UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

Annual Report Under Section 13 or 15(d) of the  Securities  Exchange Act of 1934
                                 [Fee Required]

                  For the fiscal year ended: December 31, 2002

                         Commission file number #1-13162

                              EMPIRIC ENERGY, INC.
                 (Name of small business issuer in its charter)

             Delaware
 (State or other jurisdiction of                           75-2455467
 incorporation or organization)                (IRS Employer Identification No.)


      14675 Midway Road, Suite 207
             Addison, Texas                                  75001
(Address of principal executive offices)                   (Zip Code)


                                 (972) 387-4100
              (Registrant's telephone number, including area code)


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


Title of each class on which registered                   Name of each exchange
     Common Stock ($.01 par value)                          Over the Counter

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 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  the  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. Yes X  No
                                  ---   ---

As of March  31,  2003,  the  aggregate  market  value of voting  stock  held by
non-affiliates,  computed by reference to the closing  price on the OTC Bulletin
Board, was $4,683,975.

As of March 31,  2003,  the  number of shares  outstanding  of the  Registrants'
common stock was 10,961,240.






<PAGE>





                              EMPIRIC ENERGY, INC.

                              INDEX TO FORM 10-KSB


PART I.                                                                   PAGE #

Item 1.    Description of Business.............................................1

Item 2.    Description of Property...........................................2-3

Item 3.    Legal Proceedings...................................................3

Item 4.    Submission of Matters to a Vote
           of Security Holders.................................................3

PART II.

Item 5.    Market for Common Equity and
           Related Stockholder Matters.........................................4

Item 6.    Management Discussion and Analysis
           of Financial Condition and Results of Operations................. 4-6

Item 7.    Financial Statements................................................7

Item 8.    Changes in and Disagreements with
           Accountants on Accounting and Financial Disclosure  ................7

PART III.

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act...................8

Item 10.   Executive Compensation..............................................8

Item 11.   Security Ownership of Certain Beneficial Owners
           and Management......................................................9

Item 12.   Certain Relationships and Related Transactions......................9

Item 13.   Exhibits and Reports on Form 8-K...................................10

Item 14.   Internal Controls..................................................10

SIGNATURE PAGE................................................................10

Certifications ...............................................................11



<PAGE>



                                     PART I.

ITEM I.  DESCRIPTION OF BUSINESS

Background - From Inception to Present
--------------------------------------

     The  Company  is an  independent  oil and gas  exploration  and  production
company with leasehold properties in the Hugoton Panhandle Field (the "Panhandle
Field"), Holmes County, Mississippi, Pennsylvania and South Louisiana.

     On March 21, 1996, the Company signed an agreement with Westar Energy, Inc.
("Westar")  to take  part in a joint  venture  drilling  program.  The  drilling
program was  accomplished on leases owned by Westar in Indiana and  Westmoreland
Counties,  Pennsylvania.  The Company  financed  its portion of the drilling and
completion costs of the first eight wells by obtaining outside investors.

     The  Company  has  been in  negotiations  to  acquire  substantial  revenue
producing  properties  and  contiguous  leasehold  acreage  that  would  provide
substantial drilling and exploration opportunities in South Louisiana. There can
be no assurance that the Company can successfully complete this acquisition. The
Company is currently in negotiations  to fund a 25% working  interest in a large
exploration and development  program in South  Louisiana.  The Company  believes
that it can develop  initial  funding of the first stage of this project,  which
could commence in November, 2003.


Offshore Well

     In April,  1999, the Company  participated with another  independent in the
drilling of an exploratory well on Vermilion Block 93/96,  offshore Louisiana in
a water depth of 18 ft. The prospect was  developed  with the latest 3-D seismic
data and showed the potential  for  substantial  gas reserves in three  separate
Miocene  sands  down to  8,400  ft.  The  Company  committed  to and paid for an
estimated 10% of the geological, seismic and drilling costs of the prospect. The
well was actually drilled to a depth of  approximately  8,400 ft. The sands were
encountered  as  projected.   Unfortunately,  the  reservoirs  were  not  sealed
adequately  and the gas remaining in the sands was  non-commercial  and the well
was plugged and abandoned.

     The  Company  is  also  actively  seeking  the  acquisition  of  additional
producing  and  non-producing  oil  and  gas  leases  directly  or  through  the
acquisition of or business  combinations with all or a portion of energy-related
companies or properties. (See Planned Activities).







                                      -1 -

<PAGE>


ITEM 2. DESCRIPTION OF PROPERTY


     The  following  is  a  description  of  the  Company's   natural   resource
properties.  The  Company has no  agreement  for sales of oil and gas to foreign
governments or authorities.

     The Company had  interests  in oil and gas leases and wells in the Thornton
(Smackover) Field located in Holmes County,  Mississippi,  which was plugged and
abandoned in December,  2001, and in Zavala and Frio Counties,  Texas which were
sold in September, 2001.

     HOLMES COUNTY,  MISSISSIPPI. In October, 2001, the well developed a leak in
the  tubing,  which  resulted in  hydrogen-sulfide  gas,  being  released in the
casing.  It became  mandatory that the Company plug and abandon this well, which
was completed in December,  2001, at a total cost of approximately $200,000. The
Company no longer has any leasehold interest in this property.

     SOUTH TEXAS PROPERTIES.  The Company's working interests,  varying from 33%
to 51%, in 12 producing  wells in Zavala  County,  Texas were sold in September,
2001.

     The Company still has working  interests in oil and gas leases and wells in
the Panhandle Field of Texas, primarily in Moore and Potter Counties, in Indiana
and Westmoreland Counties,  Pennsylvania, as well as the South Thornton Field in
Jefferson Parish, Louisiana.

     PANHANDLE  FIELD AREA. The Panhandle  Field covers 19 counties in the Texas
and Oklahoma  panhandles and in Western  Kansas.  The Company owns a 62% working
interest in the 43,000 acres.

     PENNSYLVANIA PROPERTIES. (See Westar Energy, Inc. Page 1)

     SOUTH  THORNWELL  FIELD.  The Company has a thirty  percent  (30%)  working
interest in the South Thornwell Field in Jefferson  Parish,  Louisiana.  The 30%
working  interest is an approximate  850 acres,  out of a 6,000 acre field.  The
Thornwell Field has produced approximately 3 trillion cubic feet of gas to date.
According to Shell Oil Company  interpretation  of 3D seismic,  there remains in
excess of 323 Bcf of gas located in five pay zones. This property represents the
Company's unproved leasehold costs in its balance sheet at December 31, 2002.

     The LDC  Operating,  Inc.  ("LDC")  lease (30%  working  interest  owned by
Empiric  Energy,  Inc.) includes the highest point of the structure  which gives
LDC access to 60% of the remaining gas reserves.  This  represents a substantial
source of production for Empiric's 30% working interest ownership in the field.

Planned Activities

     As  described  elsewhere  in this report,  the Company has  developed  many
contacts in the  industry and has been  presented  with many  opportunities  for
investments in acquisitions or combinations  with other companies and/or working
interest  participation in promising proved and undeveloped  acreage  prospects.
The Company is  negotiating  agreements  in  principle  to acquire  interests in
producing wells and leasehold  acreage with further  development  possibilities.
This program for  development,  expansion  and financial  growth  depends on the
Company obtaining adequate working capital although a substantial portion of the
working capital will be obtained by issuing the Company's equity securities.

     The Company signed a Letter of Intent to acquire from Venture Energy,  Inc,
in November,  2002 a significant  working interest in several on-going  projects
located in Louisiana,  including the Livonia Field, in Pointe Coupee Parish, and
the Red River Bull Bayou, located in the Red River Parish, Louisiana, which will
include  returning 20 wells in an existing water flood program.  In addition,  a
current  acquisition is in progress of a well in the Lake  Washington  Field, in
Placquemines  Parish,  Louisiana.  The cost of this acquisition was $75,000 plus
175,000 Empiric Energy,  Inc. Rule 144 Common shares, and 95,000 Rule 144 Series
"L" Preferred  shares.  Another  425,000  Empiric  Energy,  Inc. Rule 144 Common
shares,  and 225,000 Rule 144 Series "L" Preferred  shares are held in escrow to
be released after the wells have been proven.

