SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.

                      Commission File Number: 000-32507

                             Energy Producers, Inc.
                             ----------------------
           (Name of small business issuer as specified in its charter)

              Nevada                                       88-0345961
              ------                                       ----------
   (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                        Identification Number)

                             7944 E. Beck Lane, S-200
                             Scottsdale, AZ 85260-1774
                             -------------------------
                     (Address of principal executive offices)

                                 (480) 778-0488
                                 --------------
                 (Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities  registered  pursuant to Section  12(g) of the Act:  Common Stock Par
Value $.001 Per Share), Preferred stock, (Par Value $.001 Per Share)

Indicate by check mark whether the issuer (1) has 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____

Indicate  by check  mark if there  is no  disclosure  of  delinquent  filers  in
response  to  Item  405  of  Regulation  S-B  contained  in  this  form,  and no
disclosures  will be  contained,  to the  best  of  registrant's  knowledge,  in
definitive proxy information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year were $271,801.

The  aggregate  market  value  on  April  1,  2003,  of  common  shares  held by
non-affiliates was approximately  $1,429,283 based on the average of the closing
bid and asked prices of the  registrant's  common shares on such date, as quoted
by the National Quotation Bureau.

As of April 1st, 2003, the issuer had 13,217,812  shares of its $0.001 par value
common stock issued and outstanding.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
--------------------------------------------------

Except for the historical information contained herein, the matters discussed in
this  Form  10-KSB  are  forward-looking  statements  which  involve  risks  and
uncertainties,  including but not limited to economic,  competitive,  political,
regulatory  and   governmental   factors   affecting  the  company's   revenues,
operations,  markets and prices,  properties and other factors  discussed in the
Company's various filings with the Securities and Exchange Commission.

                                                              1
<PAGE>
                                     PART I

ITEM 1 - DESCRIPTION OF BUSINESS
--------------------------------

HISTORY AND OVERVIEW
--------------------

Energy  Producers,  Inc. ("the Company") was incorporated in the state of Nevada
on October 4, 1995 as Sterling Market Positions,  Inc. with 10,000,000 shares of
$.001 par value common stock  authorized.  Effective  June 24, 1999, the Company
changed its name to Energy  Producers,  Inc. and increased its authorized common
shares to 50,000,000 with a par value of $.001. The Company's principal place of
business is 7944 E. Beck Lane, Suite 200, Scottsdale, AZ 85260-1774.

On August 25, 1999 the Company was acquired by Energy Producers Group, Inc., and
its  wholly  owned  subsidiary,  Producers  Supply,  Inc.  The  transaction  was
accomplished   through  the  issuance  of  9,820,835  shares  of  the  Company's
restricted  common stock.  Although Energy  Producers  Group,  Inc. is the legal
acquirer;  it was dissolved subsequent to the transaction,  so Energy Producers,
Inc. (the Company) is treated as having acquired Energy  Producers  Group,  Inc.
Accordingly,  the transactions have been accounted for as a reverse  acquisition
and Energy  Producers,  Inc. is now referred to as the Company.  The  historical
financial  statements  are  those of Energy  Producers,  Inc.,  which  have been
restated for the equivalent  number of shares received in the  transaction.  The
results of  operation of Energy  Producers  Group,  Inc.  (legal  acquirer)  are
included in the financial  statements of the combined  Energy  Producers  Group,
Inc.  and Energy  Producers,  Inc.  financial  statements  from  August 25, 1999
(acquisition  date). The Company began filing  consolidated  statements with its
wholly owned subsidiary,  Producers Supply,  Inc. on the acquisition date August
25, 1999.

The purpose of the  acquisition  and reverse merger was to become an oil and gas
company,  and later  diversify.  Entering  the oil and gas  service  and  supply
business  would  provide  general   administrative  and  oil  and  gas  industry
management  experience  having  business and project  relationships  in southern
Arkansas and the surrounding area.  Producers  Supply,  Inc. provided a suitable
platform to operate in Stephens,  Arkansas. We will develop oil and gas projects
in and near Arkansas. Energy Producers Group, Inc. and the Company together will
expand  their  future  business  plans  to  include;   formation  of  subsidiary
operations  for drilling and  development of southern  Arkansas and  surrounding
area reserves; acquiring and developing potential resource related technologies;
alternative  energy research and development;  and development of other business
segments including real estate, and waste management.

The Company  after its name  change to Energy  Producers,  Inc.  has focused its
business on oil and gas exploration,  development, and production, and acquiring
existing production  facilities with proven reserves.  Sterling Market Positions
was involved with management, consulting and advisory services.

Producers Supply,  Inc., a wholly owned subsidiary of the Company, is an oil and
gas field equipment,  service and supply business serving southern Arkansas. Its
operations  are located at 124 South First Street,  Stephens  Arkansas,  and has
been in business for 26 years. Producers Supply, Inc. owns and maintains a 5,000
square  foot  building,  and  adjacent  facilities  which  house  the  Company's
inventory  of oil and gas field  equipment  including  parts and  supplies,  and
serves as the Company's regional office.

                                        2
<PAGE>

The  Company's  entry  into  the oil and gas  business  came  from  its  initial
acquisition of majority  working  interests in properties  consisting of oil and
gas leases,  wells, and equipment containing proven developed reserves producing
oil in Young County, Olney, Texas.  Additionally,  the Company owns interests in
two unproven oil and gas leases located in Runnells County Texas (see additional
discussion in following  section on "Business",  under sub heading  "Current Oil
and Gas  Operations").  The  Company is not yet set up for or engaged in natural
gas production.

On October 26, 2000 Article 3 of the Articles of  Incorporation  were amended to
increase the number of authorized  common shares to 200,000,000  par value $.001
and to  authorize  50,000,000  preferred  shares with a par value of $.001.  The
Company  increased its  authorized  common  shares to facilitate  and have ample
reserve of shares in its treasury on hand and available for future transactions.
The Company  initially  has created  three series of  preferred  shares to allow
flexibility in structuring transactions.

On October 30,  2000 the Company  entered  into a purchase  agreement  with Life
Energy  Technology   Holdings,   Ltd.  of  Ireland.   The  transaction  was  not
consummated.

The Company pursued a purchase agreement with Calmon Enterprises, Inc., of Texas
that was not consummated.

The Company is required to file a registration  statement for certain securities
under the terms of various  agreements or the Company will lose various  rights.
See  "Business  Risks"  and  "Recent  Sales  of  Unregistered   Securities"  for
additional discussion.

RECENT DEVELOPMENTS:
--------------------

Since December 31, 2000 the Company has been focused on obtaining  prospects for
the  exploration  and  development  of oil and gas with  emphasis  on  acquiring
existing production with proven reserves, and continuing operations and planning
for potential  development  of its current  producing  oil  properties in Olney,
Young County, Texas.

Effective on March 14, 2003 the Company's  stock moved from its quotation on the
pink sheets to additional  quotation on the Electronic  Bulletin Board quotation
medium  system as noticed on the OTCBB  Daily  List.  The  Company is  currently
dually quoted on the Pink Sheets and the OTC Bulletin Board.

As discussed in, and to update our Form Year 2001 10-KSB/A3 filing,  the Company
retained  ARBOC,  LC  ("ARBOC") of Florida for cash payment in the amount of USD
$10,000 in December 2001 as a financial  consultant  to assist with  structuring
and financing presentations,  and to secure funding for the Company. On February
2, 2002 comprehensive  Company due diligence  materials were sent at the written
request of ARBOC for their review and  structuring  analysis.  Initial  feedback
from ARBOC was indicated  positive.  Various  revisions  were discussed and made
available  during 2002 by the Company.  As of August 5, 2002 ARBOC  notified the
Company that we are still  considered  an open  project,  and had  continued the
search for funding.  The Company has not received  further  communications  from
ARBOC through and up to the present date of this filing.

                                       3
<PAGE>

As of  February  2003 Mr.  William  V.  Harlow  Jr.  has left the  Company as an
advisory  board post  member to pursue  other  commitments  with  respect to his
business  activities  (see also "The  Business"  section,  sub  heading  "Future
Planned Oil and Gas Operations").

The Company  continues its  negotiations to acquire all or a partial interest in
land and a building  presently  owned by Elder  Care  Services,  Inc.,  which is
located in the City of Laurinburg,  Scotland County, North Carolina.  One of the
principals of Elder Care Services, Inc., Mr. Robert Dultz, is also a shareholder
of the Company,  owning less than 5% of the  outstanding  stock.  The Company is
assisting  Elder  Care  Services,  Inc.  in  obtaining  a bridge  loan  prior to
obtaining  construction  financing to develop the  property  either under HUD or
conventional  guidelines.  If the bridge  loan,  now  revised  to  approximately
$1,000,000 were obtained,  the Company would receive  approximately  $150,000 to
$200,000  for its  assistance  in the loan  placement,  and  would  use this for
working  capital.  The loan was  expected to close escrow in October  2002,  and
failed to close. The Company has since pursued other lenders, is awaiting a term
sheet,  and various other loan  approvals and  conditions  relevant to potential
funding. The Company's new target date is by end of May 2003.

As discussed in, and to update our prior Form 10-KSB/A3  filing,  the Company is
seeking  financing for  recompletions and the drilling of new wells on our Young
County oil  properties.  We estimate it will initially take between USD $200,000
and $300,000 to begin a work program.  An additional  $350,000 would allow us to
renegotiate  and possibly  payoff or refinance the  Company's  secured note with
Baseline Capital,  Inc., of Texas.  Financing arrangements have been continually
pursued over time, and a firm  commitment  for sufficient  financing has not yet
been  obtained.  We are still working to obtain a suitable firm  commitment  for
actual financing now targeted for the latter part of April or first part of May,
2003.  (see  additional  discussion in "Description of Properties" and liquidity
and Capital Resources" section).

The Company operates in a highly competitive industry wherein many companies are
competing for the same finite resources as the Company.

THE BUSINESS
------------

The Company's  initial  revenue  stream came from the  acquisition  of Producers
Supply,  Inc.,  a wholly owned  subsidiary  of the Company  which was  effective
August 25, 1999.

The  Company has  focused  its  efforts  over the past three years in  acquiring
proved producing oil and gas properties  (including leases, wells, and equipment
having current  production and potential for additional  development) from other
companies.  We have  also  been  prospecting,  gathering  data  and  facts,  for
potential acquisition of staffed or unstaffed oil and gas company interests on a
100% or majority basis.  Presently,  the Company owns and operates, by contract,
10 wells of which 9 wells are currently producing oil in Young County, Texas.

The Company has further been  prospecting  for the potential  acquisition of new
oil and gas leases, gathering data and reports, for the purpose of exploring for
oil and gas.  Leases  have  also  been  acquired  over the past 3 years  for the
purpose  of  potential  future  development  or  resale  to  other  oil  and gas
companies.

                                       4
<PAGE>

Current Operations of Producers Supply
---------------------------------------

Producers Supply,  Inc.  ("Producers  Supply") has been in the oil and gas field
inventory and supply business serving southern Arkansas and the surrounding area
since 1974.  Producers  Supply,  Inc.  owns and  maintains  a 5,000  square foot
building, and adjacent facilities which house the Company's inventory of oil and
gas field equipment,  parts, and supplies,  and serve as the Company's  regional
office.

Producers  Supply  provides oil and gas well  services to  customers,  and sells
supplies such as rods and tubing for wells and pumping units.  From inventory on
hand it usually can replace  specialized  parts and  equipment as  required,  or
provide for the ordering of such required  parts as may be needed for workovers,
repairs,  and general maintenance.  Additionally,  it can provide mobile pulling
unit  services.  The pulling  unit  available  on hand in  inventory is portable
mobile rig with mast that pulls mechanical equipment,  such as rods, tubing, and
pumps from a well when repairs are necessary.  Sub contracted  services can also
be provided for tubing and casing swabbing of wells.

Additional services supplied by Producers Supply,  Inc.,  available for a fee to
its  customers  include  but are not  limited to:  drilling  and  implementation
programs;  sub-contract and crewing;  completions and remedial work;  design and
engineering reports; surveys and mapping;  consulting on leases; pipe line title
evaluation;  maintenance  and  support.  Producers  Supply  sells the Moyno Pump
system. This pump is built to better withstand processing of fluids (oil) having
a higher sand content.

Its  President and  principal  manager for the store  oversee the  operations of
Producers  Supply.  Minimized  operations  help keep costs and  overages in line
until the Company is prepared to begin expanding its business  operations in the
area.

Competition: The market for the products and services Producers Supply offers is
competitive  and  requires  substantial  resources  and skilled and  experienced
personnel.  The Company believes that the principal  competitive factors in this
market include the ability to deliver quality  products and services in a timely
manner at a fair price.  On the basis of these  factors,  the  Company  believes
Producers Supply can compete favorably with its competitors. Several competitors
are larger  companies  that have greater  financial,  technical,  and  marketing
resources.  In  addition,  there are  relatively  few barriers to entry into the
markets in which it operates.  As a result,  any organization  that has adequate
financial  resources and access to technical  expertise may become a competitor.
Competition  in Producers  Supply's area of business is directly  related to oil
and gas prices. Economic, political and environmental forces also play a role in
the degree of competition Producers Supply faces.

Customer  Base:  Producers  Supply is dependent on a relatively  small number of
independent  oil  producers;  these oil producers are both small and medium size
companies that are predominantly located within 100 miles of the supply store.

Suppliers:  The Company's  operations relative to Producers Supply do not depend
upon any single supplier.  Because it has multiple sources of supply, it has not
experienced   difficulties   in   obtaining   adequate   material  and  adequate
alternatives to satisfy customers.

                                       5
<PAGE>

Future Operations of Producers Supply
--------------------------------------

In order to  potentially  increase one area of revenue  output for operations of
Producers  Supply,  the Company is taking  steps to provide  initially  an inter
company line of credit to be available for its  operations.  This line of credit
is  contingent  upon  the  Company  receiving  adequate  funding.  (see  further
discussion in "Liquidity and Capital Resources" section). This would be used for
1)  wholesale  purchase  and retail sale to  customers of items such as rods and
tubing and 2) the hiring of operations and repair  personnel.  The oil wells and
operations in the area are subject to sand,  which burdens pumps. If the Company
should be delayed or fail to provide  Producers  Supply a line of credit it will
not  substantially  alter  its  business  plan,  but  shall  not be able to take
advantage of some of the recurring revenue potential available to it, due to the
renewed or continuing interest in the energy sector.

Current Oil and Gas Operations
-------------------------------

Our entry into the oil and gas business and the initial  production of oil began
on September 29, 2000 and came from the acquisition of an 87.5% working interest
and corresponding net revenue interest in oil and gas properties  comprised of 6
leases,  equipment, 2 salt water disposal wells, oil purchase contracts, and all
other associated  interests in 10 operating oil wells.  The Company's  interests
are  located  in  Olney,  Young  County,  Texas  ("Olney  Interests").  Prior to
acquisition of these interests, the Company had obtained two third party reports
to verify reserve estimates, lifting cost averages per barrel, rates of decline,
and other  factors.  A later  report  from  Russell  K. Hall and  Associates  of
Midland,  Texas was required for  verification  in order to obtain the financing
the Company received from Baseline Capital, Inc. We are presently not engaged in
the  production of natural gas, but may develop this in the future.  As of March
31, 2003 our current working interests for these properties are 87.5% along with
corresponding  net revenue  interest  (please see  SECTION 2 -  "Description  of
Properties" first discussion and table under heading).

The Olney interests were acquired from Rogers Drilling Company (Rogers) in Olney
Texas.  Initially Crown Quest Operating Company operated the properties  through
approximately  April 4, 2001.  Rogers Drilling  Company then resumed  operations
until  March 2002.  From March 2002  forward  Crown  Quest/BC  Operations,  Inc.
operates the leases, equipment, wells and reserve interests for the Company on a
month-to-month contract basis. Crown Quest/BC Operations, Inc. is experienced in
the area with staff  available  for  oversight  and  monitoring of the Company's
interests.  Crown Quest/BC Operating, Inc. utilizes a pumper operator located in
and familiar with the area and the Company's oil  interests.  Baseline  Capital,
Inc. in Midland Texas administrates  monthly activities  including the Company's
lock  box  for  oil  production  income,   issuing  monthly  note,   management,
consulting, and lease operating expense payments, collecting and compiling.

The Company originally reported in May and June of 2000 its participation in the
attempted  completion of one development  well. The one well was a dry hole. The
well was located in Runnels  County,  Texas and the Company  owned a 29.3333335%
working interest in the well. The Company  consequently  owns this same minority
interest in an unproved 257 acres on two leases held for development,  including


                                       6
<PAGE>

associated  interests  in all  equipment  and  fixtures  located  on or  used in
connection  with the  leases on a  well-to-well  basis.  The two leases are both
located in Runnels County,  Texas.  The leases were believed to contain reserves
of oil and gas, and we have not attributed proved reserves to these leases.  The
Company had been  attempting  to sell its  interests to industry  partners or to
develop  them,  and now will continue to do so from time to time. As of December
31, 2001 the Company has expensed these items.

Competition:  The  oil  and  gas  industry  is  highly  competitive.  As  a  new
Independent  producer  entering the oil and gas  business,  the Company will not
initially  own, and may never own,  any refining or retail  outlets and may have
little control over the price it will receive for crude oil  production.  Higher
costs,  fees and taxes assessed at the producer  level may become  prevalent and
will  not  necessarily  be  able to be  passed  on to the  Company's  customers.
Although  management has established  relationships in its proposed  acquisition
activities,  significant  competition  by individual  producers and operators or
major oil company's exist.  Integrated and independent  companies and individual
producers and operators are active bidders for desirable oil and gas properties.
Many of these competitors have greater financial  resources than the Company has
now or will have in the near future.

Customers/Delivery Commitments: The Company presently sells and receives monthly
payment for its  production of oil in Young County,  Texas by its division order
with  Conoco,  Inc.  The Company  believes  that there would be other  customers
available willing to purchase its oil production when its current contract ends.
By  division  order,  Conoco  Inc.  purchases  all of the  Company's  crude  oil
pertaining to its interests owned based on a month- to-month contract, which can
be terminated  upon thirty (30) days notice by either party. A division order is
a contract  for the sale of oil, by the holder of a revenue  interest in well or
property,  to the purchaser.  It lists the names of revenue interest owners of a
producible  oil well or wells,  along with the  respective  share of  production
revenues,  and directs the  purchaser to  distribute  the proceeds of production
sales,  accordingly.  The Company has no commitment that obligates us to produce
any set  amount  of oil (see  also  "Management's  Discussion  and  Analysis  of
Financial Condition, and Plan of Operation", and "Description of properties").

Future Planned Oil and Gas Operations
-------------------------------------

The Company's  entry and eventual  stability in the oil and gas business will be
dependent  largely on our ability to acquire  significant  financing  amounts to
carry out and implement these plans (see  "Management  Discussion and Analysis",
and "Liquidity and Capital Resources" sections).

The Company is presently in different stages of review and discussion, gathering
data and information,  and any available reports on other potential acquisitions
in Texas, Oklahoma, Arkansas, California, and other areas.

We are  additionally  engaged in  establishing  and planning for  organizing new
subsidiary operations.  Though not yet operational Oil & Gas One, Inc., is being
formed to be utilized for the purpose of managing and operating planned Arkansas
and surrounding  area  acquisitions of oil and gas leases,  producing  reserves,
exploration, development, and drilling programs.

                                       7
<PAGE>

Projects have been  identified  having  potential for development of oil and gas
reserves  available  for its  planned  initial  Oil and Gas 1,  Inc.  subsidiary
operations. One such initial project is located in the Stephens Field, Ouachita,
and  Columbia  Counties,  Arkansas.  One of the  opportunities  of interest is a
potential  test  drilling  Program to develop 6 wells in the  southern  Arkansas
Nacatoch Sand at depths of 1600 to 6,000 feet. Nacatoch sands are located in the
core operating area of Producers Supply,  which can provide the services for the
test  development.  Presently  the Company  does not hold any  interests  in the
Nacatoch Sand. Mr. Wilson,  director and President of Producers Supply, Inc. has
worked  many years in the region and  directly  associated  with the oil and gas
business,  can provide review and  identification of oil and gas leases for sale
available for potential  acquisition  by the Company based on where oil is being
found.  The  costs  indicated  for  such  an  initial  6  well  test  would  run
approximately  $ 527,000 and  estimates  include for  acquisition  of leases and
interests, rig, crewing, permits, title, and legal. Upon a successful first test
effort,  a multiple 6 to 12 well  drilling  program  could be considered in this
area for ongoing stages of additional  development by the Company. Older reserve
reports and studies,  that would need to be updated,  indicate that the Nacatoch
Sand has  historically  produced  long life  reserves with revenues for 20 to 30
years.

Regulations, Arkansas: Any oil undertaking within the State of Arkansas requires
obtaining  the  necessary  permits and  approvals  from the Arkansas Oil and Gas
Commission.  Once a lease is obtained,  an operator's  agreement must be on file
with  the  Commission.   In  addition  federal   regulations   governed  by  the
Environmental   Protection   Agency  must  be  strictly  followed  (see  further
discussion  addressing the regulatory  environment  governing oil & gas drilling
and production  found under "Business Risks"  "Regulation").  The Company is not
involved with obtaining any permits in Arkansas at this time.

The  Company  prior  reported  status  of a letter  of  intent  with The  Harlow
Corporation,  an oil and gas concern,  with administrative  offices in Amarillo,
Texas, and district operations office in Sayre,  Oklahoma.  The letter of intent
twice verbally  extended,  expired on or about July 30, 2001. Upon its last Form
10KSB/A3 filed on 10/04/2002,  the Company indicated this project unlikely to be
completed unless finances were arranged. As of February 2003 Mr. Harlow has left
the Company to pursue other commitments with respect to his business activities.
In  addition,  to update a Company  press  release of March 28,  2001  regarding
potential efforts in Australia with Harlow Australia Pty. Ltd.: we have no final
arrangement and the letter of intent has expired.

As to reference a Company press release of March 28, 2001 and later  reported as
an update its previous  filing on our Year 2001 Form  10-KSB/A:  with respect to
potential  projects  in the  Republic  of  Kazakhstan  we  have  terminated  all
involvement.

On October 30,  2000 the Company  entered  into a Purchase  Agreement  with Life
Energy  Technology  Holdings,  Ltd.  of Ireland in which Life  Energy  agreed to
acquire in accordance with the agreement, 49% of the then issued and outstanding
shares for  $20,000,000  investment  in the  Company.  The  agreement  was never
consummated.  Scheduled  payments  under the  agreement  were to be made by Life
Energy on a quarterly  basis  beginning  December  31, 2000 and  continue  for 3
years.  Life Energy  breached the Agreement and failed to provide funds.  In its


                                       8
<PAGE>

March 28, 2001 press release the Company  indicated it was working together with
Life Energy by identifying  certain oil and gas, and other related prospects for
acquisition by the Company.  Prior to the press release,  Life Energy had agreed
to promptly schedule a meeting with the Company in Scottsdale,  Arizona and move
forward.  The purpose of the meeting  was to resolve  all issues  regarding  the
consummation of scheduled  funding and discuss the Company's  acquisition of the
proposed  assets  sent to Life  Energy  for their  review.  It was on this basis
proposed  for the meeting and agenda,  to not hold Life Energy in  violation  or
breach of the agreement,  and that Life Energy's performance was merely pending.
The Company did not receive any  indication  for scheduling the meeting due upon
its last press release.  The Company having no substantial  correspondence since
will move to terminate this arrangement.

