United States Securities and Exchange Commission
                             Washington, D.C. 20549

Form 10-KSB
(Mark One)
[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended December 31, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 For the transition period from ___________ to __________

                        Commission file number : 0-29509

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
--------------------------------------------------------------------------------
                 (Exact name of business issuer in its charter)

         UTAH                                                      82-0520055
--------------------------------------------------------------------------------
State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

         2801 Brandt Avenue, Nampa, Idaho                              83687
--------------------------------------------------------------------------------
         (Address of principal executive offices)                   (Zip Code)

Issuer's telephone number:   (208)-463-0063             Fax:     (208)463-7601
                             --------------                      -------------

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

         Title of each class         Name of each exchange on which registered
=================================    =========================================

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

                            Common Stock no par value
                           ---------------------------
                                (Title of class)

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

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


State issuer's revenues for its most recent fiscal year. $1,258,099


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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  prices of such common  equity,  as of a
specified  date within the past 60 days:  The  aggregate  market value of equity
held by  non-affiliates  on March 27, 2002,  at the price of $0.17 per share was
$9,423,382.

(ISSUERS  INVOLVED IN BANKRUPTCY  PROCEEDINGS  DURING THE PAST FIVE YEARS)
Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes[ ] No[ ].

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the  number of shares  outstanding  of each of the  Issuers's  classes  of
common equity, as of the latest practicable date. December 31, 2001,  73,220,116
shares of no par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference,  briefly describe them
and  identify  the part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.) into
which the documents is incorporated;  (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format.  Yes [ ] No [X]

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                                     PART I

ITEM  1. DESCRIPTION OF BUSINESS.

History and Business Development.

Environmental Oil Processing Technology Corporation (EVOP) is a Utah corporation
with an Idaho subsidiary  corporation,  Environmental Oil Processing Technology,
Inc. The principal offices of both corporations and the pilot refining plant are
located at 2801 Brandt Avenue, Nampa, Idaho 83687. The location is approximately
16 miles West of Boise, Idaho. The primary business of the Company is to design,
fabricate and develop  processing  plants that will re-refine waste  lubricating
oil into petroleum  products  including naphtha  (gasoline),  diesel for fuel to
power motors, and residuum to be used in asphalt products and as burner fuel.

The on site  pilot  plant  started  test  operations  in  December  of 1999  and
continued testing during 2000 and 2001, and, from time to time, produced refined
petroleum products as designed. During the latter part of 2001 Management,  with
the assistance of new consulting engineers,  redesigned portions of the plant to
improve  efficiency,  continuity and quality of petroleum  products.  Making the
improvements   to  the  plant  required   shutting  the  plant  down  until  the
improvements are completed. Management expects the improvements and revisions in
the plant to be  completed  by the end of May,  2002,  and  expects the plant to
resume producing petroleum products at that time.  Management intends to operate
the Nampa processing  plant as a pilot and experimental  plant, and to build and
operate additional plants as Company owned projects.

In order to gather used  lubricating  oil to feed the Nampa plant,  the Company,
and its  predecessors,  developed a gathering and collecting system which it has
been continuously operating since 1994.

Growth and Expansion.

To grow the Company Management during 2001 commenced the following operations:

         1.   The  acquisition  in May of the assets of Artesian  Oil  Recovery,
              Inc., a Nevada corporation, doing business in Oakland, California.
              The Company  formed a subsidiary  corporation  EOPT Oil  Recovery,
              Inc., a California corporation,  to operate the business under the
              fictitious  business  name  of  Artesian  Oil  Recovery.  The  oil
              recovered  from  Artesian  is  being   transported  by  commercial
              trucking  companies  to Nampa  for  treatment  and for  resale  to
              customers  using used oil for burner  and  bunker  fuel.  When the
              Nampa plant is reconditioned, the oil from Artesian is expected to
              be refined in the plant into petroleum products.

         2.   The  organization  in August of EOPT  Refining of Nevada,  Inc., a
              subsidiary corporation to purchase the real property and develop a
              refining  facility  in the  Reno,  Nevada,  area  to  refine  used
              lubricating  oil  gathered  in both  Nevada  and  California.  The
              corporation acquired approximately 20 acres in the Reno Industrial
              park, and is currently  preparing  approximately  15 acres of such
              land for a used oil .  refining  facility.  The site is planned to
              include  two  refining  plants,  and a tank farm and  transporting
              facility for both  trucking and railroad  transfers.  PC&E, of St.
              Louis, a subsidiary of Emerson (formerly Emerson  Electric),  with
              the  cooperation  of  Redd  Engineering  of  Salt  Lake  City,  is
              preparing  the   engineering  and   construction   plans  for  the
              improvements  to be located on the Reno site. The Company does not
              now have a source of financing to proceed with the  fabrication of
              the refining plants.


