                               |     
|Item 1.   |  | Description of Business                                                                                                            | 3   
|Item 2.   |  | Description of Property                                                                                                            | 7   
|Item 3.   |  | Legal Proceedings                                                                                                                  | 15  
|Item 4.   |  | Submission of Matters to a
        Vote of Security Holders                                                                        | 16  
|          |  |                                                                                                                                    |     
|PART II.  |  | OTHER INFORMATION                                                                                                                  |     
|Item 5.   |  | Market For Common Equity and
        Related Stockholder Matters                                                                   | 17  
|Item 6.   |  | Managements Discussion and
        Analysis of Plan of Operation                                                                  | 17  
|Item 7.   |  | Financial Statements                                                                                                               | 19  
|Item 8.   |  | Changes in and Disagreements
        with Accountants on
           Accounting and Financial Disclosure                            | 19  
|          |  |                                                                                                                                    |     
|PART III. |  | OTHER INFORMATION                                                                                                                  |     
|Item 9.   |  | Directors, Executive Officers,
        Promoters and Control Persons; Compliance with
           Section 16(a) of the Exchange Act | 21  
|Item 10.  |  | Executive Compensation                                                                                                             | 22  
|Item 11.  |  | Security Ownership of Certain
        Beneficial Owners and Management                                                             | 24  
|Item 12.  |  | Certain Relationships and
        Related Transactions                                                                             | 24  
|Item 13.  |  | Exhibits and Reports Form 8-K                                                                                                      | 26  

|                                  |    
|--------------------------------- | ---
|SIGNATURES                        | 28 
|                                  |    
|INDEX TO THE FINANCIAL STATEMENTS | F-1

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PART I

Item 1.   Description
  of Business

General

Geo
  Petroleum, Inc. (We, Geo or the Company) is a California
  corporation formed in 1986 by Gerald T. Raydon, who, until
  December 15, 1999, was its chief executive officer and majority
  shareholder. Geo was formed primarily to develop a large tar sand deposit in
  Ventura County, California (see Properties) and to engage in the oil
  field waste disposal business. Our principal place of business is located at
  18281 Lemon Drive, Yorba Linda, California 92886. Its telephone number is
  (714) 779-9897 and its facsimile number is (714) 779-0814.

Reorganization of the CompanyFailure to
  Comply with Certain Formalities

In
  1998, we filed for protection under Chapter 11 of the
  U.S. Bankruptcy Code. In December, 1999 we emerged from Bankruptcy under
  a plan which, among other things, provided for the issuance of approximately
  1,900,000 shares of our common stock to our creditors, relinquishment by
  Mr. Raydon and certain affiliates of claims to 1.39 million shares
  of common stock in favor of our creditors and the change in our management.
  Pursuant to the Plan of Reorganization, we issued 803,674 shares during
  the year 2000 of its common stock and will issue an additional
  1,096,326 shares. Present management was installed as part of our
  reorganization. During 1997, we had interests in approximately
  6,880 gross acres (6,430 net) of oil and gas leases or mineral
  rights, of which 1,950 gross acres (1,820 net) were developed for
  oil and gas production and 4,930 gross acres (4,610 net) were
  undeveloped. At that time we owned an interest in and operated a waste
  disposal well. At the time of our Bankruptcy filing, we had sold or otherwise
  transferred a substantial portion of our oil and gas holdings and had
  interests in approximately 2230 gross acres (2030 net acres) of oil
  and gas leases or mineral rights, of which approximately 1630 gross acres
  (1410 net acres) were developed for oil and gas production and
  approximately 600 gross and net acres were undeveloped. After emerging
  from Bankruptcy, our oil and gas holdings were reduced to approximately
  2,000 gross and 1860 net acres. See Description of Property.

Shortly
  before filing the petition for Reorganization, we sold for cash and relief of
  indebtedness and other obligations, all of our interests in our Bandini and
  East Los Angeles oil and gas properties. Such properties had produced
  approximately 89% of our oil production and 95% of our production of natural
  gas during the calendar year 1998 (the year during which such properties were
  sold). We also reduced the carrying cost of our remaining oil and gas
  properties. These items resulted in the decrease in the carrying value of
  these properties from approximately $6,343,000 at December 31, 1997 to
  approximately $0 at December 31, 1998. The rapidly declining prices
  received for oil and gas production caused the present value of net future
  cash flows to be zero. Consequently, even though the estimated future cash
  flows from its properties substantially exceed the carrying value of our
  properties, the properties are carried on our books at nominal value.

We
  filed no public reports under the Securities Exchange Act since filing a
  report on Form 10-Q for the third quarter of the calendar year 1998 and a
  report on Form 8-K regarding our petition in bankruptcy. Our last annual
  report on Form 10-KSB was for the calendar year ended December 31,
  1997.

We
  have not held a meeting of our shareholders since 1997. California law permits
  a shareholder to obtain an order of Court requiring us to hold a meeting of
  shareholders. No shareholder has demanded that we hold such a meeting, and we
  anticipate holding our annual meeting during the second quarter of 2001.
  Additionally, our corporate records are deficient in many respects. We believe
  that these matters will be substantially rectified at or before our annual
  meeting of shareholders.

Glossary of Terms Used in This Report

The
  terms below are used in this document and have specific SEC definitions as
  follows:

Proved
  oil and gas reserves. Proved oil and gas reserves are the estimated
  quantities of crude oil, natural gas liquids which geological and engineering
  data demonstrate with reasonable certainty to be recoverable in future years
  from known reservoirs under existing economic and operating conditions, i.e.,
  prices and costs as of the date the estimate is made. Prices include
  consideration of changes in existing prices provided only by contractual
  arrangements, but not on escalations based upon future conditions.

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Proved
  developed oil and gas reserves. Proven developed oil and gas reserves are
  reserves that can be expected to be recovered through existing wells with
  existing equipment and operating methods. Additional oil and gas expected to
  be obtained through the application of fluid injection or other improved
  recovery techniques for implementing the natural forces and mechanisms of
  primary recovery should be included as proved developed reserves only
  after testing by a pilot project or after the operation of an installed
  program has confirmed through production response that increased recovery will
  be achieved.

Proved
  undeveloped reserves. Proved undeveloped oil and gas reserves are reserves
  that are expected to be recovered from new wells on undrilled acreage, or from
  existing wells where a relatively major expenditure is required for
  recompletion. Reserves on undrilled acreage shall be limited to those drilling
  units offsetting productive units that are reasonably certain of production
  when drilled. Proved reserves for other undrilled units can be claimed only
  where it can be demonstrated with certainty that there is continuity of
  production from the existing productive formation. Under no circumstances
  should estimates for proved undeveloped reserves be attributable to any
  acreage for which an application of fluid injection or other improved recovery
  technique is contemplated, unless such techniques have been proved effective
  by actual tests in the area and in the same reservoir.

As
  used in this Form 10-KSB:

Mcf
  means thousand cubic feet, MMcf means million cubic feet, Bcf
  means billion cubic feet, Bbl means barrel, MBbls means thousand
  barrels, MMBbls means million barrels, BOE means equivalent
  barrels of oil, MBOE means thousand equivalent barrels of oil and MMBOE
  means million equivalent barrels of oil.

Unless
  otherwise indicated in this Form 10-KSB, gas volumes are stated at the
  legal pressure base of the state or area in which the reserves are located and
  at 60 degrees Fahrenheit. Equivalent barrels of oil are determined using
  the ratio of 5.56 Mcf of gas to 1 Bbl of oil.

The
  term gross refers to the total acres or wells in which we have a working
  interest, and net refers to gross acres or wells multiplied by the
  percentage working interest owned by us. Net production means production
  that is owned by us less royalties and production due others.

Cautionary Information about Forward-Looking
  Statements

This
  document contains forward-looking statements within the meaning of
  Section 27A of the Securities Act and Section 21E of the Exchange
  Act. All statements, other than statements of historical facts, included in or
  incorporated by reference into this Form 10-KSB which address activities,
  events or developments, which we expect, believe, or anticipate will or may
  occur in the future are forward-looking statements. The words believes,
  intends, expects, anticipates, projects, estimates,
  predicts and similar expressions are also intended to identify
  forward-looking statements. These forward-looking statements include, among
  others, statements concerning:

- the benefits expected to result from implementation of our proposed
      development of our Vaca Tar Sands property, discussed below, including
      increased revenues and oil production, other statements of:

- expectations,

- anticipations,

- beliefs,

- estimations,

- projections, and

other similar matters that are not historical
  facts, including such matters as:

- future capital,

- development and exploration expenditures (including the timing, amount
      and nature thereof),

- drilling and reworking of wells, reserve estimates (including estimates
      of future net revenues associated with such reserves and the present value
      of such future net revenues),

- future production of oil and gas,

4

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- repayment of debt,

- business strategies,

- oil and gas prices and demand,

- exploitation and exploration prospects,

- expansion and other development trends of the oil and gas industry, and

- expansion and growth of business operations.

These
  statements are based on certain assumptions and analyses made by the
  management of Geo in light of our experience and our perception of historical
  trends, current conditions and expected future developments as well as other
  factors it believes are appropriate in the circumstances.

These
  forward-looking statements are subject to risks and uncertainties, including
  those associated with:

- the financial environment,

- general economic, market and business conditions,

- the regulatory environment,

- business opportunities that may be presented to and pursued by Geo,

- changes in laws or regulations

- exploitation and exploration successes,

- availability to obtain additional financing on favorable conditions,

- trend projections, and

- other factors, many of which are beyond our control that could cause
      actual events or results to differ materially from those expressed or
      implied by the statements. Such risks and uncertainties include those
      risks and uncertainties identified in the Description of the Business and
      Managements Discussion and Analysis sections of this document and risk
      factors discussed from time to time in our filings with the Securities and
      Exchange Commission. In addition, the reserve estimates contained herein
      are based upon assumptions as to prices, timing of operations and other
      factors. To the extent that any of such assumptions prove to be
      inaccurate, the quantities of oil and gas and the timing of production may
      vary from those contained in this report. See Description of PropertiesCautionary
      Note.

Significant
  factors that could prevent us from achieving our stated goals include:

- the inability of Geo to obtain financing for capital expenditures and
      acquisitions,

- declines in the market prices for oil, gas and asphalt, and

- adverse changes in the regulatory environment affecting us.

The
  cautionary statements contained or referred to in this document should be
  considered in connection with any subsequent written or oral forward-looking
  statements that may be issued by us or persons acting on our or their behalf.
  We undertake no obligation to release publicly any revisions to any
  forward-looking statements to reflect events or circumstances after the date
  hereof or to reflect the occurrence of unanticipated events.

Competition and Position in the Industry

We
  are a minor factor in the California oil and gas industry and faces
  competition from numerous companies, which have considerably more resources,
  both financial, property and manpower, than do we. We are in a weak financial
  condition and must rely upon third party sources of funds to conduct our
  proposed operations. Essentially, our only revenue producing operations are
  expected to be our Vaca Tar Sands, Rosecrans and Waste Disposal properties,
  each of which require significant cash expenditures to realize their
  potential. See Description of Property.

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Regulation

Our
  operations are regulated by certain federal and state agencies. In particular,
  oil and natural gas production and related operations are or have been subject
  to price controls, taxes and other laws relating to the oil and natural gas
  industry. We cannot predict how existing laws and regulation may be
  interpreted by enforcement agencies or court rulings, whether additional laws
  and regulations will be adopted, or the effect such changes may have on our
  business or financial condition.

All
  of our operations are subject to extensive federal, state and local laws and
  regulations relating to the generation, storage, handling, and transportation
  of materials and their potential discharge into the environment. Permits are
  required for all of our operations, and these permits are subject to
  revocation, modification and renewal by issuing authorities.

Governmental
  authorities have the power to enforce compliance with their regulations, and
  violations are subject to fines, injunctions or both. It is possible that
  increasingly strict requirements will be imposed by environmental laws and
  enforcement policies thereunder. We do not anticipate that we will be required
  in the near future to expend amounts that are material to the Companys
  financial position or results of operations by reason of environmental laws
  and regulations, but because such laws and regulations are frequently changed,
  we are unable to predict the ultimate cost of such compliance.

It
  is our belief that the oil and gas industry may experience increasing
  liabilities and risks under the Comprehensive Environmental Response,
  Compensation and Liability Act, as well as other federal, state and local
  environmental laws, as a result of increased enforcement of environmental laws
  by various regulatory agencies. As an owner or operator of
  property where hazardous materials may exist or be present, we, like all
  others engaged in the oil and gas industry, could be liable for the release or
  remediation of any hazardous substances. Under previous management, we have
  been subject to imposition of clean-up orders by the government for
  accidental spillage of oil, but have not been subject to hazardous waste
  removal orders. The potential for sudden and unpredictable liability for
  environmental problems is a consideration of increasing importance to us and
  to the oil and gas industry as a whole. We have suffered some oil spills, in
  amounts which we consider to have been minor and have cleaned up such spills.
  At times we have been supervised in so doing by governmental agencies.

During
  1997, regulatory agencies of the State of California and Los Angeles County
  cited us for an accidental oil spill at a property, which we no longer own. We
  complied with the citation requirements and were required to pay fines and
  fees (approximately $28,000) that were discharged in bankruptcy. As a
  result of the citation, we were placed in a probationary status. In 1999,
  while we were in bankruptcy, local agencies alleged that we had violated
  various environmental and other regulatory requirements in failing to clean up
  a small oil spill and to maintain our Rosecrans properties in compliance with
  regulations. During the bankruptcy and after, we were able to obtain funds
  enabling it to remedy the asserted violations. On November 22, 1999, the
  District Attorney of Los Angeles County, California filed an information
  accusing us and certain of our former officers of violating certain provisions
  of the County Health Code and various provisions of the fire protection
  ordinances as a result of the allegations described above. All proceedings and
  our probationary status were terminated without fines being assessed on
  October 24, 2000, and we were not subjected to any additional penalties;
  however, a former officer was compelled to accept performance of
  100 hours of community service. See Litigation. The Company
  estimates that compliance with environmental laws and regulations in 1999 was
  negligible and will amount to approximately $90,000 during the year 2000.

We
  are required to comply with various federal and state regulations regarding
  plugging and abandonment of oil and gas wells. We provide a reserve for the
  estimated cost of plugging and abandoning our wells on a unit of production
  basis. We maintain a $100,000 certificate of deposit for State of
  California authorization purposes to perform additional oil and gas well
  recompletions. These funds are subject to withdrawal restrictions. We also
  have $60,000 in restricted cash, $50,000 with the City of Los Angeles and
  $10,000 with Ventura County, for the purposes of paying for any future
  environmental liabilities that could arise. See  Note 4 to Financial
  Statements. In addition, we carry $3,000,000 in pollution insurance, which
  covers many, but not all, sources of pollution.

Principal Purchasers and Marketing of
  Production

During
  the calendar year 1999, we produced and sold insignificant amounts of oil and
  gas. The principal purchasers of our oil and gas during such period were
  Equiva Trading Co. as to all of oil produced and Pacific Energy Resources
  as to all gas produced. We produced very small amounts of oil and gas during
  the first three

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quarters of the year 2000. Commencing in the
  third quarter 2000, we began production of and sales from our Vaca Tar Sands
  Property. All of the production from such property consisting solely of oil,
  was sold to Equiva Trading Co. We believe that multiple purchasers of any oil
  produced by us exist and that the loss of any one purchaser would not have a
  material effect on our ability to sell our oil and gas. Alternative purchasers
  are available for all of our production, except for gas production at the
  Rosecrans field where there is only one purchaser. See Description of
  Properties.

Essentially
  all of the oil that may be produced from our properties is transported to the
  purchaser by truck, which reduces the net price we receive for our oil.

Volatility of Commodity Prices and Markets

Oil
  and gas prices have been and are likely to continue to be volatile and subject
  to wide fluctuations in response to any of the following and other factors:

- relatively minor changes in the supply of and demand for oil and gas;

- market uncertainty;

- political conditions in international oil producing regions;

- the extent of domestic production and importation of oil in certain
      relevant markets;

- the level of consumer demand;

- weather conditions;

- the competitive position of oil or gas as a source of energy as compared
      with other energy sources;

- the refining capacity of oil purchasers;

- the effect of regulation on the production, transportation and sale of
      oil and natural gas, and other factors beyond our control.

Employees and Consultants

We
  have 6 full time employees, 5 of whom are professional or technical
  and 1 is clerical. All of our employees are located at our executive
  offices at Yorba Linda, California, except for 2 who are engaged full
  time at our Vaca facility. In addition, we retain two engineering consultants
  at our Vaca facility on an almost full time basis. See Description of
  PropertyVaca Tar Sands and Description of PropertyWaste Disposal
  Facility.

Item 2.   Description
  of Property

Cautionary Note

Reserve
  information presented herein is based upon reports prepared by our independent
  petroleum reservoir engineers, Krummrich Engineering and Stan Brown, P.E.
  Reserve estimates are inherently imprecise and estimates of new discoveries
  are more imprecise than those of producing oil and gas properties.
  Accordingly, these estimates are expected to change as future information
  becomes available.

Proved
  oil and gas reserves are the estimated quantities of crude oil, natural gas
  and natural gas liquids which geological and engineering data demonstrate with
  reasonable certainty to be recoverable in future years from known reservoirs
  under existing economic and operating conditions. Proved developed oil and gas
  reserves are those expected to be recovered through existing wells with
  existing equipment and operating methods.

Although
  we believe that our expectations are based upon reasonable assumptions, it can
  give no assurance that our goals will be achieved. Important factors that
  could cause actual results to differ materially from those in the
  forward-looking statements contained in this report include, but are not
  limited to: the time and extent of changes in commodity prices for oil and
  gas; increases in the cost of conducting operations, including remedial
  operations; the extent of our success in discovering, developing and producing
  reserves; political conditions; condition of capital and equity markets;
  changes in environmental laws and other laws affecting our ability to explore
  for and produce oil and gas and the cost of so doing; and other factors which
  are described in this report.

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The
  proved developed and undeveloped oil and gas reserve figures presented in this
  report are estimates based on reserve reports prepared by independent
  petroleum engineers. The estimation of reserves requires substantial judgment
  on the part of the petroleum engineers, resulting in imprecise determinations,
  particularly with respect to new discoveries. Estimates of reserves and of
  future net revenues prepared by different petroleum engineers may vary
  substantially, depending, in part, on the assumptions made, and may be subject
  to material adjustment. Estimates of proved undeveloped reserves, which
  comprise a substantial portion of our reserves, are, by their nature, much
  less certain than proved developed reserves.

The
  accuracy of any reserve estimate depends on the quality of available data as
  well as engineering and geological interpretation and judgment. Results of
  drilling, testing and production or price changes subsequent to the date of
  the estimate may result in changes to such estimates. The estimates of future
  net revenues in this report reflect oil and gas prices and production costs as
  of the date of estimation, without escalation, except where changes in prices
  were fixed under existing contracts. There can be no assurance that such
  prices will be realized or that the estimated production volumes will be
  produced during the periods specified in such reports. Proven reserves are
  estimates of hydrocarbons to be recovered in the future.

Reservoir
  engineering is a subjective process of estimating the sizes of underground
  accumulations of oil and gas that cannot be measured in an exact way. The
  accuracy of any reserve estimate is a function of the quality of available
  data and of engineering and geological interpretation and judgment. Reserve
  reports of other engineers might differ from the reports contained herein.
  Results of drilling, testing, and production subsequent to the date of the
  estimate may justify revision of such estimate. Future prices received for the
  sale of oil and gas may be different from those used in preparing these
  reports. The amounts and timing of future operating and development costs may
  also differ from those used. Accordingly, reserve estimates are often
  different from the quantities of oil and gas that are ultimately recovered.