On October 30, 2000 the Company  pursued a purchase  agreement to acquire all of
the  Hull  Silk  field  equipment,  technology  licenses,  and  certain  related
liabilities of Calmon Enterprises,  Inc. The Agreement terminated, and was never
consummated.

The  Company  is  dependent  in its  early  stages  primarily  on its  obtaining
significant  first  financing for furthering the  commencement  of its phase one
acquisition  and  development  program (see also section  "Liquidity and Capital
Resources").

Phase One Acquisition and Development:
--------------------------------------

The commencement of our phase-one  acquisition and development  program began in
part with the acquisition of the Company's  interests in the producing oil wells
in Young County, Texas. We have been focused on building an initial platform and
infrastructure  for our future growth.  We were slowed down in our 2001 and 2002
attempts for financing and growth activities in part due to prevailing  economic
conditions,  and  declines  in oil  prices.  Part  of our  plan  is to  start  a
test-drilling  program and expand the supply  operations in Arkansas.  Our plans
include  development of potential  natural gas wells, and to further develop our
Young County  interests.  The projects can be activated at present,  one or all,
and not necessarily in any required order but depend on availability  and timing
of  capital.  The  Company  has been  actively  presenting  for  bank  financing
attempting  to structure  potential  acquisitions  for  producing  oil and a gas
interests,  seeking working  capital  through  potential real estate asset based
type loans,  and  discussing  one or more of the  available  opportunities  with
potential working interest partners we speak with from time to time. The Company
also has  interest in  securing a future  private  placement  or offering of its
equity to finance some or all of its proposed operations. The Company may reduce
or increase its requirement as circumstances dictate.

The  Company's  efforts to obtain  capital  have and will be  dependent  on many
factors including timing, the stock market in general, oil and gas prices, media
news, OPEC  announcements,  timing,  and suitable and continued  availability of
acquisitions viable for the present stage of the Company's activities. An equity
purchase  arrangement for acquiring producing oil and gas interests would be one
of the best means to provide  for  increased  cash flow and also  conversion  of
debt.  There is no  assurance  or  guarantee  that the  Company  will be able to
attract and consummate  additional debt or equity funding for the development of
its phase one  acquisition  and  development  plans, or that if it obtained such
debt or equity funds that its expectations  would ultimately  result in positive
cash flow operations and increased equity to the Company and its shareholders.

                                       9
<PAGE>

Successful  negotiations  for  acquisitions,  confidentiality,  timing  and  the
Company's financial  capabilities will play a significant role in any success of
both  current  and  future  operations  for the  Company  activities,  including
existing subsidiary and planned subsidiary operations.

From  time to time  Management  will  examine  oil and gas  operations  in other
geographical areas for potential acquisition and joint venture development.

SALES AND MARKETABILITY
-----------------------

The marketability of the Company's crude oil has not posed a problem.  Crude oil
can be easily sold, wherever it is produced,  in the states the Company operates
in, subject to the  transportation  costs. The crude oil produced by the Company
is transported  by truck and in the future may be  transported by pipeline.  The
Company does not yet produce  natural  gas.  The Company is  presently  pursuing
potential acquisitions for natural gas production and in some of the areas there
are gas gathering systems and pipelines available.

The Company will evaluate  strategies to improve upon  performance in year 2003.
The  Company's  plans  presently  are to  further  build  its  Producers  Supply
clientele base by attempting to structure  development  projects in the southern
Arkansas core area of operation.  The Company will require  significant  capital
infusion and success in  marketing  certain  available  project  interests.  The
Company  may need a line of credit  sufficient  for  development  and to provide
needed  staffing and marketing  necessary to implement  potential  growth of its
operation (see earlier "business discussions" and "future plans" segment).

BUSINESS RISKS
--------------

Production  Risks:  All of the  Company's  proposed oil and gas  activities  are
subject to the risks normally  incident to the exploration  for, and development
and production of, natural gas and crude oil. These include, but are not limited
to, blowouts,  cratering and fires, each of which could result in damage to life
and property. In accordance with customary industry practices, the Company plans
to maintain future insurance for its proposed  operations  against some, but not
all, of the risks.  Losses and liabilities arising from such events could reduce
revenues  and  increase  costs to the  Company  to the  extent  not  covered  by
insurance.

Development  Stage  Company and New Business  Activities:  Due to the  Company's
limited  operating  history,  it is a  development  stage  company  and  will be
difficult to predict accurately future revenues.  This may result in one or more
future  quarters  where  the  Company's  financial  results  may fall  below the
expectation of management and investors.  However firmly  management may believe
in its prospects,  the Company could fail. Operating results may vary, depending
upon a number of  factors,  many of which are  outside  the  Company's  control.
Material  factors  expected to impact the Company's  operating  results include,
decline and stabilization of oil and gas prices at an unprofitable  level, legal
costs  associated with  registration  of options and other filing  requirements,
expansion  activities,  increased  interest  and  expenses  for  borrowings  and
possible  hiring  of  additional  full time  employees.  Every  investor  should


                                       10
<PAGE>

evaluate  the  risks,   uncertainties,   expenses  and  difficulties  frequently
encountered  by  companies  in the  early  stage  of  development,  particularly
companies in the oil and gas industry. The past performance of Energy Producers,
Inc. cannot be used to predict the future performance of the Company.

Lack of Experience:  Almost all of the Management team joined Energy  Producers,
Inc. in 1999.  Most of the Company's  Management  lacks  technical  training and
experience in the oil and gas industry and certain of our Management only devote
a small percentage of their time to Company business.  This lack of training and
experience and less than full time effort will probably cause management to miss
opportunities that more experienced  managers would recognize and take advantage
of. With no direct training or experience in these areas, our Management may not
be fully aware of many of the specific  requirements  related to working in this
industry.  Management's  decisions  and choices may not be well  thought out and
operations and earnings and ultimate  financial  success may suffer  irreparable
harm.  Additionally,  many of  these  individuals  have  not  previously  worked
together.  If senior executives and managers are unable to work effectively as a
team, business operations could be considerably disrupted.

Operating  Losses:  The Company  expects to incur increased  operating  expenses
during the next year.  The  amount of net losses and the time  required  for the
Company to reach and sustain profitability are uncertain.  The likelihood of the
Company's  success  must be  considered  in  light  of the  problems,  expenses,
difficulties,  and  delays  frequently  encountered  in  connection  with  a new
business,  including,  but not  limited to  uncertainty  as to  development  and
acquisitions  and the time  required for the  Company's  planned  production  to
become available in the marketplace.  There can be no assurance that the Company
will ever generate  product  revenue or achieve  profitability  at all or on any
substantial  basis. Our net losses through  December 31, 2002 are  approximately
$503,325.

Requirement for Additional Capital: The Company believes that additional debt or
equity financing will be necessary to develop its planned activities through the
next twelve to twenty four months.  However,  no assurance can be given that all
or a  significant  portion  of any debt or equity  financing  will be  arranged,
consummated,  and sold or that  any  changes  in the  Company's  operations  and
expansion  plans  would  not  consume  available  resources  more  rapidly  than
anticipated.  The Company will need substantial funding to support the long-term
expansion,  development, and marketing of its business and subsidiary operations
(see "future plans").

To the extent that the Company's  capital  resources,  including the proceeds of
any offering,  are  insufficient  to meet current or planned  requirements,  the
Company will continue to seek additional funds through equity or debt financing,
collaborative,  or other  arrangements with corporate  partners,  and from other
sources,  which  may have the  effect  of  diluting  the  holdings  of  existing
shareholders.  The Company has no effective or approved current arrangement with
respect to such additional financing that is either secured or finalized at this
time.  Even  though the Company has  existing  prospects  for general or project
financing,  the  outcome  may  change,  be  delayed,  or may not be  conclusive,
therefore  financing is not assured or  guaranteed.  Financing to be potentially
obtained from prospects is not assured or guaranteed until actually  consummated
and financing  actually  provided.  The Company at this date does not anticipate
that  existing  shareholders  will provide any portion of the  Company's  future
financing requirements.

                                       11
<PAGE>

Need for Expansion:  The Company  expects  expansion will be required to address
potential  growth.  This need for expansion will continue to place a significant
strain on the  management  and  financial  resources of the Company.  Failure to
manage growth could disrupt the operations  and  ultimately  prevent the Company
from generating  expected  revenues.  The Company's  business  strategy includes
entering  into business  partnerships  and may include  acquiring  complementary
businesses,  such as,  existing  production or products  such as technology  and
acquisitions  related  to oil  and gas or  other  resources,  oil and gas  field
operations,  and engineering.  Other areas of future operations may include real
estate, land and commercial development,  bio solid waste treatment,  technology
and facilities,  and fuel cell technology. The Company may be unable to complete
suitable  business  partnerships  and  acquisitions on  commercially  reasonable
terms, if at all. Competition could impair the Company's ability to successfully
pursue these aspects of this business strategy.

Business  partnerships or acquisitions could disrupt ongoing business,  distract
management  and  employees  and  increase  expenses.  If the  Company  makes  an
acquisition,  it could face difficulties  assimilating that company's  personnel
and operations. Key personnel of the acquired company may decide not to work for
the Company.  Acquisition of additional  services or technologies  also involves
risk of incompatibility and lack of integration into existing operations. If the
Company  finances the  acquisitions  by issuing  equity  securities,  this could
dilute existing stockholders  positions.  Additionally,  funding instruments may
have  rights,  preferences  or  privileges  senior  to  those  of the  Company's
stockholders.

No Financial  Data: As a result of its limited  operating  history,  the Company
does not have  historical  financial  data upon which to forecast  revenues  and
results of  operation.  The actual effect of these factors on the price of stock
will be  difficult  to  assess.  Results  of  operation  may fall well below the
expectations  of  securities  analysts and  investors,  and the trading price of
common stock may drop.

Estimating Inaccuracies: There are numerous uncertainties inherent in estimating
quantities of proven  reserves and in projecting  future rates of production and
timing of development expenditures, including many factors beyond the control of
the  Company.   Reserve  engineering  is  a  subjective  process  of  estimating
underground  accumulations of crude oil, condensate and natural gas liquids that
cannot be measured in an exact manner. The accuracy of any reserve estimate is a
function of the amount and  quality of data and of  engineering  and  geological
interpretation.  Estimates of  different  engineers  vary.  Results of drilling,
testing and  production  after the date of an estimate  may justify  revision of
such  estimate.  Reserve  estimates  are  often  different  from the  quantities
ultimately recovered including the continual  possibility of failure to find oil
or gas and the drilling of a dry hole, and  concentrations  of oil in unexpected
differing amounts on certain holes or targets drilled.

Declining Reserves:  Volumes of proposed oil and gas acquisitions by the Company
will decline as reserves are depleted.  Reserve  volumes  generated  from future
activities  of the  Company  are highly  dependent  upon the level of success in
acquiring or finding additional reserves.

                                       12
<PAGE>

Key Officers Services Provided By Outside  Consulting Firms:  Individual outside
consulting  firms owned by three of our key  officers  Mel Herzog,  Chairman and
CEO,  Dennis R.  Alexander,  President  and  Director,  and  Melvena  Alexander,
Secretary and  Comptroller  manage the business of the Company.  The loss of the
services of any key individual  could be  detrimental to the  development of the
Company's  business  and could  adversely  affect the  conduct of the  Company's
business.  The Company may hire future  employees not provided  through  outside
consulting  firms,  and  depend  on their  services,  the  loss of which  may be
detrimental  to the  development of the Company's  business and could  adversely
affect the conduct of our  business.  While it intends to do so, the Company has
not yet applied  for key-man  life  insurance  and the Company has not  obtained
insurance  covering the possibility  that any of its key officers and management
personnel  might become  disabled or otherwise  unable to render services to the
Company.  The  success of the  Company  is also  dependent  upon its  ability to
attract,  contract with and retain highly  qualified  technical,  managerial and
marketing personnel. The Company faces competition for such personnel from other
companies,  many of which have significantly greater resources than the Company.
There can be no  assurance  that the Company  will be able to recruit and retain
such personnel.

Regulation:  The Company will be subject to regulation by numerous  governmental
authorities.  The Company and its  proposed  operations  are subject to federal,
state and local laws,  regulations and ordinances relating to the production and
sale of oil and gas. Some of the laws that the Company is subject to include the
Clean Air Act, the Clean Water Act, and  Endangered  Species Act. Other laws and
regulations include laws governing allowable rates of production,  well spacing,
air emissions, water discharges, marketing, pricing, taxes, and use restrictions
and other laws relating to the petroleum industry. For example, coal bed methane
wells are being  highly  regulated  for  disposing  produced  fresh water on the
surface. The EPA is requiring that the fresh water meet more stringent standards
than before,  and can require the water be injected  underground making drilling
these  wells  potentially   uneconomical.   As  another  example,   Governmental
regulation may delay drilling in areas that have endangered species.  Therefore,
if the  Company  were  to  undertake  a  drilling  program  in such an area by a
proposed  development  project in the future,  no assurance  could be given that
such delays  would not become more  expensive.  Regulations  may have a negative
financial impact on us depending on the compliance costs.

Any  failure to  obtain,  or delays in  obtaining  regulatory  approvals  by the
Company and or its  operators  could  delay or  adversely  affect the  Company's
ability  to  generate   revenues.   These  laws  and  regulations  could  impose
substantial  liabilities for the Company if it fails to comply.  Further,  there
can be no assurance that the Company through its contract operators will be able
to obtain necessary  regulatory  approvals if these are necessary for any if its
future  activities  including  those which may become  proposed  for the further
development of oil and gas.  Although the Company does not  anticipate  problems
satisfying  any of the  regulations  involved,  the Company  cannot  foresee the
possibility of new regulations, which could adversely affect the business of the
Company.

Environmental   regulations  and  taxes  imposed  by  state   governments  in  a
jurisdiction  wherein oil and gas  properties are located impose a burden on the
cost of production.  Of the gross production revenues,  severance and ad valorem
taxes in Texas for oil and gas amount to approximately  4.5-7%, in Arkansas they
amount to approximately 4-6%.

                                       13
<PAGE>

Environmental  requirements  do  have  a  substantial  impact  upon  the  energy
industry.  Generally,  these  requirements  do not appear to affect the proposed
Company  operations any  differently,  or to any greater or lesser extent,  than
other companies in the domestic  industry as a whole. The Company will establish
policies and procedures for compliance with  environmental  laws and regulations
affecting its proposed  operations.  The Company  believes that  compliance with
environmental  laws and regulations  will not have a material  adverse effect on
the Company's  operations or financial  condition.  There can be no  assurances,
however,  that  changes in or  additions to laws or  regulations  regarding  the
protection  of the  environment  will not have such an impact in the future.  At
this time no regulatory or additional regulatory approvals are necessary and, to
the best  knowledge of the officers,  we have complied with all laws,  rules and
regulations.

Officers And Directors Beneficially Own 69.70% Majority Of Shares: The executive
officers and directors of the Company  currently  beneficially own approximately
69.70% of the  outstanding  Common Stock  representing a majority.  Accordingly,
such persons will effectively  control the Board of Directors of the Company and
will direct the affairs of the Company.

Penny  Stock  As A Risk;  Definition  And Rule  Reference:  The  Securities  and
Exchange  Commission  has adopted Rule 3a51-1 of General Rules and  Regulations,
Promulgated under the Securities and Exchange Act of 1934, which established the
definition of a "penny stock", for the purposes relevant to the Company,  as any
equity security that has a market price of less than $5.00 per share, or with an
exercise price of less than $5.00 per share, subject to certain exceptions.  For
any transaction  involving a penny stock, unless exempt, the rules require:  (i)
that  broker or dealer  approve a person's  account  for  transactions  in penny
stocks;  and,  (ii) the  broker or dealer  receive  from the  investor a written
agreement to the transaction, setting for the identity and quantity of the penny
stock to be purchased.

OBLIGATIONS AND CONTINGENCIES
-----------------------------

The Company is liable for future  restoration and abandonment  costs  associated
with its oil and gas properties. These costs include future site restoration and
plugging costs of wells.  The cost of future  abandonment of producing wells has
not been  determined.  Management  believes  that  these  costs  will not have a
material adverse effect upon its financial position or results of operations.

OTHER
-----

The Company presently does not retain any employees. Individual consulting firms
owned by three key officers manage the day-to-day operations of our Company full
time.  The Company is not in the  position  to afford to make  salary  payments.
Three other directors,  two of which are officers of the Company,  assist us and
are  available  as required  for no charge.  The third is an  executive  officer
supervising  our subsidiary  operations in Arkansas on a contract basis. We also
have three advisors; one assists the executive officers on a contract basis; the
other two advisors  assist us with project  evaluations.  The Company intends to
hire  several  full time  employees  if we receive  funds which  include;  chief
communications officer; investor relations; vice president;  operations officer;
financial officer;  oil and gas operator pumper  supervisor.  Future performance
will be  substantially  dependent on the continued  services of management at no

                                       14
<PAGE>

cost and the ability to retain and  motivate  them.  The loss of the services of
any officers or senior managers could affect  activities of our business and its
operations  until  additional  personnel  can be retained and trained to perform
some of the  management  tasks.  At the present  time the Company  does not have
long-term employment agreements with any key personnel and does not maintain any
life insurance policies.

All of the  company's  revenues  during the last fiscal year were  derived  from
domestic sources.

ITEM 2 - DESCRIPTION OF PROPERTY
--------------------------------

The Company owns an interest in 10 oil wells located in Young County,  Texas,  9
of which are currently producing.

The Company  attempts to maintain  all of its  operating  wells in good  working
condition. Our contract operator,  familiar with the oil and gas business in the
area contracts pumpers to oversee wells and interests owned by the Company.

The Young  County  Texas  wells,  properties  and  interests  are secured by the
Company's loan and note agreement held by Baseline Capital, Inc., and additional
notes and security interests.  All liens and encumbrances are discussed later in
this section.

The Company  owns a majority  working  and net  revenue  interest in oil and gas
properties,  which  includes  six  leases,  equipment,  oil wells and salt water
disposal  wells  (swd)  set up for  production  of  these  interests  in  proved
developed producing oil reserves, with revenues. The following table details the
interests of the Company.

<TABLE>
<CAPTION>
Lease Name                 Well Names       County     Working       Net Revenue
                           Under Leases                Interest(%)   Interest(%)
-----------                ----------       -------    -----------   -----------
<S>                        <C>              <C>        <C>           <C>
Griffin                                     Young      87.5          68.359370
                           Griffin #1       Young      87.5          68.359370
                           Griffin #2(SWD)  Young      87.5          68.359370
K-W Unit                                    Young      87.5          69.692910
                           K-W Unit         Young      87.5          69.692910
McClatchy "B"                               Young      87.5          71.750000
                           McClatchy B      Young      87.5          71.750000
Weichman (Deep)                             Young      87.5          70.000000
                           Weichman#1       Young      87.5          70.000000
Wiechman (Shallow)                          Young      87.5          70.000020
                           Wiechman#2       Young      87.5          70.000020
                           Wiechman#4       Young      87.5          70.000020
                           Wiechman#5       Young      87.5          70.000020
                           Wiechman#8       Young      87.5          70.000020
                           Wiechman#10      Young      87.5          70.000020
Wiechman "B"                                Young      87.5          70.000000
                           Wiechman B       Young      87.5          70.000000
                           Wiechman (SWD)   Young      87.5          70.000000
</TABLE>

                                       15
<PAGE>

A working interest means the percentage of the operating,  drilling,  completing
and  reworking  costs  that the  Company is  required  to pay.  The net  revenue
interest is the  percentage of the revenues  that the Company  receives from the
sale of oil that is produced from the wells.

A mineral  interest is the ownership of rights to gas, oil, or other minerals as
they  naturally  occur in  place,  at or below the  surface  of a tract of land.
Ownership of the minerals  carries with it the right to make such reasonable use
of the surface as may be necessary to explore for and produce the minerals. Only
the mineral  owner (or fee owner) may execute an oil or gas lease  conveying his
interest  in a tract of land.  Severance:  The owner of all rights to a tract of
land (vertically or horizontally).  In horizontal severance,  for example, if he
chooses to sell all or part of the  mineral  rights,  two  distinct  estates are
created:  the surface  rights to the tract of land and the mineral rights to the
same  tract.  The two  estates  may change  hands  independently  of each other.
Severed  minerals  rights may be  restricted  as to mineral  type, or limited by
depth,  (in which case the landowner  retains the rights to minerals  other than
those severed, and to depth intervals other than those severed.)

The Black Family  Partnership,  Ltd. owns the remaining one eighth (1/8) working
interests in the various properties,  including the leases, equipment,  operated
wells, and associated contracts, listed above.

The Company's re-completed Weichman #1 deep well and is reported by our operator
to be producing oil in the Caddo  Formation and  casinghead  gas, which is being
vented off.  Casinghead  Gas is natural gas produced  along with oil from an oil
well (as  distinguished  from gas  produced  from a gas well).  Casing  head gas
pressure can reduce fluid production, and limit the economic life of some wells.
If gas pressure is reduced by venting off, oil  production  (measured in barrels
of oil per day, BOPD),  will increase.  This results in increased revenue to the
Company  aiding the economics of keeping the oil well on production for a longer
period  of time at a higher  profit  margin.  As  facilities  are not  presently
available in the area where this well is located, gas production is uneconomical
at the present  time.  The Company  may in the future  look into  employing  new
technology  and or other  effective  measures  or methods to be taken to improve
production of oil in this well.

The table above  represented  is the  Company's  current  interest in the leased
wells and equipment that principally produce our revenues from the production of
oil, and is not all inclusive of our interests in the properties.  The interests
are subject to certain  rights and  limitations of Baseline  Capital,  Inc. that
presently receives at payout (55%) retained back in working interest that can be
exchanged all or part by Baseline Capital,  Inc. and certain Baseline  investors
for certain  options  granted to Baseline  Capital,  Inc. which vest upon payout
with  expiration  three  years  after the  vesting  (see  "Stock  Options"  this
document, and Material Contracts, "Note Agreement with Baseline Capital" that is
filed as an exhibit  to our  amended  Form  10SB/A2,  date of filing  October 1,
2001).

The referenced wells listed above are all located in Young County, Texas.

                                       16
<PAGE>

The Company  attempts to maintain  all of its  operating  wells in good  working
condition. BC Operating,  Inc. of Midland Texas is familiar with the oil and gas
business in the area. BC Operating, Inc. operates the Company's interests in the
properties overseeing  production and maintenance  activities for its oil wells,
equipment and other development activities for the leases.

The Material terms of the Operating Agreement with the Company include:

BC Operating,  Inc. (BC) is an  independent  contractor and operates the subject
properties on a contract basis for a monthly overhead fee of $700.00.  All other
charges  whether  by  BC,  an  affiliate  of BC or  third  parties  will  be the
responsibility  of the working  interest owners of the properties.  Either party
may elect to cancel the agreement upon 30 day written notice to the other party.
Rogers Drilling  Company,  our operator prior to March of 2002, had notified the
Company  in  January  2002  that  they  were  focusing  on new  exploration  and
development. Therefore, operations were turned over to Crown Quest/BC Operating,
Inc.  effective  March of 2002.  Crown  Quest/BC  Operating,  Inc.  continues to
utilize a pumper  operator  used by  Rogers  with such  operating  agreement  on
similar terms.