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<PAGE>

         3.   The  organization  in April of EOPT Power Group  Nevada,  Inc.,  a
              subsidiary  corporation  to develop  the  remaining 5 acres on the
              Reno site for generation of electricity.  Management intended that
              the power plant would use fuel from the  refining  site to run the
              power plant. The power  corporation  successfully  obtained all of
              the  required  permits  from the State of Nevada  and the  Federal
              agencies for the  construction of a power plant,  and the property
              is considered a "fully  permitted"  site. The  manufacturer of the
              electric  generators was not able to timely deliver the generating
              equipment.  The Company is currently  involved in litigation  with
              the  manufacturer  who was to provide the  equipment.  (See "Legal
              Proceedings"  page 8, Item 2).  The  Company  has the  "permitted"
              property  for sale for an  asking  price of $20.5  Million  and is
              negotiating with several companies for the sale thereof. Until the
              property is sold, the Company is not ruling out the development of
              the site for the production of electricity.

Overall Purpose of the Company.

The design of the  Company's  processing  plant is to produce  useful  petroleum
based  products  from  used  motor  lubricating  oil that is now  considered  an
environmental  hazard in most  parts of the  developed  world.  In  addition  to
eliminating any  environmental  hazard from the accumulation of used lubricating
oil the resulting  petroleum products will (a) fuel diesel and gasoline engines,
(b) provide  burner fuel to generate  heat for many  applications  including the
production of electrical  energy in  co-generating  systems,  and (c) add usable
ingredients to different asphalt  applications.  Management's long range outlook
includes  building and operating  refining plants and  co-generating  electrical
plants located in both the  continental  United States and in foreign  countries
where there is access to used  lubricating  oil. The Company has been approached
by several  continental and international  firms who have expressed  interest in
having a processing  plant in their locality to manage the used  lubricating oil
surpluses and to provide petroleum products and electrical power.

History of Business:

Environmental Oil Services Company,  LLC, a predecessor  company,  was organized
and  financed in 1994 for the purpose of (i)  locating in  Southwestern  Idaho a
plant for re-refining used lubricating oil into usable petroleum  products,  and
(ii) establishing a system to gather the used oil for the plant. The predecessor
company (i) purchased four vacuum tank trucks, installed a tank farm to contain,
separate and  circulate  the used oil and began  gathering  used oil  throughout
southern  Idaho,  eastern  Oregon and eastern  Washington,  and (ii) purchased a
processing  plant from a manufacturing  company in the East, which was installed
at the present  location.  After  several  months of  continuous  efforts by the
manufacturer  and the  predecessor  company,  the  plant was  unable to  perform
according to the manufacturer's claims, the plant was demolished and removed. In
order to maintain its sources for used lubricating oil, the predecessor  company
continued  the  waste  oil  gathering  business,  and sold the oil to local  and
coastal used-oil consumers, even though operating at a loss.

In early 1995 the  predecessor  company  retained  Jacobs  Engineering  Group in
Denver,  Colorado,  to design and develop a plant to process and re-refine  used
lubricating  oil  into  petroleum   products.   Following  Jacob's  design,  the
predecessor  company  constructed  the presently  existing  processing  plant in
compliance with all EPA and other governmental regulations.  The plant conducted
initial test runs in April and May of 1997, and established  that the production
of naphtha,  diesel and other  by-products  was possible.  After  evaluating the

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<PAGE>

estimated cost of completing  and  implementing  equipment for producing  diesel
fuel meeting road specifications, the predecessor company elected to discontinue
the completion of the plant.

In December of 1997,  Environmental  Oil Services,  Inc.,  ("EOS") organized and
owned  by  Mr.  N.  Tod  Tripple,  acquired  all  of the  existing  business  of
Environmental Oil Services Company,  LLC, with the issuance of its stock. During
the calendar year 1998,  EOS continued  gathering used  lubricating  oil and the
handling of related  hazardous waste materials,  and continued the evaluation of
the processing plant with the intent of producing marketable petroleum products.
In  March  of 1999 EOS  merged  with  EOPT,  (also  principally  owned by N. Tod
Tripple) the Company,  that is presently  operating the business and  completing
the processing plant.

Presently the  processing  plant is a fully  "permitted  plant"  meeting all the
requirements of the EPA and all Federal and State air quality  requirements  and
all other governmental agencies.

Description of Current Business.