Oxnard Field



The
  Vaca Tar Sands accumulation on our property in the Oxnard Field, Ventura
  County, California, contains an estimated 33,000,000 gross Bbls of
  recoverable heavy oil. Geo and Gerald T. Raydon (as to a
  25% interest), former president and a major shareholder of Geo, purchased
  the property from Sun Oil Company in 1990, for a total cost of $150,000.
  Mr. Raydon subsequently transferred the property to us in two
  transactions for a consideration consisting solely of the common stock of the
  Company. In addition, Mr. Raydon retained a five percent net profits
  interest in the income or sales proceeds from the property. During October,
  2000, we released one parcel of approximately 170 acres of land to settle
  a dispute with the lessor of such parcel. As a result of such release, the
  gross barrels underlying our properties in the Oxnard Field are estimated to
  be approximately 26,000,000 barrels. See Saba Agreement for a
  discussion of Sabas right to acquire an interest in this property. We
  understand that Sun purchased the property in 1984 for $14 million and
  had invested some $3.9 million in attempting to establish economic
  production before selling the property to us. We produced the Vaca using
  conventional methods, including cyclic steaming operations, in the wells
  drilled by Sun and its predecessor, and achieved a production rate of
  275 barrels of oil per day from a total of eleven vertically drilled
  wells. Production has steadily declined from its maximum to a point at which
  the wells were non-producing at year-end 1999. We attribute the decline
  primarily to low oil prices and our financial instability.

Our
  Vaca property is fully equipped for the transportation, processing, storage,
  and sale of oil, the separation and disposal of wastewater, and for the
  injection of high pressure steam into the wells. The equipment, in general,
  consists of: heated and insulated oil flow lines; gas and water pipelines; an
  automatic well tester; 9,600 barrels of oil storage capacity in three
  insulated, heated tanks; waste water disposal tanks; two steam generators
  capable of producing high quality steam at rates of 24,000,000 BTU per
  hour; tank heaters; a water treatment plant; a vapor recovery system; oil
  shipping equipment; a fresh water well to provide what appears to be
  sufficient amounts of good quality water for steam generation; and an
  injection well to dispose of all wastewater produced with the oil. The
  property is also in close proximity to several oil pipelines and a rail line.
  At year-end 1999, a substantial portion of the equipment was in a deteriorated
  state because of a lack of maintenance. We commenced to repair and maintenance
  of this equipment during 2000.

The
  production in this field is from the prolific and massive Vaca Tar Sands that
  are found at depths of between 1,950 and 2,400 feet. In 325 acres of
  the leases, the thickness of the oil-saturated sand averages 225 feet.

---

The reservoir is highly porous (32%) and
  permeable (1,800 Md.). The oil is heavy, approximately 6 - 8 degrees API,
  of high sulfur content (6-7% by weight) and is highly viscous.
  Consequently, steam injection is necessary to heat the oil and reduce its
  viscosity, permitting it to flow readily through the well bores and pipelines
  into storage tanks. In previous operations, we generated steam at the surface
  and injected it into the producing formation through vertical wells. The heat
  permeates that portion of the formation adjacent to the well bore, rendering
  it more mobile than in its natural state. To increase mobility and lower the
  gravity and viscosity of the crude, we inject diluent (a light crude oil) into
  the well bore, after which the oil is pumped in a conventional manner. Because
  of the use of steam and diluent, operations are comparatively expensive while
  the price received for the oil is relatively low compared to better grades of
  crude. Increasing costs for natural gas, which is used to fire the steam
  generators, which are an integral element of producing oil from this property,
  have increased the operating costs of producing the Vaca. However, as a result
  of the recent favorable increases in the price for crude oil, this property
  should become profitable.

Development
  of the Vaca Property carries with it the risk that removal of the tar may
  create a void, which will result in subsidence of the surface of the
  property. Presently, the surface is used for agricultural purposes. We do not
  believe that subsidence is a high risk, since the reservoir is 1,500 to 2,000
  feet below the surface, which we believe is sufficient support for the
  surface. Additionally, we have not seen any evidence of subsidence, in our
  leased area or in adjacent areas, which have been developed for oil and gas
  purposes. We do not carry insurance, which would protect us from claims
  resulting from subsidence.



In
  1996 and 1997, we entered into a series of agreements with Saba Petroleum
  Company (Saba) for the joint development of the Vaca Tar Sands. As last
  amended, the agreements provide that we, as operator with a 2/3 interest,
  and Saba, as a non-operating farm-in participant with the right to earn a 1/3 interest,
  will commence development of the Vaca Tar Sand with a SAGD well by 1999. SAGD
  is a process which consists of drilling two parallel horizontal wells, with
  one spaced approximately 15 feet above the other, with the lower well
  located at the bottom of the producing zone. The wells extend horizontally for
  as far as 2,600 feet. Steam is injected into the upper well at a
  temperature of approximately 500 degrees Fahrenheit. The steam lowers the
  viscosity of the oil so that it becomes substantially more mobile than in its
  natural state. The oil then gravitates to the lower horizontal well, and then
  flows with high temperatures (above 400 degrees Fahrenheit) and pressures
  to the surface through the lower well. The well production rates are assumed
  to increase each year until the tenth year, and then gradually decline after
  achieving a productive life of approximately 17 years. We understand that
  the SAGD process has been used with success in Canada on accumulations, which
  are similar to the Vaca Tar Sand, but such process has not been widely
  accepted in the United States. An alternative SAGD method employs a single
  horizontal well bore into which steam is cyclically injected and from which
  production is obtained through gravity drainage much as is described above.

The
  agreement provides that Saba and we will share equally in the cost of
  operations and development until Saba has invested $5,000,000. Thereafter,
  Saba is to pay one-third of the costs and receive one-third of the revenues,
  and we are to pay two-thirds of the costs and receive two-thirds of the
  revenues. As to the wells for which Saba pays a disproportionately higher
  share of the costs, Saba can recover its costs out of one-half of production
  revenues, after which its interest in these wells will be reduced to
  one-third. Since we do not believe that Saba has earned its interest in the
  property, our reserves as reported herein do not take into account Sabas
  potential interest.

The
  agreement provides that the first well to be drilled on the property shall be
  a SAGD well. However, because of the deteriorated economics of drilling oil
  wells, neither Saba nor we attempted to commence operations for such a well.
  It is our interpretation that Saba is responsible for payment of fifty percent
  of all costs properly chargeable under an Operating Agreement, which is in
  effect between the parties. Subsequent to year-end 1999,we billed Saba for
  such costs and Saba has declined to pay the same. Subsequent to year-end 1999,
  we commenced operations to restore two vertical wells to production and to
  place the production facilities to an operable condition Saba has been
  unavailable to our representatives to discuss operations and the billings made
  to Saba.

The
  agreement provides that should Saba fail to perform its material obligations,
  we may terminate Sabas interest in the joint property.

---



Under
  Sec. 29 of the Internal Revenue Code, a tax credit is allowed to
  producers of Non-Conventional Fuels. The tax credit for 1999 is
  $6 per barrel and is subject to annual increases with inflation. The tax
  credit is applicable to production from all redrilled Vaca Tar Sands wells.
  The previous owners of our property, and the owners of offsetting leases, have
  taken the tax credit on production from the Vaca Tar Sands since 1980, the
  first year of the credit.

We
  treat the production from existing wells in the Oxnard Field as oil from non-conventional
  sources, which thus qualifies for tax credits provided under Section 29
  of the Internal Revenue Code. At this time, we do not pay federal income taxes
  and the credit is not currently available for use by us. We have, in the past,
  secured funds for operations on this lease by entering into transactions
  designed to provide these credits to investors in exchange for payments. We
  intend to continue seeking such funding on an ad hoc basis. Funding from such
  sources would not, however, be sufficient to develop the property to any
  material extent.



Except
  for one 230-acre lease, our leases have no current drilling obligations nor do
  they require the payment of rentals to keep the leases in good standing. The
  leases are subject to a Pooling Agreement executed in 1987, which essentially
  combined the leases for operating and royalty purposes, and reserve an average
  royalty of 16.67% of gross revenues to the lessors. One 230-acre parcel is
  outside the unit and is subject to a 12.5% royalty and an annual delay rental
  in the amount of $5,225. We hold a 100% working interest and a related
  average 88% net revenue interest in these properties, subject to Sabas
  right to acquire a portion of our interest and to the five percent net profits
  interest held by Mr. Raydon. See discussion above. Vertical wells cost
  approximately $265,000 to drill and complete for production. In connection
  with our Reorganization Proceedings, certain lessors asserted claims to the
  effect that our leases had terminated because production had ceased for
  extended periods of time. Rather than litigating the issue, we settled the
  matter by agreeing to an increase of the royalty on certain of our leases to
  an average of 15.6% and by agreeing to make an annual minimum royalty
  payment to the lessor. The property covers some 635 acres of land. In
  addition, we, subsequent to year-end 1999, released one of our leases, which
  had covered approximately 160 acres of land and lay on the periphery of
  our holdings, reducing our holdings to approximately 465 acres.

We
  have two conditional use permits from Ventura County, allowing us to drill up
  to120 wells on part of our property and a sufficient number of wells to
  develop the balance of our property. Steaming operations require compliance
  with various environmental regimes, including those designed to protect air
  quality. The Ventura Air Pollution Control District has permitted our
  operations and has found them to be in compliance with relevant requirements.
  Emission limits under existing permits are sufficient to allow the drilling
  and steaming of a number of wells on the property, but are not sufficient to
  permit a full development of the property. We intend to apply for amendments
  to existing or additional permits to allow full-scale development when
  economic justify that action. There is no assurance that such operations will
  remain in compliance or that necessary amendments or additional permits will
  be obtained.

Rosecrans Field

We
  purchased 30 wells in the Rosecrans Oil Field located in Los Angeles
  County, California, in December, 1994, with the plan of improving the seven
  active wells and repairing or reworking an additional 19 wells in order
  to return them to production. Wells in this field were drilled during a period
  of between ten and fifty years ago. The royalty amounts to 16.67% of
  gross revenues. According to the report of Stan W. Brown, independent
  petroleum engineer, if an investment of $172,600 is made by us to restore the
  wells to production, the estimated proven developed reserves (currently
  designated as non-producing) would amount to 488,200 barrels of oil
  (406,400 net) and 556,000 Mcf (463,600 net) of natural gas.
  There are seven principal producing zones of Miocene and Pliocene age in the
  Field, ranging from depths of 4500 to 8,400 feet. The wells have been
  drilled through these zones, but have not produced from all of them. This
  provides the opportunity to commence production from bypassed zones in the
  future. During 1999, the property produced no oil but produced a small amount
  of gas continuously. The purchaser of the gas has completed a gas processing
  facility that is now connected by pipeline to our wells.

The
  property consists of five community oil and gas leases. The average
  royalty burden on the property is 16.67 % and we have a 100% working
  interest and an 83.33% related net revenue interest. The property covers

---

approximately 800 acres of land in a
  semi-industrialized and low-income residential area. At year-end 1999, the
  property was not producing oil or gas. We intend to restore the property to
  production during the year 2000 or 2001, depending largely upon the financing
  that we will seek. Since significant production has ceased for a considerable
  period of time, there is a considerable risk that the leases have terminated
  or are subject to termination by action of the lessors. We intend to attempt
  to secure appropriate documentation from as many of the lessors as is
  practicable in an effort to validate or confirm our title to the oil and gas
  leases. It is not certain that we will be able to obtain such documentation
  and in lieu thereof may assume a business risk and pursue restoration of
  production without all such documentation.

Environmental Services

We
  own two commercial Class II (as designated by the Environmental
  Protection Agency) disposal facilities at which waste fluids and solids
  produced in oil field operations conducted by ourselves and by other operators
  are injected into the subsurface for disposal. Such facilities are located at
  our Oxnard property and cover approximately four acres of land. Lessors are
  compensated by sharing in ten percent or twelve and one-half percent of gross
  revenues from the operations depending on the type of substance disposed. In
  late 1999, we obtained a new contract with a lessor authorizing the use of a
  second disposal well, and settled a dispute with the lessor of the first
  disposal site. We commenced disposal operations in the second well in August,
  2000 and intend to repair the first well. Until our financial condition and
  disputes with lessors resulted in a discontinuance of operations in 1999, the
  waste disposal operations were becoming an increasing source of our revenues
  for Geo.

The
  most significant increase in revenues (which has since decreased) has resulted
  from the September 1996 granting of a new permit to us by the California
  Division of Oil and Gas. This permit provides for the disposal of liquids
  containing various solids in suspension, including tank bottoms,
  drilling mud, water softener wastes, and other oilfield waste materials in our
  wells, in addition to produced wastewater. Tank bottoms consist of the mud,
  paraffin, and sand, which accumulate at the bottom of oil production tanks and
  must be periodically removed and disposed of. The past primary method for
  handling such wastes is an expensive surface disposal process. We can offer
  substantial savings to oil operators by disposing of the waste in our disposal
  well.

Water
  and other wastes produced by other oil operators are hauled to our disposal
  sites, treated, stored, screened, and injected into wells operated in a joint
  venture with Capitan Resources, Inc., an affiliate, which provided the
  capital for disposal facilities and retained 25% of the revenues. In 1996,
  Capitan entered into a transaction with affiliates of Drake Capital
  Securities, Inc. by which the latter acquired a portion of Capitans
  interest in the disposal facilities. We subsequently acquired both the
  interests of Drake and Capitan. See Certain Relationships and Related
  Transactions.

The
  price received for Class II fluids averages about $0.60 per barrel
  for water and $6.50 for tank bottoms. In 1999 we had contracts with, among
  others, AERA Energy L.L.C. (a consortium owned by Shell &
  Mobil), POPCO, Exxon Corporation, Chevron Corporation, Southern California Gas
  Company, Rincon Island L.P., Torch Operating Company, and several other
  independent oil companies to dispose of wastes. Because there are few
  high-capacity waste disposal wells permitted by the California Division of Oil
  & Gas, and an expanding need by operators to dispose of their waste water
  and tank bottoms, we believe that operations of this type are capable of
  substantial growth. The contracts which we had, have now terminated, but we
  are seeking to reestablish our old customer base.

During
  the first half of 1999,our financial condition and regulatory compliance
  problems led to the curtailment of our waste disposal operations and disputes
  with our lessors. At year-end 1999, the facility was not operating. We plan to
  reinstitute operations at the facility during 2000 and to remediate our
  facilities, which have fallen into a state of disrepair. All of the contracts
  with oil operators named above, terminated because of the lack of operations
  at our facility. In late 2000, we resumed operation of one disposal well.

Estimated Oil and Gas Reserves

At
  January 1, 2000, our net proved oil and gas reserves, as estimated by our
  independent petroleum engineers, Krummrich Engineering (as to the Oxnard Field
  Properties) and Stan W. Brown, Consulting Petroleum Engineer, (as to the
  Rosecrans properties) amounted to 26,340,000 barrels of oil and
  464,000 Mcf of natural gas, of which 827,000 barrels and
  464,000 Mcf were classified as proved developed. Future cash flows
  attributable to such proved developed reserves (before income taxes) are
  estimated to be $9,912,000 at December 31, 1999, and the discounted value
  thereof, at 10%, is estimated to be $5,352,000.

---

Proved
  undeveloped reserves were a net 25,513,000 barrels of oil. Estimated
  future net revenues (before income taxes) are $234,707,000 having a present net worth, discounted at
  10% per annum, of $130,141,000.

A
  major portion of our oil reserves is comprised of heavy crude. This portion is
  highly price sensitive, costs more to produce than lighter crudes, and
  receives a lower price in the market. Accordingly, a price at or above 1999
  levels is needed in order to cover operating costs and yield a profit
  utilizing conventional completion and production techniques.

In
  general, the volume of production from oil and gas properties declines as
  reserves are depleted. The SAGD process, which is described above, if
  successfully deployed, has an opposite effect essentially until exhaustion of
  the resource. Except to the extent we acquire properties containing proved
  reserves or conduct successful exploration and development activities, or
  both, our proven reserves will decline as reserves are produced. Our future
  oil and gas production is, therefore, highly dependent upon our level of
  success in acquiring or developing additional reserves.

For
  additional information concerning the discounted future net cash flows to be
  derived from these reserves see Note 11 to the Financial Statements
  included elsewhere herein.

The
  Companys estimates of reserves have not been filed with or included in
  reports to any federal agency other than the Securities and Exchange
  Commission.

Estimated Proved Oil and Gas Reserves

|                                                 |  | At
        December 31, |  
|------------------------------------------------ |  | ----------------------- | -
|                                                 |  |                         |  
|                                                 |  | 1998                    |  
|                                                 |  |                         |  
|Net oil reserves (Mbbl):                         |  |                         |  
|Proved
        developed producing               |  |                         | 
|Proved
        developed non-producing           |  |                         | 
|Proved
        undeveloped                       |  |                         | 
|                                                 |  |                         |  
|Total
        proved oil reserves (Mbbl)         |  |                         | 
|                                                 |  |                         |  
|Net natural gas reserves (MMcf):                 |  |                         |  
|Proved
        developed producing               |  |                         | 
|Proved
        developed non-producing           |  |                         | 
|Proved
        undeveloped                       |  |                         | 
|                                                 |  |                         |  
|Total
        proved natural gas reserves (MMcf) |  |                         | 
|                                                 |  |                         |  
|Total proved reserves (MBOE)                     |  |                         | 
|                                                 |  |                         |  

Estimates
  of proved reserves vary from year to year reflecting changes in the price of
  oil and gas and results of drilling activities during the intervening period.
  Reserves previously classified as proved undeveloped may be completely removed
  from the proved reserves classification in a subsequent year as a consequence
  of negative results from additional drilling or product price declines which
  make such undeveloped reserves non-economic to develop. Conversely, successful
  development and/or increases in product prices may result in additions to
  proved undeveloped reserves.

Estimated Present Value of Future Net
  Revenue

|                                       |  | At
        December 31, |  
|-------------------------------------- |  | ----------------------- | -
|                                       |  |                         |  
|                                       |  | 1998                    |  
|                                       |  |                         |  
|                                       |  | (in
        thousands)  |  
|PV-10 Value:                           |  |                         |  
|Proved
        developed producing     |  |                         | 
|Proved
        developed non-producing |  |                         | 
|Proved
        undeveloped             |  |                         | 
|                                       |  |                         |  
|Total                                  |  |                         | 
|                                       |  |                         |  

As
  used herein, the terms proved oil and gas reserves, proved developed
  oil and gas reserves, and proved undeveloped reserves have the
  meanings defined by the SEC as set forth in the forepart of this document.
  Reservoir engineering is a subjective process of estimating the sizes of
  underground accumulations of oil and gas that cannot be measured in an exact
  way. The accuracy of any reserve estimate is a function of the quality of
  available data and of engineering and geological interpretation and judgment.
  Reserve reports of other engineers might differ from the

---

reports contained herein. Results of drilling,
  testing and production subsequent to the date of the estimate may justify
  revision of such estimate. Future prices received for the sale of oil and gas
  may be different from those used in preparing these reports. The amounts and
  timing of future operating and development costs may also differ from those
  used. Accordingly, reserve estimates are often different from the quantities
  of oil and gas that are ultimately recovered.