BC Operations,  Inc.  (current  operator)  furnishes the monthly Lease Operation
Expense and various activity reports to Baseline Capital, Inc. (Baseline) acting
in capacities as Manager and consultant through its principal Karl Reiter.  Both
operator and Baseline  coordinates  with Company  Management  for  oversight and
decision  making on important  items related to the oil  production  activities.
Baseline  administrates the Company's lock box account at First American Bank in
Midland  Texas and  receives  the monthly run checks from  Conoco,  Inc. The run
checks to the Company  represent  monthly payments due for the production of oil
Conoco has received.  Baseline  administrates  monthly activities  including the
Company's lock box for oil production  income,  issuing the monthly note payment
due to Baseline  Capital,  Inc.,  after payment of management,  consulting,  and
lease-operating  expenses  (LOE's),  collecting  and  compiling  Joint  Interest
Billing (JIB) Statements and certain reports and financial statements related to
production income and expenses for monthly delivery to Company's  accounting for
compilation.

The wells listed above are secured and encumbered by notes to Baseline  Capital,
Inc.  and First  American  Bank  that is  internal  to  Baseline  Capital,  Inc.
Additional  liens and  encumbrances  include  Royal Crest,  L.L.C.,  and Bennett
Family Trust. Mr. David J. Kronenberg a Director, and assistant secretary of the
Company,  is related to Royal Crest LLC, as a beneficial  owner, and shareholder
indirectly  through DJ and SM Kronenberg  Limited Liability Limited  Partnership
(LLLP).

The Company paid cash for the interests in the  properties,  leases,  equipment,
wells, etc., borrowing  $1,050,000 from Baseline Capital,  Inc. Monthly payments
payable  to  Baseline  are  the  greater  of  eighty  percent  (80%)  of the net
production  proceeds (from the acquired wells) or $25,000 beginning  December 1,
2000 and continuing  until paid in full. The present note matures March 31, 2004
or sooner  depending  on the amount of each  monthly  payment  made in excess of
$25,000.  The Baseline Capital,  Inc. note agreement contains  provisions for an
"Option  Agreement" and in conjunction with the Baseline  agreements the Company
provided additionally for other various Baseline covered "Option Agreements".
(See  discussion  and  tables  listed   throughout  this  document,   and  under
"Description of Securities" titled "Stock Options" and "Stock Option Grants".)

                                       17
<PAGE>

General Terms for the Royal Crest, LLC note: effective for the period commencing
March 31, 2001; Original principle amount, $342,500,  secured by a deed of trust
on the Young County Properties, with interest rate of 20%, payable interest only
beginning April 30, 2001 and  continuing,  all due and payable May 1, 2003. (See
also section on "Liquidity and Capital  Resources",  "Certain  Relationships and
Related Transactions" and note 17 to the financial statements).

General  terms for the  Bennett  Family  Trust  note:  effective  for the period
commencing June 12, 2001;  Principle amount,  $50,000,  secured by a ucc lien on
the Young County Properties,  with interest rate of 12% per annum, interest only
for the first three months, with $5,000 per month thereafter.  All principal and
interest was due on or before June 12, 2002.

The Company  owns a minority  interest  in an  unproved  257 acres of leases for
development,  including  associated  interests  in all  equipment  and  fixtures
located on or used in connection  with the leases on a well-to-well  basis.  The
two leases are both located in Runnels County, Texas. The leases are believed to
contain reserves of oil and gas. We have not attributed proved reserves to these
leases.  The  Company,  at its  election,  will  attempt to sell its interest to
partners or develop them.

Continued Description of Properties
-----------------------------------

The Company's wholly owned subsidiary  Producers Supply, Inc. owns and maintains
a 5,000 square foot building,  and adjacent facilities which house the oil field
inventory, sales support and regional offices for the Company. Producers Supply,
Inc. is located at 124 South First Street,  Stephens,  Arkansas  71764,  and its
telephone number is (870) 786-5424.

During July 1999,  Mr. Larry Lough,  ASA, ISA,  President of Appraisal  Systems,
Inc.,  was  retained to perform an  appraisal  on the  equipment  and  inventory
located  on the  premises  of  Producers  Supply.  The  primary  purpose  of the
appraisal was to determine a market value of the property belonging to Producers
Supply.  The market value  concept may be described as the likely price within a
price range that a seller of such  property  might  receive or the likely  price
within a price range that a buyer might pay.  Estimating the cost to replace the
property and then  accounting  for any  observed  deterioration,  functional  or
economic obsolescence,  might further determine this value or price. Mr. Lough's
detailed  appraisal  report dated July 16, 1999  indicated a market value of the
inventory held by Producers Supply of $941,000.

During July, 1999, Mr. George P. Betts, MBA, GRI,  Certified General  Appraiser,
CG-0561, Betts Enterprises, was retained to perform an appraisal of the land and
building of the subject  property  commonly known as Producers  Supply,  Inc., a
commercial business in Stephen,  Ouachita County,  Arkansas. The present utility
of the property reported is a petrochemical  industry parts and supply operation
located at 124 South  First  Street in  Stephens.  Producers  Supply,  Inc. is a
wholly owned subsidiary of Energy Producers,  Inc. (the "Company")The  aggregate
property  considered within the appraisal is approximately .36 acres. The retail
space, warehouse,  offices and baths within the appraisal is approximately 5,000
square feet.

                                       18
<PAGE>

The property,  which is the subject of the  appraisal,  is commercial in nature.
The  contiguous  property is comprised of  commercial  utilities  and public use
areas. Other surrounding  property would support the subject property in utility
completely in its present form. No adverse utilities are in place presently that
would have a negative effect on the subject property.

The purpose of the  appraisal is to estimate the market value of the property as
of July 12,  1999.  In  estimating  the  value it has been  necessary  to make a
careful physical inspection, examination, study and analysis of the property.

<TABLE>
<CAPTION>
<S>                                                           <C>
Cost Approach                                                 $34,000
Income Approach                                               $25,500
Market Data Approach                                          $21,500
</TABLE>

EXPLORATION AND PRODUCTION
--------------------------

The Company has participated in the attempted completion of one development well
in  May/June  of 2000.  The one well was a dry  hole.  The well was  located  in
Runnels County,  Texas and the Company owned a 29.3333335%  working  interest in
the well.

The  Company  did not  participate  in the  drilling  of a well or  wells  since
May/June of 2000 through 2002 and to the present date of this filing.

The Company may  participate in the drilling of a well or wells if it is able to
successfully  acquire  attractive oil and gas leases with  substantially  proven
undeveloped  reserves,  a preferred  majority or suitable working interest being
available,  and can obtain or provide  financing  or market an interest on terms
acceptable to the Company.

PROVED RESERVES
---------------

The following table sets forth the estimated total proved  developed  producing,
and total proved  developed  nonproducing  oil  reserves,  net to the  Company's
interest. The reserve information is based on excerpts of the independent report
prepared by Russell K. Hall Texas P.E.  no. 69926 at the request of the Company.
The  reserve   information   presented  evaluates  the  Company's  interests  in
properties located in Young County, Texas operated currently as of March 1, 2003
by Crown Quest Operating.  The following table summarizes  Proved Reserves using
an effective  date of *March 1, 2003 with an oil price of $33.25 per barrel (WTI
posted) for same date. The table does not include Proved  Undeveloped  Reserves.
As per SEC guidelines,  prices and costs remain unescalated  throughout the life
of the  properties.  For each  lease,  oil  prices  were  compared  to  Scurlock
Permian's West Texas Intermediate  posted price.  Differences between historical
prices and this reference price were used to adjust for  transportation,  bonus,
and gravity adjustments.

                                       19
<PAGE>

<TABLE>
                (1) *Present Value of Estimated Future Net Revenues
<CAPTION>
                               Proved           Proved
                               Developed        Developed          Total
                               Producing        Non-Producing      Proved
                               ---------        -------------      ------
<S>                            <C>              <C>                <C>
Reserves (Net)
Oil (bbl)                         37,485          140,618            178,103
Gas (Mcf)                              0                0                  0
Revenue ($)                    1,317,304        4,942,219          6,259,522
Expenses ($)                     454,838          780,514          1,215,352
Investments ($)                        0          110,000            110,000
Future Net Income ($)
        Undiscounted             862,466        4,071,705          4,934,171
        Discounted @ 10%         627,161        1,187,504          1,814,665

</TABLE>

(1)  The  oil  reserves  assigned  to  the  properties  in the  evaluation  were
determined by analyzing current test data,  extrapolating  historical production
data, and comparing  field data with the production  history of similar wells in
the  area.  The  current  volatility  of  oil  prices  provides  an  element  of
uncertainty to any  estimates.  If prices should vary  significantly  from those
projected in the appraisal, the resulting values would change substantially. The
reserve  estimates  contained  in the  engineering  report are based on accepted
engineering and evaluation principles. The present value of estimated future net
revenues,  discounted  at 10%, does not  necessarily  represent an estimate of a
fair market value for the evaluated properties.

There are numerous uncertainties inherent in estimating quantities of proved oil
reserves.  The  estimates  in the  appraisal  are based on  various  assumptions
relating  to rates of  future  production,  timing  and  amount  of  development
expenditures,  oil prices,  and the results of planned  development work. Actual
future  production  rates and  volumes,  revenues,  taxes,  operating  expenses,
development  expenditures,  and quantities of recoverable  oil reserves may vary
substantially  from those assumed in the estimates.  Any  significant  change in
these  assumptions,   including  changes  that  result  from  variances  between
projected and actual  results,  could  materially  and  adversely  affect future
reserve  estimates.  In  addition,  such  reserves may be subject to downward or
upward revision based upon production  history,  results of future  development,
prevailing oil prices, and other factors.

The  actual  amount  of  the  Company's  proved  reserves  is  dependent  on the
prevailing  price for oil,  which is beyond the Company's  control or influence.
World oil prices declined significantly during 1997 and 1998 from previous years
and  increased  significantly  during the 1999 and 2000. In 2001 and 2002 prices
again have been  extremely  volatile.  There can be no assurance that oil prices
will  decline or increase  in the  future.  Oil and gas prices have been and are
likely to continue to be volatile and subject to wide  fluctuations  in response
to any of the following  factors:  relatively minor changes in the supply of and
demand  for  oil  and  gas;   market   uncertainty;   political   conditions  in


                                       20
<PAGE>

international oil producing regions; fear of war, or non fear of war; the extent
of domestic  production and  importation  of oil; the level of consumer  demand;
weather  conditions;  the  competitive  position of oil as a source of energy as
compared with natural gas, coal, nuclear energy,  hydroelectric power, and other
energy sources;  the refining  capacity of prospective oil purchasers;  national
inventory levels;  the effect of federal and state regulation on the production,
transportation  and sale of oil; and other factors,  all of which are beyond the
control or influence of the Company.

WELLS AND ACREAGE
-----------------

In the oil and gas industry and as used herein, the word "gross" well or acre is
a well or acre in which a working  interest is owned;  the number of gross wells
is the total number of wells in which a working  interest is owned. A "net" well
or acre  is  deemed  to  exist  when  the sum of  fractional  ownership  working
interests  in gross wells or acres  equals one. The number of net wells or acres
is the sum of the fractional working interests owned in gross wells or acres.

Set fourth below is information respecting the developed and undeveloped acreage
owned by the Company in Young County and Runnells  County Texas  respectively as
of December 31, 2002.

<TABLE>
<CAPTION>

                Developed      Acreage          Undeveloped       Acreage
                Gross          Net              Gross             Net
                -----          ---              -----             ---
<S>             <C>            <C>              <C>               <C>
Young County    192.5          154               70               56
Runnells Cty      -0-          -0-              257               75
                -----          ---              ---               ---
Total           192.5          154              327               131
</TABLE>

PRODUCTION AND SALE OF OIL AND GAS
----------------------------------

The following table summarizes certain information relating to the Company's net
oil produced from the Company's properties located in Young County, Olney Texas,
after royalties, during the periods indicated.

<TABLE>
<CAPTION>

                                                    Year Ended December 31
                                                       2001       2002
                                                      -------    -------
<S>                                                   <C>        <C>
Average net daily production of oil (Bbl)             37.72      27.96
Average net daily production of gas (MCF)               -0-        -0-
Average sales price of oil ($ per Bbl)                25.16      24.50
Average sales price of gas ($ per MCF)                  -0-        -0-
Average lifting cost ($ per bbl) oil equivalent        4.69       9.29
</TABLE>

                                       21
<PAGE>

ITEM 3 - LEGAL PROCEEDINGS
--------------------------

The Company is not involved in litigation  that would have a material  effect on
the operations of the Company.


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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year ending December 31, 2001.



                                     PART II
                                     -------

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

MARKET PRICE AND DIVIDENDS OF COMPANY
-------------------------------------

The Company  became  available for quotation on the  over-the-counter,  NASD NQB
Pink Sheets  initially  January 20, 2000. As of March 14, 2003 the Company moved
to the  over-the-counter  market NASD OTC Electronic  Bulletin  Board  quotation
medium system, and is presently dually quoted on both Pinks Sheets, and Bulletin
Board. The range of high and low bid information for the shares of the Company's
stock for the last two complete  fiscal  years,  as reported by the OTC Bulletin
Board National  Quotation Bureau, is set forth below. Such quotations  represent
prices between  dealers,  do not include retail markup,  markdown or commission,
and do not represent actual transactions.

<TABLE>
<CAPTION>

<S>                                                 <C>              <C>
Year Ended December 31, 2002                        High             Low
----------------------------                        ----             ---
First Quarter                                       $0.02            $0.02
Second Quarter                                       0.02             0.02
Third Quarter                                        0.02             0.02
Fourth Quarter                                       0.02             0.0005

Year Ended December 31, 2001                        High             Low
----------------------------                        ----             ---
First Quarter                                       $0.36            $0.25
Second Quarter                                       0.25             0.225
Third Quarter                                        0.23             0.025
Fourth Quarter                                       0.05             0.02
</TABLE>

                                       22
<PAGE>

As of December  31,  2002,  the Company  had issued and  outstanding  12,017,812
common shares held by approximately 147 holders of record.

There have been no cash  dividends  declared by the Company since its inception.
Further, there are no restrictions that would limit the Company's ability to pay
dividends  on its common  equity or that would be likely to do so in the future.
At the present time the Company plans to file for  registration  of common stock
reserved for issuance under an initial stock option and payout option  agreement
with Baseline  Capital,  Inc. and related  parties dated September 29, 2000 (see
"Stock  Options").   The  Company  may  become  required  to  file  for  an  SB2
registration  statement  in  accordance  with its  agreement  with  Life  Energy
Technology  Holdings,  Ltd.  and other (see  "Material  Contracts"  "Life Energy
Technology Holdings, Ltd.").

RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------

On August 25, 1999 the Company  through a business  combination,  reorganization
and reverse acquisition  acquired all the outstanding shares of Energy Producers
Group,  Inc.,  and its wholly  owned  subsidiary,  Producers  Supply,  Inc.  The
transaction  was  accomplished  through the issuance of 9,820,835  shares of the
Company's restricted common stock. Five shares of the Company's stock was issued
in exchange for each one share of Energy Producers  Group,  Inc.'s common stock.
The Company in this  process  acquired  all of the shares  representing  100% of
Energy  Producers  Group,  Inc., which included 100% ownership held in Producers
Supply,  Inc. Although Energy Producers Group,  Inc. was the legal acquirer;  it
was dissolved  subsequent to the  transaction,  so Energy  Producers,  Inc. (the
Company) is treated as having acquired Energy Producers Group, Inc. Accordingly,
the  transactions  have been accounted for as a reverse  acquisition  and Energy
Producers,  Inc. and its wholly owned subsidiary  Producers Supply,  Inc. is now
referred to as the Company.  The  historical  financial  statements are those of
Energy  Producers,  Inc., which have been restated for the equivalent  number of
shares received in the transaction.

The results of operation of Energy  Producers  Group,  Inc. (legal acquirer) are
included in the financial  statements of the combined  Energy  Producers  Group,
Inc.  and Energy  Producers,  Inc.  financial  statements  from  August 25, 1999
(acquisition  date). The Company began filing  consolidated  statements with its
wholly owned subsidiary,  Producers Supply,  Inc. on the acquisition date August
25, 1999. The Shares were issued  pursuant to an exception from  registration as
provided in Section 4(2) of the Securities Act of 1933.

The Company issued 10,000 shares of restricted common stock in September 2000 to
William  V.  Harlow  Jr. in  exchange  for a letter of  intent to  purchase  his
business  (Harlow  Corporation).  Mr.  Harlow is a former member of our advisory
board,  a shareholder  and owns The Harlow  Corporation.  The shares were issued
pursuant to an exception  from  registration  as provided in Section 4(2) of the
Securities Act of 1933.

(*)The Company issued 105,000 shares of its common  restricted  stock in January
2001 to the following  persons.  The shares were issued pursuant to an exception
from registration as provided in Section 4(2) of the Securities Act of 1933.

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                                             Fair Market
                               Share                                         Value of
Name                  Date     Amount  Type of Consideration                 Consideration
-----                 ----     ------- ---------------------                 -------------
<S>                   <C>      <C>     <C>                                   <C>
Troy Rogers(1)        9/27/00  10,000  Stock in exchange for a first right
                                       to purchase Young County, Texas oil
                                       properties-leases                      $1,260
Michael Trapp(2)      9/27/00  15,000  Stock as additional consideration for
                                       making a 15,000 cash loan*             $1,890
Thomas J. Richards(3) 9/27/00  30,000  Stock as additional consideration for
                                       making a 30,000 cash loan*             $3,780
Scott Gardner (4)     9/27/00  30,000  Stock as additional consideration for
                                       making a 30,000 cash loan*             $3,780
Scott Gardner (4)     1/18/01  20,000  Stock as additional consideration for
                                       making a cash 20,000 loan*             $2,520
</TABLE>

(*)$75,000  of the  loan  proceeds  was  used to pay the  closing  costs  on the
purchase of the Rogers Property  interests.  The additional $20,000 was used for
working capital.

(1) Troy Rogers of Rogers Drilling Company of Olney,  Young County Texas,  owned
certain properties and a majority of its interests were purchased by the Company
September 29, 2000 (see  "Description of Properties").  The Company must include
and file for a registration of these shares if it has n offering.

(2) In the immediately preceding table above, a $15,000 loan was made by Michael
Trapp who is a  shareholder  of the  Company  and the son of Larry W.  Trapp,  a
shareholder, Director, and Treasurer of the Company.

(3) In the immediately  preceding table above, a $30,000 loan was made by Thomas
J. Richards who is on our advisory board, and a shareholder and beneficial owner
of the Company.

(4) Scott Gardner is not an affiliate, director, or officer of the Company.

(**) The Company  issued or  subscribed  for  issuance of 745,000  shares of its
common restricted stock in March 2002 to the following persons.  The shares were
issued pursuant to an exception from registration as provided in Section 4(2) of
the Securities Act of 1933.


                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                                                     Fair Market
                                    Share                                            Value of
Name                       Date     Amount     Type of Consideration                 Consideration
-----                      ----     -------    ---------------------                 -------------
<S>                       <C>       <C>        <C>                                   <C>
Scott Gardner (5)         10/01/01  150,000    Stock in exchange for the full
                                               payment of a $20,000 cash loan           $20,000
Michael A. Herzog (6)     10/01/01   25,000    Stock in exchange for the full
                                               payment of a $5,000 cash loan            $ 5,000
William V. Harlow Jr.(7)  10/01/01   10,000    Stock in exchange for extensions
                                               Granted on Letters of Intent             $ 1,250
                                               (The Harlow Corporation)
Bud Hirk (8)              10/01/01   10,000    Stock in exchange for an extension
                                               granted on a $10,000 cash loan           $ 1,250
Bennett Family Trust (9)  10/01/01  100,000    Stock as additional consideration for
                                               making a $50,000 cash loan               $ 6,250
Blume Law Firm(10)        10/01/01   25,000    Stock in exchange for extensions
                                               granted on bill payment                  $ 3,150
Blume Law Firm(10)        12/28/01   25,000    Stock in exchange for a $500
                                               services rendered                        $   500
Garrett S. Lipski(11)     12/23/01   50,000    $10,000 cash for restricted stock        $10,000
                                               subscription
Royal Crest LLC (12)      12/31/01  300,000    Stock in exchange for $30,000 interest   $30,000
                                               Due on a Company loan
</TABLE>

(**) $125,000 of the financing proceeds in the immediately proceeding table were
used  primarily  for  reduction of Company  debt or to pay  expenses  related to
Company operations.

(5) Scott Gardner is not an affiliate, director, or officer of the Company.

(6) Michael A. Herzog is the son of Mel Herzog, Chairman/CEO of the Company.

(7) Mr. Harlow is a former member of our advisory board, and a shareholder.

(8) Bud Hirk is not an affiliate, director, or officer of the Company.

(9)  Bennett  Family  Trust is not an  affiliate,  director,  or  officer of the
Company.

(10) Blume Law Firm is the Company's corporate securities counsel.

(11) Garrett S. Lipski is not an affiliate, director, or officer of the Company.

(12) Mr.  Kronenberg  administers Royal Crest LLC, which is owned by his mother.
Mr.  Kronenberg  is a  director/assistant  secretary of the Company,  related to
Royal  Crest LLC, a  beneficial  owner and  shareholder  of the  Company,  and a
control  person  indirectly  through,  DJ and SM  Kronenberg  Limited  Liability
Limited Partnership (LLLP).

(***)The  Company  issued or  subscribed  for issuance of 326,000  shares of its
common  restricted stock in January,  April, May, and July 2002 to the following
persons.  The shares were issued  pursuant to an exception from  registration as
provided in Section 4(2) of the Securities Act of 1933.

                                       25
<PAGE>
<TABLE>
<CAPTION>
                                                                               Fair Market
                                        Share                                  Value of
Name                          Date      Amount    Type of Consideration        Consideration
-----                         ----      -------   ---------------------        -------------
<S>                           <C>       <C>       <C>                          <C>
Tim N. and Audrey K. Martin,  01/19/02  50,000    Cash for $10,000             $10,000
Joint Tenants with                                restricted stock
Right of Survivorship (13)                        subscription

William V. Harlow Jr. (14)    04/01/02  10,000    Stock as additional          $200
                                                  consideration for making a
                                                  $4,000 cash loan
William V. Harlow Jr. (14)    04/01/02  10,000    Stock in exchange for        $200
                                                  services rendered
Grant Elam            (15)    04/01/02   6,000    Stock as additional          $ 120
                                                  consideration for making a
                                                  $3,000 cash loan
Thomas J. Richards    (16)    05/01/02 150,000    Stock as additional          $ 3,000
                                                  consideration for making a
                                                  $12,700 cash loan
John Martin and Jyoti         07/05/02 100,000    Cash for $10,000 restricted   $10,000
Crystal, Joint Tenants with                       stock subscription
right of Survivorship (17)
</TABLE>

(***) $39,700 of the financing proceeds in the immediately proceeding table were
used  primarily  for  reduction of Company  debt or to pay  expenses  related to
Company operations.

(13) Tim N. and Audrey K.  Martin with Joint  Right of  Survivorship  are not an
affiliate(s), director(s), or officer(s) of the Company.

(14) Mr. Harlow is a former member of our advisory board, and a shareholder.

(15) Grant Elam is not an affiliate, director, or officer of the Company.

(16) Thomas J.  Richards is on our  advisory  board,  and is a  shareholder  and
beneficial owner of the Company.

