SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                          FORM 10-KSB

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.

           For the fiscal year ended:   June 30, 2002

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

             COMMISSION FILE NUMBER:   000 - 30254.

              SHANNON INTERNATIONAL RESOURCES INC.
(Exact name of small business issuer as specified in its charter)

             Nevada                                  98-02049656
   (State or other jurisdiction           (IRS Employer Identification No.)
          of incorporation)

      2900, 500-4th Avenue, S.W., Calgary, Alberta    T2P 2V6
  (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:(403) 538 3706

Securities registered under Section 12(b) of the Exchange Act: NONE.

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

                  Common Stock, $.001 par value
                        (Title of class)

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

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. [X]

     State issuer's revenues for its most recent fiscal year.$-0-

As of September 30, 2002, 14,050,000 shares of Common Stock of the Registrant
were deemed outstanding. (See Item 11). The aggregate market value of the voting
and non-voting common equity stock held by non-affiliates of the registrant as
of September 30, 2002: $1,152,500 (See Item 5)

          Documents incorporated by reference:   None.

Transitional Small Business Disclosure Format (check one): YES  NO X

Exhibit index on consecutive page 24          Page 1 of 38 Pages



<PAGE>



                            GLOSSARY


The following is a glossary of oil and gas terms used in this Annual Report:

Alluvial, Fluvial And Lacustrine Strata: Sedimentary rock deposits.

Basin: A synclinal structure, roughly circular in its outcrop pattern, in which
beds dip gently toward the center from all directions.

Bituminous Coal: A soft grade of coal commonly mined for use by coal-fired,
electric power generation plants.

Borehole Data: Geological data compiled by exploratory drilling.

carboniferous period: The period spanning a time interval of 70 million years,
from 360 million to 290 million years ago.

Carboniferous System: Rocks that were formed or deposited during the
Carboniferous period including Old Red Sandstone; Mountain Limestone; Millstone
Grit and Shale and the Coal Measures.

Coalification: The geological process whereby coal is formed.

Coal Measures: The uppermost division of the Upper Carboniferous rocks
consisting of a repetitive sequence of marine and nonmarine strata. Productive
coal deposits occur in the marine strata and consist largely of soft,
bituminious coal.

Coal Seam: Layer of coal enclosed in other sedimentary layers.

Fault Systems: Large fractures of the subsurface rock strata.

Permeabilities: The degree to which the porous space can be filled with gas or
liquid.

Permian Period: The period spanning a time interval of 50 million years, from
290 million to 240million years ago. The rocks of this period are rich in
deposits of coal, oil and gas.

Porosities: The molecular open space within rock.

Seismic Data: Geological data compiled by measuring underground movement caused
by test explosions.

Trending Fault Systems: Large fractures of the subsurface rock strata.

Working Interest: The interest held by a company in an oil or natural gas
property, which bears its proportionate share of the costs of exploration,
development, and operation as well as any royalties or other production burdens.



<PAGE>




                             Part I.

Item 1. DESCRIPTION OF BUSINESS


Shannon International Resources, Inc. (the "Company") was incorporated on
February 17, 1999 under the laws of the State of Nevada for the purpose of
financing and owning oil and natural gas development properties. During February
and March 1999, the Company sold a total of 8,000,000 shares of common stock for
gross proceeds of $80,000.

During March 1999, the Company sold 2,000,000 shares of common stock to CMB
Energy Corp. ("CMB Energy") in exchange for a 25% working interest in a
petroleum, natural gas and coalbed methane Permit(Oil and Natural Gas Permit No.
9606) covering 116,279 acres of Prince Edward Island, Canada (the "Working
Interest"). As a result of the acquisition of this Working Interest, CMB Energy
became the Company's largest shareholder. See "Item 11. Security Ownership of
Certain Beneficial Owners and Management." Additionally, CMB Energy owns 10% of
the Prince Edward Island working interest. As the Company's largest shareholder
and the owner of 10% of this Prince Edward Island working interest, at this time
CMB Energy is able to exert significant influence on the Company.

CMB Energy is a closely held private company located in Toronto, Ontario, and is
owned by the following companies: Regal Tours Atlantic, Inc. (owned by Laughlin
MacLean) and the Calder Company, Ltd., each owning 25% of CMB Energy, and
Investimo S.A., which owns the remaining 50% of CMB Energy.

In January 2002, the Company acquired a further five percent Working Interest in
six additional Permits totaling a gross acreage of 525,857 acres from CMB Energy
Corp. (the "Additional Interests). The purchase price for the Additional
Interests was $190,368, plus the vendor retains a Gross Overriding Royalty
("GORR") of 10% on this newly acquired acreage.

The Company has two operating agreements with joint operating partners whom it
is engaging in exploration activities on its Working Interests. The Joint
Operating Agreement for Permit 96-06 is dated October 22, 2001 and the Joint
Operating Agreement for Permits 96-04, 96-05, 96-07, 96-08, 96-09 and 96-10 is
dated October 23, 2002. The Parties are the Company, CMB Energy Corp., Rally
Energy Corp., and Osprey Energy Limited. The division of costs and expenses for
the covered property is Rally Energy Corp., fifty-five percent, Osprey Energy
Limited, ten percent, CMB Energy Corp., ten percent and Shannon, twenty five
percent. Rally Energy Corp., is the Operator with management responsibility for
the operations on the property.

Regarding the Joint Operating Agreement for Permits 96-04, 96-05, 96-07, 96-08,
96-09 and 96-10 dated October 23, 2001, the parties and the division of costs
and expenses for the properties covered are the Company five percent, Osprey
Energy Limited ten percent, Energy Power Systems Ltd., twenty-five percent, CMB
Energy Corp., five percent and Rally Energy Corp., fifty-five percent. Rally
Energy Corp., is the Operator with management responsibilities for the
operations on the properties.

<PAGE>
As of September 30, 2002, all available data relevant to the permits has been
assembled and analyzed. 1200 kilometers of 2D seismic data has been acquired,
assessed and analyzed, along with well logs and core samples. Based on seismic
data, core samples and well log analysis, several high potential, shallow depth
(less than 2000 meters in depth) conventional natural gas targets have been
identified. A 126 kilometer 2D seismic acquisition program was initiated to
supplement the 1200 kilometer existing seismic data in order to provide
information relevant to finalizing the selection of locations for planned
exploratory wells.

The focus of the exploration program is on conventional natural gas
accumulations at depths of less than 2000 meters. It is planned that an initial
program of up to five wells will be initiated in late October 2002, with the
exact locations to be determined by early October 2002.



BUSINESS OF ISSUER

The Company holds a 25% Working Interest and a further five percent Working
Interest in six additional permits in petroleum, natural gas and coalbed methane
leases in Prince Edward Island, Canada. See "Item 2. Description of Property."
The Working Interests acquired from CMB Energy gives the Company the right to
receive 25% of any income derived from the property covered in the lease. In
exchange for the right to receive income, the Company has an obligation to pay
25% of the costs of exploration, development and production of the property. The
agreement between the Company and CMB Energy granted the Company the option to
acquire an additional 12.5% of the Working Interest by the expenditure of
Cdn.$1,500,000, by October 2000, a second option to acquire a further 12.5% of
the Working Interest by the expenditure of Cdn.$1,500,000, by October 2001 and
the right to enter into a joint venture agreement with the holder or holders of
the remaining 50% of the Working Interest, by the expenditure of Cdn.$3,000,000,
on the property until August 2002. The agreement between the Company and CMB
Energy was amended on August 18, 2000 to extend the first option to acquire a
further 12.5% of the Working Interest by the expenditure of Cdn. $1,500,000 to
August 18, 2001 and to extend the second option to acquire a further 12.5% of
the Working Interest by the expenditure of Cdn. $1,500,000 to August 18, 2002.