                                      - 2 -
<PAGE>



     The Company believes the acquisition of the above  properties,  wherein the
Empiric  Energy,  Inc.  working  interest  will  range  from  20% to  40%,  with
production accruing to Empiric Energy, Inc. of approximately 300 to 400 BOPD and
250 mcfpd, will add significant revenues to Empiric Energy, Inc.,  commencing in
April, 2003 and increasing substantially thereafter.


Productive Well Summary

     The following table sets forth certain information  regarding the Company's
ownership, through December 31, 2002 of productive wells in the areas indicated.


                        PRODUCTIVE WELLS
                              OIL                      GAS
                       GROSS       NET          GROSS       NET

Pennsylvania             0          0             7          4
Louisiana                1          .5            1          .5



ITEM 3.  LEGAL PROCEEDINGS

     The Company is a defendant,  in what it considers to be a spurious  lawsuit
that relates to the LDC Operating Company Bankruptcy,  and related claims to the
leasehold interest. The claim is for approximately $60,000. The Company believes
that the  potential  loss,  if any,  from this  matter  will not have a material
effect on its financial condition.


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

     In November of 2002 a restructuring  of stock was proposed to Shareholders.
This  restructuring  included a 1 for 2 split,  and a dividend of one "L" Series
Preferred  Convertible  Share for every ten pre-split common shares of record. A
letter was sent out to  shareholders  on  November  25,  2002,  asking for their
consent prior to December 20, 2002. We received 56% approval.  The restructuring
was put in to action, and became effective for shareholders of record on January
14, 2003.




                                      - 3 -


<PAGE>


                                    PART II.

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock and Series A Warrants were listed for trading on
the Boston Stock  Exchange  from October 24, 1994 to December 10, 1996, at which
time the securities  were de-listed  because of minimum unit prices being bid on
the Boston Stock Exchange.  The Common shares are now quoted on the OTC Bulletin
Board  market.  The  following are the high and low bid prices for the Company's
Common Stock as reported by the NASDAQ OTC Bulletin Board (Symbol: EMPE) in 2002
and 2001.

     The Company  declared a restructure of capital with a 1 for 2 reverse split
of the  common  stock,  and a one for ten  (pre-split)  dividend  of "L"  series
preferred  convertible  shares,  effective  January 14, 2003. All shares and per
share information in this report has been retroactively adjusted for the reverse
stock split, including the amounts below.

                                                     HIGH      LOW      CLOSE
                                       VOLUME        TRADE     TRADE    TRADE

      2001
      First Quarter                      582,600     2.18      0.62     1.00
      Second Quarter                     703,150     1.90      0.74     1.14
      Third Quarter                      409,600     1.18      0.50     0.56
      Fourth Quarter                     793,300     0.70      0.30     0.56

      2002
      First Quarter                      626,750     0.66      0.20     0.38
      Second Quarter                   1,402,700     0.80      0.26     0.32
      Third Quarter                      338,500     0.60      0.28     0.40
      Fourth Quarter                     282,000     0.62      0.38     0.44


     As of December 31,2002, there were approximately 628 stockholders of record
     and beneficial holders of the Company's Common Stock.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Comparison of 2002 to 2001

     The  following  schedule  sets forth in summary  the  financial  results of
operations of the Company for the years ended December 31, 2002 and 2001.

                  YEAR        REVENUES        LOSS
              -----------   -----------   -----------
                  2002      $    48,561   $  (472,577)
                  2001      $   192,289   $(1,776,116)



     The decrease in revenues was due to the sale of South Texas  Properties and
lower production.

     Production  expense  of $5,966 in 2002 was  $65,009 or 92% lower than 2001.
The decrease was due to the sale of South Texas  Properties and the plugging and
abandonment of the Smith well in Mississippi in 2001.

                                      - 4 -

<PAGE>

     There were no  plugging  and  abandonment  expenses  for 2002  compared  to
$193,187 in 2001.  This plugging and  abandonment was primarily due to the Smith
well in Mississippi in 2001.

     Depletion and  depreciation  expenses of $34,794 were $181,527 or 84% lower
than 2001.  The decrease was due to the sale of South Texas  Properties  and the
plugging and abandonment of the Smith well in Mississippi.

     There was no impairment expense for 2002 compared to $949,297 in 2001. This
impairment is due primarily to the sale of the Company's South Texas  properties
in 2001.

     General and  Administrative  expense of $338,031  was $187,703 or 36% lower
than 2001. The decrease was due  principally to a decrease in consulting fees in
2002.

     Interest  expense of $142,347 was $129,456 higher than 2001. The difference
was due to a higher  level of debt in 2002,  and from the issuance of stock as a
financing  cost in connection  with the  Company's  income  participation  units
payable.

Liquidity

     As noted in the financial  statements,  the Company has suffered  recurring
losses from operations. Future positive results are dependent upon the Company's
ability to raise capital or utilize  securities to acquire producing  properties
or drill  developmental  wells in order to  generate  profits.  In the event the
Company is not able to raise capital or acquire properties, there is substantial
doubt about the Company's ability to continue as a going concern.

     Cash flows  provided an increase of $73,583 for 2002 leaving a cash balance
of $86,911 at December  31,  2002.  Net cash used by  operating  activities  was
$173,027 due primarily to the net loss of $472,577, offset by non-cash expenses.
Net cash used by investing  activities  was $196,631 which was primarily for the
purchase of oil and gas properties. Financing activities, which included the net
proceeds from the issuance of long term debt and sales of common stock, provided
cash of  $443,241  which  was  used  to  support  the  operating  and  investing
activities described above.

     During the year 2002,  the Company  issued the following  securities  which
were outstanding at the end of the year:

           2,067,200              Common Shares, par value $0.01

     The Common Shares were issued at prices from $0.28 to $0.56 and were issued
for cash,  payables,  debt, services and interest.  None of the above securities
were registered.

     As of December  31,  2002,  the Company  had a working  capital  deficit of
$389,366.  The Company needs and is seeking the infusion of working  capital for
expanded drilling and developmental programs, for further debt reduction and for
acquisition of production  properties to obtain  improved cash flow as set forth
in the Planned Activities section above.

     The company has issued  455,000 Common shares and 15,000 Series L preferred
shares for the acquisition of property from Venture Energy,  Inc.,  certain debt
payments, and to raise capital from January 1, 2003 through March 31, 2003.


                                       -5-
<PAGE>


Critical Accounting Policies

The Company  prepared its financial  statements in  accordance  with  accounting
principles  generally  accepted in the United States (GAAP).  GAAP  represents a
comprehensive  set of accounting  and  disclosure  rules and  requirements,  the
application of which requires management judgments and estimates. In response to
the SEC's Release No. 33-8040,  "Cautionary  Advice  Regarding  Disclosure About
Critical Accounting  Policies",  we have identified the most critical accounting
policies upon which our financial statements are based on as follows:

Revenue Recognition

Oil and  natural gas sales are  recognized  upon  delivery to the metered  point
upstream of the pipeline connection.

Oil and Gas Properties

The Company uses the full cost method of accounting for oil and gas  properties.
The Company's  properties are all located in the continental  United States, and
therefore,  its costs are  capitalized  in one cost center.  Under the full cost
method, all costs related to the acquisition,  exploration or development of oil
and gas properties are capitalized into the "full cost pool." Such costs include
those related to lease  acquisitions,  drilling and equipping of productive  and
non-productive wells, delay rentals, geological and geophysical work and certain
internal  costs  directly  associated  with  the  acquisition,   exploration  or
development of oil and gas  properties.  Upon the sale or disposition of oil and
gas properties,  no gain or loss is recognized,  unless such  adjustments of the
full cost pool would  significantly  alter the relationship  between capitalized
costs  and  proved  reserves.  Unproved  properties,  which are not  subject  to
depletion,  are assessed  periodically for possible  impairment.  Any impairment
amounts are transferred to the proved oil and gas properties. The Company had no
impaired unproved properties as of December 31, 2002.