The
  following table summarizes sales volume, sales price and production cost
  information for our net oil and gas production for each of the years in the
  two-year period ended December 31, 1999.

|                                                 |  | Year
        EndedDecember 31, |      
|------------------------------------------------ |  | ------------------------------ | -----
|                                                 |  |                                |      
|                                                 |  | 1998                           |      
|                                                 |  |                                |      
|Production Data:                                 |  |                                |      
|Oil (MBbls)                                      |  |                                | 36   
|Gas (MMcf)                                       |  |                                | 17   
|                                                 |  |                                |      
|Total
        (MBOE)                             |  |                                | 39   
|                                                 |  |                                |      
|                                                 |  |                                |      
|Average Sales Price Data
        (Per Unit):     |  |                                |      
|Oil (Bbls)                                       |  | $                              | 4.31 
|Gas (Mcf)                                        |  | $                              | 0.76 
|                                                 |  |                                |      
|BOE                                              |  | $                              | 4.45 
|                                                 |  |                                |      
|                                                 |  |                                |      
|Selected Data per BOE:                           |  |                                |      
|Production
        costs (2)                     |  | $                              | 3.98 
|General
        and administrative               |  | $                              | 18.09
|Depletion,
        depreciation and amortization |  | $                              | 2.98 

______________



Drilling Activity

The
  following tables set forth certain information for each of the years in the
  two-year period ended December 31, 1999, relating to our participation in
  the drilling of exploratory and development wells, all of which are located in
  California:

|                   |  | Year
        Ended December 31, |  
|------------------ |  | ------------------------------- | -
|                   |  |                                 |  
|                   |  | 1998                            |  
|                   |  |                                 |  
|                   |  | Gross
        (1)               |  
|                   |  |                                 |  
|Exploratory Wells: |  |                                 |  
|Oil                |  |                                 |  
|Gas                |  |                                 |  
|Dry (3)            |  |                                 | 
|                   |  |                                 |  
|Development Wells: |  |                                 |  
|Oil                |  |                                 | 1
|Gas                |  |                                 | 
|Dry (3)            |  |                                 | 
|                   |  |                                 |  
|Total Wells:       |  |                                 |  
|Oil                |  |                                 | 1
|Gas                |  |                                 | 
|Dry (3)            |  |                                 | 

______________





---



Productive Oil and Gas Wells

The
  following table sets forth information at December 31, 1999, relating to
  the number of productive oil and gas wells (producing wells and wells capable
  of production, including wells that are shut in or suspended) in which we
  owned a working interest:

|           |  | Oil   |    | Gas |  | Total | 
|---------- |  | ----- | -- | --- |  | ----- | 
|           |  |       |    |     |  |       | 
|           |  | Gross |    | Net |  | Gross | 
|           |  |       |    |     |  |       | 
|California |  |       | 57 |     |  | 57    | 

Oil and Gas Acreage

The
  following table sets forth certain information at December 31, 1999,
  relating to oil and gas acreage (all of which is located in California) in
  which Geo owned a working interest:

|              |  | Developed
        (1) |      | Undeveloped | 
|------------- |  | --------------------- | ---- | ----------- | 
|              |  |                       |      |             | 
|              |  | Gross                 |      | Net         | 
|              |  |                       |      |             | 
|United States |  |                       | 1460 |             | 

______________



Recent Activities

Since
  year-end 1999, we have not participated in the drilling of any oil or gas
  wells. We are, however, repairing two wells at our Vaca property and have
  restored one of our waste disposal wells to active service. We are attempting
  to reattract customers to our waste disposal facility and are meeting with
  moderate success in our efforts.

Title to Properties

Many
  of our oil and gas properties are held in the form of mineral leases, licenses
  and similar agreements. In general, these agreements do not convey a fee
  simple title to us, but rather create lesser interests, such as a profit a
  prendre. As is customary in the oil and gas industry, a preliminary
  investigation of title is made at the time of acquisition of undeveloped
  properties. Title investigations are generally completed, however, before
  commencement of drilling operations or the acquisition of producing
  properties. Because most of our oil and gas leases require continuous
  production beyond the primary term, it is always possible that a cessation of
  producing or operating activities could result in the loss of one or more
  leases. Prior to and during our bankruptcy proceedings, most of our properties
  did not produce oil or gas on a continuous basis. We have taken steps to cure
  deficiencies in our title at our Vaca facility, but have not yet done so with
  respect to any other property.

While
  we have been in possession of our two major properties (Oxnardapproximately
  10 years and Rosecransapproximately 6 years) a number of years
  and have not received notice of a third-party adverse claim, we have not
  obtained title insurance or a title opinion covering such properties, but have
  relied upon title abstracts of the public records and the apparently
  unchallenged possession of our predecessors in interest. Consequently, while
  we believes that title to our properties is satisfactory, we would be unable
  to demonstrate such fact without obtaining title insurance or opinions that we
  believe is not cost-effective or otherwise warranted under the circumstances.
  Generally, once production has been established on an oil and gas lease,
  production must be maintained in quantities sufficient to pay the costs of
  operations, or the lease will terminate of its own accord. We believe that all
  of our material leases have been kept in force by production, but because
  there have been interruptions in continuous production at various times, we
  cannot give any assurance that a claim will not be asserted that one or more
  of such leases have terminated.

Title
  to our properties is, in addition, subject to royalty and overriding royalty
  interests and to contractual arrangements customary in the oil and gas
  industry, to liens for work and materials, current taxes not yet due and to
  other minor encumbrances. We have not encumbered any of our properties to
  secure bank indebtedness. Our working interest in properties may be subject to
  liens for non-payment of labor or services provided to us. In the

---

event of our non-payment or untimely payment of
  our obligations, we expect liens to be filed against our assets and to be
  subject to lawsuits. Oil and gas leases in which we have an interest may be
  deficient, require ratifications and be subject to action by us.

Average Sales Price and Production Cost

The
  following table sets forth information concerning average per unit sales price
  and production cost for our oil and gas production for the periods indicated:

|                                        |  | Year
        EndedDecember 31, |      
|--------------------------------------- |  | ------------------------------ | -----
|                                        |  |                                |      
|                                        |  | 1998                           |      
|                                        |  |                                |      
|Average sales price per
        BOE     |  | $                              | 4.45 
|Average production cost
        per BOE |  | $                              | 25.05

Markets

The
  market for oil and natural gas produced by us depends on factors beyond our
  control, including the extent of domestic production and imports of oil and
  natural gas, the proximity and capacity of natural gas pipelines and other
  transportation facilities, demand for oil and natural gas, the marketing of
  competitive fuels and the effects of state and federal regulation of oil and
  natural gas production and sales. The oil and gas industry as a whole also
  competes with other industries in supplying the energy and fuel requirements
  of industrial, commercial and individual consumers.

During
  1997, we experienced a substantial decrease in the price paid for our oil.
  During the latter part of 1999, prices increased significantly. We anticipate
  that there may be a strengthening of the prices for both our oil and gas
  production, but that periods of unstable pricing may occur. We will be subject
  to variations in cash flow depending upon changes in prices paid for oil and
  gas.

Competition

The
  oil and gas industry is highly competitive. Competitors include major oil
  companies, other independent oil and gas companies, and individual producers
  and operators, many of which have financial resources, staffs and facilities
  substantially greater than ours. The Company faces intense competition for the
  acquisition of producing oil and gas properties that are being divested by
  major and independent oil and gas companies.

Offices

We
  lease office space in Yorba Linda, California, on a month-to-month tenancy
  from an affiliate (see Certain Transactions) aggregating some
  5000 square feet for a monthly rental of $5,000.

Item 3.   Legal
  Proceedings

From
  time to time, we may be involved in legal proceedings, including those arising
  out of our operations and the amounts due suppliers or royalty owners. None of
  such proceedings are generally considered material to our operations or
  financial condition. During the course of our bankruptcy proceedings, which
  was styled In re Geo Petroleum, Inc., Debtor, U. S. Bankruptcy
  Court for the Central District of California, Santa Barbara Division,
  number 98-15477-RR, we were involved in several adversary proceedings,
  all of which were settled as part of the bankruptcy proceedings, except for Bud
  Antle, Inc. v. Geo Petroleum, Inc, an adversary action in the
  bankruptcy proceedings. In the proceedings, the lessor of a 170-acre tract
  assertedly not part of the Vaca Tar Sand Unit, claimed that our lease had
  terminated by reason of non-production of oil or gas. The lessor sought a
  declaration that the lease had terminated, that damages of over $450,000 were
  owed, and an order requiring Geo to abandon three wells on our property.
  Subsequent to year-end 1999, we settled this dispute, which resulted in our
  quitclaiming the lease and abandoning the three wells.

Item 4.   Submission
  of Matters to a Vote of Security Holders

No
  matters were submitted for a vote of Security Holders during the fourth
  quarter of 1999. See Description of BusinessFailure to Comply With
  Certain Formalities for a discussion of our failure to hold an annual
  meeting.

---

PART II

Item 5.   Market For
  Common Equity and Related Stockholder Matters

Market Information

Since
  August 1996, the shares of our common stock have been traded on the Electronic
  Bulletin Board of the National Association of Securities Dealers, Inc. In
  December 1999, the common stock was removed from the Electronic Bulletin Board
  by action of the manager thereof, and commenced trading in the over-thecounter
  market (pink sheets). We believe that at October 1, 2000 there were nine
  firms are making a market in the common stock. Prior to August 1996, there was
  no public market for the common stock. The following table sets forth the high
  and low bid prices of the common stock for the periods indicated as reported
  by the National Association of Securities Dealers, Inc. for periods prior to
  December 10, 1999, and by the National Quotation Services for periods
  after December 9, 1999. The prices set forth below reflect inter-dealer
  prices, without retail mark-up, mark-down or commission, and may not represent
  actual transactions.

|                       |  | High
        Bid |     | Low
        Bid | 
|---------------------- |  | ---------------- | --- | --------------- | 
|                       |  |                  |     |                 | 
|Year Ended 1998:       |  |                  |     |                 | 
|First
        Quarter  |  |                  | 1.5 |                 | 
|Second
        Quarter |  |                  | 1.5 |                 | 
|Third
        Quarter  |  |                  | .75 |                 | 
|Fourth
        Quarter |  |                  | .20 |                 | 
|                       |  |                  |     |                 | 
|Year Ended 1999:       |  |                  |     |                 | 
|First
        Quarter  |  |                  | .08 |                 | 
|Second
        Quarter |  |                  | .08 |                 | 
|Third
        Quarter  |  |                  | .50 |                 | 
|Fourth
        Quarter |  |                  | .55 |                 | 

On
  October 16, 2000, the reported closing price per share was $0.80.

Holders of Common Equity

At
  December 31, 1999, there were approximately 400 holders of record known
  to us of our common equity. Based on a broker count, we believe at least an
  additional 230 persons are shareholders with street name positions.

Dividends

Holders
  of our common stock are entitled to receive such dividends as may be declared
  by our board of directors. We have never paid dividends on our common equity
  and have no plans to do so in the foreseeable future. There are no agreements
  to which we are a party or by which our property is bound which restricts the
  payment of dividends. Our board of directors presently intends to pursue a
  policy of retaining earnings, if any, for use in our operations and to finance
  expansion of our business.

Item 6.   Managements
  Discussion and Analysis of Plan of Operation

The
  following discussion and analysis for the years ended December 31, 1999 and
  December 31, 1998 should be read in conjunction with our Financial Statements
  and the Notes thereto elsewhere in this statement.

During
  1998 we filed petitions for relief under Chapter 11 of the federal bankruptcy
  laws. As a result of the proceedings under Chapter 11, we continued operations
  as Debtor-in-possession and the court ultimately approved a plan of
  reorganization in December 1999. The plan of reorganization includes the
  compromise of most of our liabilities and the infusion of $500,000 of
  additional capital from the sale of 4,500,000 shares of common stock. In
  addition, new management has replaced the former President and Chief Executive
  Officer, Secretary/Treasurer and other members of management.

During
  1998 and 1999 we disposed of significant assets by sale or by transfer as part
  of the bankruptcy proceedings. Also, the operations of remaining oil and gas
  properties as well as waste disposal operations were curtailed during 1998 and
  ultimately ceased during 1999. However, despite these constrictions of our
  asset base and

---

operations, significant assets have been
  retained and we are pursuing development of these assets. An immediate
  priority is the restoration of the waste disposal operations and some of the
  oil and gas operations to provide an internal source of cash flow. Further, we
  are continuing efforts to obtain additional funds so that we can meet our
  obligations, commence operations and develop our oil and gas properties.
  Potential opportunities for additional funds include, among other things,
  private placement of debt, and/or equity securities, bank loans using oil and
  gas properties as collateral, and/or the sale of the interests in certain oil
  and gas properties, and or entering into joint ventures or partnerships to
  develop oil and gas properties.

Results of Operations

During
  the years ended December 31, 1999 and 1998, we had losses of $1,028,762 and
  $6,309,539 and negative cash flows from operations of $69,945 and $286,625,
  respectively.

Oil
  and gas revenues decreased from $135,298 in 1998 to $872 in 1999. Decreases in
  1999 were primarily related to sharp declines in oil prices resulting in the
  reduction of production from properties that became economically unviable. The
  further reduction in revenue reflects the disposition of the East LA/Bandini
  property in late 1998, combined with the continued shut-in of all other
  producing properties. Low oil prices combined with our weak financial position
  caused all production to cease by the end of 1998. Consequently, oil and gas
  revenues for 1999 were effectively zero.

Industrial
  waste disposal revenues decreased from $446,446 in 1998 to $157,529 in 1999.
  The decrease in 1999 was due to the curtailment of all operations during 1999
  resulting from our weak financial position. Dwindling finances while we were
  in bankruptcy rendered us incapable of meeting the operating costs associated
  with the waste disposal operations. Ultimately, all such operations were
  ceased during 1999. As part of the reorganization in bankruptcy, we acquired
  all of the rights including an additional 25% revenue interest in the waste
  disposal operations previously owned by Capitan Resources, Inc. Acquisition of
  this revenue interest resulted in our owning 100% of the waste disposal
  operations. Consequently, revenues from waste disposal are anticipated to
  increase when we renew these operations in the future.

Lease
  operating expenses decreased from $482,167 in 1998 to $204,336 in 1999. These
  decreases were due to the curtailment of operations caused by our weakened
  financial position.

In
  1998 we incurred a charge for the write-off of costs of oil and gas properties
  due to the application of the cost ceiling limitation under the
  full-cost method of accounting for oil and gas operations. The combination of
  depressed oil prices and relatively high development and lifting costs
  resulted in the reduction of the valuation of proven reserves. Consequently,
  the historical cost basis of oil and gas properties was written-off to reflect
  the decline in value.

Expenses
  incurred for environmental remediation decreased from $589,521 in 1998 to
  $42,832 in 1999. The significant decrease in these costs during 1999 was
  primarily related to a judgment in 1998 against us requiring either the clean
  up of two abandoned wells or the payment of $352,000. This liability was
  approved by the bankruptcy court as an unsecured creditor. An additional
  liability in the amount of $232,000 was incurred in connection with certain
  leases previously acquired by us.

General
  and administrative expenses decreased from $705,386 in 1998 to $199,769 in
  1999. As operations were curtailed in 1999, general and administrative
  expenses were naturally reduced significantly.

We
  sold a major oil and gas property in 1998 known as the East LA/Bandini
  property. This sale resulted in a loss of $3,702,481, as the portion of costs
  capitalized for the purchase and development of this property were written-off
  against the proceeds from the sale. This property was sold to provide
  operating capital and to eliminate costs associated with the continued
  ownership and operation of this property. Management considered the sale
  necessary in light of the financial difficulties that ultimately forced us to
  seek the protection of the United States Bankruptcy Court. No oil and gas
  properties were sold in 1999.

Expenses
  incurred in connection with the reorganization under bankruptcy in 1998
  represent payments to legal counsel to begin the proceedings. These expenses
  increased to $880,359 in 1999 as the bankruptcy proceedings progressed and the
  reorganization plan was approved by the court. Professional fees increased
  from $36,000 in 1998 to $226,883 in 1999 due to the requirement for legal and
  accounting services during the full year of bankruptcy proceedings. Settlement
  costs of $648,248 were incurred in 1999 were primarily related to the
  elimination of a

---

receivable from Capitan Resources, Inc. whereby
  we received an additional 25% revenue interest in the waste disposal
  operations. The face amount of this receivable was in excess of $1,056,503;
  however, a reserve was recorded as a valuation allowance in the amount of
  $500,000.

Interest
  income decreased from $8,944 in 1998 to $5,225 in 1999 as cash reserves
  decreased. Interest expense decreased from $102,760 to $865 in 1999 as we
  ceased accruing interest on outstanding debts after filing bankruptcy.

Capital Resources and Liquidity

As
  of December 31, 1997, our total assets were $6,179,391. Total assets decreased
  to $913,728 at December 31, 1998. The most significant component of this
  decrease was the reduction of costs capitalized for the acquisition and
  development of oil and gas properties. As previously discussed, in 1998 we
  sold a major oil and gas property know as the East LA/Bandini property. This
  sale resulted in the write-off of approximately $4,084,000 of capitalized
  costs and a recognized loss on the sale of $3,702,481. In addition, the
  balance of oil and gas properties were written-off in 1998 as a result of the
  cost ceiling limitation under the full-cost method of accounting for oil
  and gas operations. This limitation requires us to compare the total
  capitalized costs for our oil and gas properties net of any depletion to the
  present value of future net revenues from production of proven reserves. Since
  the price of oil was very low in 1998, the present value of future net
  revenues (gross revenue less projected development and lifting costs) was
  negative. This resulted in the write-off of the remaining balance of oil and
  gas properties.

Cash
  and equivalents increased from $6,861 in 1998 to $436,916 when we realized
  additional funds through the sale of shares of our common stock pursuant to
  the plan of reorganization.

Receivable
  from Capitan Resources, Inc., a related party, decreased from $556,503 as
  December 31, 1998 to zero as of December 31, 1999. As previously discussed,
  this receivable was eliminated in 1999 as part of the plan of reorganization
  and we acquired Capitans 25% interest in the property.

Due
  to our financial distress, substantially all of our liabilities as of December
  31, 1997 remained unpaid when the petitions for bankruptcy were filed.
  Additional liabilities were incurred during 1998 prior to the bankruptcy
  filing and the total liabilities at the time of filing were then subject to
  compromise. Liabilities subject to compromise at December 31, 1998 totaled
  $2,478,094. During 1999 we continued to operate in a severely diminished
  capacity. Additional liabilities were incurred and are reflected on the
  balance sheet as of December 31, 1999. Also reflected on the balance sheet as
  of December 31, 1999 are the liabilities remaining after implementation of the
  plan of reorganization approved by the bankruptcy court on December 15, 1999.
  A summary of the provisions of the plan of reorganization is provided as
  Footnote 7 in the Notes to Financial Statements.

Our
  primary sources of liquidity and capital resources in the near term will
  consist of the working capital on hand and funds derived from oil and gas
  production and waste disposal operations. We intend to concentrate our efforts
  on restoring operation of the waste disposal facility and selected oil and gas
  wells in order to reestablish sources of cash flow.

Item 7.   Financial
  Statements

Please
  see accompanying Index to Financial Statements commencing on page F-1.

Item 8.   Changes in
  and Disagreements with Accountants on Accounting and Financial Disclosure

(a)  On
  January 18, 2000, we engaged Kelly & Company to replace
  Ernst & Young, LLP, who resigned as our independent accountants
  during the third quarter of 1998. Ernst & Young, LLP did not issue an
  opinion on our 1998 financial statements. Our Board of Directors approved the
  change in our independent accountant.

The
  independent auditors report of Ernst & Young, LLP for our
  financial statements for the year ended December 31, 1997 contained a
  going concern qualification but otherwise did not contain an adverse opinion
  or a disclaimer of opinion, and was not modified as to uncertainty, audit
  scope, or accounting principles. The report of Kelly & Company for
  the years ended December 31, 1998 and 1999 contains a similar going
  concern qualification.

---

During
  our two most recent fiscal years and through the date of the resignation of
  Ernst & Young, LLP, We did not have any disagreements with Ernst
  & Young, LLP on any matter of accounting principles or practices,
  financial statement disclosure, or auditing scope or procedure.



---

PART III

Item 9.   Directors,
  Executive Officers, Promoters and Control Persons; Compliance with Section
  16(a) of the Exchange Act

Directors and Executive Officers

The
  following table lists the directors, executive officers and key employees of
  the Company.

|Name of
        Individual     |  | Age |    | Position Held with Company |  | Director
        Since                                                                    | 
|------------------------------ |  | --- | -- | -------------------------- |  | ----------------------------------------------------------------------------------------- | 
|                               |  |     |    |                            |  |                                                                                           | 
|Gerald T.
        Raydon (1)   |  |     | 70 |                            |  | Chairman of
        the Board, President                                                  | 
|Alyda L.
        Raydon (1)    |  |     | 58 |                            |  | Secretary-Treasurer,
        Chief Financial Officer,Principal Accounting
        Officer | 
|Larry R.
        Burroughs (1) |  |     | 58 |                            |  | President                                                                                 | 
|William J.
        Corcoran    |  |     | 69 |                            |  | Director                                                                                  | 
|Dennis Timpe
        (2)       |  |     | 53 |                            |  | President and
        Chief Executive Officer                                             | 
|Lori Timpe-Long
        (2)    |  |     | 31 |                            |  | Chief
        Financial Officer, PrincipalAccounting Officer                              | 
|Christopher
        Dillon (2) |  |     | 55 |                            |  | Director,
        General Counsel                                                         | 

______________





The
  following is a brief description of the business experience during the
  preceding five years of each of the nominees for the office of Director of the
  Company, indicating their principal occupation and employment during the
  period and the name and principal business of any organization in which such
  occupations and employment were carried out.