(17) John Martin and Jyoti Crystal with Joint Right of  Survivorship  are not an
affiliate(s), director(s), or officer(s) of the Company.


                                       26
<PAGE>

The  Company  has  granted  stock  options  to  certain  officers,  consultants,
directors,  and  advisors  of the Company to  purchase  shares of the  Company's
common  stock.  The Company  granted  these  stock  options to persons for their
direct participation  acknowledged by performance in 1999 and 2000 including the
start up of  operations,  the  development  of the Company and furthering of its
current, planned and ongoing developments.  The exercise price of the options is
equal to or in  excess  of the  fair  market  value of the  stock on the date of
grant. A schedule of the options is as follows:

<TABLE>
                      Option Grants in the Fiscal Year 2000
              To Officers, Consultants, Directors, and Advisors (1)
<CAPTION>
                               Number of             % of Total
                            Securities Underlying Options Granted Exercise or Base  Expiration
Name                        Options Granted (#)   in Fiscal Year  Price ($/sh)      Date
----                        -------------------   --------------  ----------------  ----------
<S>                             <C>                   <C>            <C>            <C>
Mel Herzog (CEO) and
Charlotte Herzog TTEE
UA DTD Jan 31,
1994 Herzog Revocable
Living
Trust JT Grantors               600,000               9.091%         $0.95          11/30/2007

Dennis R. Alexander,
President/Dir                   600,000               9.091%         $0.95          11/30/2007

Melvena Alexander,
Secretary                       500,000               7.576%         $0.95          11/30/2007

David J. Kronenberg,
Assistant Secretary/Dir         500,000               7.576%         $0.95          11/30/2007
Assigned to D.J. and S.M.
Kronenberg Family
LLLP,

Larry W. Trapp, Vice
President, Treasurer/Dir (3)    600,000               9.091%         $0.95          11/30/2007

Thomas J. Richards,
Advisory Board (3)              500,000               7.576%         $0.95          11/30/2007

</TABLE>

(1) The following are excerpts from certain  provisions  contained in the option
agreements listed above.

The date of all  agreements  set forth in the table above is September 30, 2000;
the vesting date for the option grants is sixty days (60)  following the date of
the Agreement.  The expiration of each of the agreements is seven (7) years from
the date of vesting.

                                       27
<PAGE>

The  agreements  call for the  filing  of a  registration  statement  under  the
Securities  Exchange Act of 1934 of the option  shares  within six months of the
date of the agreements or all of the option shares shall be  immediately  issued
to optionees without payment by or at cost to optionee,  and shall be restricted
stock of the Company  under rule 144 of the  Securities  act of 1933, as amended
and the  Company  shall then be  required  to file for the  registration  of the
option shares within twelve months of the date of the agreements. The forms 10SB
was filed as required.

The  provision  in the  immediately  preceding  paragraph,  whereas;  the option
agreements call for the immediate  issuance of the option shares without payment
by or at cost to the  optionees  if the filing of a  registration  of the option
shares has not occurred  within six months of the date of the  agreements;  this
provision  requirement  has been waived by all of the  individuals  and entities
listed in the option  table  listed above  entitled  "Option  Grants in the Last
Fiscal Year To Officers,  Consultants,  Directors, and Advisors", and further to
the best  knowledge of the Company this  provision has been waived by all of the
individuals  covered by option  agreements  listed  elsewhere  in this  document
including  Baseline Capital,  Inc. and individuals and or entities covered under
the Baseline Capital,  Inc. agreement with the Company. This initial requirement
has been fulfilled by the Company's filing of its initial Form 10SB registration
statement on April 2, 2001.

(2) This Option Grant was assigned  per Mr.  Kronenberg's  directive to D.J. and
S.M. Kronenberg Family Limited Liability Limited Partnership (LLLP).

The shares were issued pursuant to an exception from registration as provided in
Section 4(2) of the Securities Act of 1933.

Baseline  Capital,  Inc.  and Mr.  Karl  Reiter  hold  option  grants for future
exercises (see "Stock Options") and the Young County, Texas oil properties owned
by the Company,  which are managed by Baseline  Capital,  Inc. and provide for a
consulting agreement with Karl J. Reiter of Baseline Capital,  Inc. The exercise
price of the  options is equal to or in excess of the fair  market  value of the
stock on the date of grant. A schedule of the options is as follows:

The Company additionally granted stock options for the purchase of shares of the
Company's common stock to the below listed  individuals and entities involved in
the Baseline  Capital,  Inc.  loan  transaction  with the Company that  provided
financing  for  its  acquisition  of  the  Young  County,   Texas  interests  in
properties, equipment, wells, leases. The exercise price of the options is equal
to or in excess of the fair  market  value of the stock on the date of grant.  A
schedule of the options is as follows:

                                       28
<PAGE>
<TABLE>
                      Option Grants in the Fiscal Year 2000
<CAPTION>

                         Number of              % of Total
                         Securities Underlying  Options Granted  Exercise or Base Expiration
Name                     Options Granted (#)    in Fiscal Year   Price ($/sh)     Date
----                     -------------------    --------------   ------------     ----
<S>                      <C>                    <C>              <C>              <C>
Baseline Capital, Inc.   2,000,000 (1)  Totals, 30.303%          $0.85            See Note (1)
500 W. Wall, Suite 302
Midland, Texas 79101

Baseline Capital, Inc.   50,000 (2)                              $0.95            3/29/04
500 W. Wall, Suite 302   50,000 (3)                              $1.05            9/29/04
Midland, Texas 79101     50,000 (4)     Totals, 02.273%          $1.15            3/29/05

Texas Vanguard Oil
Company                  13,433 (2)                              $0.95            3/29/04
9811 Anderson Mill Road,
#202                     13,433 (3)                              $1.05            9/29/04
Austin, Texas 78750      13,433 (4)     Totals, 00.611%          $1.15            3/29/05

Karl J. Reiter           15,672 (2)                              $0.95            3/29/04
500 W. Wall, Suite 302   15,672 (3)                              $1.05            9/29/04
Midland, Texas 79101     15,672 (4)     Totals, 00.712%          $1.15            3/29/05

Black Family
Partnership, Ltd.        26,866 (2)                              $0.95            3/29/04
P.O. Box 50820           26,866 (3)                              $1.05            9/29/04
Midland, Texas 79710     26,866 (4)     Totals, 01.221%          $1.15            3/29/05

TMP Companies, Inc.      13,433 (2)                              $0.95            3/29/04
P.O. Box 3872            13,433 (3)                              $1.05            9/29/04
Midland, Texas 79702     13,433 (4)     Totals, 00.611%          $1.15            3/29/05

Sam Hilburn Trustee
of The Living Hilburn
Trust                    26,866 (2)                              $0.95            3/29/04
401 W. Texas, Suite 407  26,866 (3)                              $1.05            9/29/04
Midland, Texas 79701     26,866 (4)     Totals, 01.221%          $1.15            3/29/05

Tejon Exploration
Company                  53,731 (2)                              $0.95            3/29/04
400 Pine, Suite 900      53,731 (3)                              $1.05            9/29/04
Abilene, Texas 79601     53,731 (4)     Totals, 02.442%          $1.15            3/29/05
</TABLE>

No options were  exercised by any party having options in the Company during the
year ending December 31, 2001.

(1) The following are excerpts from certain  provisions  contained in the option
agreement  with Baseline  Capital,  Inc.  listed above,  and include but are not
limited to the following:

                                       29
<PAGE>

The option  shall vest upon  "Payout",  as that term is defined in that  certain
Note Agreement  between the Company and Optionee dated as of September 29, 2000,
and shall have an exercise price of $0.85 per share (the "Purchase Price").  The
Option is  exercisable,  in whole or part from time to time  during  the  period
commencing on the date of vesting as provided  above and  terminating  three (3)
years from the date of vesting.

The Company is required to file for the  registration of the Option Shares on or
before twenty four (24) months of the date of the Agreement.

If a filing for a  registration  of the  shares,  if any,  there  after  becomes
effective,  the Option  Shares shall be available  for sale by Optionee (and any
transferee)  at no more  than 20% of the  total  Trading  Volume.  The  "Trading
Volume"  shall  be the  average  daily  volume  for the  twenty  days  beginning
twenty-two days before and ending two days before the sale.

(2)(3)(4) The following  are excerpts from certain  provisions  contained in the
remaining  option  agreements set forth in the tables listed above,  and include
but are not limited to the following:

The date of all  agreements  set forth in the table above is September 29, 2000;
The  expiration  of each of the  agreements  is three (3) years from the date of
vesting. The vesting date for the option grants is:

(2) Shares at $0.95 for and after the expiration of on hundred eighty (180) days
following the date of the agreement.

(3) Shares at $1.05 for and after the  expiration  for three hundred sixty (360)
days following the date of the agreement.

(4)  Shares  at $1.15  for and  after the  expiration  for five  hundred  twenty
(520)days following the date of the agreement.

The agreements call for the filing of a registration of the option shares within
six months of the date of the  agreements  or all of the option  shares shall be
immediately issued to optionees without payment by or at cost to optionees,  and
shall be restricted stock of the Company under rule 144 of the Securities act of
1933,  as  amended,  and the  Company  shall  then be  required  to file for the
registration  of the  option  shares  within  twelve  months  of the date of the
agreements.  Should  the  registration  not be filed  within  such  twelve-month
period,  the  properties  listed in Exhibit A attached to the Option  Agreement,
shall be assigned by the Company to Optionee  within ten days of the  expiration
of such twelve month period by a form of assignment acceptable to Optionee.

The  provision  in the  immediately  preceding  paragraph,  whereas;  the option
agreements call for the immediate  issuance of the option shares without payment
by or at cost to the  optionees  if the filing of a  registration  of the option
shares has not occurred  within six months of the date of the  agreements;  this
provision  requirement  has been waived by all of the  individuals  and entities
listed in the option  table under the Section  titled  "Executive  Compensation"
table  and  footnotes  "Option  Grants  in the  Last  Fiscal  Year To  Officers,
Consultants,  Directors, and Advisors", and further to the best knowledge of the
Company  this  provision  has been waived by all of the  individuals  covered by


                                       30
<PAGE>

option  agreements  including  Baseline  Capital,  Inc. and  individuals  and or
entities covered under the Baseline  Capital,  Inc.  agreement with the Company.
This  initial  requirement  has been  fulfilled by the  Company's  filing of its
initial Form 10SB registration statement on April 2, 2001.

The Option  shares are subject to a lock up  agreement to be entered into by the
Optionee upon effectiveness of a registration statement, if any, that will limit
the sale of the shares  during a six month period after  effectiveness,  whereby
one sixth of the Option  Shares shall become  available for sale each month from
and after the effective date of the registration statement.

The shares were issued pursuant to an exception from registration as provided in
Section 4(2) of the Securities Act of 1933.

The Company additionally has granted stock options for the purchase of shares of
the  Company's  common  stock to a certain  individual  for his  consulting  and
advisory work on the Life Energy Technology Holdings,  Ltd transaction and other
assistance.  The  exercise  price of the options is equal to or in excess of the
fair market  value of the stock on the date of grant.  A schedule of the options
is as follows:

<TABLE>
                Option Grants in the Fiscal Year 2000, continued
<CAPTION>
                         Number of              % of Total
                         Securities Underlying  Options Granted   Exercise or Base  Expiration
Name                     Options Granted (#)    in Fiscal Year    Price ($/sh)      Date
----                     -------------------    --------------    ------------      ----
<S>                      <C>                    <C>               <C>               <C>
Bradley T. Ray
7105 Catalina Isle Drive
Lake Worth, Florida 33467   500,000             7.576%            $0.95             11/30/07
</TABLE>

(1) The following are excerpts from certain  provisions  contained in the option
agreement listed above, and include but not limited to the following:

The date of all  agreements  set forth in the table above is September 30, 2000;
the vesting date for the option grants is sixty (60) days  following the date of
the  Agreement.  The expiration of each of the agreement is seven (7) years from
the date of vesting.

The agreement calls for the filing of a registration of the option shares within
six months of the date of the  agreements  or all of the option  shares shall be
immediately  issued to optionee  without payment by or at cost to optionee,  and
shall be restricted stock of the Company under rule 144 of the Securities act of
1933,  as  amended  and the  Company  shall  then be  required  to file  for the
registration  of the  option  shares  within  twelve  months  of the date of the
agreements.

The  provision  in the  immediately  preceding  paragraph,  whereas;  the option
agreements call for the immediate  issuance of the option shares without payment
by or at cost to the  optionees  if the filing of a  registration  of the option


                                       31
<PAGE>

shares has not occurred  within six months of the date of the  agreements;  this
provision  requirement  has been waived by all of the  individuals  and entities
listed in the option  table under the Section  titled  "Executive  Compensation"
table  and  footnotes  "Option  Grants  in the  Last  Fiscal  Year To  Officers,
Consultants,  Directors, and Advisors", and further to the best knowledge of the
Company  this  provision  has been waived by all of the  individuals  covered by
option  agreements  listed in the table  above and  elsewhere  in this  document
including  Baseline Capital,  Inc. and individuals and or entities covered under
the Baseline Capital,  Inc. agreement with the Company. This initial requirement
has been fulfilled by the Company's filing of its initial Form 10SB registration
statement on April 2, 2001.

For all  option  grants  listed in this  document  the  following  provision  is
provided:  If at any time  after  the date of this  Agreement  and  prior to the
expiration  of  all  Exercise   Period(s),   the  Company  proposes  to  file  a
registration  statement  to register  any Common  Stock (other than Common Stock
issued with respect to any  acquisition  or any  employee  stock  option,  stock
purchase or similar  plan) under the  Securities  Act of 1933,  as amended  (the
"Securities Act") for sale to the public in an underwritten offering, it will at
each such time give prior written  notice to the Optionee of its intention to do
so ("Notice of Intent")  and,  upon the  written  request of the  Optionee  made
within 30 calendar days after the receipt of any such notice (which request must
specify  the number of Option  Shares  Optionee  requests  to be included in the
registration,  the Company will use its best efforts to effect the  registration
under the  Securities  Act of the Option  Shares  which the  Company has been so
requested to register, provided, however, that if the managing underwriter shall
certify in writing that  inclusion of all or any of the Option Shares would,  in
such managing  underwriter's  opinion,  materially  interfere  with the proposed
distribution and marketing of the Common Stock in respect of which  registration
was  originally to be effected  (such writing to state the basis of such opinion
and  the  maximum  number  of  shares  which  may be  distributed  without  such
interference),  then the Company may, upon written notice to the Optionee,  have
the right to exclude from such  registration  such number of Option Shares which
it would  otherwise be required to register  hereunder as is necessary to reduce
the total amount of Common Stock to be so registered to the maximum amount which
can be so marketed.

The shares were issued pursuant to an exception from registration as provided in
Section 4(2) of the Securities Act of 1933.

The Company entered into an agreement with Life Energy Technology Holdings, Ltd.
of Ireland under which Life Energy  agrees to purchase 49% of Energy  Producers,
Inc.'s  stock  for  twenty  million  U.S.  Dollars.   The  agreement  was  never
consummated.

The shares were issued pursuant to an exception from registration as provided in
Section 4(2) of the Securities Act of 1933.

The Company  granted a stock option for the purchase of shares of the  Company's
common stock to a certain non-affiliated individual for providing capital to the
Company and subscribing to the Company's common  restricted  stock. The exercise
price of the  options is equal to or in excess of the fair  market  value of the
stock on the date of grant. A schedule of the options is as follows:

                                       32
<PAGE>
<TABLE>
                      Option Grants in the Fiscal Year 2001
<CAPTION>
                       Number of                    % of Total     Exercise
                       Securities Underlying      Options Granted  or Base       Expiration
Name                   Options Granted (#)        in Fiscal Year   Price ($/sh)  Date
----                   -------------------        --------------   ------------  ----
<S>                    <C>                        <C>              <C>           <C>
Garrett S. Lipski          100,000                100%             $1.00         3/23/04
421 E. Oraibi Drive
Phoenix, Arizona 85024

</TABLE>


(1) The following are excerpts from certain  provisions  contained in the option
agreement listed above, and include but not limited to the following:

The date of the agreement set forth in the table above is December 22, 2001; the
vesting date for the option grants is sixty (90) days  following the date of the
Agreement.  The  expiration  of each of the  agreement is two (2) years from the
date of vesting, valid until March 23, 2004.

The option shares all or part upon  exercise,  if any, must be paid for in cash.
The  option  shares  upon any  effective  registration  are  subject to and will
require a separate lock up agreement to be entered into by the optionee. Further
the option shares  contain leak out  provisions  that will limit sale to no more
than the then one sixth of 20% of the total trading volume for the month and the
trading volume shall be the average daily volume for the previous twenty trading
days.

If at any  time  after  the  date  of the  option  Agreement  and  prior  to the
expiration  of  all  Exercise   Period(s),   the  Company  proposes  to  file  a
registration  statement  to register  any Common  Stock (other than Common Stock
issued with respect to any  acquisition  or any  employee  stock  option,  stock
purchase or similar  plan) under the  Securities  Act of 1933,  as amended  (the
"Securities Act") for sale to the public in an underwritten offering, it will at
each such time give prior written  notice to the Optionee of its intention to do
so ("Notice of Intent")  and,  upon the  written  request of the  Optionee  made
within 30 calendar days after the receipt of any such notice (which request must
specify  the number of Option  Shares  Optionee  requests  to be included in the
registration),  the Company will use its best efforts to effect the registration
under the  Securities  Act of the Option  Shares  which the  Company has been so
requested to register, provided, however, that if the managing underwriter shall
certify in writing that  inclusion of all or any of the Option Shares would,  in
such managing  underwriter's  opinion,  materially  interfere  with the proposed
distribution and marketing of the Common Stock in respect of which  registration
was  originally to be effected  (such writing to state the basis of such opinion
and  the  maximum  number  of  shares  which  may be  distributed  without  such
interference),  then the Company may, upon written notice to the Optionee,  have
the right to exclude from such  registration  such number of Option Shares which
it would  otherwise be required to register  hereunder as is necessary to reduce
the total amount of Common Stock to be so registered to the maximum amount which
can be so marketed.

                                       33
<PAGE>

The shares were issued pursuant to an exception from registration as provided in
Section 4(2) of the Securities Act of 1933.

On January 19, 2002, the Board of Directors of the Company  approved and granted
by a majorities vote, a stock option for the purchase of shares of the Company's
common stock to a certain non-affiliated individual for providing capital to the
Company by subscribing to the Company's  common  restricted  stock. The exercise
price of the  options is equal to or in excess of the fair  market  value of the
stock on the date of grant. A schedule of the option is as follows:


<TABLE>
                     Option Grants From January 1, 2002 Through The Period
                                Ended August 1, 2002
<CAPTION>
                       Number of                    % of Total     Exercise
                       Securities Underlying      Options Granted  or Base      Expiration
Name                   Options Granted (#)        in Fiscal Year   Price ($/sh) Date
----                   -------------------        --------------   ------------ ----
<S>                    <C>                        <C>              <C>          <C>

Tim N. Martin              100,000                100%             $1.00        4/19/04
And Audrey K.
Martin, Joint Tenants
with Right of Survivorship

</TABLE>

(1) The following are excerpts from certain  provisions  contained in the option
agreement listed above, and include but not limited to the following:

The date of the agreement set forth in the table above is January 19, 2002;  the
vesting date for the option grants is ninety (90) days following the date of the
Agreement.  The  expiration  of each of the  agreement is two (2) years from the
date of vesting, valid until April 19, 2004.

The option shares all or part upon  exercise,  if any, must be paid for in cash.
The  option  shares  upon any  effective  registration  are  subject to and will
require a separate lock up agreement to be entered into by the optionee. Further
the option shares  contain leak out  provisions  that will limit sale to no more
than the then one sixth of 20% of the total trading volume for the month and the
trading volume shall be the average daily volume for the previous twenty trading
days.

If at any  time  after  the  date  of the  option  Agreement  and  prior  to the
expiration  of  all  Exercise   Period(s),   the  Company  proposes  to  file  a
registration  statement  to register  any Common  Stock (other than Common Stock
issued with respect to any  acquisition  or any  employee  stock  option,  stock
purchase or similar  plan) under the  Securities  Act of 1933,  as amended  (the
"Securities Act") for sale to the public in an underwritten offering, it will at
each such time give prior written  notice to the Optionee of its intention to do
so ("Notice of Intent")  and,  upon the  written  request of the  Optionee  made
within 30 calendar days after the receipt of any such notice (which request must


                                       34
<PAGE>

specify  the number of Option  Shares  Optionee  requests  to be included in the
registration),  the Company will use its best efforts to effect the registration
under the  Securities  Act of the Option  Shares  which the  Company has been so
requested to register, provided, however, that if the managing underwriter shall
certify in writing that  inclusion of all or any of the Option Shares would,  in
such managing  underwriter's  opinion,  materially  interfere  with the proposed
distribution and marketing of the Common Stock in respect of which  registration
was  originally to be effected  (such writing to state the basis of such opinion
and  the  maximum  number  of  shares  which  may be  distributed  without  such
interference),  then the Company may, upon written notice to the Optionee,  have
the right to exclude from such  registration  such number of Option Shares which
it would  otherwise be required to register  hereunder as is necessary to reduce
the total amount of Common Stock to be so registered to the maximum amount which
can be so  marketed.  The shares  were  issued  pursuant  to an  exception  from
registration as provided in Section 4(2) of the Securities Act of 1933.


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

SUMMARY RESULTS OF OPERATIONS
-----------------------------

The  following  discussion  should  be read in  conjunction  with our  financial
statements and the notes thereto and the other financial  information  appearing
elsewhere in this document. In addition to historical information, the following
discussion and other parts of this document contain forward-looking  information
that involves risks and uncertainties.  Many of the risks and uncertainties that
could cause  actual  results to differ  materially  from those  anticipated  are
beyond the  ability  of the  Company to  control  or  predict.  Those  risks and
uncertainties  include but are not limited to: The risk of  significant  natural
disaster,  the  inability  of the  Company  to  insure  against  certain  risks,
fluctuations in commodity prices, the limitations in the ability to estimate oil
and gas reserves,  changing  government  regulations,  as well as general market
conditions, competition and pricing.

To date, the Company  derives  income from both its wholly owned  subsidiary oil
field inventory and supply  operations,  Producers Supply,  Inc. and income from
commercial  operations of our interests  owned in oil production and development
located in Olney, Young County, Texas.

The Company is currently focused on making  presentations to asset-based lenders
and  other  financial  institutions  for the  purpose  of  acquiring  additional
existing oil and gas properties with revenues. If not successful the Company may
lose the opportunity to make or conclude these or other potential  acquisitions,
which would delay or require substantially altering its current plan for growth.
One of the ways plans for growth  could be altered if current  acquisitions  now
available become unavailable:

The  Company  would  need to  identify,  locate,  or address  replacing  current
potential acquisitions with new prospect acquisitions or initiate other existing
available projects that may have been planned for later stages of growth and the
Company may therefore  not be ready to activate.  This can place a strain on the
Company. New acquisitions take time to review,  analyze,  inspect and negotiate.
The time taken in the review  activities  is an unknown  factor,  including  the
business structuring of the project and due diligence for an acquisition.