Under the full cost method of accounting, a "full cost ceiling test" is required
wherein  net  capitalized  costs of oil and gas  properties  cannot  exceed  the
present value of estimated future net revenues from proved oil and gas reserves,
discounted  at 10%,  plus  the  cost  of  unproved  properties  not  subject  to
depletion, less any related income tax effects.

Depletion   of  proved   oil  and  gas   properties   is   computed   using  the
unit-of-production method based on estimated proved oil and gas reserves.

Stock Options

The Company applies SFAS No. 123, Accounting for Stock-Based Compensation, which
requires recognition of the value of stock options and warrants granted based on
an  option  pricing  model.  However,  as  permitted  by SFAS 123,  the  Company
continues  to account for stock  options and warrants  granted to directors  and
employees pursuant to Accounting Principles Board Opinion No. 25, Accounting for
Stock  Issued to  Employees,  and  related  interpretations.  Stock  options  or
warrants  that are  re-priced  subsequent  to  December  15, 1998 are treated as
variable  stock  options  beginning  on July 1, 2000 as  required  by  Financial
Interpretation No. 44 of the Financial  Accounting  Standards Board,  Accounting
for Certain Transactions Involving Stock Compensation.


                                      - 6-
<PAGE>



     ITEM 7.      FINANCIAL STATEMENTS

The  following  financial  statements  are  included as part of this Form 10-KSB
following the signature page:

                                                                            Page

Report of Independent Auditors...............................................F-2
Balance Sheets...............................................................F-3
Statements of Operations ....................................................F-4
Statements of  Changes in Stockholders' Equity...........................F-5 & 6
Statements of Cash Flow......................................................F-7
Notes to Financial Statements........................................F-8 to F-20

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

         None


                                      - 7 -
<PAGE>



                                   PART III.

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

     The Company has one  executive  officer  and one  director,  James J. Ling,
Chairman, Chief Executive Officer.  Following is a brief summary of the business
background and experience of Mr. Ling.

     James J. Ling, age 80, is a co-founder of the Company and has been Chairman
of the  Board,  Chief  Executive  Officer  and a  Director  since  inception  in
September,  1992.  Since 1 985, Mr. Ling has been  President of Hill  Investors,
Inc. ("Hill"), a company organized to hold oil and gas investments and to render
consulting services.

ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth the compensation paid by the Company to each
of its executive officers for services rendered to the Company in all capacities
during the fiscal year ended December 31, 2002 and 2001.

SUMMARY COMPENSATION TABLE

NAME/POSITION        FISCAL YEAR    SALARY(1)    BONUS*    STOCK OPTIONS
James J Ling(1)         2001        $ 120,000     -0-           -0-
                        2002        $ 120,000     -0-           -0-

*See Employment Contract Summary.

          ( 1) Mr. Ling does not receive compensation directly from the Company.
          Under the terms of a  management  consulting  agreement  entered  into
          between the Company and Hill Investors,  Inc, Hill provides management
          consulting  services  for which the Company paid Hill a monthly fee of
          $7,500 until April 1998 and $10,000 per month until October 2004.

     In the opinion of Mr.  Ling,  the fact that he is not  compensated  through
consulting contracts rather than directly from the Company has no adverse effect
on his duties  and  fiduciary  obligations  to the  Company  as an  officer  and
director.  Mr. Ling devotes substantially all of his time to the business of the
Company and is not engaged in significant outside activities.

1994 Stock Option Plan

     The Board of Directors of the Company, on January 10, 1994, adopted a stock
option plan (the "Plan") to provide for the grant of non-qualified stock options
to  employees  and  advisors  of the  Company.  A total of 250,000  shares  were
authorized  and reserved for issuance  under the Plan,  subject to adjustment to
reflect changes in the Company's  capitalization  in the event of a stock split,
stock  dividend  or  similar  event.  The Plan is  administered  by the Board of
Directors  who has the sole  authority to interpret  the Plan,  to determine the
persons to whom  options  will be granted,  the number of options  granted,  the
exercise  price,  duration and other terms of the options.  Stockholders  of the
Company approved the Plan on March 29, 1994.

     Since 1994 the Board of Directors  authorized  additional  shares to be set
aside for  issuance  under  the Plan  bringing  to  2,250,000  the total  shares
authorized  for the Stock  Option  Plan.  Options  of  400,000  shares are still
outstanding as of December 31, 2002 leaving 1,850,000 shares available.


                                      - 8-


<PAGE>


  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT

     The following table sets forth the number of shares of Common Stock held by
the principal Officers and Directors of the Company as of December 31, 2002:

                            Shares     Beneficially
                           -------     ------------
      Name                   Owned                      % of Class
      ----                 -------                      ----------
      James J. Ling(1)     552,406                         5.7%

(1)  Includes  156,508  shares of Common  Stock  held by the  Dorothy  Ruth Ling
     Trust,  of which Mr. Ling is Trustee;  and,  395,898 shares of Common Stock
     held by Hill Investors,  Inc.,  owned by the DRL Trust of which Mr. Ling is
     President.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company entered into a three year management  consulting agreement with
Hill Investors,  Inc.  ("Hill") dated October 1, 1992 (renewed for another three
year period in October 1998),  whereby Hill provides the services of Mr. Ling as
Chairman and Chief  Executive  Officer of the Company for which Hill  received a
monthly fee of $7,500 until April 1998 and $10,000 per month thereafter.  In the
event of the death or disability  of Mr. Ling during the term of the  agreement,
the agreement shall automatically  terminate or, in the case of a reorganization
of the Company during the term of the agreement, the agreement may be terminated
at Mr. Ling's option.  Upon any such termination for the foregoing  reasons such
payments  shall  continue  for a  period  of 36  months  from  the  date of such
termination.  Mr. Ling  presently  devotes the  majority of his working time and
efforts to the business and affairs of the Company and expects to continue doing
so for the foreseeable  future.  Under the terms of the agreement the Company is
obligated to provide to Hill suitable office  facilities and to reimburse it for
expenses  incurred  in  connection  with  Hill's or Mr.  Ling's  services to the
Company, including,  without limitation, the cost of providing an automobile and
health and life  insurance  for Mr.  Ling.  Pursuant to the  agreement,  Hill is
obligated to certain covenants of  confidentiality  and  non-competition  and is
entitled to receive the benefits of indemnification  against damages and cost of
defense of  litigation  or claims  resulting  from certain acts in the course of
performance  of its or Mr.  Ling's  management  duties  as  provided  for in the
Company's  By-Laws.   This  contract  will  automatically  be  extended  for  an
additional period of three years from each full year anniversary date unless the
Company notifies Mr. Ling to the contrary.

     Hill is a Delaware corporation which currently owns 395,898 shares or about
4 percent  of the  Company's  outstanding  Common  Stock.  Mr.  Ling is the sole
officer and director of Hill, and under existing SEC regulations, the beneficial
owner of 100 percent of its outstanding capital stock.


                                      - 9 -


<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     None


Item 14. CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures.

     Our management,  including our Chief Executive  Officer and Chief Financial
Officer,  has conducted an evaluation of the  effectiveness  of our controls and
procedures  pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 as
of February 3, 2003, (the  "Evaluation  Date") , within ninety days prior to the
filing of this  report  and  concluded  that,  as of the  Evaluation  Date,  our
disclosure  controls and procedures were effective in ensuring that all material
information  relating to our Company  required to be filed in this annual report
had been made known to them in a timely manner.

     (b) Changes in Internal Controls.