Mr. Dennis
  Timpe joined the Company in December 1999, pursuant to our Plan of
  Reorganization. Mr. Timpe is the founder and since 1986 has been chief
  executive office of TD & Associates, a firm which is engaged in the
  organization of entities which are engaged in the exploration and development
  of oil and gas. Mr. Timpe and certain companies with which he was or is
  affiliated have been the subject of administrative orders issued by the
  securities administrators of the States of Pennsylvania, Montana and
  Wisconsin, the effect of which is to require Mr. Timpe and such companies
  to refrain from selling securities or acting as a broker in such states unless
  appropriate registration or qualification is in effect. In addition, Mr. Timpe
  has been preliminarily enjoined from violating the Pennsylvania Securities
  Laws by selling unregistered securities and has been found by a State Court,
  in an uncontested matter, to have violated the Pennsylvania Securities laws by
  selling unregistered securities in the State of Pennsylvania. Mr. Timpe
  is the father of Lori Timpe-Long.

Lori
  Timpe-Long is SecretaryTreasurer of the Company, having been appointed to
  such office pursuant to the Plan of Reorganization of the Company.
  Mrs. Long has been the treasure of TD & Associates since 1985.
  Mrs. Long has a Bachelor of Arts degree from California State University,
  Long Beach and a Master of Arts degree in Psychology from California Graduate
  Institute. Mrs. Timpe-Long is the daughter of Dennis Timpe.

Christian
  Dillon is an attorney in private practice and acts as counsel to the Company
  and to TD & Associates. Mr. Dillon received his J.D. degree
  from Western State University, College of Law in 1979; he is a member of the
  State Bar of California and is admitted to practice in various federal courts.

The
  following persons resigned from the Company in or prior to December 1999:

Gerald T.
  Raydon founded Geo in 1986. He has over 40 years of experience in the
  California oil business as a geologist, attorney, and oil company president,
  commencing his career with Chevron USA, Inc. He was for sixteen years the
  President of American Pacific International, Inc., a public oil company
  located in Los Angeles, California, which achieved a market capitalization of
  $55,000,000 before it was merged it into Worldwide Energy Corporation in 1984.
  Subsequently he served as a director of Worldwide and as President of its West
  Coast subsidiary until 1986.

---

In March 1989, he was appointed as Receiver of
  Fountain Oil & Gas Company by the Chief Judge of the United States
  District Court, Central District of California, and served four years,
  concurrently with his service to Geo, until the receivership was concluded.
  Mr. Raydon holds B.A. and M.A. degrees in Geological Sciences from
  the University of California, Berkeley, and the J.D. degree from the
  University of Southern California, School of Law. He is a member of the
  American Association of Petroleum Geologists, the Society of Petroleum
  Engineers, and of the California State Bar. Mr. Raydon is the husband of
  Alyda L. Raydon and the father of Eric J. Raydon.

Alyda L.
  Raydon was Secretary/Treasurer and was employed in such position since
  October, 1986. She has completed college courses in financial and investment
  management, accounting, computer science, and office procedures. Alyda L.
  Raydon is the wife of Gerald T. Raydon and the mother of Eric J.
  Raydon.

William J.
  Corcoran was employed by an investment management firm representing the
  W. Averell Harriman family from 1963 until his retirement in 1995. He
  served as Secretary-Treasurer of the Mary A. H. Rumsey Foundation,
  the Gladys and Roland Harriman Foundation, and the W. Averell Harriman
  and Pamela C. Harriman Foundation. Mr. Corcoran graduated from Fordham
  University with B.A. and M.A. degrees in accounting.

Eric J.
  Raydon joined the Company in June, 1995. He has over six years of experience
  in oil and gas, finance, real estate development, accounting, and management.
  Mr. Raydon received his Bachelor of Science degree in Business
  Administration/Real Property Development and Management from the University of
  Southern California in May, 1991. Eric J. Raydon is the son of Gerald and
  Alyda Raydon.

Compliance with Section 16(a) of the
  Exchange Act

Based
  solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished
  to us with respect to calendar year 1999, we believe that Mr. G. T.
  Raydon, Mrs. A. L. Raydon filed such forms late and that
  Mr. Corcoran and Mr. Burroughs failed to file any such forms with
  respect to such year. We believe that either Form 4 or Form 5 should
  have been filed by each such person disclosing their respective resignations
  from all positions with the Company. Additionally, we believe that Mr. Raydon
  and Mrs. Raydon did not timely report a reduction in holdings of common
  stock or the right to acquire the same as a result of our Plan of
  Reorganization. No member of our Board of Directors (Messrs. Timpe,
  Dillon and Mrs. Timpe-Long) nor its executive officers (Mr. Timpe
  and Mrs. Timpe-Long) filed a Form 3 Report for the calendar year
  1999.

Item 10.   Executive
  Compensation

Compensation

None
  of our officers received compensation, including salary and bonus, in excess
  of $100,000 during either of the two preceding years. The Board authorized
  compensation to Mr. Raydon in the amount of $120,000 per year commencing
  January 1, 1997, and pursuant to such authorization Mr. Raydon
  received $120,000 during the calendar year 1997, and no cash compensation
  during 1998 and 1999. The obligation to make further payments (other than
  $4,300 which was allowed as a priority wage claim to each of Mr. and
  Mr. Raydon) was discharged as part of the Plan of Reorganization of the
  Company. The following tables contain information concerning our Chief
  Executive Officer and any other executive officer whose aggregate cash
  compensation exceeds $100,000 per year.

---

Summary Compensation Table

|                                          |  |                             |      |           |  |          |     |                     |  | Long-Term
        Compensation | 
|----------------------------------------- |  | --------------------------- | ---- | --------- |  | -------- | --- | ------------------- |  | ------------------------------ | 
|                                          |  |                             |      |           |  |          |     |                     |  |                                | 
|                                          |  | Annual
        Compensation |      | Awards    |  | Payouts  |    
|                                          |  |                             |      |           |  |          |    
|Name andPrincipal Position                |  | Year                        |      | Salary($) |  | Bonus($) |     | OtherAnnualComp.($) |  | RestrictStockAwards($)         | 
|                                          |  |                             |      |           |  |          |     |                     |  |                                | 
|G.T. Raydon,
        CEO                  |  |                             | 1998 |           |  | 1,000    | (1) |                     |  |                                | 
|G. T. Raydon,
        CEO                 |  |                             | 1999 |           |  | 1,000    | (1) |                     |  |                                | 
|Dennis Timpe,
        CEO                 |  |                             | 1999 |           |  | 0        |     |                     |  |                                | 
|Lori Timpe-Long
           Sec.-Treasurer |  |                             | 1999 |           |  | 0        |     |                     |  |                                | 

______________



The
  Company has no option or other incentive compensation plans at December 31,
  1999.

Option/SAR Grants In Last Fiscal Year(Individual Grants)

|Name |  | Number
        ofSecurities UnderlyingOptions/SARsGranted(#) |  | Percent
        of TotalOptions/SARsGranted toEmployees in1999 |  | Exercise
        orBase Price($/share) |  | ExpirationDate | 
|---- |  | ------------------------------------------------------------ |  | -------------------------------------------------------------- |  | -------------------------------------- |  | -------------- | 
|     |  |                                                              |  |                                                                |  |                                        |  |                | 
|None |  |                                                              |  |                                                                |  |                                        |  |                | 
|     |  |                                                              |  |                                                                |  |                                        |  |                | 

Aggregated Option/SAR Exercises In Last
  Fiscal Year And Fiscal Year-End Option/SAR Values

|Name |  | Shares
        Acquiredon Exercise(#) |  | Value
        Realized($) |  | No.
        of Unexercised Securities Underlying Options SARsat FY-End(#) |  | Value
        of Unexercised In-the-Money Options/SARs at FY-End($) | 
|---- |  | ------------------------------------- |  | ------------------------- |  | ------------------------------------------------------------------------- |  | ------------------------------------------------------------------- | 
|     |  |                                       |  |                           |  |                                                                           |  |                                                                     | 
|     |  |                                       |  |                           |  | (Exerciseable/Unexerciseable)                                             | 
|None |  |                                       |  |                           |  |                                                                           |  |                                                                     | 
|     |  |                                       |  |                           |  |                                                                           |  |                                                                     | 

Long Term Incentive Plans

The
  Company has no long-term incentive plans.

Compensation of Directors

Directors
  currently receive an annual issuance of 1,000 shares of common shares as
  compensation. Directors do not receive reimbursement for their out of pocket
  costs in attending board meetings.

Employment Contracts and Termination of
  Employment, and Change-In Control Arrangements

We
  have no benefit plans and no employment agreements, other than at will
  agreements, with any of our employees.

In
  1996, the Board authorized the Company to enter into employment contracts for
  periods of five years with each of Mr. Gerald T. Raydon, Mrs. Alyda
  Raydon and Mr. Eric J. Raydon. Such agreements were executed in August
  1997 and provided for annual compensation of $120,000, $39,000 and $52,000,
  respectively, all subject to escalation on an annual basis as approved by the
  Board. The agreements did not contain provisions restricting a change of
  control in the Company. As a consequence of our Plan of Reorganization, all
  such contracts were

---

terminated without payment of accrued but
  unpaid portions of salaries in December 1999, other than an allowance to each
  of Mr. and Mrs. Raydon of $4,300 as priority wage claims. During the
  pendancy of the bankruptcy proceedings, Mr. Raydon received $5,000 per
  month and Mrs. Raydon received $3,250 per monthly. See Compensation Table
  above.

Item 11.   Security
  Ownership of Certain Beneficial Owners and Management

The
  following table sets forth information, as of December 31, 1999, with
  respect to the beneficial ownership of our Common Stock by: (i) each
  stockholder known to us to be the beneficial owner of more than 5% of our
  Common Stock; (ii) each director; (iii) each of the Chief Executive
  Officer and any executive officer that received $100,000 or more in
  compensation during the fiscal year.

|Title of Class |  | Name and Address ofBeneficial Owner |                                            | Amount
        and Nature of Beneficial Ownership |  | Percent
        ofClass | 
|-------------- |  | ----------------------------------- | ------------------------------------------ | ------------------------------------------------- |  | ----------------------- | 
|               |  |                                     |                                            |                                                   |  |                         | 
|Common Stock   |  |                                     | Drake Capital
        Securities, Inc. (1) |                                                   |  | 95,000                  | 
|Common Stock   |  |                                     | Drake Holding
        Corp. (1)            |                                                   |  | 60,000                  | 
|Common Stock   |  |                                     | Drake Energy
        Corp. (1)             |                                                   |  | 323,675                 | 
|Common Stock   |  |                                     | Gerald T.
        Raydon (2)               |                                                   |  | 2,462,842               | 
|Common Stock   |  |                                     | Harriman
        Interests                 |                                                   |  | 140,832                 | 
|Common Stock   |  |                                     | Dennis Timpe
        (3)                   |                                                   |  | 3,649,279               | 

______________







Item 12.   Certain
  Relationships and Related Transactions

In
  1998, we filed a voluntary petition for Reorganization under Chapter 11
  of the Bankruptcy Code in the U.S. Bankruptcy Court, Central District of
  California, Santa Barbara Division (No. ND 98-15477-RR). In December
  1999, our Third Amended Plan of Reorganization was confirmed by the Court.

Until
  December 1999, Capitan Resources, Inc. owned an undivided 25% interest in
  the waste disposal facilities owned and operated by us at our Oxnard
  properties. Gerald T. Raydon and his family own all of the stock of
  Capitan Resources, Inc. As part of our Reorganization, we acquired all of the
  interests of Capitan Resources in the jointly owned properties and terminated
  the agreement pursuant to which Capitan operated such properties. Relations
  between the Company and Capitan Resources were governed by an agreement, which
  provides for a proportionate sharing of costs and revenues.

During
  1996, affiliates of Drake Investment Securities, Inc. invested $50,000 in
  Capitan in exchange for an undivided 25% share of profits in the disposal of
  solid wastes by Capitan. This interest was subsequently acquired by the
  Company.

Capitan
  Resources, Inc. was the purchaser of natural gas from our Bandini-East Los
  Angeles properties, which were sold during 1998. Capitan purchased the natural
  gas under a contract dated June 30, 1991, which provides for a payment to
  Capitan of 30% of gross sales in exchange for advancing capital and other
  costs of gas processing and transportation. Capitan then resold the natural
  gas to other purchasers. This contract was terminated as part of our
  reorganization.

From
  time to time there were outstanding balances and credits between Capitan and
  us pursuant to the agreements above mentioned. At December 31, 1998 and
  1999 we had a receivable of $556,503 and $0,

---

respectively, from Capitan. Similar credits and
  balances were outstanding from time to time with respect to the Bandini-East
  Los Angeles properties and Vaca properties; during the two years ended
  December 1999, the largest balance receivable from Capitan was approximately
  $1 million and on December 31, 1999, the receivable balance was $0
  as a consequence of our Plan of Reorganization which provided for the release
  of all claims of Capitan against us and all of our claims against Capitan in
  exchange for the conveyance to us of Capitans interest in the waste
  disposal project and termination of its operating contract.

The
  Harriman affiliated group currently owns approximately 365,576 shares or 2.27%
  of our outstanding common stock. In 1992, members of the group provided
  collateral to a bank for a loan to us in the principal amount of $1,200,000
  ($650,000 as of June 30, 1997). The group received 273,669 shares of our
  common stock as partial consideration for providing such collateral. The loan
  was extended to January 15, 1998 on the condition that it be reduced by
  one-half, which we did by making a $750,000 payment in December, 1996. We paid
  the Harriman group 51,010 shares of the common stock in 1996 as consideration
  for retaining the use of their collateral for the loan through the period of
  extension. In 1998, a further extension was granted in exchange for an
  additional 25,000 shares of common stock. The indebtedness was discharged in
  our reorganization and the Harriman affiliated group received $664,990 in
  allowed claims as a creditor.

In
  1998, Drake Energy Company, an affiliate of Drake Securities Corporation,
  loaned us $16,500 and purchased 33,000 shares of common stock for $16,500. The
  note was discharged in the bankruptcy and Drake Energy received an allowed
  unsecured claim for $16,500.

Under
  our Plan of Reorganization, which was confirmed on December 15, 1999, the
  following transactions, among others, occurred:

1.
  TD & Associates, a company owned by Mr. Dennis Timpe received
  1,270,000 shares of our common stock related to our sale of 3,230,000 common
  shares in exchange for $500,000.

2.
  Capitan Resources, Inc., a company owned by Mr. G. T. Raydon,
  relinquished all of its rights under agreements with us by which Capitan
  operated certain of our properties, acted as natural gas reseller for us, and
  released any claims it may have had against us. We released Capitan and
  Mr. Raydon from any claims we may have had against either. We asserted
  claims of approximately $1 million against Capitan.

3.
  Mr. Raydon released claims for 1,390,000 shares of our common stock as
  replacement for shares owned by him lost through sale by a third party, which
  were provided by Mr. Raydon as collateral for an indirect loan to us.

4.
  Mr. Raydon released certain collateral and claims secured thereby on
  certain of our properties.

5.
  The Harriman affiliated group released its claims against us, including that
  for repayment of $652,000, in exchange for the payment of $25,000, a two year
  installment ($2,487.50 monthly) note bearing 8% interest, principal amount of
  $55,000, and a general unsecured claim of $584,990 for which they have
  received 210,595 shares of common stock and will receive a maximum of
  497,978 additional shares.

6.
  Unsecured notes in the amount of $185,000 held by Mr. And Mrs. Raydon
  are to be discharged and various liens of the Raydons on our properties were
  released.

7.
  Advances in the amounts of $33,000 from Mr. Eric Raydon were discharged
  in exchange for an allowed claim of $33,919 for which he received shares of
  the Common Stock on the same basis as other creditors of his class.

As
  a condition to investing in our common stock, Mr. Timpe required that
  Mr. G. T. Raydon grant Mr. Timpe a proxy covering all of the shares
  owned of record by Mr. Raydon. Such proxy was granted in December 1999,
  and permits Mr. Timpe and his nominees to vote the shares subject thereto
  for a period ending December 20, 2001.

We
  occupy approximately 5000 square feet of office space in Yorba Linda,
  California, which it subleases from TD & Associates, Inc., a company
  owned by Dennis Timpe, our president. The Company pays TD $5,000 per month for
  rental and administrative support, an amount which approximates TDs cost of
  providing such office space and administrative support to us.

From
  time to time and when Geo was controlled by previous management, ventures
  organized by Mr. Timpe or an affiliate, have participated in the drilling of
  wells on properties owned and operated by Geo. We believe that

---

the terms of such participation were as
  favorable to Geo as could be obtained from other unaffiliated parties. None of
  the transactions were economic to the ventures.