                                       35
<PAGE>

GENERAL
-------

Energy  Producers,  Inc.  derives its revenues  from retail sales of oil and gas
field inventory  equipment,  service, and supply items primarily in the southern
Arkansas area.  Additional  revenues effective for the period ended December 31,
2000 have been  derived from the  acquisition  of the  producing  oil wells with
revenues in Olney, Young County,  Texas. The Company is focused on evaluation of
the market  potential for further  development of its subsidiary  operations and
revenues  in fiscal  2003,  and other  potential  proved  producing  oil and gas
properties available to the Company for acquisition.

The Company expects to incur continued increase in operating expenses during the
next year from commencing  activities related to its oil and gas acquisition and
development  program.  The amount of net losses  and the time  required  for the
Company to reach and maintain profitability are uncertain at this time. There is
a likelihood that the company will encounter  difficulties and delays frequently
encountered  in connection  with a new business,  including,  but not limited to
uncertainty as to development  and the time required for the Company's  plans to
be fully implemented,  governmental  regulatory responses to the Company's plans
as well as fluctuating  markets and corresponding  fluctuations in the prices of
oil and gas.  There can be no  assurance  that the  Company  will ever  generate
significant  oil and gas  revenues  or  achieve  profitability  at all or on any
substantial basis.

RESULTS OF OPERATIONS - 2002 Compared to 2001
---------------------------------------------

Total revenue for oil  production  and retail sales segments in fiscal year 2002
was  $271,801  compared to $384,729 in total  revenue for the year 2001.  Retail
sales  decreased  during 2002 compared to 2001 and total oil and sales  declined
31% to $246,328 in 2002 as compared to $354,608 in 2001. Oil sales account for a
majority of the Company's revenues. The decrease in oil revenues was due in part
delay in oil production  pick ups, and delay in  maintenance  scheduling due bad
weather  conditions in certain months,  which effected  overall  production.  In
addition,  natural oil  production  field declines and overall  continued  lower
periodic  oil  prices  to  production  sale  timing  in  general  added to lower
revenues.  While oil production was lower,  lease operating  energy demand costs
began to rise.  Maintenance  and repair costs  decreased  in 2002 from 2001;  In
fiscal 2002 the average oil prices  remained just slightly lower than 2001, down
..03%  percent  from  $24.50 per barrel in 2002  compared to $25.16 per barrel in
2001.

Producers Supply, Inc. retail sales income also decreased, down 15% from $30,121
in 2002 to  $25,473 in 2001 due to  decreased  or slower  demand  for  inventory
supplies in the Stephens Arkansas and surrounding area.

Costs of  operations  for oil  decreased  14% to $67,526 in 2002 as  compared to
$78,878 in 2001. This item includes all well operating  expenses and any amounts
paid to the property manager and consultants. Decrease in disbursements made due
lower oil production  volume,  delays or fewer repairs due  conditions  present,
accounted for most of the decline in costs.

                                       36
<PAGE>

General and administrative  costs increased 62% percent to $566,788 in 2002 from
$214,927  in 2001 due to rising  operational  expenses  which  include  covering
shortfall  differences  in loan payments due to Baseline  Capital,  Inc. for the
Company's oil loan.

The Company's total  stockholders'  equity deficit rose to ($564,265) in 2002 as
compared to ($83,460) in 2001.  This reduction of  shareholder's  equity was the
result of decreased revenues and increases in general expenses in 2002.

Income from  operations  decreased to a loss from  operations of ($368,418)  for
2002 compared to $81,129 in 2001 due to the decrease in revenues from operations
and increases in interest payable.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Cash flow used by operating  activities was $368,308 for the year ended December
31, 2002 compared to $13,955 in cash flow provided by operating  activities  for
the year ended December 31, 2001.

Cash flow from investing activities was $118,295 for the year ended December 31,
2002, compared to $192,957 for the year ended December 31, 2001.

Cash flow from financing activities was $244,353 for the year ended December 31,
2002,  compared to ($129,719)  for the year  December 31, 2001.  This was due to
substantial borrowings from shareholders.

<TABLE>
<CAPTION>
     Outstanding Capital Commitments For 2001 include:

<S>                                                                 <C>
a) Note to Royal  Crest,  LLC issued March 31, 2001 with            $  366,067
   interest at 20% per annum.  Monthly payments are interest
   only with full payment due on April 30, 2003.

Status: (The note is current at March 31, 2003)

Anticipated Payment Source(s): Development of increased cash flow from the Olney
Interests;  from bridge or other bank financing  loans;  equity based financing;
rollover refinancing of note.

b.) Note to Baseline Capital, Inc. Note was issued                  $  399,800
    September 29, 2000 and is a non-interest  bearing note.
    Minimum monthly payments of $25,000 or 80% of net
    production proceeds from specified properties.

Status: (*The note is current at March 31, 2003)

Anticipated  Payment  Source(s):  Existing  ongoing  revenues  from sales of oil
produced;  work program  development  of properties  and  restructuring  note to
potentially  increase cash flow associated with these property  interests by: 1)
interest  only bank type  financing 2) sale of a percentage  interest to JV type
partner 3) equity based financing.
</TABLE>

                                       37
<PAGE>

(*If a default  occurred,  Young  County  oil  property  interests  owned by the
Company would be sold)

(See also other discussions contained elsewhere in this document)

<TABLE>
<CAPTION>
<S>                                                                 <C>
c.) Note to J.C. Wilson Pipe and Supply, Inc.                       $  245,000
    Note was issued August 15, 1999 and accrues interest at
    the rate of 9.5% per annum and, with extensions is due
    on or before May 1, 2003.

Status: (At March 31, 2003, an extension is being negotiated on the terms of the
note, and negotiations are underway to restructure the debt.)

Anticipated  Payment Source(s):  Extension on the note by issuance of restricted
common  stock.  Payment of loan  partially or in full by: 1) interest  only bank
type financing 2) Inventory type loan 3) equity based financing.

(If a default occurred, subsidiary assets would be sold whose value is in excess
of the obligation).


d.) Note to Bennett Family Trust                                    $   50,000
    Note was issued June 12, 2001 and accrues interest at
    the rate of 12% per annum and is due on or before
    June 12, 2002. Principal to be paid at maturity.

Status: (Due date and terms is in process of negotiations)

Anticipated  Payment  Source(s):  Partial  payments  from  bridge or other  bank
financing  loans,  restricted  common  stock;  full  payment  from equity  based
financing; rollover refinancing of note.

e.) There are several small notes that in the aggregate are immaterial.
</TABLE>

The  Company  must  generally  undertake  certain and  ongoing  expenditures  in
connection with preservation of its property interests,  to maintain its oil and
gas  development  rights,  and develop its business  prospects,  acquisition and
interests in accordance  with its plan.  Expenditures  made in  connection  with
preservation of property interests during 2002 were approximately $176,000.

Management has estimated that such cost for initially activating  development of
its current  plans will require  $1,500,000 or more during the first six to nine
months of fiscal 2003.  Financing and full project  development  or  acquisition
program  could  require up to  $5,000,000  or more.  The  Company  may reduce or
increase its requirement as circumstances  dictate. We may elect to revise these
plans and  requirements  for funds depending on factors  including;  oil and gas
price activities; the markets as a whole; the availability, interest, and timing
indicated  from  potential  sources  of  capital;   structure,   and  status  of
availability of any of our targeted acquisitions and interests.

                                       38
<PAGE>

We have been  continuously  working on obtaining  additional  financing  for the
development of work programs on our Young County oil  properties.  Plans include
potential  recompletions  and for the  drilling  of 2 new  wells.  We have  been
additionally  working on obtaining  loans for  renegotiation  and refinance of a
portion of or all the Baseline Capital,  Inc. secured loan balance that includes
a secured  interest on the  properties  held by First  American  Bank of Midland
Texas. The revised  requirements and timing now anticipated for this development
and note  restructuring  are as follows:  To begin a drilling and  recompletions
work program,  approximately  $200,000 to $300,000, and an additional 350,000 to
negotiate,  payoff,  or restructure the existing  Baseline Capital note balance;
Our  target  has been  reset  for end of  April,  beginning  of May.  Management
believes  cash flow can be improved if it is able to  successfully  obtain funds
needed  for the work  program,  and can  successfully  restructure  terms of the
existing note on the Company's Young County  property  interests (see additional
discussions in "Business" and "Recent Developments" Sections).

The Company  cannot  predict  how the oil and gas  industry  and its  collective
markets  and  pricing as a whole will vary during 2003 and what effect they will
ultimately have on the Company.

Dividends
---------

No assurances  can be given that the proposed  operations of the Company will be
profitable.  The  Company  has not paid and does  not  currently  intend  to pay
dividends.

Insurance
---------

The Company intends to maintain insurance coverage that it believes is customary
in the industry.  It is not aware of any environmental claims as of December 31,
2002, which would have a material impact upon the Company's  present or proposed
financial problems.

OIL AND GAS PROPERTIES
----------------------

The  Company  as of the date of this  filing is the  primary  owner of  majority
interests in oil producing properties consisting of 6 leases, wells,  equipment,
and reserves  located in Young County,  Olney Texas.  The Company operates these
properties on a  month-to-month  contract with local  operators in the area. The
Company  currently sells its oil production by Division Order to Conoco Oil. The
standardized  measure of discounted  future net cash flows for all the Company's
properties as of December 31, 2002 is $1,796,848.

INCOME TAXES
------------

At December 31, 2002, the Company has a federal  operating loss  carryforward of
$1,283,322 for financial accounting and federal income tax purposes. Utilization
of the net operating loss in any taxable year during the carryforward period may
be subject  to an annual  limitation  due to the  ownership  change  limitations
imposed by the tax law. The net operating  losses will expire  commencing in the
year 2010.

                                       39
<PAGE>

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
-----------------------------------------------

This report on Form 10-KSB contains certain "forward-looking  statements" within
the meaning of Section 27A of the  Securities  Act of 1933, as amended,  Section
21E of the  Securities  Exchange  Act of  1934,  as  amended,  and  the  Private
Securities Litigation Reform Act of 1995,  including,  among others (i) expected
changes in the Company's revenues and profitability,  (ii) prospective  business
opportunities and (iii) the Company's  strategy for financing its business.  All
statements  other than  statements of historical  facts included in this report,
including,  without  limitation,  statements  under  "Description  of Business",
"Description of Property" and  "Management's  Discussion and Analysis or Plan of
Operation"  regarding the Company's financial  position,  reserve quantities and
net present values, business strategy, plans and objectives of management of the
Company for future  operations  and capital  expenditures,  are  forward-looking
statements and the assumptions  upon which such forward  looking  statements are
based are believed to be reasonable. The Company can give no assurance that such
expectations and assumptions will prove to be correct.  Reserve estimates of oil
and gas  properties  are  generally  different  from the  quantities  of oil and
natural gas that are ultimately  recovered or found.  This is particularly  true
for estimates  applied to exploratory  prospects.  Additionally,  any statements
contained in this report  regarding  forward-looking  statements  are subject to
various known and unknown risks, uncertainties and contingencies,  many of which
are beyond the control of the  Company.  Such things may cause  actual  results,
performance,   achievements  or  expectations  to  differ  materially  from  the
anticipated results, performance, achievements or expectations. Factors that may
affect  such  forward-looking  statements  include,  but are not limited to: the
Company's  ability to  generate  additional  capital  to  complete  any  planned
drilling and exploration activities; risks inherent in oil and gas acquisitions,
exploration,  drilling,  development and production; price volatility of oil and
gas;  competition;  shortages of equipment,  services and  supplies;  government
regulation;  environmental  matters;  financial condition of the other companies
participating  in the  exploration,  development  and  production of oil and gas
programs;  and other matters beyond the Company's control.  All written and oral
forward-looking  statements attributable to the Company or persons acting on its
behalf  subsequent to the date of this report are  expressly  qualified in their
entirety by this disclosure.


ITEM 7 - FINANCIAL STATEMENTS
-----------------------------



                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)



                                  CONSOLIDATED
                              FINANCIAL STATEMENTS



                     DECEMBER 31, 2002 AND DECEMBER 31, 2001

                                       40
<PAGE>





                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)

                                  CONSOLIDATED
                              FINANCIAL STATEMENTS

               YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001





Accountant's Report . . . . . . . . . . . . . . . . . . . .F-2
Financial Statements
Balance Sheets - Assets . . . . . . . . . . . . . . . . . .F-3
Liabilities and Stockholders' Equity. . . . . . . . . . . .F-4
Statement of Operations . . . . . . . . . . . . . . . . . .F-5
Statement of Stockholders' Equity . . . . . . . . . . . . .F-6
Statement of Cash Flows . . . . . . . . . . . . . . . . . .F-7
Notes to Consolidated Financial Statements. . . . . . . . .F-8
Supplemental Oil and Gas Information. . . . . . . . . . . .F-20






                                      F-1
<PAGE>



                              ACCOUNTANT'S REPORT


To: The Board of Directors and Stockholders
Energy Producers, Inc.

I have audited the accompanying  consolidated balance sheet of Energy Producers,
Inc.,  (formerly Sterling Market Positions,  Inc.) at December 31, 2002 and 2001
and the related consolidated statements of operations, stockholders' equity, and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Company's  management.  My responsibility is to express an
opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally  accepted auditing  standards.
Those standards  require that I 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.
I believe my audit provides a reasonable basis for my opinion.

In my opinion,  the financial statements referred to above present fairly in all
material aspects, the financial position of Energy Producers,  Inc. at the dates
listed above, and the results of its operations,  stockholders'  equity and cash
flows for the years then ended, in conformity with generally accepted accounting
principles.


/s/ Henry Schiffer
------------------
Henry Schiffer, C.P.A.
Beverly Hills, California
April 14, 2003


                                      F-2
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                                 (Consolidated)

                                 BALANCE SHEETS

               Years ended December 31, 2002 and December 31, 2001

                                     ASSETS

                                                 Year ended          Year ended
                                                 December 31,       December 31,
                                                    2002                2001
                                                 ------------        -----------

Current Assets
Cash                                               $  19,143         $  24,803
Accounts receivable                                   19,706            15,907
Inventory                     (Note 1)                50,507            50,507
Notes and other receivables   (Note 2)                 2,500             2,500
Prepaid expenses              (Note 1)                13,837                 -
                                                   ---------         ---------

   Total Current Assets                              105,693            93,717
                                                   ---------         ---------

Property and Equipment        (Note 1)
Land                                                   9,000             9,000
Building/Improvements                                 47,184            47,184
Equipment                                             98,571            92,247
 Less:  accumulated depreciation                    (108,672)         (106,717)
                                                   ---------         ---------
   Net Property and Equipment                         46,083            41,714
                                                   ---------         ---------

Oil and Gas Leases            (Note 1)             1,215,809         1,340,428
 Less:  accumulated amortization                    (  4,851)         (  3,402)
                                                   ---------         ---------
   Net Oil and Gas Leases                          1,210,958         1,337,026
                                                   ---------        ----------

Total Net Properties and Equipment                 1,257,041         1,378,740
                                                   ---------         ---------

         Total Assets                             $1,362,734        $1,472,457
                                                  ==========        ==========

                                      F-3
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                                 (Consolidated)

                                 BALANCE SHEETS

               Years ended December 31, 2002 and December 31, 2001

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                 Year ended          Year ended
                                                 December 31,       December 31,
                                                    2002                2001
                                                 ------------        -----------

Current Liabilities:
Accounts payable                                  $   50,346        $   53,489
Taxes payable                                            498               498
Notes payable                 (Note 3)               326,413           389,776
Accrued interest                                     177,891            38,536
                                                  ----------        ----------

 Total Current Liabilities                           555,148           482,299
                                                  ----------        ----------
Long-Term Liabilities:
Notes payable                 (Note 3)               169,032           400,164
Due to shareholders           (Note 5)             1,202,819           673,454
                                                  ----------        ----------

 Total Long-Term Liabilities                       1,371,851         1,073,618
                                                  ----------        ----------

         Total Liabilities                         1,926,999         1,555,917
                                                  ----------        ----------
Stockholders' Equity:
Common stock:
 Authorized  200,000,000  shares at $0.001 par
 value;  issued  and  outstanding 12,017,812
 shares at December 31, 2002; 11,741,812 shares
 at December 31, 2001; 10,891,812 at
 December 31, 2000;  10,881,812  shares at
 December 31, 1999,  and 1,250,000 at December
 31, 1998 and 1997.                                   12,018            11,742

Preferred stock:
 Authorized 50,000,000 shares at $0.001 par
 value; issued and outstanding: none

Paid in capital                                      707,039           684,795
Accumulated deficit                               (1,283,322)       (  799,997)
                                                  ----------        ----------

     Total Stockholders' Equity                   (  564,265)       (   83,460)
                                                  ----------        ----------

     Total Liabilities and Stockholders' Equity   $1,362,734        $1,472,457
                                                  ==========        ==========

                                       F-4
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                                 (Consolidated)

                             STATEMENT OF OPERATIONS

               Years ended December 31, 2002 and December 31, 2001

                                                 Year ended          Year ended
                                                 December 31,       December 31,
                                                    2002                2001
                                                 ------------        -----------
Revenues:
 Oil Revenues                                     $  246,328        $  354,608
 Cost of Sales                                    (   67,526)       (   78,878)
                                                  ----------        ----------
   Net Oil Revenues                                  178,802           275,730
                                                  ----------        ----------

Retail Sales:                                         25,473            30,121
 Cost of Goods Sold                                    5,905        (    9,795)
                                                  ----------        ----------
   Net Retail Sales                                   19,568            20,326
                                                  ----------        ----------

Total Net Revenues                                   198,370           296,056

Operating Expenses:
 Selling, General and Administrative              (  566,788)       (  214,927)
                                                  ----------        ----------

Gain (Loss) from operations   (Note 3)            (  368,418)           81,129
                                                  ----------        ----------

Other Income (Expense):
 Other Income                                          5,500               330
 Interest Expense                                 (  140,407)       (   89,734)
                                                  ----------        ----------

   Total Other Income (Expense)                   (  134,907)       (   89,404)
                                                  ----------        ----------

Income before provision for income taxes                   0                 0
                                                  ----------        ----------

Net Income (Loss                                 $(  503,325)       $(   8,295)
                                                 ===========        ==========

Number of outstanding shares                      12,017,812        11,741,812
                                                  ==========        ==========

Net Gain (Loss) per share     (Note 6)                (.0419)            (nil)
                                                  ==========        ==========

Earnings per share on operating income                (.0307)            .0069
                                                  ==========        ==========

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                                 (Consolidated)
                        STATEMENT OF STOCKHOLDERS EQUITY
         From October 4, 1995 (date of inception) to December 31, 2002

                                       Common Stock        Paid in   Accumulated
                                     Shares      Amount    Capital     Deficit       Totals
                                    ---------   --------   -------   -----------     ------
<S>                                 <C>         <C>        <C>       <C>             <C>
Shares issued at inception
 to initial shareholders            1,250,000     1,250                               1,250
Capital contributed by S/H                                  71,920                   71,920
Net(loss) for year 1995                                               (   31,096)  ( 31,096)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 1995           1,250,000     1,250     71,920    (   31,096)  ( 42,074)

Capital contributed by S/H                                 290,087                  290,087
Net(loss) for year 1996                                                ( 332,088)  (332,088)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 1996           1,250,000     1,250    362,007     ( 363,184)        73

Capital contributed by S/H                                  51,046                   51,046
Net(loss) for year 1997                                                 ( 51,046)  ( 51,046)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 1997           1,250,000     1,250    413,053      (414,230)        73

Capital contributed by S/H                                  71,913                   71,913
Net(loss) for year 1998                                                 ( 71,986)   (71,986)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 1998           1,250,000     1,250    484,966     ( 486,216)         0

Stock surrendered by S/H
 and retired to treasury            ( 189,023)   (  189)       189                        0
Issuance of stock for
 reverse acquisition of
 Energy Producers Group, Inc.       9,820,835     9,821    114,108                  123,929
Capital contributed by S/H                                  27,325                   27,325
Net(loss) for the year 1999                                            ( 330,323)  (330,323)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 1999          10,881,912    10,882    626,588     ( 816,539)  (179,069)

Stock issued as consideration
 for loans and other services          10,000        10      1,240                   1,250
Net gain for year 2000                                                    44,817     44,817
                                    ---------   --------   -------   -----------   --------
Balance December 31, 2000          10,891,812    10,892    627,828      (771,722)  (133,002)

Capital contributed by S/H            105,000       105     13,125                   13,230
Stock issued as consideration
 for loans and other services         745,000       745     43,842                   44,587
Net(loss) for year 2001                                                  ( 8,275)    (8,275)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 2001          11,741,812    11,742    684,795      (779,997)   (83,460)
Stock issued as consideration
 for loans and other services         276,000       276     22,244                   22,520
Net(loss) for year 2002                                                 (503,325)  (503,325)
                                    ---------   --------   -------   -----------   --------
Balance December 31, 2002          12,017,812    12,018    707,039    (1,283,322)  (564,265)
                                   ==========   =======    =======   ===========   ========
</TABLE>
                                       F-6
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                                 (Consolidated)
                             STATEMENT OF CASH FLOWS
               Years ended December 31, 2002 and December 31, 2001

                                                 Year ended          Year ended
                                                 December 31,       December 31,
                                                    2002                2001
                                                 ------------        -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss)                                  $(503,325)         $ ( 8,275)
Non-cash adjustments to reconcile net income
to Net cash provided by operating activities:
 Depreciation and amortization                         3,404              3,906
Change in assets and liabilities:
 (Increase)decrease in accounts receivable          (  3,799)           (37,804)
 (Increase)decrease in inventory                                        ( 1,687)
 Increase(decrease) in accounts payable             (  3,943)           (60,729)
 Increase(decrease) in accrued expenses              139,355             39,562
                                                    --------           --------
Net cash provided(used) by operating activities     (368,308)            13,955
                                                    --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 (Increase)decrease in notes receivable                                  53,000
 Proceeds from sale (cost) of equipment                5,500                  0
 Purchase of property and equipment                  (11,824)           ( 5,000)
(Purchase) re-evaluation of oil leases               124,619             44,957
                                                    --------            -------
Net cash provided(used)by investing activities       118,295             92,957
                                                    --------            -------

CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase)decrease in advances to shareholder        (13,837)           (22,807)

CASH BALANCE BEGINNING OF PERIOD                   $  24,803           $ 47,610
                                                    --------           -------

CASH BALANCE END OF PERIOD                         $  19,143           $ 24,803
                                                    ========           =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year:
 Interest                                            140,407             89,734
 Income taxes                                              0                  0



                                       F-7

<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     This summary of significant  accounting policies of Energy Producers,  Inc.
is presented to assist in understanding the Company's financial statements.  The
financial statements and notes are representations of the company's  management,
which is  responsible  for their  integrity and  objectivity.  These  accounting
policies  conform to  generally  accepted  accounting  principles  and have been
consistently applied in the preparation of the financial statements.

(a)  ORGANIZATION AND BUSINESS ACTIVITIES:
     ------------------------------------

     The Company was  incorporated  in the State of Nevada on October 4, 1995 as
     Sterling Market Positions,  Inc. Upon  incorporation,  10,000,000 shares of
     $.001 par value Common Stock was  authorized.  The Company was organized in
     order to conduct any lawful  business.  Effective June 24, 1999 the Company
     changed its name to Energy  Producers,  Inc. and increased  its  authorized
     common shares to 50,000,000.