     There have been no significant  changes made in our internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the Evaluation Date.



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,  hereunto duly
authorized.



                                                     /s/ James J. Ling
                                                     ---------------------------
                                                     James J. Ling. Chairman and
                                                       Chief Executive Officer





                                     - 10 -
<PAGE>



CERTIFICATIONS
--------------


I, James J. Ling, certify that:

1.   I have  reviewed  this  year-end  report on Form 10-KSB of Empiric  Energy,
     Inc.;

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

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

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


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


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


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

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


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


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

6.   I  have  indicated  in  this  annual  report  whether  or  not  there  were
     significant  changes in internal  controls or in other  factors  that could
     significantly  affect internal controls  subsequent to the date of our most
     recent  evaluation,   including  any  corrective  actions  with  regard  to
     significant deficiencies and material weaknesses.


Date: April 14, 2003

                                                     EMPIRIC ENERGY, INC.

                                                     /s/ James J. Ling
                                                     ---------------------------
                                                     James J. Ling. Chairman,
                                                     Chief Executive Officer and
                                                     Chief Financial Officer


                                     - 11 -

<PAGE>



                              EMPIRIC ENERGY, INC.

                              FINANCIAL STATEMENTS

                     Years Ended December 31, 2002 and 2001



                                Table of Contents



Report of Independent Auditors...............................................F-2

Audited Financial Statements:

         Balance Sheets .....................................................F-3

         Statements of Operations ...........................................F-4

         Statements of Changes in Stockholders' Equity.......................F-5

         Statements of Cash Flows ...........................................F-7

         Notes to Financial Statements.......................................F-8



<PAGE>



                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders of
Empiric Energy, Inc.


We have audited the  accompanying  balance sheets of Empiric Energy,  Inc. as of
December 31, 2002 and 2001 and the related statements of operations,  changes in
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  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 Empiric  Energy,  Inc. as of
December 31, 2002 and 2001, and the results of its operations and its cash flows
for the years then ended in  conformity  with  accounting  principles  generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note B to the
financial  statements,  the Company has suffered recurring  operating losses and
has negative working capital. These conditions raise substantial doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note B. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

Substantially all of the Company's oil and gas properties at December 31, 2002
and 2001 are unproved leasehold costs.

                                                     Whitley Penn



Dallas, Texas
March 17, 2003

                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                              EMPIRIC ENERGY, INC.

                                 BALANCE SHEETS

                                                                                           December 31,
                                                                                         2002            2001
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
Assets
Current assets:
Cash and cash equivalents                                                          $     86,911    $     13,328
     Oil and gas sales receivable                                                        19,584           2,910
                                                                                   ------------    ------------
Total current assets                                                                    106,495          16,238
Property and equipment:
     Oil and gas properties (full cost method):
        Unproved leasehold costs                                                      2,979,004       2,730,419
        Proved leasehold costs and well equipment                                     4,571,190       4,572,790
        Less accumulated depletion and impairment                                    (4,529,975)     (4,496,492)
                                                                                   ------------    ------------
Net property and equipment                                                            3,020,219       2,806,717
Other assets                                                                             15,498          15,086
                                                                                   ------------    ------------
Total assets                                                                       $  3,142,212    $  2,838,041
                                                                                   ============    ============

Liabilities and Stockholders' Equity
Current liabilities:
     Current portion of long-term debt                                             $     11,543    $     20,071
     Accounts payable and accrued expenses                                               99,962         173,183
     Payroll taxes payable                                                               71,643          70,134
     Notes payable                                                                       75,000         100,885
     Income participation units payable                                                 215,950            --
     Due to related parties                                                              21,763          67,434
                                                                                   ------------    ------------
Total current liabilities                                                               495,861         431,707
Long-term debt, less current portion                                                       --               625
                                                                                   ------------    ------------
Total liabilities                                                                       495,861         432,332

Commitments and contingencies                                                              --              --

Series P preferred stock, subject to mandatory redemption                                 5,000           8,750

Stockholders' equity:
     Series L convertible preferred stock, $.10 par value; 2,120,000 shares
        1,933,094 authorized; shares issued as a stock dividend in January 2003;
        1,933,094 and 1,519,654 shares applied retroactively to
        2002 and 2001, respectively                                                     193,309         151,965
     Common stock, $.01 par value; 30,000,000 shares authorized;
        9,740,470 and  7,673,270 issued; 9,665,470
        and 7,598,270 outstanding                                                        97,405          76,733
     Additional paid-in capital                                                      11,380,663      10,665,383
     Accumulated deficit                                                             (8,939,699)     (8,467,122)
                                                                                   ------------    ------------
                                                                                      2,731,678       2,426,959
     Less interest on debt prepaid by issuance of common stock                          (60,327)           --
     Less treasury stock, 75,000 shares, at cost                                        (30,000)        (30,000)
                                                                                   ------------    ------------
Total stockholders' equity                                                            2,641,351       2,396,959
                                                                                   ------------    ------------
Total liabilities and stockholders' equity                                         $  3,142,212    $  2,838,041
                                                                                   ============    ============
</TABLE>


                 See accompanying notes to financial statements.

                                       F-3
<PAGE>


                              EMPIRIC ENERGY, INC.

                            STATEMENTS OF OPERATIONS


                                                Year Ended December 31,
                                                    2002           2001
                                               -----------    -----------


Oil and gas revenues                          $    48,561    $   192,289

Cost and expenses:
     Production expense                             5,966         70,975
     Plugging and abandonment                        --          193,187
     Depletion and depreciation                    34,794        216,321
     Impairment of oil and gas properties            --          949,297
     General and administrative                   338,031        525,734
                                              -----------    -----------
Total expenses                                    378,791      1,955,514
                                              -----------    -----------
Loss from operations                             (330,230)    (1,763,225)

Other income (expense):
     Interest expense                            (142,347)       (12,891)
                                              -----------    -----------


Net loss                                      $  (472,577)   $(1,776,116)
                                              ===========    ===========

Basic and diluted net loss per common share   $     (0.05)   $     (0.25)
                                              ===========    ===========

Weighted average common shares outstanding      8,752,661      7,220,843
                                              ===========    ===========




                 See accompanying notes to financial statements.
                                       F-4
<PAGE>
<TABLE>
<CAPTION>




                              EMPIRIC ENERGY, INC.

                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                 For the Years Ended December 31, 2002 and 2001


                                                    Series L                             Common      Series A,C,D
                                                    Preferred      Common Stock           Stock       Preferred
                                                     Stock      Shares       Amount     Subscribed      Stock
                                                    ---------   ---------   ---------   ----------   ----------
<S>                                                 <C>         <C>         <C>         <C>          <C>
Balance at December 31, 2000                        $  13,151   6,575,694   $  65,757   $     188    $  48,141
Issuance of common stock subscribed                      --        18,750         188        (188)        --
Common stock, preferred stock and warrants
   issued for cash                                       --       356,250       3,563        --          2,800
Common stock and options issued for services             --       115,189       1,152        --           --
Common stock issued in the acquisition of oil
   and gas properties                                    --       176,550       1,765        --           --
Conversion of notes payable to common stock,
   preferred stock and warrants                          --        69,500         695        --           --
Conversion of accounts payable and due to related
   party to common stock, preferred stock and
   warrants                                              --       105,000       1,050        --           --
Conversion of preferred stock to common
   stock                                                 --       256,337       2,563        --        (50,941)
Stock dividend retroactively applied                  138,814        --          --          --           --
Purchase of treasury stock                               --          --          --          --           --
Net loss                                                 --          --          --          --           --
                                                    ---------   ---------   ---------   ---------    ---------
Balance at December 31, 2001                          151,965   7,673,270      76,733        --           --
Common stock issued for cash                             --       695,000       6,950        --           --
Common stock issed for prepaid interest                  --       516,450       5,165        --           --
Common stock issued for services                         --       487,500       4,875        --           --
Common stock issued for debt                             --       125,000       1,250        --           --
Common stock issued for conversion of warrants
   and preferred stock                                   --        93,750         937        --           --
Common stock issued in the acquisition of oil
   and gas properties                                    --       149,500       1,495        --           --
Stock dividend retroactively applied                   41,344        --          --          --           --
Amortization of prepaid interest                         --          --          --          --           --
Net loss                                                 --          --          --          --           --
                                                    ---------   ---------   ---------   ---------    ---------
Balance at December 31, 2002                        $ 193,309   9,740,470   $  97,405   $    --      $    --
                                                    =========   =========   =========   =========    =========