Item 13.   Exhibits
  and Reports on Form 8-K



| | ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                       
| | ------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1           |  | Agreement of Merger and Plan
        of Reorganization between Drake Investment Corp. and Geo Petroleum, Inc.
        dated November 1, 1995.*                                                                                                                                                                    
| | 2.2           |  | Certificate of Approval of
        Agreement of Merger between Drake Investment Corp. and Geo Petroleum,
        Inc., dated April 9, 1996.*                                                                                                                                                                      
| | 2.3           |  | Permit to issue stock in
        merger, dated March 26,1996.*                                                                                                                                                                                                                                                    
| | 2.4           |  | Plan of Reorganization of Geo
        Petroleum, Inc. dated October 12, 1999, and confirmed by the
        U. S. Bankruptcy Court for the Central District of California,
        Santa Barbara Division, on December 15,1999.                                                                                    
| | 3.1           |  | Articles of Incorporation of
        Geo Petroleum, Inc., filed November 6, 1986.*                                                                                                                                                                                                                                
| | 3.1(a)        |  | First Amendment to Articles of
        Incorporation of Geo Petroleum, Inc. filed June 1, 1994.*                                                                                                                                                                                                                  
| | 3.1(b)        |  | Second Amendment to Articles
        of Incorporation of Geo Petroleum, Inc. filed November 7, 1995.*                                                                                                                                                                                                             
| | 3.1(c)        |  | Third Amendment to Articles of
        Incorporation of Geo Petroleum, Inc. filed December 5, 1995.*                                                                                                                                                                                                              
| | 3.2           |  | By-laws of Geo Petroleum,
        Inc., dated November 30, 1986.*                                                                                                                                                                                                                                                 
| | 4.1           |  | Corporate Resolution
        establishing Rights, Preferences and Privileges of Preferred Stock,
        Series A, dated August 23, 1994.*                                                                                                                                                                        
| | 4.1(a)        |  | Form of Preferred Stock
        Certificate.*                                                                                                                                                                                                                                                                     
| | 4.2           |  | Form of Common Stock
        Certificate.*                                                                                                                                                                                                                                                                        
| | 4.3           |  | Form of Promissory Note, Deed
        of Trust, and Assignment of Oil Payment of Geo Petroleum, Inc.*                                                                                                                                                                                                             
| | 10.3(a)       |  | Form of Oil and Gas lease
        covering various lands in Oxnard Field (Vaca Tar Sands Unit) (exemplar),
        dated January 1, 1987.*                                                                                                                                                                        
| | 10.3(b)       |  | Pooling Agreement, Vaca Tar
        Sands Unit, Ventura County, California.*                                                                                                                                                                                                                                      
| | 10.4          |  | Form of Oil and Gas lease
        covering various lands in the Rosecrans Oil Field, Los Angeles County,
        CA. (exemplar), dated October 15, 1956.*                                                                                                                                                         
| | 10.5          |  | Gas Sales Contract dated
        August 31, 1991, between Geo Petroleum Inc. and Capitan Resources,
        Inc. (East Los Angeles/Bandini fields).*                                                                                                                                                              
| | 10.6(a)       |  | Gas Sales Contract dated
        August 9, 1991 between Pacific Tube Company and Geo Petroleum,
        Inc.*                                                                                                                                                                                                     
| | 10.6(b)       |  | Assignment of Gas Sales
        Contract, Geo Petroleum, Inc. To Capitan Resources, Inc.*                                                                                                                                                                                                                         
| | 10.7          |  | Settlement Agreement between
        Geo Petroleum, Inc. and William Lennox, dated February 28, 2000 (Vaca
        Properties)                                                                                                                                                                                    
| | 10.8(a)       |  | Oil Sales Contract dated
        November 22, 1994 between Geo Petroleum, Inc. and Texaco Trading
        and Transportation Inc. (Oxnard).*                                                                                                                                                                      
| | 10.8(b)       |  | Oil Sales Contract dated
        July 5, 1995 between Geo Petroleum, Inc. and Unocal Corp. (Rosecrans
        field).*                                                                                                                                                                                            
| | 10.9          |  | Oil Sales Contract between Geo
        Petroleum, Inc. and Kern Oil & Refining Co., dated July 10th,
        1995 (Orcutt field).*                                                                                                                                                                                
| | 10.10         |  | Oil and Gas Lease between Gene
        Careaga, et al and Central California Oil Co., (our predecessor in
        interest) (Orcutt Field) dated October 3, 1972.*                                                                                                                                                
| | 10.11         |  | Letter Agreement dated
        December 22, 1989 between Geo Petroleum, Inc. and Gerald T.
        Raydon and Notice of Conversion pursuant thereto dated January 2,
        1990 (Vaca Tar Sand net profits interest)**                                                                                          
| | 10.12         |  | Agreement and Assignment among
        Gerald T. Raydon and Alyda L. Raydon, as assignors, and Geo
        Petroleum, Inc., as assignee, dated April 1, 1994, conveyance of
        interests in East Los Angeles and Vaca Tar Sands properties, retaining a
        5% net profits interest in Vaca properties.**
| | 10.13         |  | Water Disposal Agreement
        between J.W. Hansen and Geo Petroleum, Inc. dated May 14,
        1992.*.                                                                                                                                                                                                        
| | 10.14         |  | Water Disposal Agreement
        between Geo Petroleum, Inc. and Capitan Resources, Inc. dated
        June 1, 1990.*                                                                                                                                                                                             
| | 10.15         |  | Services and Drilling Master
        Contract (water disposal) between Unocal Corporation and Geo Petroleum,
        Inc. dated February 3, 1993.*                                                                                                                                                                

---

| | ExhibitNumber |  | Description                                                                                                                                                                                                                                              
| | ------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.16         |  | Term Loan Agreement, as
        amended and extended to June 15, 1996, dated June 6, 1994,
        between First Los Angeles Bank (now City National Bank) and Geo
        Petroleum, Inc.*.                                                             
| | 10.17         |  | Letter Agreement between Geo
        Petroleum, Inc. and William Rich III, as attorney in fact, (Harriman
        interests) dated September 6, 1990.*.                                                                                                  
| | 10.18         |  | Assignment and Bill of Sale,
        Rosecrans Area Leases, by and between Kelt California, Inc., and Geo
        Petroleum, Inc., dated December 1, 1994.*                                                                                              
| | 10.19         |  | Consulting Agreement between
        Geo Petroleum, Inc. and Gerald T. Raydon, dated October 1999.                                                                                                                                                       
| | 10.20         |  | Office Lease between TD &
        Associates and Geo Petroleum, Inc. dated January 1, 2000                                                                                                                                                               
| | 10.21         |  | Agreement between Geo
        Petroleum, Inc. and Bud Antle, dated October 24, 2000, releasing
        certain lands in the Oxnard Field and order of the Bankruptcy Court
        authorizing execution thereof.                                        
| | 16.2          |  | Agreement for Assignment of
        Leases dated December 31, 1996 by and between Geo Petroleum, Inc.
        as Assignor and Saba Petroleum, Inc. as Assignee with respect to our oil
        properties in the Oxnard Field, Ventura County, California
| | 16.3          |  | Agreement and Assignment of
        Leases dated November 1, 1997, between Geo Petroleum, Inc. and Saba
        Petroleum, Inc. covering a reassignment of the formers interest in
        the Oxnard Field, California.                                
| | 16.4          |  | Amendment to Water Disposal
        Lease dated February 28, 2000 between Geo Petroleum, Inc. and
        William Lennox (Water disposal facility lease)                                                                                                 
| | 21.1          |  | List of Subsidiaries**                                                                                                                                                                                                                                   
| | 23.1          |  | Consent of Stan Brown,
        Petroleum Engineer.**                                                                                                                                                                                                     
| | 23.2          |  | Consent of Krummrich
        Engineering.**                                                                                                                                                                                                              
| | 27            |  | Financial Data Schedule                                                                                                                                                                                                                                  

______________

*   Filed as
  an exhibit to Registrants Form 10 Registration Statement dated
  June 6, 1996 and incorporated herein by reference thereto.

**   To be
  filed by Amendment

---

SIGNATURES

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

|                          |  |     | GEO PETROLEUM INC.                                      
|------------------------- |  | --- | --------------------------------------------------------
|Dated: November 22 , 2000 |  | By: | /S/
        Dennis Timpe                                
|                          |  |     |                                                         
|                          |  |     | Dennis Timpe
        Chairman of the Board and President

Signatures and dates of directors.

|                          |  |  |                                     
|------------------------- |  |  | ------------------------------------
|November 22,
        2000 |  |  | /S/
        Dennis Timpe            
|                          |  |  |                                     
|                          |  |  | Dennis Timpe
        Chairman/C.E.O.

|                          |  |  |                                                                                                        
|------------------------- |  |  | -------------------------------------------------------------------------------------------------------
|November 22,
        2000 |  |  | /S/ Lori
        Timpe- Long                                                                           
|                          |  |  |                                                                                                        
|                          |  |  | Lori Timpe-Long
        Secretary/Treasurer/Director
        Principal Financial and Accounting Officer

|                          |  |  |                                  
|------------------------- |  |  | ---------------------------------
|November 22,
        2000 |  |  | /S/
        Christian Dillon     
|                          |  |  |                                  
|                          |  |  | Christian Dillon
        Director

---

GEO PETROLEUM, INC.INDEX TO THE FINANCIAL STATEMENTSAs of December 31, 1999 and 1998 andFor Each of the Two Years in the Period Ended December 31, 1999

| |  |                                                                                                                                 | Page
| |  | ------------------------------------------------------------------------------------------------------------------------------- | ----
| |  | Report of Independent Auditors                                                                                                  | F-2 
| |  |                                                                                                                                 |     
| |  | Financial Statements of Geo
        Petroleum, Inc.:                                                                            |     
| |  |                                                                                                                                 |     
| |  | Balance Sheets, December 31,
        1999 and 1998                                                                              | F-3 
| |  |                                                                                                                                 |     
| |  | Statements of Operations for
        Each of the Two Years in the Period
           Ended December 31, 1999                     | F-4 
| |  |                                                                                                                                 |     
| |  | Statements of Shareholders
        Equity (Deficit) for Each of the Two Years in the
           Period Ended December 31, 1999 | F-5 
| |  |                                                                                                                                 |     
| |  | Statements of Cash Flows for
        Each of the Two Years in the Period
           Ended December 31, 1999                     | F-6 
| |  |                                                                                                                                 |     
| |  | Notes to the Financial
        Statements                                                                                       | F-8 

F-1

---

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
  Geo Petroleum, Inc.

We
  have audited the accompanying balance sheets of Geo Petroleum, Inc. as of
  December 31, 1999 and 1998, and the related statements of operations,
  shareholders equity (deficit) and cash flows for each of the two years in
  the period ended December 31, 1999. These financial statements are the
  responsibility of the Companys management. Our responsibility is to express
  an opinion on these financial statements based on our audits.

We
  conducted our audits in accordance with generally accepted auditing standards.
  Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of
  material misstatement. An audit includes examining, on a test basis, evidence
  supporting the amounts and disclosures in the financial statements. An audit
  also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial
  statement presentation. We believe that our audits provide a reasonable basis
  for our opinion.

In
  our opinion, the 1999 and 1998 financial statements referred to above present
  fairly, in all material respects, the financial position of Geo Petroleum,
  Inc. as of December 31, 1999 and 1998, and the results of its operations and
  its cash flows for each of the two years in the period ended December 31,
  1999, in conformity with generally accepted accounting principles.

The
  accompanying financial statements have been prepared assuming that the Company
  will continue as a going concern. As discussed in Note 3 to the financial
  statements, the Company has suffered recurring losses from operations, has
  negative working capital, filed in November 1998 for relief under the federal
  bankruptcy laws from which it emerged in December 1999, needs to attain
  positive cash flow from operations, and to obtain additional funds to commence
  operations and development of its oil and gas properties. These matters raise
  substantial doubt about the Companys ability to continue as a going
  concern. Managements plans in regard to these matters are partially
  described in Note 3. The accompanying financial statements do not include any
  adjustments that might result from the outcome of this uncertainty.

Kelly & Company
  Newport Beach, California
  November 2, 2000

F-2

---

GEO PETROLEUM, INC.BALANCE SHEETSDecember 31, 1999 and 1998

|                                                                                                                                                                                                         |  | 1999 |            | 1998 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | -
|                                                                                                                                                                                                         |  |      |            |      |  
|ASSETS                                                                                                                                                                                                   |  |      |            |      |  
|Current assets:                                                                                                                                                                                          |  |      |            |      |  
|Cash and
        equivalents                                                                                                                                                                             |  | $    | 436,916    |      | $
|Accounts
        receivable:                                                                                                                                                                             |  |      |            |      |  
|Accrued
        oil and gas revenues, net of allowance for doubtful accounts of
                $29,944 in 1999 and 1998                                                                                 |  |      | 4,069      |      |  
|Joint
        interest and other, net of allowance for doubtful accounts of $131,508
        in
                1999 and 1998                                                                            |  |      | 70,000     |      |  
|Prepaid
        expenses                                                                                                                                                                                 |  |      | 3,634      |      |  
|Note
        receivable                                                                                                                                                                                  |  |      | 45,000     |      |  
|                                                                                                                                                                                                         |  |      |            |      |  
|Total
        current assets                                                                                                                                                                             |  |      | 559,619    |      |  
|Receivable from Capitan
        Resources Inc., net of allowance for doubtful accounts of
           $500,000 in 1998                                                                                    |  |      |           |      |  
|Account receivable                                                                                                                                                                                       |  |      |           |      |  
|Deposits                                                                                                                                                                                                 |  |      | 160,592    |      |  
|Note receivable                                                                                                                                                                                          |  |      |           |      |  
|Property and equipment:                                                                                                                                                                                  |  |      |            |      |  
|Oil and
        gas properties                                                                                                                                                                           |  |      |           |      |  
|Vehicles                                                                                                                                                                                                 |  |      | 20,884     |      |  
|Office
        furniture and equipment                                                                                                                                                                   |  |      |           |      |  
|                                                                                                                                                                                                         |  |      |            |      |  
|                                                                                                                                                                                                         |  |      | 20,884     |      |  
|Less:
        accumulated depreciation and depletion                                                                                                                                                     |  |      | (11,199    | )    |  
|                                                                                                                                                                                                         |  |      |            |      |  
|                                                                                                                                                                                                         |  |      | 9,685      |      |  
|                                                                                                                                                                                                         |  |      |            |      |  
|Total
        assets                                                                                                                                                                                     |  | $    | 729,896    |      | $
|                                                                                                                                                                                                         |  |      |            |      |  
|                                                                                                                                                                                                         |  |      |            |      |  
|LIABILITIES AND
        SHAREHOLDERS EQUITY (DEFICIT)                                                                                                                                                   |  |      |            |      |  
|Current liabilities:                                                                                                                                                                                     |  |      |            |      |  
|Accounts
        payable:                                                                                                                                                                                |  |      |            |      |  
|Trade
        and other                                                                                                                                                                                  |  | $    | 29,912     |      |  
|Related
        party                                                                                                                                                                                    |  |      | 14,149     |      |  
|Accrued
        expenses                                                                                                                                                                                 |  |      | 220,408    |      | $
|Income
        tax payable                                                                                                                                                                               |  |      | 3,039      |      |  
|Installment
        obligation                                                                                                                                                                           |  |      | 48,000     |      |  
|Other
        liabilities                                                                                                                                                                                |  |      | 255,046    |      |  
|Liabilities
        subject to compromise                                                                                                                                                                |  |      |           |      |  
|Note
        payableother                                                                                                                                                                               |  |      | 26,404     |      |  
|Total
        current liabilities                                                                                                                                                                        |  |      | 596,958    |      |  
|Installment obligation                                                                                                                                                                                   |  |      | 96,000     |      |  
|Note payableother                                                                                                                                                                                       |  |      | 28,596     |      |  
|Total liabilities                                                                                                                                                                                        |  |      | 721,554    |      |  
|                                                                                                                                                                                                         |  |      |            |      |  
|Shareholders equity
        (deficit):                                                                                                                                                                  |  |      |            |      |  
|Preferred
        stock; no par value; 100,000 shares authorized; no shares issued and
              outstanding at December 31, 1999 and
        1998, respectively                                     |  |      |           |      |  
|Common
        stock; no par value; 50,000,000 shares authorized; 15,215,995 and
              8,815,995 shares issued and
        outstanding at December 31, 1999 and 1998,
              respectively |  |      | 9,918,974  |      |  
|Accumulated
        deficit                                                                                                                                                                              |  |      | (9,910,632 | )    |  
|Total
        shareholders equity (deficit)                                                                                                                                                             |  |      | 8,342      |      |  
|                                                                                                                                                                                                         |  |      |            |      |  
|Total liabilities and
        shareholders equity (deficit)                                                                                                                                             |  | $    | 729,896    |      | $
|                                                                                                                                                                                                         |  |      |            |      |  

The accompanying notes are an integral
  part of the financial statements.

---

GEO PETROLEUM, INC.STATEMENTS OF OPERATIONSFor Each of the Two Years in the Period Ended December 31, 1999

|                                                                                                                 |  | 1999 |            | 1998 |  
|---------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | -
|                                                                                                                 |  |      |            |      |  
|Revenues:                                                                                                        |  |      |            |      |  
|Oil and
        gas sales                                                                                        |  | $    | 872        |      | $
|Waste
        water disposal services, related party                                                             |  |      | 157,529    |      |  
|Other
        revenue                                                                                            |  |      | 4,000      |      |  
|                                                                                                                 |  |      |            |      |  
|Total
        revenues                                                                                           |  |      | 162,401    |      |  
|Expenses:                                                                                                        |  |      |            |      |  
|Lease
        operating expenses                                                                                 |  |      | 204,336    |      |  
|Lease
        environmental remediation expenses                                                                 |  |      | 42,832     |      |  
|Depletion
        and depreciation                                                                               |  |      | 23,194     |      |  
|Write-off
        of costs of oil and gas properties in excess of cost ceiling                                 |  |      |           |      |  
|General
        and administrative                                                                               |  |      | 199,769    |      |  
|Loss on
        sale of oil property                                                                             |  |      |           |      |  
|                                                                                                                 |  |      |            |      |  
|Total
        expenses                                                                                           |  |      | 470,131    |      |  
|                                                                                                                 |  |      |            |      |  
|Loss
        from operations                                                                                     |  |      | (307,730   | )    |  
|                                                                                                                 |  |      |            |      |  
|Reorganization items:                                                                                            |  |      |            |      |  
|Loss on
        disposal of equipment                                                                            |  |      | (5,228     | )    |  
|Professional
        fees                                                                                        |  |      | (226,883   | )    |  
|Capitan
        and other settlements                                                                            |  |      | (648,248   | )    |  
|                                                                                                                 |  |      |            |      |  
|Total
        reorganization items                                                                               |  |      | (880,359   | )    |  
|                                                                                                                 |  |      |            |      |  
|Other income (expense):                                                                                          |  |      |            |      |  
|Interest
        income                                                                                          |  |      | 5,225      |      |  
|Interest
        expense(contractual interest of $75,883 in 1999)                                                |  |      | (865       | )    |  
|                                                                                                                 |  |      |            |      |  
|Total
        other income (expense)                                                                             |  |      | 4,360      |      |  
|                                                                                                                 |  |      |            |      |  
|Loss before provision for
        income taxes and extraordinary item                                            |  |      | (1,183,729 | )    |  
|Provision for income taxes                                                                                       |  |      | (800       | )    |  
|                                                                                                                 |  |      |            |      |  
|Loss before extraordinary
        item                                                                           |  |      | (1,184,529 | )    |  
|Extraordinary gain from
        claims discharged in bankruptcy, net of applicable
           income taxes of $0 |  |      | 155,767    |      |  
|                                                                                                                 |  |      |            |      |  
|Net loss                                                                                                         |  | $    | (1,028,762 | )    | $
|                                                                                                                 |  |      |            |      |  
|Net loss per share, basic
        and diluted                                                                    |  | $    | (0.11      | )    | $
|                                                                                                                 |  |      |            |      |  

The accompanying notes are an integral
  part of the financial statements.

---

GEO PETROLEUM, INC.STATEMENTS OF SHAREHOLDERS EQUITY (Deficit)For Each of the Two Years in the Period Ended December 31, 1999

|                                                                                                                           |   | CommonShares |            | CommonStock |   | AccumulatedDeficit |  | Total |           
|-------------------------------------------------------------------------------------------------------------------------- | - | ------------ | ---------- | ----------- | - | ------------------ |  | ----- | ----------
|                                                                                                                           |   |              |            |             |   |                    |  |       |           
|Balance, December 31, 1997                                                                                                 |   |              | 7,900,432  |             | $ | 7,049,399          |  | $     | (2,572,331
|Common shares issued as
        additional
           consideration in connection with private
           placement        |   |              | 180,000    |             |   |                   |  |       |          
|Common shares issued for
        services                                                                                  |   |              | 46,672     |             |   | 17,890             |  |       |          
|Common shares issued to
        employees as
           compensation                                                       |   |              | 35,700     |             |   | 26,174             |  |       |          
|Common shares issued for
        commissions on
           debt financing                                                  |   |              | 48,200     |             |   | 19,700             |  |       |          
|Common shares issued in
        lieu of registration
           of shares issued in private placement                      |   |              | 347,991    |             |   |                   |  |       |          
|Common shares issued for
        cash                                                                                      |   |              | 133,000    |             |   | 116,500            |  |       |          
|Common shares issued for
        royalty interest                                                                          |   |              | 100,000    |             |   | 28,000             |  |       |          
|Common shares issued in
        connection with note
           extension                                                  | 6 |              | 25,000     |             |   | 18,750             |  |       |          
|Cancellation of common
        shares issued in error                                                                      |   |              | (1,000     | )           |   |                   |  |       |          
|Net loss                                                                                                                   |   |              |           |             |   |                   |  |       | (6,309,539
|                                                                                                                           |   |              |            |             |   |                    |  |       |           
|Balance, December 31, 1998                                                                                                 |   |              | 8,815,995  |             |   | 7,276,413          |  |       | (8,881,870
|Common shares issued to
        unsecured creditors
           pursuant to the confirmed plan of
           reorganization |   |              | 1,900,000  |             |   | 2,142,561          |  |       |          
|Common shares issued for
        cash                                                                                      |   |              | 4,500,000  |             |   | 500,000            |  |       |          
|Net loss                                                                                                                   |   |              |           |             |   |                   |  |       | (1,028,762
|                                                                                                                           |   |              |            |             |   |                    |  |       |           
|Balance, December 31, 1999                                                                                                 |   |              | 15,215,995 |             | $ | 9,918,974          |  | $     | (9,910,632
|                                                                                                                           |   |              |            |             |   |                    |  |       |           

The accompanying notes are an integral
  part of the financial statements.