The Company did not exercise its first option to acquire up to an additional
12.5% of the Working Interest from CMB Energy, for the expenditure of
approximately Cdn.$1,500,000, by August 18, 2001. Therefore this option, along
with a similar second option expiring on August 18, 2002, were cancelled. See:
Item 12, "Acquisition of Working Interest."

The Company has two operating agreements with joint operating partners with whom
it is engaging in exploration activities on its Working Interests. The Joint
Operating Agreement for Permit 96-06 is dated October 22, 2001 and the Joint
Operating Agreement for Permits 96-04, 96-05, 96-07, 96-08, 96-09 and 96-10 is
dated October 23, 2002. The Parties are the Company, CMB Energy Corp., Rally
Energy Corp., and Osprey Energy Limited. The division of costs and expenses for
the covered property is Rally Energy Corp., fifty-five percent, Osprey Energy
Limited, ten percent, CMB Energy Corp., ten percent and Shannon, twenty five
percent. Rally Energy Corp., is the Operator with management responsibility for
the operations on the property.
<PAGE>
Regarding the Joint Operating Agreement for Permits 96-04, 96-05, 96-07, 96-08,
96-09 and 96-10 dated October 23, 2001, the parties and the division of costs
and expenses for the properties covered are the Company five percent, Osprey
Energy Limited ten percent, Energy Power Systems Ltd., twenty-five percent, CMB
Energy Corp., five percent and Rally Energy Corp., fifty-five percent. Rally
Energy Corp., is the Operator with management responsibilities for the
operations on the properties.

The Company intends to raise funds through a private equity offering in order to
fund the exploration of the Working Interests and its portion of the ongoing
lease payments, described below. If the Company is not successful in raising the
necessary equity, it will remain unable to cover these costs. To date, the
Company has been able to raise $400,000 of additional funding in a private
placement completed during the fiscal quarter ended March 31, 2002. However
there is no assurance the Company will be able to raise any additional funds in
the future. Any financing program conducted by the Company will most likely
result in the issuance of additional shares of common stock which will dilute
the ownership interests of the Company's current shareholders.

The Company and its joint operating partners are obligated to maintain the
leases in good standing by the expenditure of Cdn.$32,107 per year. The
Company's portion of this obligation is Cdn.$2,768, the next payment of which
was due and paid on or about July 15, 2002.

The Company has no revenues from operations and will have to raise additional
funds to meet its obligations with respect to the exploration program.
Management believes that the general and administrative expenses, capital and
operating expenditures related to the implementation of the exploration program
is approximately Cdn.$3,500,000, of which the Company may be expected to provide
up to Cdn.$700,000. See "Item 6. Management's Discussion and Analysis or Plan of
Operations."


PRINCIPAL PRODUCTS OR SERVICES AND MARKETS

The Company's principal target markets are natural gas transmission pipeline
companies, utilities and private end-users, which may purchase the natural gas
directly from the Company or from pipeline companies.


COMPETITIVE BUSINESS CONDITIONS, COMPETITIVE POSITION IN THE INDUSTRY AND
METHODS OF COMPETITION

The Company's planned petroleum and natural gas exploration activities in Prince
Edward Island will be undertaken in a highly competitive and speculative
business atmosphere. The Company is not the operator of the Joint Operating
Agreements and, therefore, will not be required to own any equipment. The
Company and its joint operating partners have entered into joint operating
agreements described above to provide the necessary equipment and personnel to
begin exploration of the joint lands. There is significant competition in the
exploration business and the Company is an insignificant participant. The
Company will have to raise additional capital to fully participate in the
exploration program. There are a significant number of companies seeking funding
for exploration programs, many which are more developed than the Company. Given
its size, lack of sufficient working capital and the lack of exploration on the
joint lands to date, the Company may have difficulty raising additional capital.
<PAGE>

GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL LAWS

As of September 2002, the Company does not offer or sell any products or
services and is not subject to material government regulations; however it, or
any venture in which it participates, will be required to obtain permits for
drilling oil or gas wells.

Exploration and production activities relating to oil and gas permits and leases
are subject to extensive regulation for the protection of the environment by the
Canadian Federal Government and the Provincial Government where the acreage is
located. The Company must submit exploration and, if warranted, development
plans to the Department of the Environment for the Province of Prince Edward
Island for approval prior to the execution of such plans. Compliance with
environmental regulation may be expected to result in Cdn.$50,000, of estimated
expenses once the exploration program is implemented. Environmental protection
expenses are expected to include the cost of site preparation such as road
construction, fencing and earthen berms or retaining walls to contain potential
overflows or spillage of oil or drilling fluids. If production is begun, the
temporary measures must be made permanent, if production is not warranted, the
temporary measures must be removed and the land restored to its prior condition.

The Company believes it is presently in compliance with all applicable
environmental laws, rules or regulations; however, future legislation may have
an adverse impact on the Company's present and contemplated business operations.

The foregoing is a brief summary of the regulations and legislation to which the
Company is subject to by virtue of its operations and activities. The Company
cannot predict what impact any future environmental laws, rules or regulations
would have on business operations. But given that the Company operates in a
highly regulated industry and historically such operations are of a high profile
from the standpoint of environmental groups, studies and advocates, the impact
could be substantial.


RESEARCH AND DEVELOPMENT

As of September 30, 2002, the Company has not spent any money on research and
development.
<PAGE>


EMPLOYEES

The Company has no full time employees. The officers and directors of the
Company, do not devote all of their time to the affairs of the Company, but will
be devoting such time required to effectively manage the Company.


Item 2. Description of Property.

The Company holds a 25% Working Interest in one Permit (#96-06) and a further
five percent Working Interest in six additional Permits (96-04, 96-05, 96-07,
96-08, 96-09, 96-10) in petroleum, natural gas and coalbed methane permits in
Prince Edward Island, Canada. The portion of the Working Interests acquired from
CMB Energy gives the Company the right to receive 25% and 5% respectively of any
income derived from the property covered in the permits. In exchange for the
right to receive income, the Company has an obligation to pay 25% and 5%
respectively of the of exploration, development and production costs of the
property. See "Item 1. Description of Business."

Prince Edward Island, where the Working Interests are located, lies in the
southwestern part of a large, mainly non- marine, Carboniferous to Permian area
called the Maritimes Basin. The basin fill consists of fluvial, alluvial,
lacustrine and minor marine strata. Seismic and borehole data suggest Prince
Edward Island is underlain by coal measures strata, as estimated by the
Geological Survey of Canada. The offshore extension of the coal measures basin
strata containing up to 20 to 25 coal seams, ranging in thickness between 0.6 to
3 meters (2 to 10 feet) with a net coal thickness from 15 to 40 meters (48 to
131 feet). The coal rank is bituminous, and calculated theoretical gas capacity
values for eastern Canadian coals range form 14.4 to 17.08 cubic meters per gram
of coal. Structural features associated with major northeast trending faults
systems and salt deposits may have created favorable permeability conditions for
enhanced natural gas and coalbed methane gas recovery. Source rock studies
indicate that the early Carboniferous rocks are oil prone with more than 2%
total oil capacity and greater than 5 milligrams per gram of rock. Conversely,
the upper Carboniferous rocks are mainly gas prone. In addition, excess coal gas
expelled during coalification may have charged nearby reservoirs. Porosities up
to 25% and favorable permeabilities have been reported from the lower
Carboniferous rocks, whereas porosities up to 15% have been reported for the
upper Carboniferous rocks. The Prince Edward Island property is not currently
producing oil or gas and has no proven reserves.




<PAGE>



UNDEVELOPED ACREAGE

As of June 30, 2001 and June 30, 2002, the Company, directly or indirectly, held
undeveloped acreage as follows:

                                  June 30, 2001     June 30,2002
                         ------------------  -------------------

Undeveloped Acres:

        Gross                    116,279     /          642,136

        Net                       29,070     /           55,363


DRILLING ACTIVITIES

As of September 30, 2002, there are no drilling activities on the Working
Interests.