</TABLE>

                See accompanying notes to financial statements.
                                      F-5

<PAGE>
<TABLE>
<CAPTION>
                              EMPIRIC ENERGY, INC.
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
                     Years Ended December 31, 2002 and 2001
                                                                                            Interest on
                                                    Additional                             Debt Prepaid by
                                                     Paid-in                  Accumulated   Issuance of     Treasury
                                                     Capital     Receivables     Deficit   Common Shares      Stock         Total
                                                 ------------  ------------  ------------  ------------  ------------  ------------
<S>                                               <C>           <C>           <C>          <C>           <C>           <C>
Balance at December 31, 2000                     $  9,728,319   $   (74,061) $ (6,691,006) $       --    $       --    $  3,090,489
Issuance of common stock subscribed                      --            --            --            --            --            --
Common stock, preferred stock and warrants               --
   issued for cash                                    418,637          --            --            --            --         425,000
Common stock issued for services                      167,892          --            --            --            --         169,044
Common stock issued in the acquisition of oil            --
   and gas properties                                 318,191        74,061          --            --            --         394,017
Conversion of notes payable to common stock,             --
   preferred stock and warrants                        27,580          --            --            --            --          28,275
Conversion of accounts payable and due related           --
   party to common stock, preferred stock and            --
   warrants                                           103,950          --            --            --            --         105,000
Conversion of preferred stock to common                  --
   stock                                               39,628          --            --            --            --          (8,750)
Stock dividend retroactively applied                 (138,814)         --            --            --            --            --
Purchase of treasury stock                               --            --            --            --         (30,000)      (30,000)
Net loss                                                 --            --      (1,776,116)         --            --      (1,776,116)
                                                 ------------  ------------  ------------  ------------  ------------  ------------
Balance at December 31, 2001                       10,665,383          --      (8,467,122)         --         (30,000)    2,396,959
Common stock issued for cash                          205,379          --            --            --            --         212,329
Common stock issued for prepaid interest              187,415          --            --        (192,580)         --            --
Common stock issued for services                      262,097          --            --            --            --         266,972
Common stock issued for debt                           48,750          --            --            --            --          50,000
Common stock issued for conversion of warrants           --
   and preferred stock                                  2,813          --            --            --            --           3,750
Common stock issued in the acquisition of oil            --
   and gas properties                                  50,170          --            --            --            --          51,665
Stock dividend retroactively applied                  (41,344)         --            --            --            --            --
Amortization of prepaid interest                         --            --            --         132,253          --         132,253
Net loss                                                 --            --        (472,577)         --            --        (472,577)
                                                 ------------  ------------  ------------  ------------  ------------  ------------
Balance at December 31, 2002                     $ 11,380,663  $       --    $ (8,939,699) $    (60,327) $    (30,000) $  2,641,351
                                                 ============  ============  ============  ============  ============  ============
</TABLE>

                 See accompanying notes to financial statements.
                                       F-6

<PAGE>
<TABLE>
<CAPTION>




                              EMPIRIC ENERGY, INC.

                            STATEMENTS OF CASH FLOWS


                                                                                   Year Ended December 31,
                                                                                      2002           2001
                                                                                 -----------    -----------
<S>                                                                              <C>            <C>
Operating Activities
    Net loss applicable to common stock                                          $  (472,577)   $(1,776,116)
       Adjustments to reconcile net loss to
          net cash used in operating activities:
          Depletion, depreciation and impairment                                      34,794      1,165,618
          Amortization of prepaid interest                                           132,253           --
          Common stock and warrants issued for services                              266,972        169,044
          Changes in assets and liabilities:
             Oil and gas receivable                                                  (16,674)        21,649
             Other assets                                                               (412)          --
             Accounts payable, accrued expenses and payroll taxes payable            (71,712)       237,688
             Oil and gas revenues payable                                               --          (16,590)
             Due to related parties                                                  (45,671)       105,715
                                                                                 -----------    -----------
Net cash used in operating activities                                               (173,027)       (92,992)

Investing Activities
    Proceeds from sale of oil and gas properties                                        --          125,000
    Purchase of oil and gas properties                                              (196,631)      (546,300)
                                                                                 -----------    -----------
Net cash used in investing activities                                               (196,631)      (421,300)

Financing Activities
    Proceeds from long-term debt, notes payable and income participation units       340,950         25,000
    Repayments of long-term debt, notes payable and income participation units      (110,038)      (108,546)
    Proceeds from sales and subscription of common stock                             212,329        425,000
    Purchase of treasury common stock                                                   --          (30,000)
                                                                                 -----------    -----------
Net cash provided by financing activities                                            443,241        311,454
                                                                                 -----------    -----------

Net increase (decrease) in cash and cash equivalents                                  73,583       (202,838)

Cash and cash equivalents at beginning of year                                        13,328        216,166
                                                                                 -----------    -----------

Cash and cash equivalents at the end of year                                     $    86,911    $    13,328
                                                                                 ===========    ===========

Supplemental Disclosures of Cash Flow Information
    Cash paid during the year for interest                                       $     7,000    $     4,910
                                                                                 ===========    ===========


Non-cash investing and financing transactions:
    Purchase of oil and gas properties with common stock                         $    51,665    $   394,017
                                                                                 ===========    ===========
    Conversion of due to related parties to common stock                         $      --      $   105,000
                                                                                 ===========    ===========
    Conversion of preferred stock to common stock                                $     3,750    $     8,750
                                                                                 ===========    ===========
    Common stock issued for prepaid interest                                     $   192,580    $      --
                                                                                 ===========    ===========
    Conversion of income participation units payable to common stock             $    50,000    $    28,725
                                                                                 ===========    ===========

</TABLE>

                 See accompanying notes to financial statements.
                                       F-7

<PAGE>



                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001



A.   Nature of Business

Empiric  Energy,  Inc. (the  "Company") was  incorporated  under the laws of the
state  of  Delaware  in  1992.  The  Company  is  engaged  in  the  acquisition,
exploration  and  development  of oil and gas  properties,  which are located in
Pennsylvania as of December 31, 2002. The Company also has working  interests in
unproved leasehold acreage in Texas and Louisiana as of December 31, 2002.

B.   Summary of Significant Accounting Policies

A summary of the Company's significant  accounting policies consistently applied
in the preparation of the accompanying financial statements follows:

Basis of Accounting

The accounts are  maintained  and the  financial  statements  have been prepared
using the accrual basis of accounting in accordance with  accounting  principles
generally accepted in the United States of America.

Basis of Presentation

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company has suffered  recurring
operating  losses and has negative  working  capital,  which raises  substantial
doubt 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.

The Company has  acquisition  interest in two producing wells and is partners in
various  rework wells through  Venture  Energy,  Inc. and another  operator that
management  believes  have the  potential  to  provide  positive  cash  flow and
ultimately profits to the Company.

The Company may  participate  in  additional  drilling  programs  through  these
operators, but will need to raise additional capital to do so.

Use of Estimates

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

                                      F-8

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

B.   Summary of Significant Accounting Policies - continued

Revenue Recognition

Oil and  natural gas sales are  recognized  upon  delivery to the metered  point
upstream of the pipeline connection.