---

GEO PETROLEUM, INC.STATEMENTS OF CASH FLOWSFor Each of the Two Years in the Period Ended December 31, 1999

|                                                                                    |  | 1999 |            | 1998 |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | -
|                                                                                    |  |      |            |      |  
|Cash flows from operating
        activities:                                       |  |      |            |      |  
|Net loss                                                                            |  | $    | (1,028,762 | )    | $
|Adjustments to reconcile
        net loss to net cash used in operating activities: |  |      |            |      |  
|Depletion                                                                           |  |      |           |      |  
|Depreciation                                                                        |  |      | 23,194     |      |  
|Write-off
        of oil and gas properties                                         |  |      |           |      |  
|Issuance
        of common stock for services and other                             |  |      |           |      |  
|Provision
        for uncollectible accounts receivable                             |  |      |           |      |  
|Loss on
        sale of oil and gas property                                        |  |      |           |      |  
|Loss on
        settlement with Capitan Resources Inc.                              |  |      | 503,248    |      |  
|Extraordinary
        gain from claims discharged in bankruptcy                     |  |      | (155,767   | )    |  
|Loss on
        disposal of equipment                                               |  |      | 5,228      |      |  
|Decrease (increase) in
        assets:                                              |  |      |            |      |  
|Accounts
        receivable                                                         |  |      | (4,069     | )    |  
|Due from
        Capitan Resources, Inc., net                                       |  |      | 53,255     |      |  
|Prepaid
        expenses                                                            |  |      | (3,634     | )    |  
|Deposits                                                                            |  |      |           |      |  
|Increase (decrease) in
        liabilities:                                         |  |      |            |      |  
|Accounts
        payabletrade                                                      |  |      | 29,912     |      |  
|Accounts
        payablerelated party                                              |  |      | 14,149     |      |  
|Accrued
        royalties                                                           |  |      |           |      |  
|Accrued
        expenses                                                            |  |      | 268,816    |      |  
|Income
        tax payable                                                          |  |      | 3,039      |      |  
|Other
        liabilities                                                           |  |      | 221,446    |      |  
|Notes
        payable to bank                                                       |  |      |           |      |  
|Capital
        lease obligations                                                   |  |      |           |      |  
|Notes
        payable to officers                                                   |  |      |           |      |  
|Notes
        payableothers                                                        |  |      |           |      |  
|Convertible
        debentures                                                      |  |      |           |      |  
|Liabilities
        subject to compromise                                           |  |      |           |      |  
|                                                                                    |  |      |            |      |  
|Net cash used in operating
        activities                                       |  | $    | (69,945    | )    | $
|                                                                                    |  |      |            |      |  

The accompanying notes are an integral
  part of the financial statements.

---

GEO PETROLEUM, INC.STATEMENTS OF CASH FLOWSFor Each of the Two Years in the Period Ended December 31, 1999

|                                                                                                                   |  | 1999 |            | 1998 |  
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | ---- | -
|                                                                                                                   |  |      |            |      |  
|Cash flows provided by
        (used in) investing activities:                                                     |  |      |            |      |  
|Purchases
        of property and equipment                                                                        |  |      |           |      | $
|Proceeds
        from the sale of property                                                                         |  |      |           |      |  
|                                                                                                                   |  |      |            |      |  
|Net cash used in investing
        activities                                                                      |  |      |           |      |  
|                                                                                                                   |  |      |            |      |  
|Cash flows provided by
        (used in) financing activities:                                                     |  |      |            |      |  
|Proceeds
        from issuance of a note payable                                                                   |  |      |           |      |  
|Repayments
        on notes payable                                                                                |  |      |           |      |  
|Net
        proceeds from the issuance of common stock                                                             |  | $    | 500,000    |      |  
|                                                                                                                   |  |      |            |      |  
|Cash provided by financing
        activities                                                                      |  |      | 500,000    |      |  
|                                                                                                                   |  |      |            |      |  
|Net increase (decrease) in
        cash                                                                            |  |      | 430,055    |      |  
|Cash and equivalents at
        beginning of year                                                                  |  |      | 6,861      |      |  
|                                                                                                                   |  |      |            |      |  
|Cash and equivalents at
        end of year                                                                        |  | $    | 436,916    |      | $
|                                                                                                                   |  |      |            |      |  
|                                                                                                                   |  |      |            |      |  
|Supplemental
        Disclosures of Cash Flow Information                                                          |  |      |            |      |  
|Interest paid                                                                                                      |  |      |           |      | $
|Income taxes paid                                                                                                  |  |      |           |      | $
|                                                                                                                   |  |      |            |      |  
|Supplemental Schedule
        of Non-Cash Investing and Financing
           Activities                            |  |      |            |      |  
|Satisfaction of federal
        bankruptcy proceedings allowed claims through issuance
           of common stock: |  |      |            |      |  
|Allowed
        claims satisfied                                                                                   |  | $    | 2,142,561  |      |  
|Shares
        issued                                                                                              |  | $    | (2,142,561 | )    |  

The accompanying notes are an integral
  part of the financial statements.

---

GEO PETROLEUM, INC.NOTES TO FINANCIAL STATEMENTSAs of December 31, 1999 and 1998 andFor Each of the Two Years in the Period Ended December 31, 1999

1.      Description
  of the Companys Business

Geo
  Petroleum, Inc. (the Company) is an oil and gas production company
  founded in 1986 and incorporated in the State of California. The Company
  engages in the development, production and management of oil and gas
  properties located in California. Certain of the wells on one of the Companys
  oil properties are used for waste water disposal services. These disposal
  operations were conducted by a related party (see Note 13), and the Company
  had a 75% revenue interest in such operations.

During
  June 1998, the Company decided to shut-in its oil and gas production at all of
  its property locations except for certain oil wells and the waste water
  disposal wells on the Vaca Tar Sands property, and the , Rosecrans gas
  production.

2.      Petition
  for Relief Under Federal Bankruptcy Laws

On
  November 16, 1998, Geo Petroleum, Inc. (the Debtor) filed a petition for
  relief under the federal bankruptcy laws in the United States Bankruptcy Court
  for the Central District of California, Santa Barbara Division (the bankruptcy
  court). Under federal bankruptcy laws, certain claims against the Debtor in
  existence prior to the filing of the petition for relief were stayed while the
  Debtor continued business operations as the Debtor-in-Possession. These
  pre-bankruptcy petition claims are reflected in the December 31, 1998 balance
  sheet as liabilities subject to compromise. Additional claims
  (liabilities subject to compromise) arose subsequent to the filing date
  resulting from rejection of executory contracts, including leases, and from
  the determination by the bankruptcy court (or agreed to by parties in
  interest) of allowed claims for contingencies and other disputed amounts.
  Claims secured against the Debtors assets (secured claims) were also
  stayed, although the holders of such claims had the right to request the
  bankruptcy court for relief from the stay. Secured claims were collateralized
  primarily by liens on the Debtors oil and gas properties, equipment and the
  pledge of specific assets of certain shareholders as collateral for the note
  payable to the bank (see Note 5).

The
  Debtor received approval from the bankruptcy court to pay or otherwise honor
  certain of its prepetition obligations, including employee wages when the
  Companys Third Amended Plan of Reorganization (the Plan) was
  approved. The Debtor determined that there was insufficient collateral to
  cover the interest portion of scheduled payments on its prepetition debt
  obligations. Contractual interest on those obligations amounted to $75,883,
  which is $75,018 in excess of reported interest expense; therefore, the debtor
  has discontinued accruing interest on these obligations. Refer to Note 7 for a
  discussion of credit arrangements entered into subsequent to the federal
  bankruptcy petition filing.

3.      Summary
  of Significant Accounting Policies



The
  accompanying financial statements have been prepared on a going-concern basis,
  which contemplates the realization of assets and the satisfaction of
  liabilities in the normal course of business. The Company incurred net losses
  of $1,028,762 and $6,309,539 and negative cash flows from operations of
  $69,945 and $286,625 for the years ended December 31, 1999 and 1998,
  respectively. At December 31, 1999 the Company had an accumulated deficit of
  $9,910,632, and its current liabilities exceed its current assets by $37,339.
  In June 1998, the Company decided to shut-in its oil and gas production at all
  of its property locations except certain of the oil wells and the waste water
  disposal wells on the Vaca Tar Sands property, and the Rosecrans Field gas
  production. It planned to focus its resources on the development of the Vaca
  Tar Sands property. In November 1998, the Company filed for protection under
  the federal bankruptcy laws. Effectively, the Company curtailed its oil and
  gas production in 1999, and substantially reduced its waste water disposal
  operations. In December 1999, the bankruptcy court confirmed the Plan (see
  Note 7) and the Company received $500,000 from the sale of 4,500,000 shares of
  its common stock and emerged from bankruptcy.

---

The
  Companys continuation as a going concern is dependent upon its ability to
  commence production from its oil and gas properties, generate sufficient cash
  flow to meet its current obligations on a timely basis, to obtain additional
  financing, and ultimately to attain profitable oil and gas and waste water
  disposal operations. Management is continuing its efforts to obtain additional
  funds so that the Company can meet its obligations, commence operations and
  develop its oil and gas properties. These potential alternatives include,
  among other things, private placement of debt and/or equity securities, bank
  loans using oil and gas properties as collateral and/or the sale of the
  interests in its oil and gas properties. There can be no assurance that any of
  these potential alternatives will materialize. The financial statements do not
  include any adjustments that might result from the outcome of this
  uncertainty.



The
  preparation of financial statements in conformity with generally accepted
  accounting principles requires management to make estimates and assumptions
  that affect amounts reported in the financial statements. Changes in these
  estimates and assumptions are considered reasonably possible and may have a
  material impact on the financial statements.



The
  Company follows the full-cost method of accounting for oil and gas properties.
  Accordingly, all costs associated with the acquisition, exploration and
  development of oil and gas reserves are capitalized as incurred. The Company
  has not capitalized any interest or any of its internal costs related to its
  oil and gas properties.

In
  addition, the capitalized costs are subject to a ceiling test, which
  basically limits such costs to the aggregate of the estimated present value
  of future net revenues from proved reserves, discounted at a 10-percent
  interest rate, based on current economic and operating conditions, plus the
  lower of cost or fair market value of unproved properties. Any unamortized
  costs capitalized in the cost center in excess of the cost center ceiling are
  charged to expense in the period in which the excess occurs.

Sales
  of proved and unproved properties are accounted for as adjustments of
  capitalized costs with no gain or loss recognized, unless such adjustments
  would significantly alter the relationship between capitalized costs and
  proved reserves of oil and gas, in which case the gain or loss is recognized
  in income. Abandonments of properties are accounted for as adjustments of
  capitalized costs with no loss recognized.

All
  capitalized costs of oil and gas properties, including the estimated future
  costs to develop proved reserves, are amortized over the estimated useful
  lives of the properties by application of the unit-of-production method using
  only estimated proved oil and gas reserves, excluding future estimated costs
  and related oil reserves at the Vaca Tar Sands property, which relate to a
  significant development project involving an enhanced recovery process.
  Evaluations of the oil and gas reserves for the Companys Rosecrans, LA/Bandini,
  and Vaca Tar Sands property were prepared by independent petroleum engineers.

Substantially
  all additions to oil and gas properties in 1998 relate to recompletions of
  existing producing or previously producing wells. There were no additions in
  1999. The Company sold its LA/Bandini properties in 1998, which represented a
  significant portion of its developed oil and gas reserve interests.

The
  Companys oil and gas producing properties are estimated by the Companys
  independent petroleum engineers to have remaining producing lives ranging from
  6 to 30 years. The Companys policy for accruing site restoration and
  environmental exit costs related to its oil and gas production is that such
  costs are accounted for in the Companys calculation of depletion expense.

Depreciation
  of office furniture and equipment, and vehicles, is computed using the
  straight-line method, with depreciation rates based upon estimated useful
  lives of five years.



Revenue
  from oil and gas sales is recognized upon delivery of the oil and gas to the
  Companys customer. Such revenue is recorded net of royalties and certain
  other costs that the Company incurs to bring the oil and gas into salable
  condition.

---

All
  of the Companys revenue from waste water disposal services and a portion of
  its gas revenues arose from operating and sales agreements with a related
  party (see Note 13), which operated the Companys waste water disposal well
  and sold gas produced from wells owned by the Company. The Company accrued its
  share of waste water disposal revenues when payment for services were received
  by the related party. As described in Note 7, under the Plan the rights to the
  operation and sales agreements were transferred to the Company.



Long-lived
  assets held and used by the Company are reviewed for impairment whenever
  events or changes in circumstances indicate that the carrying amount of an
  asset may not be recoverable. When circumstances indicate that the carrying
  amount of a long-lived asset, other than oil and gas properties, is not
  recoverable, as demonstrated by the projected undiscounted cash flows, an
  impairment loss is recognized.

The
  Company accounts for its oil and gas properties under the full cost method and
  evaluates these assets separately in accordance with applicable cost ceiling
  limitations. The Companys management has determined that there was no
  impairment of long-lived assets, other than its oil and gas properties that
  exceeded cost ceiling limitations in 1998.



The
  Company uses the asset and liability method to account for income taxes.
  Deferred income tax assets and liabilities are recognized for the future tax
  consequences attributable to differences between the carrying amounts of
  existing assets and liabilities for accounting purposes, and their respective
  tax bases. Deferred income tax assets and liabilities are measured using
  statutory tax rates expected to apply to taxable income in the years in which
  those temporary differences are expected to be recovered or settled. The
  effect on deferred income tax assets and liabilities of a change in statutory
  tax rates is recognized in net income in the year of change. A valuation
  allowance is recorded for those deferred income tax assets whose
  recoverability is not sufficiently likely.



Basic
  earnings (loss) per common share is computed by dividing net earnings (loss)
  applicable to common shareholders by the weighted-average number of common
  shares outstanding during the period. Diluted earnings (loss) per common share
  is determined using the weighted-average number of common shares outstanding
  during the period, adjusted for the dilutive effect of common stock
  equivalents, consisting of shares that might be issued upon exercise of common
  stock options and warrants. In periods where losses are reported, the
  weighted-average number of common shares outstanding excludes common stock
  equivalents, because their inclusion would be anti-dilutive.



Costs
  related to environmental remediation are charged to expense. Other
  environmental costs are also charged to expense unless they increase the value
  of the property and/or provide future economic benefits, in which event they
  are capitalized. Liabilities are recognized when the expenditures are
  considered probable and can be reasonably estimated. Measurement of
  liabilities is based on currently enacted laws and regulations, existing
  technology, and undiscounted site-specific costs. Generally, such recognition
  coincides with the Companys commitment to a formal plan of action.

Accruals
  for environmental matters are recorded when it is probable that a liability
  has been incurred and the amount of the liability can be reasonably estimated,
  or if an amount is likely to fall within a range and no amount within that
  range can be determined to be the better estimate, the minimum amount of the
  range is recorded. Accruals for environmental matters exclude claims for
  recoveries from insurance carriers and other third parties until it is
  probable that such recoveries will be realized.

---

4.      Deposits

The
  Company has deposits with the State of California, the County of Ventura and
  the City of Los Angeles that are required by these governmental agencies in
  connection with the Companys oil and gas operations. The deposits with the
  State of California and Ventura County are in certificates of deposit that are
  subject to withdrawal restrictions imposed by these agencies. The deposit with
  the City of Los Angeles is in the form of a noninterest bearing cash deposit.
  The amounts of these deposits at December 31, 1999 and 1998 are as follows:

|State of California |  | $ | 100,387 | 
|------------------- |  | - | ------- | 
|County of Ventura   |  |   | 10,205  | 
|City of Los Angeles |  |   | 50,000  | 
|                    |  |   |        
|Total deposits      |  | $ | 160,592 | 
|                    |  |   |        

5.      Notes
  Payable



At
  December 31, 1997, the Company had a $622,500 note payable to a bank with an
  interest rate at the banks prime rate plus 3.00% (an effective rate of
  10.50% at December 31, 1997). Note payments were due monthly, and the bank had
  extended the maturity date of the note to January 1998. In October 1997, the
  bank agreed to reduce the monthly payments from $20,000 to $7,500.

In
  January 1998, the Company signed an extension agreement with the bank that
  extended the due date of the note to either June 30, 1998, if the Company
  received certain investment capital, or December 1998 if the Company did not
  receive the anticipated investment capital. The extension agreement required
  the Company to make monthly payments of $10,000 starting February 1, 1998
  through May 1, 1998, and a lump-sum principal paydown of 30% of the net of any
  investment capital proceeds received by the Company as of June 30, 1998.

The
  entire obligation did not become due and payable on June 30, 1998 as the
  anticipated investment capital was not received, and the remaining principal
  balance was to then be repaid in six equal monthly installments starting in
  July 1998.

As
  compensation for their cooperation in obtaining the extension of this note
  payable, the Company issued 25,000 shares of its common stock to the owners of
  the collateral provided as security for the bank debt and recognized $18,750
  of compensation expense based on the quoted market price of the shares at the
  date they were issued. As part of the note payable extension agreement, the
  bank released 27,500 shares of the Union Pacific Corp. common stock used as
  collateral, and reducing the collateral to 7,500 shares of the Union Pacific
  Corp. common stock . In addition to the 7,500 shares of common stock, the loan
  was also secured by 7,642 shares of Union Pacific Resource common stock which
  was spun-off from Union Pacific Corp. and $328,260 in cumulative dividends.

The
  Company defaulted on the note payable in 1998 prior to filing a petition for
  relief under the federal bankruptcy laws in November 1998. The parties who had
  provided the collateral, satisfied the note payable with the bank in 1999, and
  filed a proof of claim in bankruptcy to obtain reimbursement from the Company.
  Under the terms of the Plan, as described in Note 7, these parties, who were
  shareholders at the time of the bankruptcy filing, received $25,000 in cash, a
  $55,000 note as a secured creditor and an approved claim of $584,990 as a
  general unsecured creditor.