PRINCIPAL OFFICES

The Company's offices are located at 2900, 500-4th Avenue, S.W., Calgary,
Alberta T2P 2V6. The offices are provided by Rally Energy Corp., on a
month-to-month basis to the Company. Blair Coady, the Company's President, is a
director of Rally Energy Corp.


Item 3. Legal Proceedings.

There is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge of the
Company, threatened, against or affecting the Company, or any of its properties,
business affairs or business prospects.


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

No matters were submitted to a vote of security holders during the Company's
fiscal year ended June 30, 2002, either through the solicitation of proxies or
otherwise.



                               PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's common stock is not listed for sale on any exchange or trading
medium. The Company is seeking the listing of its Common Stock on the OTC
Electronic Bulletin Board. As of September 30, 2002, there is no public market
for the Company's common stock. As of September 30, 2002 there were
approximately 53 holders of the Company's common stock.
<PAGE>
As of September 30, 2002, the aggregate market value of the voting and
non-voting common equity stock held by non- affiliates of the Company was
$1,152,500. Calculation of this value is based on an issuance of the Company's
common stock at a value of $0.10 per share in the private placement completed
during fiscal quarter ended March 31, 2002. As of September 30, 2002 there were
11,525,000 shares of common stock held by non-affiliates of the Company.



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

OVERVIEW

The Company holds a 25% Working Interest in one permit (96-06) and a further
five percent Working Interest in six additional permits ((96-04, 96-05, 96-07,
96-08, 96-09, 96-10)granting the exclusive right to carry out
geological-geophysical work and exploratory drilling for all petroleum, natural
gas and coalbed methane gas in the areas of the permits located in Prince Edward
Island, Canada. See "Item 1. Description of Business."

The Company intends to follow the full cost method of accounting for oil and gas
properties. The Company is deemed to be in the planning and development stage.
Under the full cost method of accounting for oil and gas properties, all costs
associated with acquisition, exploration and development of oil and gas
reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects are not amortized until proved reserves associated with the
projects can be determined or until impairment occurs. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized. In addition, the
capitalized costs are subject to a "ceiling test," which basically limits such
costs to the aggregate of the "estimated present value," discounted at a ten
percent interest rate of future net revenues from proved reserves, based on
current economic and operating conditions, plus the lower of cost or fair market
value of unproved properties.

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 or oil and gas, in which case the gain or loss is recognized in income.

Abandonment of properties is accounted for as adjustments of capitalized costs
with no loss recognized.

<PAGE>
PLAN OF OPERATION

As of June 30, 2002, the Company had current assets of $17,580 cash. The Company
through the Joint Operating Agreements has engaged in planning and exploration
activities on the Working Interests. The Company is not the operator of the
Joint Operating Agreements and, therefore, will not be required to own any
equipment. The Company and its joint operating partners have entered into the
Joint Operating Agreements described above to provide the necessary equipment
and personnel to begin exploration of the joint lands. The Company will not be
able to satisfy its cash requirements for the next twelve months and will have
to raise additional funds to participate in drilling activities of the Working
Interests. See "Item 1. Description of Business."

The Company has two operating agreements with joint operating partners whom it
is engaging in exploration activities on its Working Interests. The Joint
Operating Agreement for Permit 96-06 is dated October 22, 2001 and the Joint
Operating Agreement for Permits 96-04, 96-05, 96-07, 96-08, 96-09 and 96-10 is
dated October 23, 2002. The Parties are the Company, CMB Energy Corp., Rally
Energy Corp., and Osprey Energy Limited. The division of costs and expenses for
the covered property is Rally Energy Corp., fifty-five percent, Osprey Energy
Limited, ten percent, CMB Energy Corp., ten percent and Shannon, twenty five
percent. Rally Energy Corp., is the Operator with management responsibility for
the operations on the property.

Regarding the Joint Operating Agreement for Permits 96-04, 96-05, 96-07, 96-08,
96-09 and 96-10 dated October 23, 2001, the parties and the division of costs
and expenses for the properties covered are the Company five percent, Osprey
Energy Limited ten percent, Energy Power Systems Ltd., twenty-five percent, CMB
Energy Corp., five percent and Rally Energy Corp., fifty-five percent. Rally
Energy Corp., is the Operator with management responsibilities for the
operations on the properties.

There is drilling activity in the general area of the Company's Working
Interests, which has created increased interest in the exploration of the
Company's Working Interests. Through the Joint Operating Agreements an
exploratory drilling program has been established. Though no assurances can be
given, this program is expected to provide for the drilling of up to five
exploration or test wells to determine whether there is sufficient reserves of
natural gas to then develop a program to establish production. Management
believes that sufficient reserves would be such reserves that the sale of
natural gas from the area at the current market prices would repay the cost of
exploration and development of the area within a reasonable time as well as
provide profitable production for a period of time consistent with industry
standards. Exploratory data determining the size and pressures of reserves and
other drilling factors effecting production cost must first be obtained and then
analyzed before a final determination may be made that there are "sufficient"
reserves to justify production.

As of September 30, 2002, all available data relevant to the permits has been
assembled and analyzed. 1200 kilometers of 2D seismic data has been acquired,
assessed and analyzed, along with well logs and core samples. Based on seismic
data, core samples and well log analysis, several high potential, shallow depth
(less than 2000 meters in depth) conventional natural gas targets have been
identified. A 126 kilometer 2D seismic acquisition program was initiated to
supplement the 1200 kilometer existing seismic data in order to provide
information relevant to finalizing the selection of locations for planned
exploratory wells.
<PAGE>
The focus of the exploration program is on conventional natural gas
accumulations at depths of less than 2000 meters. It is planned that an initial
program of up to five wells will be initiated in late October 2002, with the
exact locations to be determined by early October 2002.

Management believes that the general and administrative expenses, capital and
operating expenditures related to the implementation of such a program is
approximately Cdn.$3,500,000, of which the Company may be expected to provide up
to Cdn.$700,000. The Company intends to raise sufficient additional capital
through the private placement or public offering of securities. During the
quarter ended March 31, 2002, the Company sold 4 million units at a price of
U.S. $0.10 per unit for gross proceeds of $400,000, plus additional proceeds to
the extent that warrants accompanying these units are exercised. Each unit
consisted of one common share plus one-half common share purchase warrant. One
full warrant plus U.S. $0.20 is exercisable into one additional common share up
to November 1, 2003. These proceeds have been applied to acquire the Additional
Interests and to participate with the Company's joint operating partners in the
planning, development and exploration of the interests.

In the event the Company is unable to pay its obligations under its existing
Working Interests, its Working Interests can be proportionally reduced in favor
of whatever joint operating partner or other party pays the delinquent amount.
Each joint operating partner must approve the expenditures and provide funding
in order to remain a joint operating partner. The approval for expenditures sets
forth the specific costs for development of the program , site preparation and
drilling for the specific sites for exploratory wells and that these costs will
vary due to different conditions such as drilling depth and whether drilling is
to be through relatively soft sedimentary layers or dense rock layers.

The Company filed a Form 10-SB registration statement on November 5, 1999 in
order to establish itself as a fully reporting company under the Securities
Exchange Act of 1934, as amended. On the basis of the public information
provided in the registration statement filed on November 5, 1999, the Company is
seeking a listing of its common stock on the OTC Electronic Bulletin Board. See
"Item 5. Market for Common Equity and Related Stockholder Matters." As of
September 30, 2002, the Company's stock is not listed on the OTC Electronic
Bulletin Board. It is the Company's belief that an independent market for its
common stock will be advantageous to the Company by establishing an objective
measure of value for the common stock.

The Company's business plan is to raise additional capital through private
placements or public offerings of its equity securities and use the capital to
pay its proportional share of the costs of further development of its Working
Interests. The Company has not established any limitations on the amount or
price for the Company's securities if the Company is successful in establishing
a market. The Company does not, however, intend to sell such securities as would
result in a change in voting control of the Company.
<PAGE>


YEAR ENDED JUNE 30, 2002

RESULTS OF OPERATIONS

During the year ended June 30, 2002, the Company recorded a net loss of $73,335,
a loss of less than $0.01 per common share. The Company has not yet generated
any revenues. The $75,579 in total expenses consisted of professional fees in
the amount of $24,902 and administrative expenses in the amount of $29,727.