Cash and Cash Equivalents

The Company  considers  all highly liquid  investments  with a maturity of three
months or less when purchased to be cash  equivalents.  At December 31, 2002 and
2001, the Company had no such investments included in cash and cash equivalents.
The Company maintains deposits primarily in one financial institution, which may
at times  exceed  amounts  covered by  insurance  provided  by the U.S.  Federal
Deposit  Insurance  Corporation  ("FDIC").  There were no uninsured  deposits at
December 31, 2002 and 2001.

Oil and Gas Properties

The Company uses the full cost method of accounting for oil and gas  properties.
The Company's  properties are all located in the continental  United States, and
therefore,  its costs are  capitalized  in one cost center.  Under the full cost
method, all costs related to the acquisition,  exploration or development of oil
and gas properties are capitalized into the "full cost pool." Such costs include
those related to lease  acquisitions,  drilling and equipping of productive  and
non-productive wells, delay rentals, geological and geophysical work and certain
internal  costs  directly  associated  with  the  acquisition,   exploration  or
development of oil and gas  properties.  Upon the sale or disposition of oil and
gas properties,  no gain or loss is recognized,  unless such  adjustments of the
full cost pool would  significantly  alter the relationship  between capitalized
costs  and  proved  reserves.  Unproved  properties,  which are not  subject  to
depletion,  are assessed  periodically for possible  impairment.  Any impairment
amounts are transferred to the proved oil and gas properties. The Company had no
impaired unproved properties as of December 31, 2002.

Under the full cost method of accounting, a "full cost ceiling test" is required
wherein  net  capitalized  costs of oil and gas  properties  cannot  exceed  the
present value of estimated future net revenues from proved oil and gas reserves,
discounted  at 10%,  plus  the  cost  of  unproved  properties  not  subject  to
depletion,  less any related income tax effects.  During the year ended December
31, 2001, the Company recorded impairment of the full cost pool in the amount of
$949,297. No such impairment was incurred in the year ended December 31, 2002.

                                      F-9
<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

B.   Summary of Significant Accounting Policies - continued

Oil and Gas Properties - continued

Depletion   of  proved   oil  and  gas   properties   is   computed   using  the
unit-of-production  method  based  on  estimated  proved  oil and gas  reserves.
Depletion  expense of  approximately  $33,000 and  $215,000 was recorded for the
years ended December 31, 2002 and 2001,  respectively.  Depletion per equivalent
mcf of natural gas was approximately $.84 and $2.43 for the years ended December
31, 2002 and 2001, respectively.

Loss Per Share and Reverse Stock Split

Basic loss per share is computed based on the weighted  average number of shares
of common stock outstanding during the period.  Diluted loss per share takes all
potentially  dilutive  common shares (such as options,  warrants and convertible
securities) into consideration.  For the years ended December 31, 2002 and 2001,
the Company's  potential  dilutive common shares  totaling  433,000 and 556,500,
respectively,  are not included in the dilutive calculation of loss per share as
the effect would be antidilutive.

The Company  declared a 1-for-2  reverse  split of its common  shares  effective
January 14, 2003 and issued a stock  dividend of series L preferred  shares (see
Note M).  All share  and per share  information  in the  accompanying  financial
statements  has been  retroactively  adjusted for this  reverse  stock split and
stock dividend.

Income Taxes

Deferred  income taxes are determined  using the liability  method in accordance
with Statement of Financial  Accounting  Standards ("SFAS") No. 109,  Accounting
for Income Taxes.  Deferred tax assets and  liabilities  are  recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  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 tax assets and liabilities of a change in tax rates is recognized in
the period that included the enactment date. In addition,  a valuation allowance
is established to reduce any deferred tax asset for which it is determined  that
it is more likely than not that some  portion of the deferred tax asset will not
be realized.

                                      F-10

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

B.   Summary of Significant Accounting Policies - continued

Stock Options

The Company applies SFAS No. 123, Accounting for Stock-Based Compensation, which
requires recognition of the value of stock options and warrants granted based on
an  option  pricing  model.  However,  as  permitted  by SFAS 123,  the  Company
continues  to account for stock  options and warrants  granted to directors  and
employees  pursuant  to  Accounting  Principles  Board  Opinion  ("APB") No. 25,
Accounting  for Stock Issued to Employees,  and related  interpretations.  Stock
options or warrants  that are  re-priced  subsequent  to  December  15, 1998 are
treated as  variable  stock  options  beginning  on July 1, 2000 as  required by
Financial  Interpretation  No. 44 of the Financial  Accounting  Standards Board,
Accounting for Certain Transactions Involving Stock Compensation.

Fair Value of Financial Instruments

In accordance with the reporting requirements of SFAS No. 107, Disclosures About
Fair Value of Financial  Instruments,  the Company  calculates the fair value of
its assets and  liabilities  which qualify as financial  instruments  under this
statement and includes this additional information in the notes to the financial
statements  when the fair value is different  than the  carrying  value of those
financial  instruments.  The estimated fair value of cash and cash  equivalents,
accounts  receivable and accounts payable approximate their carrying amounts due
to the  short  maturity  of the  instruments.  The  carrying  value of short and
long-term  debt also  approximates  fair value  since it bears  market  rates of
interest. None of these instruments are held for trading purposes.

C.   Related Party Transactions

Hill  Investors,  Inc., an affiliate of the chairman of the  Company's  board of
directors,  has a consulting  agreement  with the Company that calls for monthly
payments of $10,000 for management consulting services. The agreement expired in
October 2001;  however,  upon any such  termination the agreement  automatically
continues  for a period of 36 months from the date of such  termination.  During
the years ended December 31, 2002 and 2001, the Company incurred  expenses under
this agreement of $120,000 per year.

During the year ended  December 31, 2002 and 2001, the Company  converted  total
liabilities of $168,000 and $105,000  respectively,  due to officers,  directors
and family members of officers and directors to common stock of the Company.



                                  F-11

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001



D.   Long-Term Debt, Notes Payable and Income Participation Units Payable

Long-term debt at December 31, 2002 and 2001 consisted of certain unsecured
notes.

Notes  payable  at  December  31,  2001  represent  non  interest-bearing  notes
converted   from  accounts   payable  for  certain   plugging  and   abandonment
liabilities. The notes were paid during 2002. Notes payable at December 31, 2002
represents two 8% notes payable to an individual:

Note payable due October 2003, secured by
  25% of the assets of Venture Energy, Inc.                    $50,000

Note payable due April 2003, guaranteed by
  the Company's President                                       25,000
                                                               -------
                                                               $75,000
                                                               =======

Income participation units payable represent non interest-bearing  notes payable
to certain  individuals.  The notes are payable at various dates through October
2003 out of cash flow generated by certain wells owned by the Company. The notes
are  convertible  into the  Company's  common  stock at $.50  per  share.  As an
inducement  for the notes,  the Company  issued  516,450 common shares valued at
$192,580.  This  amount  has been  reflected  as a  prepaid  financing  cost and
amortized over the life of the notes as interest expense.  The remaining prepaid
financing  cost at December 31, 2002 is  recognized in  stockholders'  equity as
interest on debt prepaid by issuance of common stock.

E.   Income Taxes

The Company's  deferred tax assets and liabilities are composed of the following
at December 31 :

 Deferred tax assets:                                     2002           2001
                                                     -----------    -----------
       Difference in bases of oil and gas properties $   938,000    $   972,000
       Net operating loss carryforward                 3,098,000      2,800,000
                                                     -----------    -----------
Total deferred tax asset before valuation allowance    4,036,000      3,772,000
Valuation allowance                                   (4,036,000)    (3,772,000)
                                                     -----------    -----------
                                                           --             --
                                                     -----------    -----------
Net change in valuation allowance                    $   264,000    $   952,000
                                                     ===========    ===========


                                      F-12

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

E.   Income Taxes - continued

At December  31,  2002,  the Company has net  operating  loss  carryforwards  of
approximately   $8,800,000  for  both  financial  statement  and  tax  reporting
purposes.  Unused  net  operating  loss  carryforwards  may  provide  future tax
benefits, although there can be no assurance that these net operating losses can
be recognized in the future.  These losses may be used to offset future  taxable
income,  subject to the provisions of Internal  Revenue Code Section 382, and if
not fully utilized, expire starting in 2011 through 2017.