---



|                                                                                                                                                                                                                                                                                                                                                                           |  | December
        31, |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | -------
|                                                                                                                                                                                                                                                                                                                                                                           |  |                      |        
|                                                                                                                                                                                                                                                                                                                                                                           |  | 1999                 |        
|                                                                                                                                                                                                                                                                                                                                                                           |  |                      |        
|Collateralized:                                                                                                                                                                                                                                                                                                                                                            |  |                      |        
|Notes payable to a
        relative of a former officer and major shareholder with interest at
           10% per annum, collateralized by an interest in all of
        the Companys Vaca Tar
           Sands leases, originally due at various times during
        1997                                                                                               |  |                      |       
|Note payable to Drake
        Energy Corp., with an interest rate of 10% per annum,
           originally due in 1998 and collateralized by all of
        the Companys assets                                                                                                                                                                                            |  |                      |       
|Note payable to a bank
        with an interest rate of 9.5% per annum, principal and interest
           payable in monthly installments of $312 through March
        2002, collateralized by an
           automobile                                                                                                                                                   |  |                      |       
|Note payable to
        shareholders, with an interest rate of 8% per annum, payable in
           monthly installments of principal and interest of
        $2,487, due in December 2001,
           and collateralized by 33% net revenue interest in the
        Companys Vaca Tar Sands
           oil and gas properties (see Note 5, Notes Payable to
        Bank) |  | $                    | 55,000 
|Uncollateralized:                                                                                                                                                                                                                                                                                                                                                          |  |                      |        
|Note payable to a former
        officer with an interest rate of 8.25% per annum with
           principal and interest originally due on demand                                                                                                                                                                                                                          |  |                      |       
|Note payable to a former
        officer and major shareholder with an interest rate of
           10.25% per annum, with accrued interest payments due
        monthly commencing
           January 1, 1998, and principal and unpaid interest
        originally due on or before July
           1, 1998                                                               |  |                      |       
|Convertible Debentures:                                                                                                                                                                                                                                                                                                                                                    |  |                      |        
|10% convertible
        debentures, convertible into shares of the Companys common stock
           at a 10% discount from the stock closing price at the
        date of the stock issuance,
           with interest payable monthly, originally due in July
        2000                                                                                               |  |                      |       
|                                                                                                                                                                                                                                                                                                                                                                           |  |                      |        
|Total notes payable                                                                                                                                                                                                                                                                                                                                                        |  | $                    | 55,000 
|Less:
        current portion                                                                                                                                                                                                                                                                                                                                              |  |                      | (26,404
|                                                                                                                                                                                                                                                                                                                                                                           |  |                      |        
|Long-term portion of notes
        payable                                                                                                                                                                                                                                                                                                                                 |  | $                    | 28,596 
|                                                                                                                                                                                                                                                                                                                                                                           |  |                      |        

______________



Future
  maturities of long-term debt are as follows at December 31, 1999:

|                                           |  | NotePayable |        | InstallmentObligation(Notes 7 and 10) |   | Total   | 
|------------------------------------------ |  | ----------- | ------ | ------------------------------------- | - | ------- | 
|                                           |  |             |        |                                       |   |         | 
|2000                                       |  | $           | 26,404 |                                       | $ | 48,000  | 
|2001                                       |  |             | 28,596 |                                       |   | 48,000  | 
|2002                                       |  |             |       |                                       |   | 48,000  | 
|                                           |  |             |        |                                       |   |         | 
|Total maturities of
        long-term debt |  | $           | 55,000 |                                       | $ | 144,000 | 
|                                           |  |             |        |                                       |   |         | 

---

6.      Liabilities
  Subject to Compromise

Certain
  obligations of the Company, which were in existence as of the bankruptcy
  petition filing date, were stayed under the federal bankruptcy laws and were
  not paid while the Company operated as a debtor-in-possession. These claims
  are reflected in the accompanying balance sheet as of December 31, 1998 as liabilities
  subject to compromise. In December 1999, these liabilities subject to
  compromise were satisfied through confirmation of the Plan and converted to
  equity through the issuance of the Companys common stock.

|                                                                                                                                                                                                                                                                                                                                 |  | December
        31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | -
|                                                                                                                                                                                                                                                                                                                                 |  |                      |  
|                                                                                                                                                                                                                                                                                                                                 |  | 1999                 |  
|                                                                                                                                                                                                                                                                                                                                 |  |                      |  
|Note payable to bank, with
        an interest rate at the banks prime plus 3.00%,
           collateralized by certain of the Companys
        individual shareholders common
           stock of Union Pacific Corp. and Union Pacific
        Resources and related cumulative
           dividends earned on these stocks |  |                      | 
|Priority payroll claims                                                                                                                                                                                                                                                                                                          |  |                      | 
|Auto loans and capitalized
        lease obligations, collateralized by autos and equipment                                                                                                                                                                                                                                      |  |                      | 
|Notes payable to officers                                                                                                                                                                                                                                                                                                        |  |                      | 
|Advances from officers                                                                                                                                                                                                                                                                                                           |  |                      | 
|Collateralized notes
        payable                                                                                                                                                                                                                                                                                             |  |                      | 
|Convertible debentures                                                                                                                                                                                                                                                                                                           |  |                      | 
|Trade and other
        miscellaneous claims                                                                                                                                                                                                                                                                                     |  |                      | 
|                                                                                                                                                                                                                                                                                                                                 |  |                      |  
|Total liabilities subject
        to compromise                                                                                                                                                                                                                                                                                  |  |                      | 
|                                                                                                                                                                                                                                                                                                                                 |  |                      |  

7.      Plan
  of Reorganization

On
  December 15, 1999, the bankruptcy court confirmed the Plan. The principal
  elements of the Plan provided, among other matters, for the following:



On
  or before the effective date of the Plan, that the Company consummate a stock
  purchase and sale agreement with an investor, to sell 4,500,000 shares of the
  Companys common stock for $500,000 in cash. Of this amount, $300,000 was
  used to fund the payments required under the Plan and the balance is to be
  used for working capital.



Confirmation
  of the Plan settled certain controversies and provided for (a) Capitan
  Resources, Inc. (Capitan), a related party (see Note 13) to transfer to
  the Company all of its rights under its operating and sales agreements with
  the Company and the withdrawal of any and all claims it may have had against
  the Company, (b) the release of the rights of a former officer and major
  shareholder of the Company to reimbursement for his stock sold by a creditor
  to satisfy a debt incurred for the benefit of the Company and to his stock
  incentive compensation totaling 1,390,000 shares of the Companys common
  stock and for him to serve only as consultant to the Company at the discretion
  of new management on a fee for service basis, (c) all deeds of trust held by
  the former officer and major shareholder, the former Secretary/Treasurer, who
  is the wife of the former officer and major shareholder, and other insiders of
  the Company on the East L.A./Bandini properties were assigned to the Company
  and all deeds of trust held by insiders on property of the Company were
  released and (d) the Company released and waived all claims and other causes
  of action it may have had against Capitan Resources, Inc., the former officer
  and major shareholder and the former Secretary/Treasurer, who is the wife of
  the former officer and major shareholder.



The
  note payable to the bank was satisfied in 1999 by a group of shareholders who
  were guarantors of the loan. These shareholders who provided the collateral
  and paid off the $615,000 bank loan filed proofs of claims in bankruptcy and
  sought payment by the Company. The bankruptcy court allowed these claims, and
  the Plan provided for the payment of $25,000 in cash at confirmation date, a
  $55,000 note and a general unsecured claim of $584,990 that is satisfied
  through a pro rata distribution of the Companys common stock and a pro rata
  share of the total cash

---

installment payments in the amount of $195,000
  to be made to all unsecured creditors as further described in this note.



Payroll
  claims of $8,600 were paid in full on the effective date of the Plan.



Auto
  loans and capitalized lease obligations totaled $26,978. The vehicles
  collateralizing these obligations were repossessed. A general unsecured claim
  of $4,813 was allowed and satisfied through a pro rata distribution of the
  Companys common stock as further described in this note.



Of
  the $185,000 in notes payable to two former officers, one of whom is a major
  shareholder, upon the closing of the stock purchase and sale agreement with
  the investor, the claimant for $140,000 waived his claims against the estate
  of the Company, and caused the release of certain liens upon the property of
  the Companys estate. The remaining $45,000 due to a former officer was
  allowed as a general unsecured claim that was satisfied through a pro rata
  distribution of the Companys common stock and a pro rata share of the total
  cash installment payments in the amount of $195,000 to be made to all
  unsecured creditors as further described in this note.



The
  former officer and major shareholder ($3,555 advance) and another former
  officer who is the son of the former officer and major shareholder ($31,923
  advance) with advances to the Company totaling $35,478, were allowed as
  general unsecured claims that were satisfied through a pro rata distribution
  of the Companys common stock and a pro rata share of the total cash
  installment payments in the amount of $195,000 to be made to all unsecured
  creditors as further described in this note.



The
  holders of $57,269 of collateralized notes payable received, as general
  unsecured creditors, claims that were satisfied through a pro rata
  distribution of the Companys common stock and a pro rata share of the total
  cash installment payments in the amount of $195,000 to be made to all
  unsecured creditors as further described in this note.



The
  holders of $39,400 in convertible debentures received, as general unsecured
  creditors, claims that were satisfied through a pro rata distribution of the
  Companys common stock and a pro rata share of the total cash installment
  payments in the amount of $195,000 to be made to all unsecured creditors as
  further described in this note.



The
  holders of trade and other miscellaneous claims of approximately $1,510,369
  received, as general unsecured creditors, claims that were satisfied through a
  pro rata distribution of the Companys common stock and a pro rata share of
  the total cash installment payments in the amount of $195,000 to be made to
  all unsecured creditors as further described in this note.



The
  Plan provided for the general unsecured claims to be satisfied through pro
  rata distributions of:

(1)
  the remaining balance, if any, of $300,000 in cash available after the
  payments of:





---



(2)
  the sum of $195,000 less any amounts necessary to pay any remaining balance of
  (1) above. The remaining amount is to be paid quarterly over approximately 12
  quarters, with payments of not less than $12,000 and up to 30% of quarterly
  net income (as defined), and

(3)
  1,900,000 shares of the Companys common stock.



Under
  the terms of the Plan, the Company assumed certain executory contracts and
  unexpired leases. Unless timely objection to these contracts and leases were
  filed by the non-debtor parties, the cure amounts were forever binding
  on the non-debtor parties to these contracts and leases.

The
  monetary defaults under each executory contract and unexpired lease assumed
  was satisfied on the effective date of the Plan by the payment of the Executory
  Contract Cure Amounts totaling $39,004. The executory contracts and
  unexpired leases consist of the following:

- Leases at the Rosecrans oil field in Los Angeles County representing 28
      oil and gas wells

- 5 oil and gas leases at the Vaca Tar Sands unit of the Oxnard field in
      Ventura County

- 1 oil and gas lease at the Orcutt/Careaga oil field in Santa Barbara
      County

- 2 oil and gas leases in the Somis field in Ventura County

- Newgate oil and gas leases in Los Angeles County

- Waste water disposal agreement dated May 14, 1992

- Vaca Tar Sands farm-out agreement with Saba Petroleum, Inc.

- Operating contract for waste water disposal with Capitan Resources, Inc.
      This agreement is also included as part of the settlement with Capitan
      Resources, Inc. described above.



Because
  the holders of existing voting shares immediately before confirmation of the
  Plan maintain more than 50% of the voting shares of the reorganized Company,
  the Company has not adopted Fresh-start reporting upon its emergence
  from the federal bankruptcy proceeding. Accordingly, the historical cost basis
  of accounting has been continued by the Company.

8.      Disputes
  Related to the Third Amended Plan of Reorganization

Certain
  creditors claims submitted during the pendency of the bankruptcy were
  objected to by the Company. All claims as of the date of this report have been
  resolved.

The
  pro rata distribution of the 1,900,000 shares of the Companys common stock
  in satisfaction of the identified portion of the general unsecured creditors
  claims can now be finalized as the last remaining claim was resolved on
  October 27, 2000. The total amount of the allowable claims of the general
  unsecured creditors had not been determined at December 31, 1999. As an
  interim step, a pro rata distribution of 803,674 of the 1,900,000 common
  shares of the Companys common stock were issued to general unsecured
  creditors whose claims were not being disputed by the Company in partial
  satisfaction of the amounts due these creditors pursuant to the Plan. As the
  bankruptcy court confirmed the Plan and it became effective in December 1999,
  all of the 1,900,000 shares are reflected as issued and outstanding in
  satisfaction of $2,142,561 in liabilities subject to compromise.

---

9.      Income
  Taxes

The
  components of the provision for income taxes are as follows:

|                      |  | December
        31, |    
|--------------------- |  | -------------------- | ---
|                      |  |                      |    
|                      |  | 1999                 |    
|                      |  |                      |    
|Current tax expense:  |  |                      |    
|Federal               |  |                      |   
|State                 |  | $                    | 800
|                      |  |                      |    
|                      |  |                      | 800
|                      |  |                      |    
|Deferred tax expense: |  |                      |    
|Federal               |  |                      |   
|State                 |  |                      |   
|                      |  |                      |    
|                      |  |                      |   
|                      |  |                      |    
|Total provision       |  | $                    | 800
|                      |  |                      |    

Significant
  components of the Companys deferred income tax assets and liabilities at
  December 31, 1999 and 1998 are as follows:

|                                                           |  | December
        31, |           
|---------------------------------------------------------- |  | -------------------- | ----------
|                                                           |  |                      |           
|                                                           |  | 1999                 |           
|                                                           |  |                      |           
|Deferred income tax
        assets:                        |  |                      |           
|Net
        operating loss carryforward                    |  | $                    | 3,177,626 
|Allowance
        for doubtful accounts                    |  |                      | 67,403    
|Differences
        between book and tax basis of property |  |                      | 63,230    
|Other                                                      |  |                      | 272       
|                                                           |  |                      |           
|Net deferred income tax
        asset                      |  |                      | 3,308,531 
|                                                           |  |                      |           
|Deferred income tax
        liability:                     |  |                      |           
|Differences
        between book and tax basis of property |  |                      |          
|                                                           |  |                      |           
|Total deferred income tax
        liability                |  |                      |          
|                                                           |  |                      |           
|Net                                                        |  |                      | 3,308,531 
|Valuation
        allowance                                |  |                      | (3,308,531
|                                                           |  |                      |           
|Net deferred income taxes                                  |  |                      |          
|                                                           |  |                      |           

The
  Company, based upon its recent history of losses and managements assessment
  of when operations are anticipated to generate taxable income, has concluded
  that it is more likely than not that none of the net deferred income tax
  assets will be realized through future taxable earnings and has established a
  valuation allowance for them.

Reconciliation
  of the effective tax rate to the U.S. statutory rate is as follows:

|                                           |  | December
        31, |      
|------------------------------------------ |  | -------------------- | -----
|                                           |  |                      |      
|                                           |  | 1999                 |      
|                                           |  |                      |      
|Tax expense at U.S.
        statutory rate |  |                      | (34.0
|State tax provision                        |  |                      | 0.1  
|Other                                      |  |                      | 0.1  
|Change in valuation
        allowance      |  |                      | 33.9 
|                                           |  |                      |      
|Effective income tax rate                  |  |                      | 0.1  
|                                           |  |                      |      
|                                           |  |                      |      
|                                           |  |                      |      

---

At
  December 31, 1999, the Company has available unused net operating loss
  carryforwards that expire as follows:

|Year of Expiration    |  | Federal
        NetOperating LossCarryforwards |           | State
        NetOperating LossCarryforwards |  
|--------------------- |  | ---------------------------------------------- | --------- | -------------------------------------------- | -
|                      |  |                                                |           |                                              |  
|2000                  |  |                                                |          |                                              |  
|2001                  |  |                                                |          |                                              | $
|2002                  |  | $                                              | 109,562   |                                              |  
|2003                  |  |                                                | 154,627   |                                              |  
|2004                  |  |                                                | 129,349   |                                              |  
|Thereafter up to 2019 |  |                                                | 8,308,872 |                                              |  
|                      |  |                                                |           |                                              |  
|Total                 |  | $                                              | 8,702,410 |                                              | $
|                      |  |                                                |           |                                              |  

The
  Company has determined that there will be significant limitations on the
  future utilization of the net operating loss carryforwards due to ownership
  changes in the Company.

10.      Commitments
  and Contingencies



Prior
  to the federal bankruptcy proceeding, the Company was involved in litigation
  in which a judgment was awarded against the Company requiring it to clean up
  and abandon two idle wells or pay $300,000 in damages to the plaintiff. The
  Company filed an appeal with respect to the damages awarded the plaintiff.
  Upon the filing by the Company for relief under the federal bankruptcy laws,
  the plaintiff filed a claim for $352,000, which included the court awarded
  damages. The Plan provided for $352,000 as an unsecured claim to be satisfied
  by the pro rata distributions of the Companys common stock as described in
  Note 7.



The
  Plan provides for payment of up to $195,000 on a pro rata basis to the
  unsecured creditors. The payment of this amount is to be made quarterly over
  12 quarters or less commencing 90 days after the effective date of the Plan.
  The amounts to be paid are essentially the greater of 30% of the Companys
  quarterly net income as defined in the Plan or $12,000. As a result, the
  Companys obligation to make payments in excess of $12,000 per quarter is
  contingent upon the Companys quarterly net income exceeding $40,000.



Financial
  instruments which potentially subject the Company to concentrations of credit
  risk consist primarily of cash and cash equivalents and accounts receivable.
  The Company places its cash and cash equivalents with high quality financial
  institutions. Exposure to losses on accounts receivable is principally
  dependent on the individual customers financial condition, as credit sales
  are not collateralized. The Company monitors its exposure to credit loss and
  reserves those accounts receivable that it deems to be uncollectible. The
  Company had one significant customer for its oil and gas production in 1998
  that accounted for approximately 81% of gross oil and gas sales.



The
  Company maintains its cash in bank depository accounts, which, at times, may
  exceed federally insured limits. Accounts are guaranteed by the Federal
  Deposit Insurance Corporation (FDIC) up to $100,000. At December 31,
  1999, the Company had approximately $325,775 in excess of FDIC insured limits.
  The Company has not experienced any losses in such accounts.



The
  Company participates in an industry that is characterized by competitive
  pressure, changes in the prices of oil and gas on a world-wide basis, federal,
  state, and local regulations governing production and development of its oil
  and gas reserves and compliance with various environmental laws and
  regulations. The Companys results of operations are affected by a wide
  variety of factors, including world events, general economic conditions,
  changes in average selling prices over the productive life of oil and gas
  reserves, the timing of production from new and

---

existing proved developed and undeveloped
  reserves by the Company, its competitors, and others, the ability to produce
  sufficient quantities of oil and gas reserves in a timely manner, and the
  timely implementation of new and alternative reserve recovery process
  technologies. Based on the factors noted herein, the Company may experience
  substantial period-to-period fluctuations in future operating results.

The
  Company does not have any commitments for future minimum lease payments at
  December 31, 1999. Rental expense recorded for the years ended December 31,
  1999 and 1998 was $6,667 and $31,207, respectively.

11.      Disclosures
  about Fair Values of Financial Instruments

The
  Companys financial instruments are cash and cash equivalents, accounts
  receivable, notes receivable, accounts payable, and notes payable. The
  recorded values of cash and cash equivalents, accounts receivable, notes
  receivable, accounts payable, and notes payable approximate their fair values
  based on their short-term nature. The recorded values of notes receivable and
  notes payable approximate their fair values, as interest approximates market
  value.

12.      Farm-Out
  of Vaca Tar Sands Property

In
  December 1996, the Company entered into an agreement with Saba Petroleum, Inc.
  (Saba) to farm-out two-thirds (2/3) of the Companys rights and
  interests in the Vaca Tar Sands property in exchange for Saba to expend a
  minimum of $10,000,000 in operating and developing the property over a
  two-year period from the date of the agreement. Saba had the right to receive
  all revenues from the properties until its costs were recouped. Subsequent
  thereto, the Company was to participate as to its one-third (1/3) interest in
  the property and co-operate the property with Saba. Ownership interest at that
  time in the recorded net revenue from the properties was to be two-thirds
  (2/3) and one-third (1/3) for Saba and the Company, respectively.

On
  November 1, 1997, the contract agreement with Saba was renegotiated and
  modified so that the Companys interest would increase from one-third (1/3)
  to two-thirds (2/3) as Saba did not make the required operating and
  development expenditures. The modification required Saba to pay for one-half
  (1/2) of the operating and development costs until they expend $5,000,000. At
  that point, Saba will have earned a one-third (1/3) interest and the Company
  will retain a two-thirds (2/3) interest in the property and these two parties
  will share in the costs and revenues based on their respective interests.
  Assignments for the changes in the net revenue interests based on this
  modification of the agreement have been executed and have been recorded.
  Development of this propertys oil and gas reserves has not commenced. This
  agreement was assumed as an executory contract under the Plan as described in
  Note 7.

13.      Related
  Party Transactions



The
  Company had certain agreements with Capitan to sell gas produced from wells
  owned by the Company and to offer waste water disposal services on sites owned
  by the Company. A former officer and major shareholder of the Company is also
  the principal officer and shareholder of Capitan. Under the agreements, the
  Company was to receive 70% of Capitans net revenues from gas sales and 75%
  of Capitans net revenues from waste water disposal services.