The Company's current assets at June 30, 2002, consisted of $17,580 in cash. As
of June 30, 2002, the Company had working capital of $156,356, compared to
working capital of $60 at June 30, 2001.



LIQUIDITY

At present, the Company is not producing revenues and its main source of funds
has been the sale of the Company's equity securities. The Company had $17,580 in
cash and other current assets of $138,776 in marketable securities as of June
30, 2002.

The Company will need to raise additional capital to meet its ongoing overhead
obligations and to finance the exploration program. Such funding may be obtained
through sale of additional securities. If the Company is unable to obtain
sufficient funds, the Company may seek to increase funds available to the
Company through the sale of some portion of its Working Interests. The ability
of the Company to sell a portion of the Working Interests is not a certainty and
the proceeds derived from such sale will be subject to the ongoing economic
viability of the project.



<PAGE>



ITEM 7. FINANCIAL STATEMENTS.

                                 C O N T E N T S

                                                                        Page
                                                                        ----

Independent Accountants' Report                                         F-2

Financial Statements

       Balance Sheets                                                   F-3

       Statements of Operations                                         F-4

       Statement of Stockholders' Equity                                F-5

       Statements of Cash Flows                                         F-7

Notes to Financial Statements                                           F8 - F14

                                       F-1
<PAGE>


                         Independent Accountants' Report


Board of Directors
Shannon International Resources, Inc.



     We have audited the  accompanying  balance sheets of Shannon  International
Resources,  Inc. (a Development Stage Company) as of June 30, 2002 and 2001, and
the related  statements of operations,  stockholders'  equity and cash flows for
the years ended June 30, 2002 and 2001 and for the period from February 17, 1999
(inception) to June 30, 2002. These financial  statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audit.

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

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  financial  position  of Shannon  International
Resources,  Inc. (a Development  Stage Company) as of June 30, 2002 and 2001 and
the  results of its  operations  and its cash flows for the years ended June 30,
2002 and 2001, and for the period from February 17, 1999 (inception) to June 30,
2002, in conformity with generally accepted accounting  principles in the United
States of America.

     The accompanying  financial statements have been prepared assuming that the
Company will  continue as a going  concern.  As described in Note 2, the Company
has suffered  operating  losses since  inception that raise  substantial  doubts
about its ability to continue as a going  concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/S/ Miller and McCollom
-----------------------
MILLER AND McCOLLOM
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado
September 25, 2002

                                       F-2
<PAGE>

<TABLE>
                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)


                                 Balance Sheets
<CAPTION>

                                     ASSETS
                                     ------
                                                                        June 30,     June 30,
                                                                          2002         2001
                                                                       ----------    --------
<S>                                                                       <C>        <C>
CURRENT ASSETS
   Cash                                                                $   17,580    $     60
   Investments in marketable securities                                   138,776        --
                                                                       ----------    --------
         Total current assets                                             156,356          60

Investments in unevaluated oil and gas properties                         313,012      45,000
                                                                       ----------    --------

         Total assets                                                  $  469,368    $ 45,060
                                                                       ==========    ========

                       LIABILITIES AND STOCKHOLDERS EQUITY
                       -----------------------------------

CURRENT LIABILITIES
   Accounts payable                                                    $   94,944    $  2,407
   Shareholder advances                                                    13,769       7,430
                                                                       ----------    --------
         Total current liabilities                                        108,713       9,837

Deferred tax liability                                                     11,559        --
                                                                       ----------    --------

         Total liabilities                                                120,272       9,837
                                                                       ----------    --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Common stock - 200,000,000  shares of $.001 par value authorized;
      14,050,000 and 10,050,000 shares issued
      and outstanding at June 30, 2002 and 2001                            14,050      10,050
   Additional paid-in capital                                             349,750      82,749
   Common stock warrants-
     200,000 warrants to purchase common stock                             94,740        --
   Deficit accumulated during development stage                          (130,911)    (57,576)
   Accumulated other comprehensive income                                  21,467        --
                                                                       ----------    --------
         Total stockholders' equity                                       349,096      35,223

Total liabilities and stockholders' equity                             $  469,368    $ 45,060
                                                                       ==========    ========
</TABLE>

         The accompanying notes are an integral part of these statements

                                       F-3
<PAGE>

<TABLE>
                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)

                            Statements of Operations
<CAPTION>


                                     For the year     For the year    February 7, 1999
                                         ended            ended       (Inception) to
                                     June 30, 2002    June 30, 2001    June 30, 2002
                                     ------------     ------------     ------------
<S>                                  <C>              <C>              <C>
Expenses
     Administrative costs            $     29,727     $     15,877     $     54,108
     Consulting                            17,372           11,834           29,206
     Professional fees                     24,902           15,341           46,242
     Currency exchange                      3,578               22            3,600
                                     ------------     ------------     ------------
         Total expenses                    75,579           43,074          133,156
                                     ------------     ------------     ------------

(Loss) from operations                    (75,579)         (43,074)        (133,156)

Other Income and Expenses:
     Amortization of loan discount           --              4,358             --
     Interest expense                        (186)            --               (186)
     Gain on sale of investments            2,430             --              2,430

Provision for income tax                     --               --               --
                                     ------------     ------------     ------------

Net (loss)                           $    (73,335)    $    (38,716)    $   (130,912)
                                     ============     ============     ============

Net (loss) per share                 $          *     $          *     $       (.01)

Weighted number of shares
outstanding                            10,716,667       10,047,260        9,987,805

*  Less than $.01


Other comprehensive income:
     Net (loss)                      $    (73,335)    $    (38,716)    $   (124,764)
     Unrealized gain on marketable
      securities                           21,467             --             21,467
                                     ------------     ------------     ------------
Total other comprehensive income     $    (51,868)    $    (38,716)    $   (103,297)
                                     ============     ============     ============
</TABLE>

         The accompanying notes are an integral part of these statements

                                       F-4
<PAGE>

<TABLE>
                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)

                        Statement of Stockholders' Equity
<CAPTION>

                                                                                        Deficit
                                                                                     Accumulated   Accumulated
                                      Common Shares       Additional      Common        During       Other
                                -----------------------    Paid-in        Stock      Development  Comprehensive
                                 Shares      Par Value     Capital       Warrants       Stage         Income         Total
                                ----------   ----------   ----------    ----------    ----------    ----------    ----------
<S>                             <C>          <C>          <C>           <C>           <C>           <C>           <C>
Balance,
February 17, 1999                     --     $     --     $     --            --      $     --      $     --      $     --
Common stock
issued for cash in
February 1999                      300,000          300        2,700          --            --            --           3,000
Common stock
issued for cash in
March 1999                       7,700,000        7,700       69,300          --            --            --          77,000
Common stock issued
for oil and gas properties in
March 1999                       2,000,000        2,000       28,000          --            --            --          30,000

Offering costs                        --           --        (19,701)         --            --            --         (19,701)

Net loss for period ended
June 30, 1999                         --           --           --            --          (8,449)         --          (8,449)
                                ----------   ----------   ----------    ----------    ----------    ----------    ----------

Balance,
June 30, 1999                   10,000,000       10,000       80,299          --          (8,449)         --          81,850

Net loss for the year ended
June 30, 2000
                                      --           --           --            --         (10,411)         --         (10,411)
                                ----------   ----------   ----------    ----------    ----------    ----------    ----------

Balance,
June 30, 2000                   10,000,000       10,000       80,299          --         (18,860)         --          71,439
</TABLE>

         The accompanying notes are an integral part of these statements

                                       F-5
<PAGE>

<TABLE>
                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)