F.   Stockholders' Equity

At December 31, 2000, the Company had $575,000 face amount of Series A preferred
stock  outstanding.  Series A preferred  stock is  denominated  in face  amounts
rather than shares,  has no par value,  no interest  rate, no dividend  rate, no
voting  privileges,  a  liquidation  preference  equal to the face amount and is
convertible  into  common  stock at a rate of $3.33 per  share of common  stock.
There is  $1,150,000  of face  amount  authorized  for the Series A  convertible
preferred stock. All Series A shares were cancelled by the Company in 2001.

During 2000, the Company designated Series B and C convertible  preferred stock.
Each series of convertible  preferred  stock has a par value of $0.05 per share,
no interest rate, no voting  privileges,  a one-time  common stock  dividend,  a
liquidation preference and is convertible into common stock. All Series B shares
were cancelled by the Company in 2001.

Series C  convertible  preferred  stock is  entitled  to a one-time  dividend of
common  stock of an entity that the  Company had  intended to enter into a stock
exchange  with during 2000 or 2001.  This stock  exchange  did not occur and the
letter of intent expired. Additionally,  Series C convertible preferred stock is
convertible  into common  stock at a rate of $2.00 per share of common stock for
each  $1.00 of  liquidation  value.  Series C  convertible  preferred  stock was
callable for conversion at the Company's  option any time after the common stock
of dividend is paid or at the end of one year from a date  ranging  from October
to December  2001.  As of December  31, 2000,  the Company had 74,450  shares of
Series C convertible  preferred stock outstanding with a liquidation  preference
of $480,000,  convertible into 240,000 shares of common stock. All the Company's
outstanding  Series C preferred  shares were  converted to common  shares during
2001.

In 1998,  the Company  designated  Series B and C warrants  to  purchase  common
stock. The Series B warrants have an exercise price of $2.50 per share of common
stock and the  remaining  outstanding  warrants  expire in September  2004.  The
Series C warrants have an exercise  price of $3.00 per share of common stock and
expire four years from the date of the grant. As of December 31, 2002, there are
5,000 and nil  warrants  outstanding  for the  Series B and  Series C  warrants,
respectively.

                                      F-13

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001


F. Stockholders' Equity - continued

There were no Series B warrants or Series C warrants exercised during the years
ended December 31, 2002 and 2001.

In 1999,  the Company  designated  Series D and E warrants  to  purchase  common
stock. The Series D warrants have an exercise price of $1.50 per share of common
stock and are exercisable until May 2003. The Series E warrants have an exercise
price of $2.00 per share of common  stock and were  exercisable  until May 2002.
These  warrants  may be  called by the  Company  at $0.10  (Series  D) and $0.15
(Series E) per warrant if the Company's common stock trades for $1.88 (Series D)
and $2.50  (Series E) per share for ten  consecutive  days.  As of December  31,
2002, there are 50,000 and nil warrants  outstanding for the Series D and Series
E warrants,  respectively.  There were no Series D warrants or Series E warrants
exercised during the years ended December 31, 2002 and 2001.

During  2000,  the  Company  designated  two new series of  warrants to purchase
common stock. The Series F warrants have an exercise price of $0.75 per share of
common  stock and can be exercised  until April 2005.  The  Redeemable  Series F
warrants  have an exercise  price of $2.50 per share of common  stock and can be
exercised until  September 2003. The Redeemable  Series F warrants may be called
by the Company for $0.25 per warrant if the  Company's  common  stock trades for
$3.13 per share for ten consecutive days.

During the year ended  December 31, 2000,  there were 250,000  Series F warrants
issued to a financial consulting company and 61,000 Redeemable Series F warrants
issued in  connection  with the issuance of the Series C  Convertible  Preferred
Stock.  All of the  Series F warrants  and  Redeemable  Series F  warrants  were
outstanding at December 31, 2002.

See Note M  regarding  the  Company's  issuance,  in  January  2003,  of a stock
dividend of Series L preferred stock.

G.   Stock Options

In 1994,  the Company  established a Stock Option Plan to compensate  directors,
employees,  advisors and  consultants.  All options  granted  under the plan are
exercisable at $1.00 per share and expire five years from the date of the grant.
The  exercise  price for all options  granted  under this plan was  re-priced in
March 1999 to $0.50 per share.  At December 31, 2002,  there are 1,850,000 stock
options reserved and available for grant under the plan.

                                      F-14
<PAGE>
<TABLE>
<CAPTION>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

G.   Stock Options - continued

The  following  is a summary of activity for the stock  options  granted for the
years ended December 31, 2002 and 2001:

                                         December 31, 2002                December 31, 2001
                                 --------------------------------   --------------------------------
                                                                       Weighted         Weighted
                                    Number of          Average         Number of         Average
                                     Shares        Exercise Price        Shares       Exercise Price
                                 --------------    --------------   --------------    --------------
<S>                              <C>               <C>              <C>               <C>
Outstanding, beginning of year          475,000    $         0.50        1,170,000    $         0.50
Granted                                    --      $         0.50           60,000    $         0.50
Forfeited/Expired                       (75,000)   $         0.50         (755,000)   $         0.50
                                 --------------    --------------   --------------    --------------
Outstanding, end of year                400,000    $         0.50          475,000    $         0.50
                                 ==============    ==============   ==============    ==============
Exercisable, end of year                400,000    $         0.50          475,000    $         0.50
                                 ==============    ==============   ==============    ==============
</TABLE>


If not  previously  exercised,  options  outstanding  at December  31, 2002 will
expire as follows:

                                                      Weighted
                                    Number of         Average
                                     Shares        Exercise Price
                                 --------------    --------------
December 31, 2003                       340,000    $         0.50
December 31, 2006                        60,000    $         0.50
                                 --------------    --------------
                                        400,000    $         0.50
                                 --------------    --------------


As  discussed  in Note B, the  Company  applies  APB  Opinion No. 25 and related
interpretations   in  accounting   for  its  stock  options.   Accordingly,   no
compensation  cost has been recognized for grants of options to employees in the
statement of operations  since the exercise  prices were greater than the market
prices of the  Company's  common stock on the  measurement  dates.  No pro forma
compensation  expense in accordance with SFAS No. 123 has been disclosed here as
the amount was nominal.

                                      F-15

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

H.   Environmental Issues

The Company is engaged in oil and gas  exploration and production and may become
subject to certain  liabilities as they relate to environmental clean up of well
sites  or other  environmental  clean  up of well  sites or other  environmental
restoration  procedures  as they relate to the drilling of oil and gas wells and
the operation  thereof.  In the Company's  acquisition of existing or previously
drilled  wells,  the Company may not be aware of what  environmental  safeguards
were  taken at the time such wells  were  drilled or during  such time the wells
were operated.  Should it be determined that a liability  exists with respect to
any  environmental  clean  up or  restoration,  the  liability  to  cure  such a
violation  could  fall  upon the  Company.  No claim has been  made,  nor is the
Company aware of any liability, which the Company may have, as it relates to any
environmental clean up, restoration or the violation of any rules or regulations
relating thereto.

I.   Commitments and Contingencies

Leases

The Company has a non-cancellable  sublease for office space. The lease requires
minimum monthly rental payments of $1,220 until expiration in November 2003.

The Company incurred rent expense of  approximately  $17,000 and $22,000 for the
years ended December 31, 2002 and 2001, respectively.

Concentrations

The  Company's   revenues  are  received  solely  from  two  well  operators  in
Pennsylvania and Louisiana.