     On August 25, 1999 the Company was acquired by Energy Producers Group, Inc.
     and its wholly owned subsidiary, Producers Supply, Inc. The transaction was
     accomplished  through the  issuance of  9,820,835  shares of the  Company's
     common stock issued under Rule 144.  Although Energy Producers Group,  Inc.
     is the legal acquirer,  it was dissolved subsequent to the transaction,  so
     Energy  Producers,  Inc.  is treated as having  acquired  Energy  Producers
     Group,  Inc. for accounting  purposes.  Accordingly,  the transactions have
     been  accounted  for as a reverse  acquisition  of the purchase  method and
     Energy  Producers,  Inc. is now referred to as the Company.  The historical
     financial  statements are those of Energy  Producers,  Inc. which have been
     restated for the equivalent  number of shares received in the  transaction.
     The results of operation of Energy Producers  Group,  Inc. (legal acquirer)
     are included in the financial  statements of the combined Energy  Producers
     Group, Inc. and Energy Producers, Inc. financial statements from August 25,
     1999 (acquisition date). The Company began filing  consolidated  statements
     with  its  wholly  owned  subsidiary,   Producers  Supply,   Inc.,  on  the
     acquisition date August 25, 1999.

     The  Company  has  focused  its  business  on  oil  and  gas   exploration,
     development  and production and acquiring  existing  production  facilities
     with proven  reserves.  The Company's  wholly owned  subsidiary,  Producers
     Supply,  Inc.,  has been in the oil and gas  field  equipment  service  and
     supply  business for 25 years. On October 2, 2000 Article 3 of the Articles
     of Incorporation  were amended to increase the number of authorized  common
     shares to 200,000,000 and to authorize 50,000,000 preferred shares.


                                       F-8

<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

(b)  DEPRECIATION:
     ------------
     Depreciation  will  be  provided  by  the  straight-line  method  at  rates
     calculated to amortize  cost over the estimated  useful lives of respective
     assets.  Upon sale or retirement of the respective assets, the related cost
     and accumulated depreciation are eliminated from the accounts, and gains or
     losses are reflected in income.  Repair and maintenance  expenditures,  not
     anticipated to extend  original asset lives,  will be charged to expense as
     incurred.

(c)  FISCAL YEAR:
     -----------
     The Company operates on a Calendar Year basis.

(d)  INVENTORIES:
     -----------
     Inventories are stated at the lower of cost or market determined by the
     FIFO method.

(e)  INCOME TAXES:
     ------------
     The Company  follows  Statement of Financial  Accounting  Standards No. 109
     ("SFAS 109")  "Accounting for Income Taxes",  which requires the Company to
     recognize  deferred tax assets and liabilities for future tax  consequences
     attributable  to  differences  between  the  financial  statement  carrying
     amounts of existing assets and liabilities and their  respective tax basis.
     In addition  SFAS 109 requires  recognition  of future tax benefits such as
     net operating loss  carryforwards,  to the extent that  realization of such
     benefits is more likely than not. Accordingly,  the Company has established
     a policy of a 100%  valuation  allowance  against any  deferred  tax assets
     resulting  principally  from net operating loss  carryforwards  until it is
     more likely than not that the Company will realize taxable income.

(f)  OIL AND GAS PROPERTIES:
     ----------------------
     The oil and gas properties  include  operating  leases,  equipment  leases,
     production  sales,  processing  agreements,  transportation  agreements and
     other contracts,  equipment,  improvements,  materials, supplies, fixtures,
     wells,  pumping  units,  well head  equipment,  other  movable or immovable
     property, easements,  servitudes,  rights-of-way,  surface leases and other
     surface rights.

     The Company  follows the full cost method of accounting for oil properties.
     Accordingly,  all  costs  associated  with  acquisition,  exploration,  and
     development of oil and gas reserves,  including  directly  related overhead
     costs,  are  capitalized.  Sales or abandonment of oil properties  shall be
     accounted for as adjustments of capitalized costs.

                                       F-9

<PAGE>
                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

(f)  OIL AND GAS PROPERTIES (continued):

     Costs  to  be  amortized  include  all  capitalized  costs  (net  of  prior
     amortization),  estimated future expenditures to be incurred in development
     proved reserves, and estimated  dismantlement and abandonment costs, net of
     estimated   salvage   values.   Amortization   will  be   provided  on  the
     unit-of-production method using estimates of proved reserves.

     Costs of investments in unproved properties and major development  projects
     will not be included in amortizable capital costs until proved reserves can
     be assigned to those  properties.  Unproved  properties  are to be assessed
     annually to ascertain whether impairment has occurred,  and, any impairment
     assessed will then be added to amortizable costs and amortized accordingly.

     Capitalized costs are limited to an amount no greater than the sum total of
     the present  value of estimated  future net  revenues  computed by applying
     current  prices  of  oil  reserves,  cost  of  properties  not  subject  to
     amortization  and  the  lower  of cost or fair  market  value  of  unproven
     properties  included  in  amortizable  cost,  less the income  tax  effects
     related to the  differences  between the book and tax basis of the unproven
     properties.

     The  Company  records  oil  and  gas  sales  on  the  entitlement   method,
     recognizing its net share of all production as revenue. Any amount received
     in excess of or less than the Company's  revenue  interest will be recorded
     in the net oil balancing liability

                    Statement of Revenues and Direct Expenses
                                      2002

         REVENUES:
         Oil Sales                                   $ 246,328

         EXPENSES:
         --------
         Lease Operating           49,434
         Management                24,000
         Severance Taxes            8,965
                                   ------

           Total Expenses                               82,399
                                                     ---------
                  Net Income                         $ 163,929
                                                     =========

(g)  COMPREHENSIVE INCOME:
     --------------------
     The Company has adopted Financial  Accounting Standards Board Statement No.
     130 which  requires  reporting  of  Comprehensive  income in the  financial
     statements  in the period in which it is  recognized.  The  Company  has no
     Comprehensive Income in the reporting year.

                                      F-10
<PAGE>
                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                                 (Consolidated)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

(h)  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
     ---------------------------------------------
     The Company has adopted  Financial  Standards Board No. 133 "Accounting FOR
     Derivative  Instruments and Hedging Activities" and the amendments thereto,
     SFAS No. 137 and SFAS No. 138.  The Company  believes  that the adoption of
     these SFAS' will not have any material  affect on the financial  statements
     of the Company.

(i)  IMPAIRMENT OF LONG-LIVED ASSETS:
     -------------------------------
     The Company has adopted Financial  Accounting Standards Board Statement No.
     139.  "Rescission  of  FASB  Statement  No.  53)  which  also  amends  FASB
     Statements  Nos. 63, 89 and 121. The Company  believes that the adoption of
     SFAS 13 will  not have  any  material  affect  on the  Company's  financial
     statements.

NOTE 2   NOTES/LOANS RECEIVABLE:

           Note Receivable-David Irwin                                $  2,500
           Issued to Producers Supply, Inc. (wholly
           Owned Subsidiary) unsecured, demand note
           Dated June 9, 1999.                                        --------
                           Total Notes/Loans Receivable               $  2,500

NOTE 3   NOTES PAYABLE:

(a)      NOTE TO BENNETT FAMILY TRUST                                 $ 50,000
         ----------------------------
         Note was issued June 12, 2001 and accrues
         interest at the rate of 12% per annum and is
         due on or before June 12, 2002.  Payments
         are interest only.  Principal to be paid at
         maturity.  Due date and terms are in process
         of renegotiation.

(b)      NOTE TO BASELINE CAPITAL, INC.                               $399,800
         ------------------------------
         Note was issued September 29, 2000 and is a
         non-interest bearing note.  Minimum monthly
         payments of $25,000 or 80% of net production
         proceeds from specified properties.  Aggregate
         amount of such required payments at December 31,
         2002 are as follows:               2003    $300,000
                                            2004      99,800
                                                    --------
                                                     399,800

                                      F-11
<PAGE>
                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002
NOTE 3   NOTES PAYABLE (continued):

(c)      NOTE TO CITICAPITAL, DIGITAL COPIER AS
         COLLATERAL.                                                  $ 24,333
         -----------
         Issued November 28, 2000. Aggregate amount of such required
         payments at December 31, 2002 are as follows:
                                            2003    $  5,100
                                            2004       5,100
                                            2005       5,100
                                            2006       5,100
                                            2007       3,933
                                                     -------
                                                      24,333
(d)      NOTE TO GRANT ELAM.                                          $  3,000
         -----------------------
         Note was issued March 16, 2002 and accrues
         interest at the rate of 10% per annum and
         is due on or before 2003.  Payments are
         interest only with principal paid at maturity.

(e)      DUE TO FLEET CREDIT LINE.                                    $  3,446
         ------------------------
         Open-end line of credit with interest at
         22.990% per annum.  Payable monthly.

(f)      NOTE TO STEVENS SECURITY BANK.                               $ 14,867
         ------------------------------
         Demand note dated June 25, 2001 with interest
         at 8.5% per annum, due June 25, 2003. Terms:
         One(1) interest only payment due December 26,
         2001 and remaining interest and principal
         payable June 25, 2003.

         TOTAL NOTES PAYABLE:
                  Current portion                    $326,413
                  Long-term portion                  $169,032
                                                     --------    $495,445
                                                                 ========

NOTE 4   CONTRACTS:

     The Company has contracts with various  entities (owned by related parties)
     to provide accounting,  management,  and other professional  services.  The
     entities, their owners and their amounts are as follows:

ENTITY                                 RELATED PARTY            2002     2001
------                                 -------------          -------  -------
Academy Research                       Mel Herzog             $78,000  $ 3,000
Global Media Network USA, Inc.         Dennis R. Alexander    $96,000  $45,001
Melvena Alexander, CPA                 Melvena Alexander      $60,000  $13,550

     Mel Herzog,  Dennis R. Alexander and Melvena Alexander are all shareholders
     and officers of the Company.

                                      F-12
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 5   RELATED PARTY TRANSACTIONS
          DUE TO SHAREHOLDERS:

          Note Payable to J.C. Wilson Pipe and Supply, Inc.           $245,000
          Note was issued August 15, 1999 and
          accrues interest at the rate of 9.5%
          per annum and, with extensions, is due
          on or before June 1, 2002.  An extension
          was granted on the terms of the note, and
          negotiations are underway to restructure
          the debt.

          Unsecured demand Note Payable to J.C.Wilson Pipe            $    500
          and Supply, Inc.  J.C. Wilson, a beneficial
          shareholder of Energy Producers Inc.,
          is also owner of J. C. Wilson Pipe and
          Supply, Inc.

          Promissory Notes Payable to Larry W. Trapp.                 $ 36,800
          A.  Note for $14,200 was issued June 1, 2001
              with interest at 12% per annum.  Due
              May 1, 2003.
          B.  Note for $22,600 was issued  August 16, 2002 with
              interest at 12% per  annum.  Due May 1, 2003.
              Larry W.  Trapp is a Director and Shareholder.

         Promissory Notes payable to William Hirk.                    $ 10,000
         Note was issued January 6, 2001 with interest
         at 18% per annum.  Due May 1, 2003.
         William Hirk is a Shareholder.

         Note Payable to David J. Kronenberg.                         $  9,729
         Demand Note was issued July 6, 2002.  Note
         is non-interest bearing.  David Kronenberg
         is a Director and Shareholder.

         Note Payable to Harlow Corporation.                          $  4,000
         Note was issued February 14, 2002 with interest
         at 12% per annum.  Due May 1, 2003.  Harlow
         Corporation is an entity wholly-owned by William
         V. Harlow, Jr., a Shareholder.

                                      F-13

<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2003

NOTE 5   RELATED PARTY TRANSACTIONS
          DUE TO SHAREHOLDERS (continued):

         Promissory Notes Payable to Thomas J. Richards.              $114,991
            A.  $13,150 dated December 6, 2001   18% APR
            B.  $10,000 dated January 16, 2002   12% APR
            C.  $15,000 dated February 13, 2002  18% APR
            D.  $12,700 dated March 10, 2002     12% APR
            E.  $10,000 dated May 11, 2002       18% APR
            F.  $ 6,629 dated June 6, 2002       12% APR
            G.  $11,900 dated July 16, 2002      12% APR
            H.  $11,000 dated August 12, 2002   12% APR
            I.  $21,300 dated September 16, 2002 18% APR
            J.  $10,950 dated October 15, 2002   12% APR
            K.  $ 3,100 dated December 14, 2002  12% APR
            L.  $ 1,200 dated December 30, 2002  18% APR

         All notes are current.  Thomas J. Richards is
         an Advisor/Consultant and Shareholder.

         Note Payable to Royal Crest, LLC.                            $366,067
         Note was issued March 31, 2001 with interest at 20%
         per annum.  Monthly payments are interest only with
         full payment due April 30, 2003.  David J. Kronenberg,
         a Director and Shareholder, is the beneficial Owner
         and Manager of Royal Crest, LLC.

         Unsecured, Demand Note Payable to Mel Herzog.                $ 27,558
         Mr. Herzog is a Director and Shareholder.

         Unsecured, Demand Note Payable to Dennis R. Alexander.       $ 73,790
         Dennis R. Alexander is a Director and Shareholder.

         Unsecured, Demand Note Payable to Thomas J. Richards,        $    144
         a Consultant and Shareholder.

     Unsecured  Amounts  owed to  Officers  and  Shareholders  for  Unreimbursed
     Company expenses paid by individuals:

         Thomas J. Richards                 $61,371
         Dennis R. Alexander                 22,254
         Mel Herzog                          10,881
         Melvena Alexander                    2,465
         Harlow Corporation                     109
                                            -------    $97,080

                                      F-14

<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 6   EARNINGS PER SHARE:

     The  computation  of basic  Earnings  Per  Share  is based on the  weighted
     average number of shares outstanding during the current year.

     The  computation  of  Diluted  Earnings  per  Common  Share is based on the
     weighted  average  number of shares  outstanding  during  the year plus the
     common  stock  equivalents  which  would  arise from the  exercise of stock
     options and warrants  outstanding  using the Treasury  Stock method and the
     average  market price per share during the year.  Common stock  equivalents
     are not included in the diluted  earnings per share  calculation when their
     effect is anti-dilutive.

     Earnings  per  share  are  based on net  losses  as the  Company  showed an
     operating  loss and a net  loss in 2002.  In 2001  the  Company  showed  an
     operating profit, but a net loss.

     For the Year Ended December 31, 2002

     Income(Loss)       Shares             Per Share
                       (Numerator)        (Denominator)        Amount
                       -----------        -------------        ------
     Loss to Common
     Stockholders      $(503,325)           1,017,812          $(.0419)
                                                               ========

     Options to purchase  4,000,000  shares of common  stock at $0.95 per share,
     200,000 shares of common stock at $1.05 per share, 200,000 shares of common
     stock at $1.00 per share,  and 200,000  shares of common stock at $1.15 per
     share were  outstanding  at December  31,  2001 but were not  included in a
     computation  of diluted  earnings  per share  because  the effect  would be
     anti-dilutive.

NOTE 7   DIVIDEND POLICY:

     The Company has not adopted a policy regarding dividends.

NOTE 8   DEPRECIATION AND AMORTIZATION:

     Depreciation   on  property   and   equipment  is   calculated   using  the
     straight-line method over the estimated useful life.  Depreciation taken on
     equipment in 2002 was $1,955 and $1,355 in 2001.

     Under the full cost method,  all capitalized costs within a cost center are
     amortized on the unit-of-production basis, using proved oil reserves in the
     cost center.  Oil is converted to a common unit of measure based on current
     and future gross revenues.  Amortization  for 2002 was $1,499 and $2,551 in
     2001.

                                      F-15
<PAGE>
                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 9   INCOME TAXES:

     At December 31, 2002, the Company has a federal operating loss carryforward
     of $1,283,322  for financial  accounting  and federal  income tax purposes.
     Utilization  of the net  operating  loss in any  taxable  year  during  the
     carryforward  period  may be  subject  to an annual  limitation  due to the
     ownership  change  limitations  imposed by the tax law.  The new  operating
     losses will expire commencing in the year 2010.

     The deferred tax asset consists of the future benefit of net operating loss
     carryforwards.  A valuation allowance limits the recognition of the benefit
     of deferred tax assets until  realization  is reasonably  assured by future
     profitability.

<TABLE>
<CAPTION>
                1995      1996      1997     1998     1999       2000      2001       2002
              --------  -------   --------  -------  --------  --------  --------   ---------
<S>           <C>      <C>       <C>       <C>       <C>       <C>      <C>        <C>
Income(Loss)  (31,096) (332,188) ( 51,046) ( 71,966) (330,323)   44,817    (8,275)   (503,325)
Temporary
Difference          0         0         0         0        0          0         0           0
Loss Carry-
forward             0   (31,096) (363,184) (414,230) (486,216) (816,539) (771,722)   (779,997)
              --------  -------   --------  -------  --------  --------  --------   ---------
TaxableIncome
(Loss)        (31,096) (363,184) (414,230) (486,216) (816,539) (771,722) (779,997) (1,283,322)
             ========   =======   =======   =======   =======   =======   =======   =========
Tax Payable
(Refundable)        0         0         0         0         0         0         0          0
</TABLE>


NOTE 10  SALES TO MAJOR CUSTOMERS:

     The Company had sales to one major customer,  Conoco, Inc., during the year
     ended  December 31, 2002 of $246,328 which were in excess of ten percent of
     total sales.

NOTE 11  CONCENTRATION OF CREDIT RISK:

     The Company  maintains its cash in a bank deposit  account,  which at times
     may exceed  federally  insured limits.  The Company has not experienced any
     losses in such  account.  The  Company  believes  it is not  exposed to any
     significant credit risk on cash and cash equivalents.

NOTE 12  SEGMENT AND  RELATED INFORMATION:

     Energy Producers,  Inc. has two reportable segments: oil and gas leases and
     supplies  and  services.  The oil and gas segment  pumps oil and the oil is
     purchased  by  Conoco,  Inc.  The  equipment  and  supplies  segment  sells
     equipment and supplies to the oil industry.

                                      F-16
<PAGE>
                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 12  SEGMENT AND  RELATED INFORMATION (continued):

     The accounting  policies of the segments are the same as those described in
     the summary of  significant  accounting  policies.  The  Company  evaluates
     performance based on profit or loss from operations before income taxes not
     including any extraordinary items.

     There have been no inter-segment transactions, but if any transactions take
     place, they will be accounted for as if it were an independent  party, that
     is at current market prices.

     Energy Producers,  Inc.'s reportable  segments are strategic business units
     that offer  different  products and services.  They are managed  separately
     because  each  business  requires  different   technologies  and  marketing
     strategies. Each business was acquired as a unit, and the management at the
     time of acquisition was retained.

                                                OIL      EQUIPMENT     TOTAL
                                               WELLS    AND SUPPLIES
                                            ----------  ------------ ----------
   Revenues from external customers         $  246,328  $  25,473    $  271,801
   Inter-segment revenues                            0          0             0
   Depreciation and amortization                 1,629      1,775         3,404
   Segment(loss)profit                        (359,922)    (8,496)     (368,418)
   Segment assets                            1,716,213     79,384     1,362,671
   Expenditures for segment assets              11,824          0        11,824

   REVENUES
   Total revenues for reportable segments               $ 271,801
   Other revenues                                               0
   Elimination of inter-segment revenues                        0
                                                        ---------
            Total Consolidated Revenues                 $ 271,801
                                                        =========
   PROFIT OR LOSS
   Total loss for reportable segments                   $(368,418)
   Other profit or loss                                  (134,907)
   Elimination of inter-segment profits                         0
   Unallocated amounts                                          0
                                                        ---------
            Total Consolidated Profit(loss)             $(503,325)
                                                        =========
   ASSETS
   Total assets for reportable segments                $1,362,671
   Other assets                                                 0
   Other unallocated amounts                                    0
                                                        ---------
            Total Consolidated Assets                  $1,372,781
                                                       ==========
    Both segments are in the same geographical area.

                                      F-17
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 13  OPTIONS AND WARRANTS

     Energy  Producers,  Inc. has reserved  6,600,000 shares of its common stock
     for  issuance  under an  initial  Stock  Option  and  Payout  Stock  Option
     agreement with Baseline  Capital,  Inc.,  dated  September 29, 2000,  which
     covers key officers,  directors,  advisors, and consultants of the Company.
     The exercise  price of the options and warrants is equal to or in excess of
     the fair market value of the stock on the day of the grant.  The  following
     table summarizes  information  about stock options  outstanding at December
     31, 2002.

              Outstanding                               Exercisable
----------------------------------------------     ----------------------
                          Weighted
               Number     Remaining   Weighted     Number         Weighted
            Outstanding  Contractual   Average     Exercisable    Average
Exercise         at         Life      Exercise     at             Exercise
  Price      12/31/02     (Years)       Price      12/31/02       Price
--------    -----------  -----------  --------    -----------     --------

   .95   3,800,000           4-11/12     .95      3,800,000          .95
   .95     200,000           1-1/4       .95        200,000          .95
  1.05     200,000           1-3/4      1.05        200,000         1.05
  1.15     200,000           2-1/4      1.15        200,000         1.15
  1.00     100,000     1-1/4            1.00        100,000         1.00
  1.00     100,000           1-1/3      1.00        100,000         1.00

     The  Company  uses  the fair  value  method,  per  statement  of  Financial
     Accounting  Standards No. 123,  "Accounting  for Stock Based  Compensation"
     (SFAS No. 123) to value its options  and  warrants.  The fair value of each
     option grant is estimated on the date of the grant using the Black  Scholes
     option-pricing model with the following assumptions:

                                                 December 31, 2002
                                                 -----------------
         Expected Dividend Yield                      -0-
         Expected Stock Price volatility             0.299
         Risk-Free Interest Rate                     3.35
         Expected Life of Options                    3 to 5 years

     The weighted average fair value of options and warrants granted during 2002
     was $0.0.

NOTE 14  FAIR VALUE OF FINANCIAL INSTRUMENTS:

     The  Company's  financial  instruments  consist  of cash,  receivables  and
     payables,  and approximates  fair value because of the short-term nature of
     these items.

     The carrying value of the notes payable approximates fair value as most are
     non-interest bearing. The balance is short-term.

                                       F-18
<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2002

NOTE 15  SUBSEQUENT EVENTS:

     In the first  quarter of 2002,  the Company  raised an aggregate of $32,000
     capital through loans and issuance of stock.

     The  Company,  having  received  approval  of the  majority of the Board of
     Directors,  has additionally reserved 200,000 shares for options granted to
     two non-affiliate individuals.


                                      F-19



<PAGE>

                             ENERGY PRODUCERS, INC.

                      SUPPLEMENTAL OIL AND GAS INFORMATION
                                    Unaudited

               Years ended December 31, 2002 and December 31, 2001

The  information  on the  Company's  oil and gas  operations  as  shown  in this
schedule  is based on the full cost method of  accounting  and is  presented  in
conformity  with the  disclosure  requirements  of the  Statement  of  Financial
Accounting   Standards  No.  69   "Disclosures   about  Oil  and  Gas  Producing
Activities."