                  Statement of Stockholders' Equity, Continued
<CAPTION>


                                                                                       Deficit
                                                                                     Accumulated   Accumulated
                                      Common Shares       Additional     Common        During        Other
                                -----------------------    Paid-in       Stock       Development  Comprehensive
                                 Shares      Par Value     Capital      Warrants       Stage         Income         Total
                                ----------   ----------   ----------   ----------    ----------    ----------    ----------
<S>                             <C>          <C>          <C>          <C>           <C>           <C>           <C>
Common stock issued for
services in
July 2000                           50,000           50        2,450         --            --            --           2,500
Net loss for the year ended
June 30, 2001
                                      --           --           --           --         (38,716)         --         (38,716)
                                ----------   ----------   ----------   ----------    ----------    ----------    ----------

Balance,
June 30, 2001                   10,050,000       10,050       82,749         --         (57,576)         --          35,223
                                ----------   ----------   ----------   ----------    ----------    ----------    ----------


Common stock issued
May, 2002                        4,000,000        4,000      267,001         --            --            --         365,741
Common stock warrants
May, 2002                             --           --           --         94,740          --            --            --
Net loss for the year ended
June 30, 2002
                                      --           --           --           --         (73,335)         --         (73,335)

Unrealized gain on marketable
securities                            --           --           --           --            --          21,467        21,467

Balance,
June 31, 2002                   14,050,000   $   14,050   $  349,750       94,740    $ (130,911)   $   21,467    $  349,096
                                ==========   ==========   ==========   ==========    ==========    ==========    ==========

</TABLE>

         The accompanying notes are an integral part of these statements

                                       F-6


<PAGE>

<TABLE>
                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)

                            Statements of Cash Flows
<CAPTION>


                                                                                                      February 17, 1999
                                                                        Year Ended       Year ended     Inception) to
                                                                      June 30, 2002    June 30, 2001    June 30, 2002
                                                                        ---------        ---------        ---------
<S>                                                                     <C>              <C>              <C>
Operating Activities:
     Net (loss)                                                         $ (73,335)       $ (38,716)       $(130,911)
     Adjustments to reconcile net loss to cash
       used for operating activities:
     Adjustments for non-cash items:
       Amortization of discount                                              --             (4,358)            --
       Gain on sale of investments                                         (2,430)          (2,430)
     Changes in operating assets and liabilities:
       Accounts payable and advances                                       92,537            8,186          102,374
       Total adjustments                                                   90,107            3,828           99,944
                                                                        ---------        ---------        ---------
       Net cash provided by (used by)
        operating activities                                               16,772          (34,888)         (30,967)

Investing activities
     Acquisition of oil and gas properties                               (268,012)            --           (283,012)
     Purchases of marketable securities                                  (125,368)            --           (125,368)
     Sales of marketable securities                                        22,048             --             22,048
                                                                        ---------        ---------        ---------
       Net cash (used by) investing activities                           (371,332)            --           (386,332)

Financing activities
     Issuance of common stock and warrants                                365,741            2,500          428,540
     Advances from shareholders                                             6,339           32,369            6,339
                                                                        ---------        ---------        ---------
       Net cash provided by financing
        activities                                                        372,080           34,869          434,879
                                                                        ---------        ---------        ---------

Net change in cash and cash equivalents                                    17,520              (19)          17,580
Cash at beginning of period                                                    60               79                0
                                                                        ---------        ---------        ---------
Cash at end of period                                                   $  17,580        $      60        $  17,580
                                                                        =========        =========        =========

 Supplemental  disclosure of cash flow information:
     Cash paid during the period for:
       Interest                                                         $     186        $    --          $    --
       Income taxes                                                     $    --          $    --          $    --

 Supplemental schedule of noncash investing and financing activities:
     Issuance of 770,000 shares of common
stock for services                                                      $    --          $    --          $   7,700
     Issuance of 2,000,000 shares of common
stock for oil and gas properties                                        $    --          $    --          $  30,000
     Issuance of 50,000 shares of common
stock for services                                                      $    --          $   2,500        $   2,500
</TABLE>

         The accompanying notes are an integral part of these statements

                                       F-7

<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)
                          Notes to Financial Statements
                             June 30, 2002 and 2001


Note 1 - Summary of Significant Accounting Policies

This  summary  of  significant  accounting  policies  of  Shannon  International
Resources, Inc., is presented to assist in understanding the Company's financial
statements.  The  financial  statements  and  notes are  representations  of the
Company's  management who is responsible  for their  integrity and  objectivity.
These accounting policies conform to generally accepted accounting principles in
the  United  States  of  America  and  have  been  consistently  applied  in the
preparation of the financial statements.

Organization

The  Corporation  was  incorporated  pursuant to the provisions of the corporate
charter of the State of Nevada on February 17, 1999.

The Corporation's primary business activity is the acquisition,  development and
production  of natural gas and coalbed  methane  properties  in the  province of
Prince Edward Island, Canada. Currently, the Corporation only has an interest in
non-producing properties. The Corporation is in the development stage and it has
no revenue  from oil and gas  activities.  The Company  presents  its  financial
statements in conformity with the accounting  principles  generally  accepted in
the United States of America that apply in establishing  operating  enterprises.
As a developing stage enterprise,  the Company discloses the deficit accumulated
during the development stage and the accumulated  statements and cash flows from
inception to the current date of the balance sheet.

Use of Estimates

The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in these financial  statements
and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The  Company  considers  all highly  liquid  debt  instruments  with an original
maturity of three months or less to be cash equivalents.

Earnings (Loss) Per Share

Earnings  (loss)  per share of common  stock is  computed  by  dividing  the net
earnings by the weighted average number of common shares  outstanding during the
period.

                                       F-8
<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)
                          Notes to Financial Statements
                             June 30, 2002 and 2001


Estimated Fair Value of Financial Instruments

The  carrying  value of  cash,  marketable  securities,  accounts  payable,  and
shareholder  advances  reflected in the financial  statement  approximates  fair
value due to the short-term maturity of the instruments.

Comprehensive Income

The Company adopted Statement of Financial Accounting Standards ("FAS") No. 130,
"Reporting  Comprehensive  Income". FAS No. 130 requires that the components and
total amounts of comprehensive  income be displayed in the financial  statements
beginning in 1998.  Comprehensive  income includes net income and all changes in
equity  during a period that arise from  non-owner  sources,  such as unrealized
gains and losses on certain investments in equity securities.

Accounting for Oil and Gas Operations

The  Company has  adopted  the full cost  method of  accounting  for oil and gas
properties. Accordingly, all costs associated with acquisition, exploration, and
development of oil and gas reserves,  including directly related overhead costs,
are capitalized.

All capitalized costs of oil and gas properties,  including the estimated future
costs to develop proved reserves,  is included in cost centers and are amortized
on the unit-of-production method using estimates of proved reserves. Investments
in unproved  properties and major  development  projects are not amortized until
proved  reserves  associated  with the  projects  can be  determined.  All costs
incurred  in  acquiring  mineral  rights,   in  drilling,   and  in  exploration
activities, including all carrying costs of nonproductive properties in the cost
center, are included as a cost of reserves in that cost center.

In addition, the capitalized costs are subject to a "ceiling test," which limits
such costs to the  aggregate of the  estimated  present  value,  discounted at a
10-percent  interest rate of future net revenues from proved reserves,  based on
current economic and operating conditions, plus the lower of cost or fair market
value of unproved properties.

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.
Abandonment of properties is accounted for as  adjustments of capitalized  costs
with no loss recognized.

                                       F-9
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)
                          Notes to Financial Statements
                             June 30, 2002 and 2001

Other

The financial statements are stated in United States of America dollars.

The Company has chosen June 30 as its fiscal year end.

The Company has paid no dividends.

Advertising is expensed as incurred.

The Company consists of one reportable business segment.  All Company assets are
located in Canada.

Certain changes have been made to previously reported  information to conform to
the current statement presentation.