Legal Proceeding

The Company is a defendant,  in what it considers to be a spurious lawsuit, that
relates to the LDC  Operating  Company  Bankruptcy,  and  related  claims to the
leasehold interest. The claim is for approximately $60,000. The Company believes
that the  potential  loss,  if any,  from this  matter  will not have a material
effect on its financial condition.


                                      F-16

<PAGE>
<TABLE>
<CAPTION>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001


J.   Series P Preferred Stock, Subject to Mandatory Redemption

During 2001, the Company  designated Series P convertible  preferred stock. Each
Series P  convertible  preferred  share has a par value of $0.05 per  share,  no
interest rate and no voting privileges. Series P shares are subject to mandatory
redemption  monthly  depending  on net  revenues  from the G. A. Lyons  lease in
Louisiana.  The shares  redeemed shall be equal to 25% of the net revenue of the
lease.  Each shareholder shall have the right to accept redemption of the shares
at $1.00 per share or convert to common stock at $1.00 per share.

Series P preferred  stock has been  classified  outside of  permanent  equity in
accordance with rules of the Securities and Exchange Commission.  The shares are
reported at fair value.  Because the  mandatory  redemption is contingent on the
occurrence  of certain net revenues  from an oil and gas lease,  the  redemption
amount will not be reflected in the financial  statements  until the  contingent
net revenues are recognized.

K.   Supplemental Information on Oil and Gas Producing Activities

The following table sets forth certain  information  with respect to the oil and
gas producing activities of the Company:

                                                                     Year Ended December 31,
                                                                        2002           2001
                                                                   -----------    -----------
<S>                                                                <C>            <C>
Costs incurred in oil and gas producing activities:
    Acquisition of unproved properties                             $   248,296    $   940,317
                                                                   ===========    ===========

Net capitalized costs related to oil and gas producing activities:
    Unproved leashold costs                                        $ 2,979,004    $ 2,730,419
    Proved leasehold costs                                           4,571,190      4,572,790
       Less accumulated depletion and impairment                    (4,529,975)    (4,496,492)
                                                                   -----------    -----------
        Net oil and gas property costs                             $ 3,020,219    $ 2,806,717
                                                                   ===========    ===========
</TABLE>

                                      F-17

<PAGE>
<TABLE>
<CAPTION>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001


K.   Supplemental Information on Oil and Gas Producing Activities - continued

The following table is based on information  prepared by the Company. The tables
summarize changes in the estimates of the Company's net interest in total proved
reserves (all proved developed) of crude oil and condensate and natural gas, all
of which are domestic reserves:


                                                                  (Unaudited)
                                                       2002                         2001
                                                       ----                         ----
                                                Oil            Gas            Oil             Gas
                                             (Barrels)        (MCF)        (Barrels)        (MCF)
                                           ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>
Balance, beginning of year                         --           90,131         26,347        353,074
        Revisions of previous estimates            --             --             --             --
        Abandonment of minerals in place           --             --             --             --
        Sales of minerals in place                 --             --          (25,963)      (178,162)
        Production                                 --          (39,682)          (384)       (84,781)
                                           ------------   ------------   ------------   ------------
Balance, end of year                               --           50,449           --           90,131
                                           ============   ============   ============   ============
</TABLE>

Proved  oil  and gas  reserves  are  the  estimated  quantities  of  crude  oil,
condensate and natural gas 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 reserves  that can be expected to be recovered  through
existing  wells  with  existing  equipment  and  operating  methods.  The  above
estimated net interests in proved  reserves are based on subjective  engineering
judgments and may be affected by the  limitations  inherent in such  estimation.
The  process  of  estimating  reserves  is  subject  to  continual  revision  as
additional  information  becomes  available  as a result of  drilling,  testing,
reservoir  studies and production  history.  There can be no assurance that such
estimates will not be materially revised in subsequent periods.

L.   Standardized Measure of Discounted Future Net Cash Flows - Unaudited

The  standardized  measure of  discounted  future net cash flows at December 31,
2002 and 2001,  relating to proved oil and gas reserves is set forth below.  The
assumptions used to compute the standardized measure are those prescribed by the
Financial  Accounting  Standards Board and, as such, do not necessarily  reflect
the Company's  expectations of actual revenues to be derived from those reserves
nor their  present  worth.  The  limitations  inherent in the  reserve  quantity
estimation   process  are  equally   applicable  to  the  standardized   measure
computations since these estimates are the basis for the valuation process.

                                      F-18

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001

L.   Standardized  Measure  of  Discounted  Future  Net Cash  Flows  -Unaudited-
     continued

                                                         Year Ended December 31,
                                                            2002         2001
                                                         ---------    ---------
Future cash inflows                                      $ 217,000    $ 224,000
Future development and productions costs                   (47,000)     (49,000)
                                                         ---------    ---------
Future net cash flows, before income tax                   170,000      175,000
Future income taxes                                           --           --
                                                         ---------    ---------
Future net cash flows                                      170,000      175,000
10% annual discount                                        (96,000)     (99,000)
                                                         ---------    ---------
Standardized measure of discounted future net cash flows $  74,000    $  76,000
                                                         =========    =========

Future  net cash flows  were  computed  using  year-end  prices  and costs,  and
year-end statutory tax rates (adjusted for permanent differences) that relate to
existing  proved  oil and  gas  reserves  at year  end.  The  following  are the
principal  sources of change in the standardized  measure of discounted net cash
flows:

                                                        Year Ended December 31,
                                                            2002         2001
                                                       -----------  -----------
Sales of oil and gas produced, net of production costs $   (43,000) $  (121,000)
Net changes in prices and production costs                  92,000     (291,000)
Revisions and other                                        (59,000)     (39,000)
Sales of minerals in place                                    --       (988,000)
Accretion of discount                                        8,000      138,000
                                                       -----------  -----------
   Net change                                               (2,000)  (1,301,000)
Balance, beginning of year                                  76,000    1,377,000
                                                       -----------  -----------
Balance, end of year                                   $    74,000  $    76,000
                                                       ===========  ===========

                                      F-19

<PAGE>

                              EMPIRIC ENERGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2001


M.   Subsequent Events

The Company  declared a 1-for-2  reverse split of its common  shares,  effective
January 14, 2003, and issued a stock dividend of series L preferred shares equal
to one share of preferred for each  pre-split  common  share.  All share and per
share   information   in  the   accompanying   financial   statements  has  been
retroactively  adjusted for this  reverse  stock split and stock  dividend.  The
Company also increased its authorized common shares to 30,000,000.  The series L
preferred  stock is  voting,  convertible  to common  stock  share for share and
carries a dividend rate equal to 20% of the Net Cash Flow, as defined, after the
Company  generates  in excess of  $1,000,000  in Net Cash Flow after  January 1,
2003.  The Company may redeem the preferred  shares from time to time for $5 per
share.  In the  event of  liquidation,  the  preferred  stock is  entitled  to a
distribution of assets equal to $10 per share.

In November, 2002, the Company signed a Letter of Intent to acquire from Venture
Energy, Inc, a significant working interest in several on-going projects located
in Louisiana,  including the Livonia Field, in Pointe Coupee Parish, and the Red
River Bull Bayou, located in the Red River Parish, Louisiana, which will include
returning 20 wells in an existing  water flood program.  In addition,  a current
acquisition  is  in  progress  of a  well  in  the  Lake  Washington  Field,  in
Plaquemines  Parish,  Louisiana.  The  cost of this  acquisition,  completed  in
January 2003,  was $150,000 plus 175,000  Empiric  Energy,  Inc. Rule 144 Common
shares, and 95,000 Rule 144 Series "L" Preferred shares. Another 425,000 Empiric
Energy,  Inc. Rule 144 Common shares,  and 225,000 Rule 144 Series "L" Preferred
shares  are held in escrow  and will be  delivered  if the  properties  obtain a
minimum cash flow threshold. If minimum threshold is not achieved the securities
will be reduced proportionately.

                                      F-20