Capitalized Costs Relating to Oil and Gas Producing Activities
December 31, 2002 and 2001

                                             2002               2001
                                             ----               ----

     Proved Oil Leases                     $1,215,809        $1,178,589
     Unproved Oil Leases                            0                 0
                                           ----------        ----------

     Sub-total                              1,215,809         1,178,589

     Accumulated Depreciation,
      Depletion and amortization,
      And valuation allowances             (   4,851)        (    3,402)
                                           ----------        ----------

     Net capitalized costs                 $1,210,958        $1,175,187
                                           ==========        ==========



                                      F-20



<PAGE>

                             ENERGY PRODUCERS, INC.
                COSTS INCURRED IN OIL AND GAS LEASE ACQUISITION,
                     EXPLORATION AND DEVELOPMENT ACTIVITIES
                                    Unaudited

                     Years ended December 31, 2002 and 2001


                                             2002               2001
                                             ----               ----

      Acquisition of Oil Leases:

      Proved                                  -0-              $  -0-
      Unproved                                -0-                 -0-
      Exploration Costs                       -0-                 -0-
      Development Costs                       -0-               11,250
                                            ------             -------
               Total Costs Incurred          $-0-              $11,250
                                            ======             =======


                             ENERGY PRODUCERS, INC.
            RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCNG ACTIVITIES
                                    Unaudited

                     Years ended December 31, 2002 and 2001

                                            2002                2001
                                            ----                ----


      Oil Sales                          $246,328              $354,608
      Production Costs                   ( 92,165)             (102,878)
      Exploration Costs                      -0-                   -0-
      Depreciation, Depletion,
       Amortization and  Valuation
       Provisions                        (  4,851)             (  2,551)
                                        ---------             ---------

      Net Income(loss) before Income Tax  149,312               249,179

      Income Tax (provision) benefit         -0-                   -0-

      Producing Activities               $149,312              $249,179
                                         ========              ========

                                      F-21

<PAGE>

                             ENERGY PRODUCERS, INC.
                          RESERVE QUANTITY INFORMATION
                                    Unaudited

                     Years ended December 31, 2002 and 2001

The estimated  quantities of proved oil and gas reserves  disclosed in the table
below are based upon an appraisal of the proved developed  properties by Russell
K. Hall and Associates, Inc.

Such  estimates  are  inherently  imprecise  and may be subject  to  substantial
revisions.

All estimates  shown in the table below are proved,  developed  reserves and are
located within the United States.


                                              2002                2001
                                              ----                ----

                                       OIL        GAS         OIL         GAS
                                       ---        ---         ---         ---
PROVED DEVELOPED RESERVES             (bbls)                 (bbls)

Beginning of Year                     101,793     -0-       133,386       -0-
Revision in previous estimates         84,642     -0-       (17,828)      -0-
Discoveries and extension                 -0-     -0-           -0-       -0-
Purchase in place                         -0-     -0-           -0-       -0-
Production                            (10,067)    -0-       (13,765)      -0-
Sales in place                            -0-     -0-           -0-       -0-
                                     --------    ----      --------       ---
End of Year                           176,368     ---       101,793       ---
                                     ========              ========
Beginning of Year                     101,793               133,386
         End of Year                  176,368               101,793
                                     ========              ========



                                      F-22



<PAGE>


                             ENERGY PRODUCERS, INC.
                    STANDARDIZED MEASURE OF DISCOUNTED FUTURE
                 NET CASH FLOWS AND CHANGES THEREIN RELATING TO
                           PROVED OIL AND GAS RESERVES
                                    Unaudited

                     Years ended December 31, 2002 and 2001

                                                         2002          2001
                                                         ----          ----

Future Cash Flows                                    $6,199,335      $2,224,177
Future Production and Development Costs              (1,313,942)      ( 507,990)
Future Income Tax Expenses                                  -0-             -0-
                                                     ----------      ----------
Future Net Cash Flows                                 4,885,393       1,716,187

10% Annual Discount for Estimated Timing
  of Cash Flows                                      (3,088,545)      ( 549,180)
                                                     -----------     ----------
Standardized measure of Discounted Future
  Net Cash Flows                                     $1,796,848      $1,167,007
                                                     ===========     ==========


         The preceding table sets forth the estimated  future net cash flows and
related present value  discounted at a 10% annual rate from the Company's proved
reserves of oil.  The  estimated  future net revenue is computed by applying the
year end  prices  of oil and gas  (including  price  changes  that are fixed and
determinable)  and current  costs of  development  and  production  to estimated
future production  assuming  continuation of existing economic  conditions.  The
values expressed are estimated only, without actual long-term production to base
the  production  flows,  and may not  reflect  realizable  values of fair market
values of the oil and gas ultimately extracted and recovered.  The ultimate year
of realization is also subject to  accessibility  of petroleum  reserves and the
ability of the Company to market the products.



                                      F-23



<PAGE>




                             ENERGY PRODUCERS, INC.
                       CHANGES IN THE STANDARDIZED MEASURE
                         OF DISCOUNTED FUTURE CASH FLOWS
                                    Unaudited

                     Years ended December 31, 2002 and 2001

                                                         2002          2001
                                                         ----          ----

Balance, Beginning of Year:                          $1,167,007      $1,732,410

Sales of Oil Produced Net of Production Costs           149,312       ( 249,179)

Net Changes in Prices and Production Costs            3,430,214       ( 607,273)

Extensions and Discoveries, less Related Costs                0               0

Purchase and Sales of Oil in Place                            0       1,171,328

Revisions of Previous Quantity Estimates                138,860      (  258,131)

Accretion of Discount                                (3,088,545)        549,180

Net Changes in Income Taxes                                   0               0
                                                     ----------      ----------

Balance, End of year                                 $1,796,848      $1,167,007
                                                     ==========      ==========




                                      F-24



<PAGE>

ITEM 8 -  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANACIAL DISCLOSURE

There have been no changes or  disagreements  with the Company's  accountants on
accounting and financial disclosures.


                                    PART III
                                    --------

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

The directors,  executive officers and significant  employees of the company are
as follows:

<TABLE>
<CAPTION>
                                       POSITION
NAME                     AGE           WITH COMPANY
------                   ---           ------------
<S>                       <C>          <C>
Mel Herzog                83           Chairman  and Chief Executive Officer
Dennis R. Alexander       49           President  and Director
Jay C. Wilson             73           President and Director of Producers Supply, Inc.
Larry W. Trapp            61           Chief Financial Officer, Vice President and Director
David J. Kronenberg       49           Director and Assistant Secretary
Melvena Alexander         69           Secretary
Thomas J. Richards        57           Advisory Board Member
</TABLE>

Note:  Dennis  R.  Alexander,  President  and  Director,  is the son of  Melvena
Alexander, Secretary and Comptroller.

Mel Herzog has been Chairman of the Board, Chief Executive Officer, and Director
of the Company since May 18, 1999.  From  September  1998 he was a founder,  and
from January 19, 1999, through acquisition processes with the Company, served as
Chairman and CEO of Energy Producers  Group,  Inc. Mr. Herzog served as Chairman
and CEO of U.S. Power Systems,  Inc., a development  stage mining,  resource and
related  technology  based  publicly held company from  September 17, 1993 until
January 1, 2000 and prior to that period had served as its Vice president for 14
years.  Mr. Herzog is a Graduate in Industrial  Design from Institute of Design,
Chicago,  IL, and received a certificate for product  development  from Illinois
Institute of  Technology.  Mr. Herzog devotes  approximately  40 to 50 hours per
week minimum, and more as required, to the business of the Company.

Dennis R.  Alexander  has served the Company as President  and Director from May
18, 1999 to the present.  In September  1998 he was a founder,  and from January
19,  1999  through its  acquisition  with the Company  served as  President  and
Director of Energy  Producers  Group,  Inc.  From April 1997 through March 1998,
serving as CEO,  Director,  Consultant  of Miner  Communications,  Inc., a media
communications  company.  From  April  26,  1997  through  March,  1998 he was a


                                       41
<PAGE>

director of Rockline, Inc., a private mining, resource company, and a founder of
World Wide Bio Med, Inc., a private  health-bio  care,  start up company.  Since
March 1996 to the present he has owned Global Media Network USA, Inc., which has
included  management  consulting,   advisory  services.  Mr.  Alexander  devotes
approximately  60 to 80 hours per week  minimum,  and more as  required,  to the
business of the Company.

Jay C. Wilson has been President and Director of Producers Supply, Inc. from its
inception  in 1974.  He served as a Director of the Company from  February  2000
until April 1, 2002 having  served as Treasurer and Director of the Company from
May 1999 until  February  2000.  In  September  1998 he was a founder,  and from
January 19, 1999 through the  acquisition  processes  with the Company served as
Treasurer  and  Director  of Energy  Producers  Group,  Inc.  His duties for the
Company include oversight-monitoring responsibilities for exploration, drilling,
production,  acquisition,  and engineering  activities initially planned for the
Company's core operations area. He is the Founder, Chairman and President of Jay
C. Wilson Pipe and Supply,  Inc. Mr. Wilson Devotes  approximately  40 hours per
week, and more as required, to the business of Producers Supply, Inc.

Larry W. Trapp serves as CFO, Vice President, and Director since March 15, 2003,
having been a Vice  President,  and Director of the Company  since June 17, 1999
and is additionally serving as Treasurer since August 1, 2000. In September 1998
he was a founder, and from June 17, 1999 through the acquisition  processes with
the Company,  served as Director of Energy Producers  Group,  Inc. From November
14, 1994 to the current Mr. Trapp has been employed as a reservation sales agent
(RSA) at Southwest  Airlines.  Mr. Trapp earned a BS in Business  Administration
with  emphasis in Finance  from Arizona  State  University.  Mr.  Trapp  devotes
currently one to two days per week to the business of the Company.

David J.  Kronenberg  has served as  Director,  and  Assistant  Secretary of the
Company  since  February  2000 having  served  additionally  as  Treasurer  from
February 2000 until August 2000. From September 1998 he was a founder,  and from
January  1999 through the  acquisition  processes  with the  Company,  served as
Director and Assistant  Secretary of Energy Producers  Group,  Inc. From 1992 to
the  present,  Mr.  Kronenberg  has been the founder and  President  of David J.
Kronenberg,  CPA, P.C., and most recently  Kronenberg Tax and Asset  Management,
LLC.  which  provides  accounting,  tax planning and  preparation,  and business
advisory  services to the public.  From 1992 until dissolved in January 2000, he
was the founder and President of Global Resource Integration, Inc., which during
its  existence  was a holding  company that  handled  investment  activity.  Mr.
Kronenberg has been an established  Certified Public  Accountant since 1990, and
holds a B.A. in Chemistry from California State University. Mr. Kronenberg works
part time as needed by the Company, approximately one day per week.

Melvena Alexander serves as Secretary since March 15, 2003 having been Secretary
and  Comptroller  of the Company since May 18, 1999. In September 1998 she was a
founder,  and from January 19, 1999 through the  acquisition  processes with the
Company served as Secretary of Energy Producers  Group,  Inc. She is founder and
President  of  Melvena  Alexander  CPA  since  1982,  which  prepares  financial
statements  and tax reports.  From October 1998 to the present she has worked in
the  Department of Patient  Finance at Arizona  State  Hospital as an Accounting
Technician  11. She graduated from the Arizona State  University  with a B.S. in
Accounting,  has received a CPA Certificate,  State of Arizona # 5096E. She is a
member of AICPA and the American Society of Women  Accountants.  Mrs.  Alexander
devotes a minimum of 40 hours per week, and more as required, to the business of
the Company.

                                       42
<PAGE>

Advisory Board
--------------

Thomas J. Richards has been a member of the Advisory  Board of Energy  Producers
Inc.,  since  February 4, 2000.  From July 1999 until  February 4, 2000 he began
informally assisting Mr. Alexander in advisory capacity toward areas of research
and  project  review for Energy  Producers,  Inc.  and has  provided  additional
evaluations  for a number of  potential  projects  requested  for  review by the
Company's  Directors.  From  September  through  July  1999 Mr.  Richards  began
assisting  Management,  participating  initially  as an advisor  on an  informal
basis. From January 1996 until December 1998, he was self employed,  involved in
rehabilitation  of residential  Real Estate.  Mr.  Richards holds a BA degree in
Economics from Beloit College.

Term for Directors:  In accordance with Article 9.2 of the Company's Bylaws, the
members of the Board of  Directors  shall  hold  office  until the first  annual
meeting of Stockholders  and until their  successors shall have been elected and
qualified.  At the first  annual  meeting  of  Stockholders  and at each  annual
meeting  thereafter the Stockholders  shall elect Directors to hold office until
the next succeeding annual meeting,  except in the case of classification of the
Directors.  Each Director shall hold office for the term for which he is elected
until his  successor  shall have been  elected and  appointed at the next annual
meeting.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------------------------

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers  and  directors,  and  persons  who own more  than ten  percent  of the
Company's  Common  Stock,  to file reports of ownership and changes in ownership
with the Securities and Exchange  Commission  ("SEC").  Officers,  directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.

Based solely on current management's review of the copies of such forms received
by it from former  management,  the Company believes that, during the year ended
December  31,  2002,  its  officers,  directors,  and greater  than  ten-percent
beneficial owners complied with all applicable filing requirements.

Note: Mr. William A. Sanders, advisor of the company passed away in late January
of 2003. Mr. Sanders was less than a 5% beneficial owner of the Company's common
stock.



                                       43
<PAGE>

ITEM 10 - EXECUTIVE COMPENSATION
--------------------------------

The following summary Compensation Table sets fourth all cash compensation paid,
distributed  or  accrued  for  services,  rendered  in all  capacities  based on
agreements with consulting firms providing for the Company's  Management  during
the fiscal years ended,  December 31, 2002 and 2001. The Company  presently does
not retain any employees  and payments are made for services as  available.  All
other tables  required to be reported  have been  omitted,  as there has been no
compensation  awarded  to,  earned  by or paid to any of the  executives  of the
Company that is required to be reported other than what is stated below.

<TABLE>
<CAPTION>

                         Summary Compensation Table

                                  Other
Name and                          Annual
Principal Position         Year   Compensation
------------------         ----   ------------
<S>                        <C>    <C>
Academy Research (1)       2002    $ 78,000
                           2001    $  3,000

Global Media Network       2002    $ 96,000
USA, Inc. (2)              2001    $ 45,001

Melvena Alexander (3)      2002    $ 60,000
Secretary                  2001    $ 13,500
</TABLE>

(1) Academy  Research is owned by and provides  the services of Mel Herzog,  our
Chairman and CEO.  (also see "Certain  Relations and Related  Transactions"  for
additional discussion on agreements with individual consulting firms).

(2) Global  Media  Network  USA,  Inc. is owned by and  provides the services of
Dennis R.  Alexander,  our  President  (also see "Certain  Relations and Related
Transactions" for additional discussion on agreements with individual consulting
firms).

(3) Melvena Alexander our Secretary and Comptroller provides contracted services
through Melvena Alexander CPA, an entity she owns. Melvena Alexander CPA accrued
$60,000  in 2002,  and was paid  13,500 in fiscal  year 2001 for  providing  the
services  of  Melvena  Alexander.  (also  see  "Certain  Relations  and  Related
Transactions" for additional discussion on agreements with individual consulting
firms).

The  Company  has  granted  stock  options  to  certain  officers,  consultants,
directors,  and  advisors  of the Company to  purchase  shares of the  Company's
common  stock.  The Company  granted  these  stock  options to persons for their
direct participation  acknowledged by performance in 1999 and 2000 including the
start up of  operations,  the  development  of the Company and furthering of its
current, planned and ongoing developments.  The exercise price of the options is
equal to or in  excess  of the  fair  market  value of the  stock on the date of
grant. A schedule of the options is as follows:

                                       44
<PAGE>

<TABLE>
<CAPTION>

                      Option Grants in the  Fiscal Year 2000
              To Officers, Consultants, Directors, and Advisors (1)

                           Number of              % of Total
                           Securities Underlying  Options Granted Exercise or Base Expiration
Name                       Options Granted (#)    in Fiscal Year  Price ($/sh)     Date
-----                      -------------------    --------------  ------------     ----
<S>                        <C>                    <C>             <C>              <C>
Mel Herzog (CEO) and
Charlotte Herzog TTEE UA
DTD Jan 31, 1994 Herzog
Revocable Living
Trust JT Grantors          600,000                9.091%          $0.95            11/30/2007

Dennis R. Alexander,
President/Dir              600,000                9.091%          $0.95            11/30/2007

Melvena Alexander,
Secretary                  500,000                7.576%          $0.95            11/30/2007

David J. Kronenberg,
Assistant Secretary/Dir    500,000                7.576%          $0.95            11/30/2007
Assigned to D.J. and
S.M. Kronenberg Family
LLLP

Larry W. Trapp, Vice
President
Treasurer/Dir (3)          600,000                9.091%          $0.95            11/30/2007

Thomas J. Richards,
Advisory Board (3)         500,000                7.576%          $0.95            11/30/2007
</TABLE>

(1) The following are excerpts from certain  provisions  contained in the option
agreements listed above.

The date of all  agreements  set forth in the table above is September 30, 2000;
the vesting date for the option grants is sixty days (60)  following the date of
the Agreement.  The expiration of each of the agreements is seven (7) years from
the date of vesting.

The  agreements  call for the  filing  of a  registration  statement  under  the
Securities  Exchange Act of 1934 of the option  shares  within six months of the
date of the agreements or all of the option shares shall be  immediately  issued
to optionees without payment by or at cost to optionee,  and shall be restricted
stock of the Company  under rule 144 of the  Securities  act of 1933, as amended
and the  Company  shall then be  required  to file for the  registration  of the
option shares within twelve months of the date of the agreements. The forms 10SB
was filed as required.

                                       45
<PAGE>

The  provision  in the  immediately  preceding  paragraph,  whereas;  the option
agreements call for the immediate  issuance of the option shares without payment
by or at cost to the  optionees  if the filing of a  registration  of the option
shares has not occurred  within six months of the date of the  agreements;  this
provision  requirement  has been waived by all of the  individuals  and entities
listed in the option  table  listed above  entitled  "Option  Grants in the Last
Fiscal Year To Officers,  Consultants,  Directors, and Advisors", and further to
the best  knowledge of the Company this  provision has been waived by all of the
individuals  covered by option  agreements  listed  elsewhere  in this  document
including  Baseline Capital,  Inc. and individuals and or entities covered under
the Baseline Capital,  Inc. agreement with the Company. This initial requirement
has been fulfilled by the Company's filing of its initial Form 10SB registration
statement on April 2, 2001.

(2) This Option Grant was assigned  per Mr.  Kronenberg's  directive to D.J. and
S.M. Kronenberg Family Limited Liability Limited Partnership (LLLP).

Director Compensation
---------------------

As of  February  4, 2000  each  member of the  Board of  Directors,  subject  to
approval of the Chairman  and CEO,  may be paid $500.00 per formal  meeting plus
certain  expenses  for  out of  State  Directors  incurred  in  connection  with
attendance at Board and Committee meetings.  There are no agreements provided to
Directors or individual  agreements  with any Director other than that presented
in this paragraph,  and the understanding  that at minimum a traveling  Director
will be considered by the Chairman and CEO more favorably for  reimbursement  of
expenses  for travel and may, at the  election of the  Chairman and CEO, be paid
$500 for attendance at a formal meeting.  This determination by the Chairman and
CEO to provide for either  reimbursement or compensation for a formal meeting is
principally to be based on the finances of the Company available at the time.


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

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the Company's Common Stock by each person or group that is known by
the  Company  to be the  beneficial  owner  of more  than  five  percent  of its
outstanding Common Stock, each director of the Company, each person named in the
Summary  Compensation  Table,  and all directors  and executive  officers of the
Company as a group as of December  31, 2002.  Unless  otherwise  indicated,  the
company believes that the persons named in the table below, based on information
furnished by such owners,  have sole voting and investment power with respect to
the Common Stock beneficially owned by them, where applicable.

                                       46
<PAGE>

<TABLE>
<CAPTION>

Title of          Name and Address                 Beneficial           Percent
Class             Beneficial Owner                 Ownership            of Class
------            ----------------                 ----------           --------
<S>               <C>                              <C>                  <C>
Common            Jay C. Wilson                     1,870,335 (1)       11.09%
                  124 South First Street
                  Stephens, Arkansas 71764
Common            Larry W. Trapp                    2,620,000 (2)       15.54%
                  7944 E. Beck Lane, Suite 200
                  Scottsdale, Arizona 85260-1774
Common            Mel Herzog                        1,802,500 (3)       10.69%
                  P.O. Box 15666
                  Scottsdale, Arizona 85267-5666
Common            David J. Kronenberg               1,628,200 (4)       9.65%
                  7944 E. Beck Lane, Suite 200
                  Scottsdale, Arizona 85260-1774
Common            William A. Sanders                  510,000           3.03%
                  3202 W. Bell Road Apt#1177
                  Phoenix, Arizona 85053
Common            Melvena Alexander                   790,000 (5)       4.68%
                  6564 Smoke Tree Lane
                  Scottsdale, Arizona 85253
Common            Dennis R Alexander (5)            1,512,500 (6)       8.97%
                  5423 E. Piping Rock Road
                  Scottsdale, Arizona 85254
Common            Thomas J. Richards                  980,000 (7)       5.81%
                  7944 E. Beck Lane, Suite 200
                  Scottsdale, Arizona 85260-1774
Common            William V. Harlow, Jr.               40,000           0.24%
                  119 West 15th Street
                  Amarillo, Texas 79101
Common            All Officers and Directors
                  as a Group                       11,753,535          69.70%
</TABLE>

(1) Jay C.  Wilson has voting  power for the shares  owned by Leanna  Wilson his
daughter and the owner of 1,755,915 shares. Lenna Jenson is also the daughter of
Jay C. Wilson and sister to Leanna Wilson,  and holder of 84,695.  Juanita Whitt
is Manager at Producers Supply, Inc. and owns 29,725 shares.  There is no family
relationship  between  Juanita  Whitt and Jay C. Wilson,  however Mr. Wilson has
control over her shares.

(2) Includes  1,362,500  shares owned directly by Mr. Trapp. He is the Parent of
Michael Trapp, whose 657,500 shares are included in his total. Also included are
600,000 shares of common  restricted  stock under  presently  exercisable  stock
options,  which may be purchased by Mr.  Trapp.  Not reflected are 62,500 shares
gifted to Thomas J. Richards, Advisor (7), and Melvena Alexander, Secretary (5).


                                       47
<PAGE>

(3)  Includes  1,187,500  shares owned by the Herzog  Revocable  Living Trust JT
Grantors,  and 15,000 shares owned by his wife Charlotte  Herzog.  Also included
are 600,000 shares common restricted stock under presently  exercisable options,
which may be purchased  by the Herzog  Revocable  Living Trust JT Grantors.  Not
included in the table are 62,500  shares gifted to Thomas J.  Richards,  Advisor
(7), and 25,000 shares gifted to Melvena Alexander, Secretary (5).

(4) Included in the table are 1,037,500 shares owned by the DJ and SM Kronenberg
Family Limited  Liability  Limited  Partnership  (LLLP) that Mr. Kronenberg is a
Limited Partner of with his wife Sheryl M. Kronenberg. Included in the table are
30,000 shares owned by David J.  Kronenberg,  CPA, PC, Profit-  sharing  Pension
Plan. Also included in the table are 500,000 shares of common  restricted  stock
under  presently  exercisable  stock  options,  which  may be  purchased  by Mr.
Kronenberg,  and 10,700 shares owned indirectly  through Royal Crest, LLC, which
is managed by him. Not included in the table are 40,000  shares gifted to Ronald
and Marie Mencaraelli,  sister and brother-in-law;  40,000 gifted to Anthony and
Clare  Fernandez,  sister and  brother-in-law;  and 20,000 shares gifted to Rita
Kronenberg, sister; 62,500 shares gifted to Thomas J. Richards, advisor (5); and
25,000 shares gifted to Melvena Alexander, Secretary (7).