Note 2 - Basis of Presentation - Going Concern

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles in the United States of America,  which
contemplates  continuation  of the  Company  as a going  concern.  However,  the
Company  has  sustained  operating  losses  since  inception.  This fact  raises
substantial  doubt about the Company's  ability to continue as a going  concern.
Management plans to obtain  additional  capital to further develop the Company's
properties or locate a business combination candidate.

Note 3 - Oil and Gas Properties

The  Corporation,  by letter  agreement dated February 18, 1999,  acquired a 25%
interest  in  116,279  acres  of  non-producing  oil and gas  properties  in the
province of Prince  Edward  Island,  Canada.  This  interest was acquired by the
issuance  of  2,000,000  common  shares at an agreed  value of $0.015  per share
($30,000) and paid fees related to the acquisition of $15,000.

During the fiscal year ending June 30, 2002, the Company  acquired an additional
5% working  interest  in  properties  in the  general  location  of its  earlier
properties  at a cost  $164,334.  The  properties  were  acquired  from the same
Company as its previous acquisition.

Presently,  the Company's oil and gas  properties  consist  entirely of unproved
properties, and therefore are not being amortized.

Note 4 - Related Party Transactions

The Company is currently conducting exploratory and development activities,  and
has incurred approximately $78,000 through June 30, 2002.

                                      F-10
<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)
                          Notes to Financial Statements
                             June 30, 2002 and 2001


The operator conducting the exploratory activities that include the Company is a
related  party since the  Company's  president is an officer and director of the
operator.

During the quarter  ended June 30, 1999,  the company  loaned  Calgary  Chemical
Company  (Calgary) (an Alberta  corporation of which Mr. Coady, the President of
Shannon, was also the President) $32,370 evidenced by non-interest hearing notes
which were due on demand. At June 30, 2000 the notes had outstanding balances of
$32,370, and unamortized discount of $4,358.

During  October 2000,  Calgary  repaid  $7,714,  and during  December  2000, the
Company paid Calgary,  by  cancellation  of a note  receivable  of $24,656,  for
general and  administrative  expenses  included in the  accompany  statement  of
operations as follows:

         General office                                $ 4,932
         Administrative                                  7,890
         Consulting                                     11,834
                                                       ---------
             Total                                     $24,656
                                                       =========

During March,  May, June, and September  2001, a shareholder of the Company made
advances to the Company of $13,769.

Note 5 - Stock Option Plan

The  Company  has a Stock  Option  Plan,  entitled  the  "Shannon  International
Resources,  Inc. 1999 Stock Option Plan" (the "Plan"). Its purpose is to advance
the business and development of the Company and its shareholders by affording to
the employees, officers, directors and independent contractors or consultants to
the Company the opportunity to acquire a interest in the Company by the grant of
options to such persons under the Plan's terms.  The effective  date of the Plan
was June 1,1999.  Article 3 of the Plan provides  that the Board shall  exercise
its  discretion  in awarding  options  under the Plan,  not to exceed  1,000,000
shares.  The price per share option  price for the stock  subject to each option
shall be as the Board may  determine.  All  options  must be granted  within ten
years from the effective date of the Plan. There is no express  termination date
for the options  although  the Board may vote to terminate  the Plan.  Under the
plan, officers and directors are considered to be employees.

The  Company's  Board of  Directors  has granted  stock  options to officers and
directors of the Company.  The following is a summary of activity under the plan
for the year ended June 30,  2002.  Options were granted on October 31, 2001 and
April 5, 2002, and 350,000  options expire  November 1, 2003 and 100,000 options
expire April 4, 2004.

                                      F-11
<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                          (a Development Stage Company)
                          Notes to Financial Statements
                             June 30, 2002 and 2001

                                                                  Weighted
                                                Number of          Average
                                                 Employee         Exercise
                                                 Options            Price
                                                ---------         ---------
         Outstanding at June 30, 2001                  0             --
               Options granted                   450,000          $  .10
               Options exercised                       0             --
               Cancelled or forfeited                  0             --
         Outstanding at June 30, 2002            450,000          $  .10


Options granted during the year ended June 2002 consist of:

<TABLE>
<CAPTION>

                                                                 Weighted Average
Year and Exercise price relative to fair value of              Fair Value at Grant         Weighted Average
               underlying stock                                       Date                  Exercise Price
----------------------------------------------------------     ---------------------      -------------------
<S>                                                             <C>                        <C>
Year ending June 30, 2002:
   Exercise price exceeds fair value:                              $  .0717                    $ .10
</TABLE>


If not  previously  exercised or canceled,  all options  outstanding at June 30,
2002 will expire on November 1, 2003 and April 4, 2004.

The fair value of each  option  granted  was  computed  using the  Black-Scholes
method using the following weighted-average assumptions:

                                                    Year Ended
                                                   June 30, 2002
                                                  --------------
Expected Volatility:                                   150%
Risk-free interest rate:                               2.16%
Expected Dividends:                                     --
Expected Term in Years:                                  2

As permitted by FASB  Statement No. 123, the Company  applies the methods of APB
25 and  related  interpretations  in  accounting  for  stock  options  issued to
employees.  Accordingly,  no  compensation  cost was  recognized  for  grants of
employee  options  because all were issued with exercise prices greater than the
fair value of the underlying  stock at the grant date. If compensation  cost had
been determined based on the estimated fair value (using methods consistent with
FASB  Statement No. 123) of the options at grant date,  the Company's net income
and earnings per share would have been replaced with the following amounts:

                                      F-12
<PAGE>

                                          Year Ended
                                         June 30, 2002
                            ---------------------------------------
                                As Reported           Pro forma
                            ---------------      ------------------
Net loss:                        $(73,335)         $ (127,597)
Net loss per share:              $   *             $   (.01)
    * Less than $.01 per share

Note 6 - Income Taxes

No provision  for income taxes has been provided in the  accompanying  financial
statement.

The Corporation  has an approximate net operating loss  carryforward of $130,156
of which $6,174 will expire in 2019,  $11,931 will expire in 2020,  $58,716 will
expire in 2021 and $73,331 will expire in 2022. A valuation  allowance  equal to
the tax benefit of the net operating loss  carryforward has been provided due to
the uncertainty of the Company's ability to utilize the carryforwards.

The net  deferred  tax  liability  resulting  from  appreciation  of  marketable
securities  in excess of  deferred  tax  assets due to loss  carryforward  is as
follows:

                    Deferred tax liability                            (11,559)
                    Deferred tax asset                          $      45,550
                    Valuation allowance                               (34,011)
                                                               ----------------
                        Net deferred tax liability              $     (11,559)
                                                               ================

The overall  effective tax rate differs from the Federal  statutory rate for the
year ended June 30, 2002 is as follows:

                                                          % of Pre tax
                                                          income (loss)

         Tax provision based upon Federal statutory rate     35.0%
         Surtax exemption                                   (27.1)%
                                                            -------

         Estimated tax rate                                 (7.9)%
         Valuation allowance                                 7.9%
                                                            -------

         Effective tax rate                                   0.0
                                                            =======


                                      F-13
<PAGE>

Note 7 - Concentration of Risk

The  Company's  oil and gas  properties  are  located in Prince  Edward  Island,
Canada.

Note 8 - Commitments and Contingencies

The  corporation,  by letter  agreement  dated February 11, 1999,  agreed to pay
$10,000 to counsel  upon the  initiation  of trading of its' common stock on the
NASD Electronic Bulletin.

Note 9 - Marketable Securities (related party)

During  March and April 2002,  the  Company  purchased  400,000  shares of Rally
Energy Corp.  on the open market for an average cost of $0.314 per share.  Rally
Energy Corp. is a related party since the Company's  president is an officer and
director of Rally Energy Corp.  In  accordance  with the  Statement of Financial
Accounting  Standards  number 115 (SFAS 115),  the  securities are classified as
securities available for sale and are recorded in the accompanying balance sheet
at their market value. Based upon the market price at June 30, 2002, the Company
had a market  value of $138,775  and an  unrealized  gain of  $24,462,  which is
shown, net of deferred tax, as comprehensive income in Stockholders Equity.