The
  account receivable due from Capitan for the years ended December 31, 1999 and
  1998 is as follows:

|                                                               |  | For
        the Years Ended December 31, |          
|-------------------------------------------------------------- |  | ---------------------------------------- | ---------
|                                                               |  |                                          |          
|                                                               |  | 1999                                     |          
|                                                               |  |                                          |          
|Balance at beginning of
        year                           |  | $                                        | 1,056,503
|Companys portion of
        Capitans net revenues            |  |                                          | 3,800    
|Other advances to Capitan                                      |  |                                          |         
|Less:
        payments received from Capitan                   |  |                                          | (141,600 
|Write off of receivable
        due to settlement (see Note 7) |  |                                          | (918,703 
|                                                               |  |                                          |          
|                                                               |  |                                          |         
|Less:
        allowance for doubtful accounts                  |  |                                          |         
|                                                               |  |                                          |          
|Balance at end of year                                         |  |                                          |         
|                                                               |  |                                          |          

---

As
  of December 31, 1997, Capitan did not have sufficient liquidity to pay the
  entire amounts due the Company in the foreseeable future. Although the Companys
  management believed that the fair market value of Capitans net assets,
  which consisted primarily of Capitans revenue interests in the Companys
  properties, exceeded amounts owed to the Company, the Company recorded a
  valuation allowance of $500,000 during the year ended December 31, 1997, to
  reduce the carrying value of the accounts receivable due from Capitan. In
  November 1998, when the Company sought relief under the federal bankruptcy
  laws, it also filed various claims against Capitan, the former officer and
  major shareholder of the Company and others. Subsequently, the Plan settled
  these controversies and the Company recognized a settlement loss of $418,703,
  which is included in the $648,248 Reorganization Settlement Loss recorded in
  the year ended December 31, 1999.



At
  December 31, 1998, liabilities subject to compromise included amounts due
  relatives of a former officer and major shareholder totaling approximately
  $91,000.

The
  Companys former officer and major shareholder previously held a net profit
  interest of 25% in the LA/Bandini and Vaca Tar Sands oil and gas properties.
  In 1994, the Company acquired the 25% net profit interest in the LA/Bandini
  property and 20% of the net profit interest in the Vaca Tar Sands property
  from the former officer and major shareholder. In exchange for these
  interests, the Company issued 1,148,054 shares of common stock valued at
  $103,421, which was the approximate cost of the properties to the former
  officer and major shareholder. At the date of the acquisition of the net
  profit interest in 1994, the former officer and major shareholder owed the
  Company $31,516, which amount was forgiven as part of the purchase
  consideration.

14.      Loss
  Per Share

Basic
  and diluted loss per common share have been computed by dividing the loss
  available to common shareholders by the weighted-average number of common
  shares for the period.

The
  computations of basic and diluted loss per common share are as follows:

|                                                                               |  | For
        the Years EndedDecember 31, |           
|------------------------------------------------------------------------------ |  | --------------------------------------- | ----------
|                                                                               |  |                                         |           
|                                                                               |  | 1999                                    |           
|                                                                               |  |                                         |           
|Numerator:                                                                     |  |                                         |           
|Loss
        before extraordinary item                                         |  | $                                       | (1,184,529
|Extraordinary
        item                                                     |  |                                         | 155,767   
|                                                                               |  |                                         |           
|Net
        loss and the numerator for basic and diluted loss per common share |  | $                                       | (1,028,762
|                                                                               |  |                                         |           
|Denominator:                                                                   |  |                                         |           
|Weighted-average
        shares basic and diluted                              |  |                                         | 9,034,899 
|                                                                               |  |                                         |           
|Basic and diluted loss per
        common share:                               |  |                                         |           
|Loss
        before extraordinary item                                         |  | $                                       | (0.13     
|Extraordinary
        gain from debt discharged in bankruptcy                  |  |                                         | 0.02      
|                                                                               |  |                                         |           
|Net loss per common share                                                      |  | $                                       | (0.11     
|                                                                               |  |                                         |           

The
  potentially dilutive securities that were outstanding during 1999 and 1998
  were not included in the computation of diluted loss per share, because to do
  so would have been antidilutive for the periods presented.

|                                               |  | For
        the Years EndedDecember 31, |        
|---------------------------------------------- |  | --------------------------------------- | -------
|                                               |  |                                         |        
|                                               |  | 1999                                    |        
|                                               |  |                                         |        
|Shares of common stock
        issuable under: |  |                                         |        
|Warrants                                       |  |                                         | 856,821
|                                               |  |                                         |        
|Total                                          |  |                                         | 856,821
|                                               |  |                                         |        

---

15.      Stock
  and Warrant Transactions



In
  February 1998, the Company issued 180,000 shares of its common stock as
  additional consideration for the decline in the price of its stock to the
  purchasers of units of the Companys 1997 private placement offering. The
  issuance of these shares has been reflected as an increase in the number of
  shares with no additional value received.



During
  the year ended December 31, 1998, the Company issued a total of 46,672 shares
  of its common stock for services. Accordingly, $17,890 was recorded as an
  expense based on the quoted market price of the common stock on the date of
  issuance.



In
  February and April 1998, the Company issued a total of 35,700 shares of its
  common stock as compensation to employees. Accordingly, $26,174 was recorded
  as compensation expense based on the quoted market price of the common stock
  on the date of issuance.



In
  March and May 1998, the Company issued a total of 48,200 shares of its common
  stock for commissions in connection with obtaining debt financing in prior
  years. Accordingly, $19,700 of debt issue costs was recorded in interest
  expense and is based on the quoted market price of the common stock on the
  date of issuance.



During
  the year ended December 31, 1998, the Company issued a total of 133,000 shares
  of its common stock for cash consideration of $116,500.



In
  June 1998, the Company issued 100,000 shares of its common stock in
  consideration of the assignment to the Company of an overriding royalty
  interest and all other interests in the Vaca Tar Sands waste water disposal
  wells, cancellation of Capitans promissory note, a related party and the
  related pledge agreement between Capitan and the seller, and cancellation of
  the guaranty of the note payable by the Companys former officer and major
  shareholder and the former Secretary/Treasurer, who is the wife of the former
  officer and major shareholder. The value of the overriding royalty interest
  was $28,000 based on the quoted market value of the common stock on the date
  of issuance. This was recorded as an addition in the amount due from Capitan
  and included as part of the settlement with Capitan provided for under the
  Plan.



In
  June 1998, the Company issued 347,991units, each unit consisting of one share
  of common stock and one warrant to purchase one share of common stock that is
  exercisable for three years at $2.50 per share, as additional value in lieu of
  the registration of shares issued in connection with a private placement of
  the Companys equity securities that commenced in December 1996. The value
  of the shares issued was $85,258, which was based on the quoted market price
  of the Companys common stock on the date the shares were issued. The fair
  value of the warrants issued of $52,050 was determined using the Black-Scholes
  Option Pricing Model. The issuance of these shares and warrants has been
  treated as a cost of the original private placement.



In
  July 1998, the Company issued a warrant to a placement agent of the Companys
  1996 and 1997 private placements of units of its common stock and warrants.
  The placement agent warrant is exercisable for a period of five years into
  52,000 units at $2.65 per unit. Each unit consists of one share of common
  stock and a warrant to purchase one share of common stock at a purchase price
  of $2.625 with that warrant concurrently exercisable for the

---

same five year period as the July 1998 granting
  warrant. The issuance of this warrant has been treated as a cost of the
  original private placement.



At
  December 31, 1999 and 1998, the Company has reserved the following numbers of
  shares of its authorized but unissued common stock for possible future
  issuance in connection with the following:

|                           |  | 1999 |         | 1998 | 
|-------------------------- |  | ---- | ------- | ---- | 
|                           |  |      |         |      | 
|Exercise of stock warrants |  |      | 856,821 |      | 
|                           |  |      |         |      | 
|Total                      |  |      | 856,821 |      | 
|                           |  |      |         |      | 



A
  summary of warrant activity for the years ending December 31, 1999 and 1998 is
  as follows:

|                                       |  | Number
        ofWarrants |           | Weighted
        Average Exercise Price |   | Warrants
        Exercisable |  | Weighted
        Average Exercise Price |          
|-------------------------------------- |  | ------------------------- | --------- | --------------------------------------- | - | ---------------------------- |  | --------------------------------------- | ---------
|                                       |  |                           |           |                                         |   |                              |  |                                         |          
|Outstanding, December 31,
        1997 |  |                           | 997,361   |                                         | $ | 3.00                         |  |                                         | 997,361  
|Granted                                |  |                           | 451,991   |                                         | $ | 2.52                         |  |                                         |          
|Exercised                              |  |                           |          |                                         |   |                              |  |                                         |          
|Canceled                               |  |                           | (592,531  | )                                       | $ | 3.00                         |  |                                         |          
|Repriced                               |  |                           | 592,531   |                                         | $ | 2.50                         |  |                                         |          
|                                       |  |                           |           |                                         |   |                              |  |                                         |          
|Outstanding, December 31,
        1998 |  |                           | 1,449,352 |                                         | $ | 2.65                         |  |                                         | 1,449,352
|Granted                                |  |                           |          |                                         |   |                              |  |                                         |          
|Exercised                              |  |                           |          |                                         |   |                              |  |                                         |          
|Expired                                |  |                           | (592,531  | )                                       | $ | 2.50                         |  |                                         |          
|                                       |  |                           |           |                                         |   |                              |  |                                         |          
|Outstanding, December 31,
        1999 |  |                           | 856,821   |                                         | $ | 2.52                         |  |                                         | 856,821  
|                                       |  |                           |           |                                         |   |                              |  |                                         |          

At
  December 31, 1999, warrants had exercise prices ranging from $2.50 to $2.63
  and a weighted average remaining contractual life of 1.16 years.

16.      Oil
  and Gas Operations (Unaudited)

At
  December 31, 1999, the Company had all of its interests in oil and gas
  properties located in California.



Costs
  incurred in oil and gas producing activities were as follows:

|                                    |  | For
        the Years Ended December 31, |  
|----------------------------------- |  | ---------------------------------------- | -
|                                    |  |                                          |  
|                                    |  | 1999                                     |  
|                                    |  |                                          |  
|                                    |  | (unaudited)                              |  
|Property acquisition
        costs: |  |                                          |  
|Proved
        properties           |  |                                          | 
|Exploration
        costs           |  |                                          | 
|Development
        costs           |  |                                          | 
|                                    |  |                                          |  
|Total costs                         |  |                                          | 
|                                    |  |                                          |  



Reserve
  information presented herein is based upon reports prepared by the Companys
  independent petroleum engineers. Reserve estimates are inherently imprecise
  and estimates of new discoveries are more imprecise than those of producing
  oil and gas properties. Accordingly, these estimates are expected to change as
  future information becomes available.

---

Proved
  oil and gas reserves are the estimated quantities of crude oil, natural gas
  and natural gas liquids, which geological and engineering data demonstrate
  with reasonable certainty to be recoverable in future years from known
  reservoirs under existing economic and operating conditions.

Proved
  developed oil and gas reserves are those expected to be recovered through
  existing wells with existing equipment and operating methods.

Net
  quantities of crude oil and natural gas for the Company as of the beginning
  and the end of the years ended December 31, 1999 and 1998, as well as the
  changes in proved reserves during such years, are set forth in the following
  tables:

|                                          |  | For
        the Year Ended December 31, 1999 |            
|----------------------------------------- |  | -------------------------------------------- | -----------
|                                          |  |                                              |            
|                                          |  | (unaudited)                                  |            
|                                          |  | OilBbls                                      |            
|                                          |  |                                              |            
|                                          |  |                                              |            
|Proved developed reserves,
        net:   |  |                                              |            
|January
        1, 1999                   |  |                                              |           
|Revisions
        of previous estimates   |  |                                              | 827,000    
|Purchase
        of reserves in place     |  |                                              |           
|Production                                |  |                                              |           
|Sale of
        reserves in place         |  |                                              |           
|                                          |  |                                              |            
|December
        31, 1999                 |  |                                              | 827,000    
|                                          |  |                                              |            
|Proved undeveloped
        reserves, net: |  |                                              |            
|January
        1, 1999                   |  |                                              |           
|Revisions
        of previous estimates   |  |                                              | 25,513,000 
|Purchase
        of reserves in place     |  |                                              |           
|Sale of
        reserves in place         |  |                                              |           
|                                          |  |                                              |            
|December
        31, 1999                 |  |                                              | 25,513,000 
|                                          |  |                                              |            
|                                          |  |                                              |            
|                                          |  | For
        the Year Ended December 31, 1998 |            
|                                          |  |                                              |            
|                                          |  | (unaudited)                                  |            
|                                          |  | OilBbls                                      |            
|                                          |  |                                              |            
|Proved
        developed reserves, net:   |  |                                              |            
|January
        1, 1998                   |  |                                              | 2,918,000  
|Revisions
        of previous estimates   |  |                                              | (968,000   
|Purchase
        of reserves in place     |  |                                              |           
|Production                                |  |                                              | (36,000    
|Sale
        of reserves in place         |  |                                              | (1,914,000 
|                                          |  |                                              |            
|December
        31, 1998                 |  |                                              |           
|                                          |  |                                              |            
|Proved
        undeveloped reserves, net: |  |                                              |            
|January
        1, 1998                   |  |                                              | 26,761,000 
|Revisions
        of previous estimates   |  |                                              | (26,091,000
|Purchase
        of reserves in place     |  |                                              |           
|Sale
        of reserves in place         |  |                                              | (670,000   
|                                          |  |                                              |            
|December
        31, 1998                 |  |                                              |           
|                                          |  |                                              |            



---

The decrease in reserves during 1998 is
  primarily due to a decline in oil prices and the sale of reserves. The
  increase in reserves at December 31, 1999 is primarily the result of an
  increase in oil prices.

With
  respect to the proved undeveloped reserves, which consists principally of the
  Vaca Tar Sands property, the Company has permits for the drilling of 120 wells
  on two tracts of the Vaca Tar Sand Unit, and for sufficient wells to develop
  the remaining tracts. Because of the approximately $28,400,000 capital
  expenditure required to develop the Vaca Tar Sands property fully, management
  decided to obtain a partner who could provide the funds required to at least
  commence development. In December 1996, the Company entered into a farm-out
  agreement with Saba to provide at least $10,000,000 for the operation and
  development of the property, for which Saba would

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earn a two-thirds interest in the property. The
  development method envisioned by the Company provided for the drilling of one
  or more horizontal wells extending as much as 2,600 feet horizontally. Each
  well was to be twinned by a parallel borehole above it into which steam will
  be injected continuously. The heated, thinned oil was to flow from the lower
  borehole. Alternatively, one horizontal well would be drilled and used for
  both steam injection and oil production. In 1997, the farm-out agreement was
  modified with Saba so that the Companys interest increased from one-third
  to two-thirds. The modification requires Saba to pay for one-half of the
  operating and development costs until they expend $5,000,000. At that point,
  Saba will have earned a one-third interest and the Company will retain a
  two-thirds interest in the property and these two parties will share in the
  costs and revenues based on their respective interests.

The
  cost allocated to the Vaca Tar Sands undeveloped reserves was insignificant,
  and the estimated volume of reserves allocated to the property has been
  excluded from the calculation of the Companys depletion expense in the
  years ended December 31, 1999 and 1998. The costs related to the Vaca Tar
  Sands reserves, including future development costs, will be included in the
  Companys calculations of depletion expense when production of those
  reserves commence.



The
  following tables set forth the computation of the standardized measure of
  discounted future net cash flows relating to the Companys proved reserves
  at December 31, 1999 and 1998, respectively. The standardized measure is the
  estimated future cash inflows from proved reserves less estimated future
  production and development costs and estimated future income taxes. Future
  cash inflows represent expected revenues from the production of proved
  reserves based on prices and any fixed determinable future escalation provided
  by contractual arrangements in existence at fiscal year-end.

Escalation
  based on inflation, federal regulatory changes and supply and demand is not
  considered. Estimated future production and development costs related to
  future production of reserves are based on historical costs.

Such
  costs include, but are not limited to, drilling development wells and
  installation of production facilities. Inflation and other anticipatory costs
  are not considered until the actual cost change takes effect. Estimated future
  income tax expenses are computed using the appropriate year-end statutory tax
  rates. Consideration is given to the effects of permanent differences, tax
  credits and allowances. A discount rate of 10% is applied to the annual future
  net cash flows after income taxes.

The
  methodology and assumptions used in calculating the standardized measure are
  those required by FASB Statement No. 69. It is not intended to be
  representative of the fair market value of proved reserves. The valuations of
  revenues and costs do not necessarily reflect the amounts to be received or
  expended by the Company. In addition to the valuations used, numerous other
  factors are considered in evaluating known and prospective oil and gas
  reserves.

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The
  standardized measure of discounted future net cash flows relating to proved
  developed and undeveloped oil and gas reserves at December 31, 1999 and 1998
  are summarized below:

|                                                                 |  | For
        the Years Ended December 31, |             
|---------------------------------------------------------------- |  | ---------------------------------------- | ------------
|                                                                 |  |                                          |             
|                                                                 |  | 1999                                     |             
|                                                                 |  |                                          |             
|Future cash inflows                                              |  | $                                        | 577,474,000 
|Future production and
        development costs                  |  |                                          | (332,855,000
|Future income tax expenses                                       |  |                                          | (97,848,000 
|                                                                 |  |                                          |             
|Future net cash flows                                            |  |                                          | 146,771,000 
|10% annual discount for
        estimated timing of cash flows   |  |                                          | (65,535,000 
|                                                                 |  |                                          |             
|Standardized measure of
        discounted future net cash flows |  | $                                        | 81,236,000  
|                                                                 |  |                                          |             

For
  the calculations in the preceding table, estimated future cash inflows from
  estimated future production of proved reserves were computed using average
  year-end oil and gas prices. The average oil price, primarily based on posted
  prices, was $23.73 per barrel and $7.00 per barrel at December 31, 1999 and
  1998, respectively, and the average natural gas price, a combination of spot
  gas prices and contract prices, was $0.62 per thousand cubic feet and $1.94
  per thousand cubic feet at December 31, 1999 and 1998, respectively.

---



The
  changes in standardized measure for discounted future net cash flows relating
  to proved reserves for each of the two years ended December 31, 1999 and 1998
  is set forth below:

|                                                                                      |  | For
        the Years EndedDecember 31, |            
|------------------------------------------------------------------------------------- |  | --------------------------------------- | -----------
|                                                                                      |  |                                         |            
|                                                                                      |  | 1999                                    |            
|                                                                                      |  |                                         |            
|Sales of oil and gas
        produced, net of production costs                        |  |                                         |           
|Net changes in sales
        prices and production costs related to future production |  | $                                       | 244,619,000
|Changes in estimated
        future development costs                                 |  |                                         |           
|Development costs incurred
        during the period, which were previously estimated |  |                                         |           
|Revisions of previous
        quantity estimates                                      |  |                                         |           
|Sale of reserves in place                                                             |  |                                         |           
|Accretion of discount                                                                 |  |                                         | (65,535,000
|Net change in income taxes                                                            |  |                                         | (97,848,000
|Other, principally changes
        in timing of estimated production                  |  |                                         |           
|                                                                                      |  |                                         |            
|Net (decrease) increase                                                               |  |                                         | 81,236,000 
|Beginning of year                                                                     |  |                                         |           
|                                                                                      |  |                                         |            
|End of year                                                                           |  | $                                       | 81,236,000 
|                                                                                      |  |                                         |            

17.      Subsequent
  Events



Subsequent
  to year end, all of the unresolved disputed bankruptcy claims have been
  settled. These settlements pertained primarily to two of the leases associated
  with the Companys oil and gas production and to two waste water disposal
  agreements. In general, these settlements resulted in obligations for payments
  by the Company, which were accrued at year end. On one oil and gas lease, the
  royalty was increased from 12.5% to 16.67%, and was increased by 1.04% on a
  second lease. The settlements provided for a decrease in disposal royalties on
  solid wastes from 12.5% to 10%. The Company agreed to pay minimum royalties
  totaling approximately $36,000 annually. Royalties paid during the course of
  operations will be credited against the minimum payments. One of these
  settlements also resulted in the termination of the Companys oil and gas
  lease rights representing approximately 8.87% of the Vaca Tar Sands property
  oil and gas reserves.



Subsequent
  to year end, the Company sold a total of 1,550,600 shares of its common stock
  at $.30 per share for additional working capital and issued 402,967 common
  shares in satisfaction of amounts due for federal bankruptcy proceeding
  professional services totaling $169,246 based on the fair value of the
  professional services provided.



In
  October 2000, the Company adopted a stock option plan and granted its
  president options to purchase 4,000,000 shares of the Companys common stock
  at an exercise price of $.56 per share. The options are exercisable at anytime
  and expire in September 2005.



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