(5) Includes 190,000 shares owned directly by Mrs. Alexander, and 100,000 shares
as the total of all gifts  aggregated,  as  received by her from Mel Herzog (3),
Dennis  Alexander (6), David  Kronenberg (4), and Larry Trapp (2). Also included
are 500,000 shares of common restricted stock under presently  exercisable stock
options,  which may be purchased by Mrs.  Alexander.  Not reflected in the table
are 10,000 shares gifted to Bud Hirk from her original shares.

(6) Includes 412,500 shares owned directly by Mr. Alexander,  and 300,000 in the
name of his wife,  Deborah L. Alexander.  There are 50,000 shares in the name of
Ashton Alexander and 50,000 shares in the name of Sarah Alexander, his two minor
children,  and he has voting  power over 50,000 in the name of Aaron  Alexander,
and 50,000 in the name of Julie Alexander-Schumacher, his wife's adult children.
Also  included are 600,000  shares of common  restricted  stock under  presently
exercisable  stock  options,  which  may  be  purchased  by Mr.  Alexander.  Not
reflected are 25,000  shares gifted to Melvena  Alexander  (5),  Secretary,  and
62,500 shares to Thomas J. Richards, advisor (5). Dennis Alexander is the son of
Melvena Alexander.

(7) Includes 230,000 shares owned directly by Mr.  Richards,  and 250,000 shares
as the total of all gifts aggregated, as equally received by him from Mel Herzog
(3),  Dennis  Alexander  (6),  David  Kronenberg  (4), and Larry Trapp (2). Also
included  are  500,000  shares  of  common   restricted  stock  under  presently
exercisable stock options, which may be purchased by Mr. Richards.


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

On August 25, 1999 the Company through a business combination reorganization and
reverse  acquisition  process  acquired  all the  outstanding  shares  of Energy
Producers Group, Inc., and its wholly owned subsidiary,  Producers Supply,  Inc.
The transaction was accomplished through the issuance of 9,820,835 shares of the
Company's restricted common stock. Five shares of the Company's stock was issued


                                       48
<PAGE>

in exchange for each one share of Energy Producers  Group,  Inc.'s common stock.
The Company in this  process  acquired  all of the shares  representing  100% of
Energy  Producers  Group,  Inc., which included 100% ownership held in Producers
Supply,  Inc. Although Energy Producers Group,  Inc. was the legal acquirer;  it
was dissolved  subsequent to the  transaction,  so Energy  Producers,  Inc. (the
Company) is treated as having acquired Energy Producers Group, Inc. Accordingly,
the  transactions  have been accounted for as a reverse  acquisition  and Energy
Producers,  Inc. and its wholly owned subsidiary  Producers Supply,  Inc. is now
referred to as the Company.  The  historical  financial  statements are those of
Energy  Producers,  Inc., which have been restated for the equivalent  number of
shares received in the transaction. The results of operation of Energy Producers
Group,  Inc.  (legal  acquirer) are included in the financial  statements of the
combined Energy Producers Group, Inc. and Energy Producers, Inc.

Note to J.C. Wilson Pipe and Supply,  Inc. $245,000.  Note was issued August 15,
1999 and accrues  interest at the rate of 9.5% per annum and, with extensions is
due on or before May 1, 2003.

Status:  (As of March 31, 2003, a new extension is being negotiated on the terms
of the note, and negotiations are underway to restructure the debt.)

Unsecured demand note payable to J.C. Wilson $ 500. Pipe and Supply, Inc.

Jay C. Wilson a President  and  director of  Producers  Supply,  Inc.  owns J.C.
Wilson Pipe and Supply,  Inc. His  daughters  Leanna  Wilson and Lenna J. Jensen
along with Juanita Whitt current manage  Producers  Supply,  Inc. are the former
owners of Producers Supply, Inc. and are shareholders of the Company. Mr. Wilson
has voting power over the shares owned by Leanna  Wilson,  Lenna J. Jensen,  and
Juanita Whitt.

Note to Royal Crest,  LLC  originally  was  $342,500  issued March 31, 2001 with
interest at 20% per annum.  Monthly payments are interest only with full payment
due on April 30, 2003.

Status:(The note is current at March 31, 2002 at a balance of $366,067)

General  Terms  for the new Royal  Crest,  LLC note;  effective  for the  period
commencing  March 31, 2001;  Principle  amount,  $342,500,  secured by a deed of
trust  on the  Young  County  Properties,  with  interest  rate of 20%,  payable
interest only beginning April 30, 2001 and  continuing,  all due and payable and
extended  to April 30,  2003.  (See  also  section  on  "Liquidity  and  Capital
Resources")

The mother of Mr.  Kronenberg  owns Royal Crest LLC that he  administers.  Royal
Crest  LLC has a  security  interest  for the note in the  Young  County,  Texas
properties  owned by the Company.  Mr.  Kronenberg is a Director,  and Assistant
Secretary of the Company,  who is related to Royal Crest LLC, a beneficial owner
of the Company,  a shareholder,  and control person indirectly through DJ and SM
Kronenberg Limited Liability Limited Partnership (LLLP).

The Company is sub leasing to David J. Kronenberg, indirectly through Kronenberg
Tax and  Management  LLC,  half of the  Company's  subleased  office  space on a
month-to-month  basis. The Company's  arrangement for sub leased office space is
with a non affiliated party (a co-sharing basis) approximately 2,000 square feet


                                       49
<PAGE>

of office space for its corporate  headquarters at 7944 E. Beck Lane, Suite 200,
Scottsdale,  Arizona 85260-1774, and its telephone number is (480) 778-0488. The
terms of the sub-lease are monthly at the rate of $1,200.00 per month.  Duration
of the  lease  is  within  the  non-affiliate  party's  2-year  renewable  lease
provisions.  The Company has the same terms as to duration and roll over options
at its election and is current in its payments.

The following note is held and administered by a related party of the Company.

Note  to  Baseline  Capital,  Inc.  Note  with  original  principal  balance  of
$1,050,000  was issued  September 29, 2000 and is a  non-interest  bearing note.
Minimum  monthly  payments  of $25,000 or 80% of net  production  proceeds  from
specified properties.

Status:  (*The note is current at a balance of  approximately  $350,800 on March
31, 2003, *See also other discussions contained elsewhere in this document)

Baseline  Capital,  Inc.  and Mr. Karl  Reiter  holds  option  grants for future
exercises and the Young County, Texas oil properties owned by the Company, which
are managed by Baseline  Capital,  Inc. and provide for a  consulting  agreement
with Karl J. Reiter of Baseline Capital, Inc.

Promissory  Notes payable to Larry W. Trapp,  a director and  shareholder of the
Company.  $ 14,200 Note was issued June 1, 2001 with  interest at 12% per annum.
Due May 1, 2003.  A second  note for  $22,000  was issued  August 16,  2002 with
interest  at 12% per  annum.  Due May 1, 2002.  The notes are both  current at a
total principal balance of 36,800 on March 31, 2003)

Promissory  Notes  Payable  to Thomas J.  Richards.  Total for all notes owed is
$114,991 and is the principal  balance.  Status:  Notes are all current at March
31, 2003. All are due May 1, 2003 or sooner on demand.  Thomas J. Richards is an
advisor/Consultant  and  shareholder  of the  Company,  (Please see a listing of
these notes and summary terms in the Company's  financial  statements  which are
included  in Part II,  Item 7 of this  report,  a part of "Note 5 Related  Party
Transactions, Due to Shareholders" .

Unsecured, Demand Note Payable to Mel Herzog, Chairman, CEO, and shareholder for
funds loaned to the  Company.  Amount:  $ 27,558.  (Note is current at March 31,
2003).

Unsecured, Demand Note Payable to Dennis R. Alexander,  President,  director and
shareholder for funds loaned to the Company.  Amount: $ 73,790. (Note is current
at March 31, 2003).

Unsecured  amounts owed to officers and Shareholders for  un-reimbursed  Company
expenses paid by individuals:  Thomas J. Richards, $61,371, Dennis R. Alexander,
$22,254, Mel Herzog, $10,881, Melvena Alexander $2,465



                                       50
<PAGE>

Contracts
---------

The Company has contracts with various  entities  (owned by related  parties) to
provide accounting,  management,  and other professional services. The entities,
their owners and their amounts are as follows:

<TABLE>
<CAPTION>
                                                                Paid           Accrued
                                                           ----------------  -------------
Entity                            Related Party            2002     2001     2002     2001
-------                           -------------            ----     ----     ----     ----
<S>                               <C>                      <C>      <C>      <C>      <C>
Academy Research                  Mel Herzog (1)           $   -0-  $ 3,000  $78,000  -0-
Global Media Network USA, Inc.    Dennis R. Alexander (2)  $16,840  $45,001  $79,160  -0-
Melvena Alexander, CPA            Melvena Alexander (3)    $   -0-  $13,500  $60,000  -0-
</TABLE>

(1) Mel Herzog, Chairman and CEO, is a shareholder and officer of the Company.

(2) Dennis R. Alexander, President and Director, is a shareholder and officer of
the Company.

(3) Melvena Alexander,  Secretary and Comptroller,  is a shareholder and officer
of the Company.

Promissory Note for $10,000 payable to William Hirk. The note was issued January
6, 2001 with  interest  at 18% per  annum.  Due May 1, 2003.  William  Hirk is a
Shareholder.

Note  Payable in the amount of $9,729 to David J.  Kronenberg.  This Demand Note
was issued July 6, 2002. The Note is non-interest bearing. David Kronenberg is a
Director and Shareholder.

Note in the amount of $4,000Payable to Harlow  Corporation.  The Note was issued
February 14, 2002 with  interest at 12% per annum.  Due May 1, 2003.  The Harlow
Corporation is an entity wholly-owned by William V.
Harlow, Jr., a Shareholder.

The Company issued 10,000 shares of restricted common stock in September 2000 to
William  V.  Harlow  Jr. in  exchange  for a letter of  intent to  purchase  his
business. Mr. Harlow is a past member of our advisory board, and a shareholder.

(*)The Company issued 105,000 shares of its common  restricted  stock in January
2001 to the following:

                                       51
<PAGE>

<TABLE>
<CAPTION>
Name                   Date       Share Amt.   Purpose/in consideration of   Estimated Value
----                   ----       ----------   --------------------------   ---------------
<S>                    <C>        <C>          <C>                          <C>
Troy Rogers (1)        9/27/00    10,000       for a first right to purchase
                                               Young County Texas oil
                                               properties-leases.            $1,260
Michael Trapp (2)      9/27/00    15,000       making a 15,000 loan          $1,890
Thomas J. Richards (3) 9/27/00    30,000       making a 30,000 loan          $3,780
Scott Gardner (4)      9/27/00    30,000       making a 30,000 loan          $3,780
Scott Gardner (4)      1/18/01    20,000       making a 20,000 loan          $2,520
</TABLE>

(*)$75,000  of the  loan  proceeds  was  used to pay the  closing  costs  on the
purchase of the Rogers Property  interests.  The additional $20,000 was used for
working capital.

(1) Troy Rogers of Rogers Drilling Company of Olney,  Young County Texas,  owned
certain properties and a majority of its interests were purchased by the Company
September 29, 2000 (see  "Description of Properties").  The Company must include
and file for a registration of these shares if it has an offering in the future.

(2) Michael Trapp a shareholder  of the Company is the son of Larry W. Trapp,  a
shareholder, Director, and Treasurer of the Company.

(3) Thomas J.  Richards  is on our  advisory  board,  and is a  shareholder  and
beneficial owner of the Company.

(4) Scott Gardner is not an affiliate,  director,  or officer of the Company but
was a lender to the Company.

The Company  issued or subscribed  for issuance of 745,000  shares of its common
restricted stock in March 2002 to the following persons.  The shares were issued
pursuant to an exception  from  registration  as provided in Section 4(2) of the
Securities Act of 1933.

<TABLE>
<CAPTION>
Name                       Date     Share Amt.  Purpose/inconsideration of    Estimated Value
---------------            ----     ----------  ---------------------------   ---------------
<S>                        <C>      <C>         <C>                            <C>
Scott Gardner (5)          10/01/01 150,000     full payment of $20,000 loan   $20,000
Michael A. Herzog (6)      10/01/01  25,000     full payment of $5,000 loan     $5,000
William V. Harlow Jr. (7)  10/01/01  10,000     extensions on Letters of Intent $1,250
                                                (Harlow Corporation)
Bud Hirk (8)               10/01/01  10,000     extension on $10,000 loan       $1,250
Bennett Family Trust (9)   10/01/01 100,000     making a $50,000 loan           $6,250
Blume Law Firm(10)         10/01/01  25,000     extensions granted on           $3,150
                                                bill payment
Blume Law Firm(10)         12/28/01  25,000     $500 bill reduction/extension     $500
Garrett S. Lipski(11)      12/23/01  50,000     $10,000 restricted stock       $10,000
                                                subscription
Royal Crest LLC (12)       12/31/01 300,000     exchange for $30,000 interest  $30,000
                                                on Company loan
</TABLE>

                                       52
<PAGE>

(**) $125,000 of the financing proceeds in the immediately proceeding table were
used  primarily  for  reduction of Company  debt or to pay  expenses  related to
Company operations.

(5) Scott Gardner is not an affiliate, director, or officer of the Company.

(6) Michael A. Herzog is the son of Mel Herzog, Chairman/CEO of the Company.

(7) Mr. Harlow is a former member of our advisory board, and a shareholder.

(8) Bud Hirk is not an affiliate, director, or officer of the Company.

(9)  Bennett  Family  Trust is not an  affiliate,  director,  or  officer of the
Company.

(10) Blume Law Firm is the Company's corporate securities counsel.

(11) Garrett S. Lipski is not an affiliate, director, or officer of the Company.

(12) Mr.  Kronenberg  administers Royal Crest LLC, which is owned by his mother.
Mr.  Kronenberg  is a  director/assistant  secretary of the Company,  related to
Royal  Crest LLC, a  beneficial  owner and  shareholder  of the  Company,  and a
control  person  indirectly  through,  DJ and SM  Kronenberg  Limited  Liability
Limited Partnership (LLLP).

(3)The Company issued or subscribed for issuance of 326,000 shares of its common
restricted stock in January, April, May, and July 2002 to the following persons.
The shares were issued pursuant to an exception from registration as provided in
Section 4(2) of the Securities Act of 1933.

<TABLE>
<CAPTION>
Name                         Date      Share Amt.  Purpose/in consideration of   Estimated Value
----                         ----      ----------  ---------------------------   ---------------
<S>                          <C>       <C>         <C>                           <C>
Tim N. and Audrey K. Martin,
Joint Tenants with
Right of Survivorship (13)   01/19/02  50,000      $10,000 restricted stock      $10,000
                                                   subscription
William V. Harlow Jr. (14)   04/01/02  10,000      Making a $4,000 loan             $200
William V. Harlow Jr. (14)   04/01/02  10,000      Services Rendered                $200
Grant Elam            (15)   04/01/02   6,000      Making a $3,000 loan             $120
Thomas J. Richards    (16)   05/01/02 150,000      Making a $12,700 loan          $3,000
John Martin and Jyoti
Crystal, Joint Tenants with
right of Survivorship (17)   07/05/02 100,000      $10,000 restricted stock      $10,000
                                                   subscription
</TABLE>

                                       53
<PAGE>

(***) $39,700 of the financing proceeds in the immediately proceeding table were
used  primarily  for  reduction of Company  debt or to pay  expenses  related to
Company operations.

(13) Tim N. and Audrey K.  Martin with Joint  Right of  Survivorship  are not an
affiliate(s), director(s), or officer(s) of the Company.

(14) Mr. Harlow is a former member of our advisory board, and a shareholder.

(15) Grant Elam is not an affiliate, director, or officer of the Company.

(16) Thomas J.  Richards is on our  advisory  board,  and is a  shareholder  and
beneficial owner of the Company.

(17) John Martin and Jyoti Crystal with Joint Right of  Survivorship  are not an
affiliate(s), director(s), or officer(s) of the Company.

The Company  granted  stock  options for the purchase of shares of the Company's
common stock to a certain individual for his consulting and advisory work on the
Life Energy  Technology  Holdings,  Ltd  transaction and other  assistance.  The
exercise  price of the options is equal to or in excess of the fair market value
of the stock on the date of grant. A schedule of the options is as follows:

<TABLE>
<CAPTION>

                Option Grants in the Fiscal Year 2000, continued

                          Number of              % of Total
                          Securities Underlying  Options Granted  Exercise or Base  Expiration
Name                      Options Granted (#)    in Fiscal Year   Price ($/sh)      Date
----                      -------------------    --------------   ------------      ----
<S>                       <C>                    <C>              <C>               <C>
Bradley T. Ray
7105 Catalina Isle Drive
Lake Worth, Florida       500,000                7.576%           $0.95             11/30/07
33467
</TABLE>

(1) The following are excerpts from certain  provisions  contained in the option
agreement listed above, and include but not limited to the following:

The date of all  agreements  set forth in the table above is September 30, 2000;
the vesting date for the option grants is sixty (60) days  following the date of
the Agreement.  The expiration of each of the agreements is seven (7) years from
the date of vesting.

The agreement  calls for the filing of a  registration  statement  including the
option  shares  within  six months of the date of the  agreements  or all of the
option shares shall be immediately  issued to optionee  without payment by or at
cost to optionee, and shall be restricted stock of the Company under rule 144 of
the Securities act of 1933, as amended and the Company shall then be required to
file for the  registration of the option shares within twelve months of the date


                                       54
<PAGE>

of the  agreements.  The  provision  in  the  immediately  preceding  paragraph,
whereas;  the option  agreements  call for the immediate  issuance of the option
shares  without  payment  by or at  cost to the  optionees  if the  filing  of a
registration of the option shares has not occurred within six months of the date
of the  agreements;  this  provision  requirement  has been waived by all of the
individuals  and entities  listed in the option  table under the Section  titled
"Executive  Compensation"  table and footnotes "Option Grants in the Last Fiscal
Year To Officers, Consultants, Directors, and Advisors", and further to the best
knowledge  of  the  Company  this  provision  has  been  waived  by  all  of the
individuals covered by option agreements listed in the table above and elsewhere
in this  document  including  Baseline  Capital,  Inc.  and  individuals  and or
entities covered under the Baseline  Capital,  Inc.  agreement with the Company.
This  initial  requirement  has been  fulfilled by the  Company's  filing of its
initial Form 10SB registration statement on April 2, 2001.

For all  option  grants  listed in this  document  the  following  provision  is
provided:  If at any time  after  the date of this  Agreement  and  prior to the
expiration  of  all  Exercise   period(s),   the  Company  proposes  to  file  a
registration  statement  to register  any Common  Stock (other than Common Stock
issued with respect to any  acquisition  or any  employee  stock  option,  stock
purchase or similar  plan) under the  Securities  Act of 1933,  as amended  (the
"Securities Act") for sale to the public in an underwritten offering, it will at
each such time give prior written  notice to the Optionee of its intention to do
so ("Notice of Intent")  and,  upon the  written  request of the  Optionee  made
within 30 calendar days after the receipt of any such notice (which request must
specify  the number of Option  Shares  Optionee  requests  to be included in the
registration,  the Company will use its best efforts to effect the  registration
under the  Securities  Act of the Option  Shares  which the  Company has been so
requested to register, provided, however, that if the managing underwriter shall
certify in writing that  inclusion of all or any of the Option Shares would,  in
such managing  underwriter's  opinion,  materially  interfere  with the proposed
distribution and marketing of the Common Stock in respect of which  registration
was  originally to be effected  (such writing to state the basis of such opinion
and  the  maximum  number  of  shares  which  may be  distributed  without  such
interference),  then the Company may, upon written notice to the Optionee,  have
the right to exclude from such  registration  such number of Option Shares which
it would  otherwise be required to register  hereunder as is necessary to reduce
the total amount of Common Stock to be so registered to the maximum amount which
can be so marketed.

On October 30,  2000 the Company  entered  into a Purchase  Agreement  with Life
Energy  Technology  Holdings,  Ltd. of Ireland under which Life Energy agreed to
purchase 49% of Energy  Producers,  Inc.'s common stock for twenty  million U.S.
dollars worth of natural resource  commodity or pulverized fuel ash (PFA),  that
was to be  convertible  by Life Energy into cash by sale of the commodity or PFA
on a scheduled basis in accordance with its agreement with the Company. PFA is a
waste product derived from coal-fired power plant.  This Purchase  Agreement was
not completed.

One Million shares of Preferred  Series B convertible  stock with a stated value
of $20 per share are being held in escrow pending  receipt of the monies,  other
technical related items, and determinations.

In October  2000 the Company  pursued an Asset  Purchase  Agreement  with Calmon
Enterprises, Inc. to acquire Hull Silk Field equipment,  technology licenses and
related liabilities. The acquisition was never consummated.

                                       55
<PAGE>

                                     PART IV
                                     -------

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

There are no exhibits or reports on Form 8-K and Form 10-KSB.

ITEM 14. CONTROLS AND PROCEDURES
--------------------------------

Our  Chief  Executive  Officer  and Chief  Financial  Officer  (the  "Certifying
Officers") are responsible for establishing and maintaining  disclosure controls
and procedures for the Company.


The Certifying Officers have designed such disclosure controls and procedures to
ensure that material information is made known to them,  particularly during the
period in which this report was prepared.


The  Certifying  Officers  have  evaluated  the  effectiveness  of the Company's
disclosure controls and procedures within 90 days of the date of this report and
believe that the  Company's  disclosure  controls and  procedures  are effective
based on the  required  evaluation.  There have been no  significant  changes in
internal controls or in other factors that could  significantly  affect internal
controls  subsequent to the date of their  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

PART F/S                   FINANCIAL STATEMENTS
--------                   --------------------

The  financial  statements  of the Company as required by Item 310 of Regulation
S-B are included in Part II, Item 7 of this report.



                                       56
<PAGE>


                                   SIGNATURES
                                   ----------


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                             ENERGY PRODUCERS, INC.
                                             (Registrant)

                                       By:   /s/ Mel Herzog
                                             --------------
                                             Mel Herzog
                                             Chairman and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

/s/ Mel Herzog                                              April 14, 2003
--------------
Mel Herzog,  Chairman and CEO

/s/ Dennis R. Alexander                                     April 14, 2003
-----------------------
Dennis R. Alexander, Director/President

/s/ Larry W. Trapp                                          April 14, 2003
------------------
Larry W. Trapp,  Director/Vice President/Treasurer

/s/ David J. Kronenberg                                     April 14, 2003
-----------------------
David J. Kronenberg, Director



                                       57
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

I, Mel Herzog, Chairman and CEO of Energy Producers, Inc. certify that:

1. I have reviewed this annual report on Form 10-KSB of Energy Producers, Inc.;

2.  Based on my  knowledge,  this  annual  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.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  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. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material 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. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


/s/Mel Herzog
-------------
Mel Herzog
Date: April 14, 2002

                                       58
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

I, Larry W. Trapp, CFO of Energy Producers, Inc. certify that:

1. I have reviewed this annual report on Form 10-KSB of Energy Producers, Inc.;

2.  Based on my  knowledge,  this  annual  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.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  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. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material 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. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


/s/ Larry W. Trapp
------------------
Larry W. Trapp
Date: April 14, 2002


                                       59