The Company sold 60,000 shares during the year at a gain of $2,430.

Note 10--Common Stock

Effective  in May 2002,  the Company  sold  4,000,000  units of common stock and
stock  warrants  for  $400,000.  Each unit was  priced  at $0.10  with each unit
composed  of one share of stock  and one  warrant  to buy a half  share of stock
priced at $0.10 per share.  The warrants expire on November 1, 2003. The Company
valued the common  stock at $0.065 per share and the  warrants  at $0.035  each.
After deducting  $33,829 for costs of issuance,  $4,000 was allocated to the par
value of the stock,  $267,001 was allocated to additional  paid in capital,  and
$94,740 was allocated to the warrants.

                                      F-14





<PAGE>



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

There have been no changes in and/or disagreements with the accountants on any
accounting and financial disclosure.


                              PART III

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

The officers and directors of the Company are as follows:


Blair Coady            President and Director since February 18,1999.

Greg Isenor            Vice President and Director since October 2001

Brian P. Bradbury      Director since October 2001

Aubrey A. Palmeter.    Director since April 2002


Blair Coady. Mr. Coady is 63 years of age. Since June 2001 to present, Mr. Coady
has served as an officer and director of Rally Energy Corporation, a publicly
held company engaged in oil and gas exploration. See: Item 12, Certain
Relationships and Related Transactions. Mr. Coady commits approximately eighty
percent of his time to Rally's operations. Mr. Coady served as the President and
Chairman of the Board of Wolf Industries, Inc., a publicly held management
company with interests in the oil and gas industry, from August 1996 to April
1998. From October 1996 to February 2001. Mr. Coady was the President and Chief
Executive Officer of Calgary Chemical, a privately-held custom blender of
petroleum production chemicals. From May 1999 to June 2001, Mr. Coady has served
as a director of Autoco.com Inc., a publicly held corporation. From 1992 to 1995
Mr. Coady served as Chairman of the Board of Earthwhile Developments Inc., a
Canadian corporation involved in waste management, specifically solvent
recycling, bioremediation and composting.

Brian P. Bradbury. Mr. Bradbury is 42 years of age. He holds a Bachelors Degree
in Commerce from St. Mary's University, 1982, and a Degree in Public Relations
from Mount St. Vincent University, 1984. Since 1996, Mr. Bradbury has been Vice
President of Corporate Finance and Investor Relations with American Manor
Enterprises, Inc., a Dartmouth, Nova Scotia, publicly traded natural resources
company traded on the TSX Venture Exchange.

Greg Isenor. Mr. Isenor is 55 years of age. Mr. Isenor holds a Bachelor of
Science degree in Geology from Acadia University. Since June 2001 to the present
Mr. Isenor has consulted to various companies including PEGA Gas Alliance,
EnCana, EOG Resources, Maritimes & Northeast Pipelines and LXL Consulting on
various land and geological projects. From June 1999 to June 2001 Mr. Isenor
worked as a Land Agent for Maritimes & Northeast Pipelines in Nova Scotia. From
December 1998 to June 1999 Mr. Isenor worked with Prince Edward Gas compiling a
geological report on the gas potential of Prince Edward Island. From September
1996 to December 1998 Mr. Isenor was Vice President of Exploration for Kaoclay
Resources Inc., a kaolin exploration company in Nova Scotia, Canada and Georgia,
USA. From March 1996 to September 1996 he worked in Kazakstan on gold
exploration projects for Central Asia Goldfields.
<PAGE>
Aubrey A. Palmeter. Mr. Palmeter is a professional engineer is 45 years of age.
He holds Bachelor of Science degrees in mathematics and physics from Acadia
University, 1978and a civil engineering degree from the Technical University of
Nova Scotia, 1980. Mr. Palmeter also holds an MBA degree from Dalhousie
University, 1986. Since March 2002, Mr. Palmeter has been president and chief
executive officer of Whitman Benn E&C Services Ltd., an engineering and
construction company based in Halifax, Nova Scotia. He was Vice President &
General Manager of Amec, Inc., an international engineering firm from February
1999 to March 2002. From August 1996 to February 1999, Mr. Palmeter was
President and Chief Executive Officer of Whitman Benn Group, an architectural
and engineering firm in Halifax, Nova Scotia. Mr. Palmeter currently serves on
Rally Energy Corp.'s Board of Directors. Mr. Palmeter has extensive commercial
and policy experience in Atlantic Canada and international industrial projects.
His experience includes finance, oil and gas exploration, development and
production as well as onshore and offshore pipelines and power generation. He
has acted as advisor to the Government of Nova Scotia and several power
producers and universities in Atlantic Canada.


PROMOTERS

The Company's Director, Blair Coady, is the Company's founder and promoter.
Darrin Campbell, President of CMB Energy Corp., may also be considered a
promoter of the Company.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 100 of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. CMB Energy was
required to file an Initial Statement of Beneficial Ownership of Securities on
Form 3 at the time of the registration of the Company's securities under Section
12(g) of the Exchange Act (November 5, 1999). To the best knowledge and belief
of the Company, CMB Energy has not made a timely filing on Form 3. Other that
CMB Energy Corp., to the best of the Company's knowledge there are no others who
own 10% or more of the Company's registered equity securities.




<PAGE>



ITEM 10.       EXECUTIVE COMPENSATION.

The following table shows for the fiscal years ending June 30, 2000, 2001 and
2002, the compensation awarded or paid by the Company to its Chief Executive
Officer and any of the executive officers of the Company whose total salary and
bonus exceeded $100,000 during such year.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                             SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------
                                                                  |    Long Term Compensation        |
                                                                  |                                  |
------------------------------------------------------------------------------------------------------
                                 |     Annual Compensation        |    Awards    |        Payouts    |
                                 |                                |              |                   |
------------------------------------------------------------------------------------------------------
                                                                      Securities
                                           Salary   Other Annual      Underlying        All Other
   Name and Principle Position     Year      ($)   Compensation ($)   Options (#)     Compensation ($)
------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>      <C>          <C>                        <C>
  Blair Coady President/CEO        2002       0        0            150,000 Common             0
------------------------------------------------------------------------------------------------------
  Blair Coady President/CEO        2001       0        0                  0                    0
------------------------------------------------------------------------------------------------------
  Blair Coady President/CEO        2000       0        0                  0                    0
------------------------------------------------------------------------------------------------------
</TABLE>

No executive officer earned more than $100,000 during the current fiscal year or
the previous two fiscal years.

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------
                                          Option Grants in Last Fiscal Year
---------------------------------------------------------------------------------------
                                                  Individual Grants
---------------------------------------------------------------------------------------
               Name             Number of         % of
                                  Common          Total
                                  Shares         Options
                                 Underlying     Granted to      Exercise
                                  Options       Employees in     Price      Expiration
                                Granted (#)     Fiscal Year      ($/Sh)       Date
---------------------------------------------------------------------------------------
<S>                              <C>               <C>            <C>       <C>
  Blair Coady President/CEO      150,000           33%            0.10      11/01/03
---------------------------------------------------------------------------------------
</TABLE>


<PAGE>


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option/Values

The following table sets forth the number and value of the unexercised options
held by each of the Named Executive Officers at July 31, 2001.
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                   Aggregate Option Exercises in Last Fiscal Year and FY-End Option Values
-------------------------------------------------------------------------------------------------------------------
                    Shares        Value       Number of Securities Underlying   Value of Unexercised In-the Money
                 Acquired on   Realized at   Unexercised Options at FY-End (#)        Options at FY-End ($)
         Name    Exercise (#)  FY-End ($)        Exercisable/Unexercisable          Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------------------
<S>                   <C>           <C>      <C>                                        <C>           <C>
  Blair Coady         0             0        150,000 Common Shares/Exercisable          0/Exercisable (1)
  Pres./CEO
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Option value based on the difference between the exercise price of
     unexercised options and the last price at which the Company sold common
     stock in March 2002.


STOCK OPTION PLANS

The Company has a Stock Option Plan, entitled the "Shannon International
Resources, Inc, 1999 Stock Option Plan" (the "Plan"). Its purpose is to advance
the business and development of the Company and its shareholders by affording to
the employees, officers, directors and independent contractors or consultants to
the Company, the opportunity to acquire a proprietary interest in the Company by
the grant of options to such persons under the Plan's terms. The effective date
of the plan was June 1, 1999. Article 3 of the Plan provides that the Board
shall exercise its discretion in awarding options under the Plan, not to exceed
1,000,000 shares. The per share option price for the stock subject to each
option shall be as the Board may determine. All options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the options although the Board may vote to terminate the Plan. Under
the Plan, total of 450,000 options have been granted.


EMPLOYMENT AGREEMENTS

Blair Coady, the Company's president and chief executive officer and director
and Greg Isenor, Vice President and Director do not have employment agreements
and do not presently draw a salary. However they are reimbursed for expenses
incurred on Company business. The Company expects that as and when additional
funding or revenue is obtained and the time the Officers devote to the Company's
affairs increases, a salary and other compensation such as stock options will be
adopted. It is anticipated that future compensation will be determined by a
compensation committee of the Board of Directors which has not been formed as of
September 30, 2002

<PAGE>

DIRECTORS' COMPENSATION

The Company's directors are reimbursed for actual expenses incurred in attending
Board meetings.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

The following table sets forth information, as of September 30, 2002, with
respect to the beneficial ownership of the Company's common stock by each person
known by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock and by the officer and directors of the Company based
on 14,050,000 shares of common stock outstanding as of September 30, 2002 plus
the number of shares underlying outstanding options.
<TABLE>
<CAPTION>

    Name and Address of                               Common Stock           Percentage of Shares
     Beneficial Owner                Title             Ownership                  Outstanding
------------------------    -----------------------  ------------------     ------------------------

<S>                           <C>                        <C>        <C>          <C>
Blair Coady                   President, Director        150,000    (1)          1.0%
2900, 500-4th Av. S.W.
Calgary, AB T2P 2V6

Greg Isenor                   V. Pres., Director         275,000    (2)          1.9%
2900, 500-4th Av. S.W.
Calgary, AB T2P 2V6

Brian Bradbury                Director                   450,000    (3)          3.1%
2900, 500-4th Av. S.W.
Calgary, AB T2P 2V6

Aubrey Palmeter               Director                   900,000    (4)          6.2%
2900, 500-4th Av. S.W.
Calgary, AB T2P 2V6

Directors and Officers as a Group
(4 individuals)                                        1,775,000    (5)          12.3%

CMB Energy                  >5% Beneficial Owner       2,220,000    (6)          15.3%
McLeod Dixon
1800-121 King St.W
Toronto, ON M5H 3T9
</TABLE>

(1)  Includes presently exercisable options to acquire up to 150,000 shares.
(2)  Includes presently exercisable options to acquire up to 100,000 shares.
(3)  Includes presently exercisable options to acquire up to 100,000 shares.
(4)  Includes 800,000 shares registered in the name of Intrepid Holdings Ltd.,
     which Mr. Palmeter controls. Also includes presently exercisable options to
     acquire up to 100,000 shares.
(5)  Includes presently exercisable options held by all of the above officers
     and directors to acquire up to 450,000 shares
(6)  Includes 220,000 shares registered in the name of Laughlin MacLean, but
     does not include 200,000 shares held by Gus MacLean, Laughlin MacLean's
     uncle in which he disclaims beneficial ownership. Mr. MacLean is the
     beneficial owner of 25% of CMB Energy. Calder Company, Ltd., a closely held
     corporation is also a 25% owner of CMB Energy, and Investimo S.A., a
     closely held corporation owns the remaining 50% of CMB Energy.
<PAGE>
CHANGES OF CONTROL: As of June 30, 2002 and September 30, 2002, there are no
arrangements known to the Company which may at a subsequent date result in a
change of control of the Company .


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

As of September 30, 2002 Mr. Coady the Company's President and a Director serves
as Rally's vice president and director. Mr. Palmeter, a Company Director, is
also on the Board of Directors of Rally Energy Corp. ("Rally"). Rally is a
Calgary based energy company which holds, as of September 30, 2002 a fifty five
percent working interest in seven exploration permits covering 642,000 acres
located on-shore Prince Edward Island. These permits are the same permits in
which the Company maintains an ownership interest.

The Company has two operating agreements with joint operating partners with whom
it is engaging in exploration activities on its Working Interests. The Joint
Operating Agreements are dated October 22, 2001 and October 23, 2001. The
Parties are the Company, CMB Energy Corp., Rally Energy Corp., Energy Power
Systems Ltd., and Osprey Energy Limited. Rally Energy Corp., is the Operator
with management responsibility for the operations on the property.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a)      Exhibits:
3.1      Articles of Incorporation(1)
3.2      Bylaws(1)
4.1      1999 Stock Option Plan (1)
10.1     Working Interest Acquisition Agreement(1)
10.2     Purchase and Joint Venture Agreement(1)
10.3     Oil and Natural Gas Permit No. 96-06 (1)
10.4     Amendment to Working Interest Acquisition Agreement (1)
10.7     Acquisition of Additional Interests Agreement
10.8     Oil and Natural Gas Permits No. 96-04, -05, -07, -08, -09, -10.
10.9     Joint Operating Agreements dated October 22, 2001
         and October 23, 2001.

(1)  Incorporated by reference to the exhibits to the Company's registration
     statement in Form 10-SB(file number 000-30254)

(b)  No reports on Form 8-K were filed during the last quarter of the period
     covered by this report:


<PAGE>




                            SIGNATURES

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

                     SHANNON INTERNATIONAL RESOURCES INC.
                                 (Registrant)

               By: /s/ Blair Coady
                   ------------------
               Blair Coady, President, Chief Financial Officer
               Date September 30, 2002


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


                    By:  /s/ Blair Coady
                         ----------------------
                         BLAIR COADY, Director
                   Date: September 30, 2002


                    By:  /s/ Greg Isenor
                         ---------------------
                         GREG ISENOR, Director
                  Date:  September 30, 2002


                    By: /s/ Aubrey Palmeter
                        ----------------------
                        AUBREY PALMETER, Director
                  Date: September 30, 2002

                    By: /s/ Brian Bradbury
                        ---------------------
                        BRIAN BRADBURY, Director

                   Date:  September 30, 2002




<PAGE>






Certification of Principal Executive Officer and Principal Financial Officer
Regarding Facts and Circumstances Relating to Exchange Act Filings


I, Blair Coady, certify that:

     1.   I have read this annual report on Form 10-KSB of Shannon International
          Resources Inc.;

     2.   To my knowledge, the information in this report is true in all
          important respects as of June 30, 2002; and

     3.   This report contains all information about the company of which I am
          aware that I believe is important to a reasonable investor, in light
          of the subjects required to be addressed in this report, as of June
          30, 2002.

     For purposes of this certification, information is "important to a
reasonable investor" if:


          (a) There is a substantial likelihood that a reasonable investor would
     view the information as significantly altering the total mix of information
     in the report; and

          (b) The report would be misleading to a reasonable investor if the
     information is omitted from the report.


BY:   /s/ Blair Coady                        Subscribed and sworn to
      -----------------------------------    before me this 30th day of
      Blair Coady, President and C.E.O.      September, 2002
      (Principal Executive Officer) and
      (Principal Financial Officer)

DATE: September 30, 2002
      ------------------                      /s/ Ronda Rasnick
                                              -------------------------
                                              Notary Public
                                              My Commission Expires:
                                              5/24/2005