The Company  intends to continue to gather used  lubricating  oil,  and includes
gathering used oil filters, collecting waste water for treatment, and collecting
antifreeze for recycling through other processors. The gathering system operates
in the geographical areas commonly known as southwestern and southeastern Idaho,
the tri-cities area of eastern Washington,  and eastern Oregon. In addition, the
same type of oil  gathering  and related  services are performed in the Oakland,
California area, through the facilities of EOPT Oil Recovery,  Inc. dba Artesian
Oil Recovery.  The Company has enlarged its oil  gathering  capacity by entering
into specific  contracts for acquiring  sizable  quantities of used  lubricating
oil,  contaminated diesel, other fuels, and related products from large users of
such products.  Presently the Company gathers in excess of 2,400,000  gallons of
used-oil  annually,  and  maintains  in storage in excess of 800,000  gallons of
waste oil inventory for the anticipated  operation of the processing  plant. The
used oil that is gathered is cleaned, dewatered, and prepared as plant feed oil.
Any residual oil not used as feed oil, or residual oil that is not  processed by
the plant is resold  to  customers  who are able to burn  clean  used-oil.  Such
companies  usually  are  asphalt  manufacturing  plants and remote  construction
products manufacturers who require heat in their production processes. Some fuel
has been  marketed to western  coastal areas for use as bunker fuel in the ocean
shipping  industry..  In October of 1999, the Company completed the installation
of a reconditioned  water cleaning plant to purify the water from the processing
plant operation,  as well as other  contaminated water collected from customers.
The treated  water is then of a quality  acceptable  for  introduction  into the
local sewer system.

Management  considers the plant  operational,  although  currently shut down for
modification  and  improvements.  The plant is  designed  to refine in excess of
5,000,000  gallons of used-oil  annually,  and to produce in excess of 3,500,000
gallons of naphtha,  diesel and residuum  (burner) fuels. The plant uses the non
liquid  gasses that are  produced in the process of refining for the purposes of
generating  the heat required in operating  the  processing  plant.  The Company
continues to expand its gathering system and enter into  arrangements to acquire
used motor lubricating oil from other commercial gatherers. Management is of the
present  opinion  that  it  will be able to  acquire  the  additional  feed  oil
necessary  to  operate  the  processing  plant on a full  time  basis,  which is
approximately eleven months out of the year.

On a larger scale the Company continues to negotiate for other locations for the
construction of additional  plants for providing the same or similar services as
the Nampa facility, with the added potential of generating electrical power.

                                        5
<PAGE>

During the third  quarter  of 2001 it became  apparent  that  other  engineering
capability  was  available to the Company and that  management  of the Company's
subsidiary Project Development Industries,  L.L.C. ("PDI") was discontent,  as a
result  of which  litigation  was  entered  into  (See  Item IV) and PDI and the
Company  parted  and are no longer  affiliated.  Management  of the  Company  is
pleased with the  availability of engineering and other  consulting  services in
replacement of the services previously provided by PDI.

Competition.  Management  is not aware of any  competitors  who  re-refine  used
lubricating oil, however,  there are other entities that gather used lubricating
oil  for  the  purpose  of  filtering  and   otherwise   cleaning  the  oil  for
re-distribution  as  lubricating  oil.  Such  businesses  may be  considered  as
competitors  for the used  lubricating  market,  however,  Management  is of the
opinion that as a result of the greater margin or profit available to re-refined
petroleum  products,  that such filtering and cleaning  businesses will not be a
material factor in the operating of the Company's business.

Employees.

Effective the date of this report,  Registrant  has 1 part time and 30 full time
employees.

Forward Looking Statements.

The  foregoing  statements  in this  "Description  of Business"  concerning  the
development and growth of the Company,  and particularly the planned development
of  the  Reno  facilities  and  the  future  of  the  "permitted  property"  are
forward-looking  statements  as  well  as any  other  statements  that  are  not
historical  in  context..  The  statements  provided  are  based on  information
available  to  Management  as of the date  hereof,  and the  Company  assumes no
obligation  to revise or update  such  forward-looking  statements.  Readers are
cautioned that such  forward-looking  statements  involve risk and uncertainties
that may cause the  Company's  actual  results  to differ  materially  from such
forward-looking statements.

ITEM  2. DESCRIPTION OF PROPERTY.

1.       Company Principal Office.

         The Company's administrative offices, oil gathering headquarters,  tank
farm and processing plant including ancillary structures, are located on Company
owned  property at 2801 Brandt Avenue,  Nampa,  Idaho,  83687.  Nampa is located
about 16 miles West of Boise, Idaho.

         In  stock  recapitalization   transactions  the  Company  acquired  the
property,  buildings  and other  improvements,  tank farm,  vacuum tank  trucks,
office facilities and waste oil processing plant from predecessor  companies who
originally  purchased the bare ground and constructed  all of the  improvements,
tank farm, processing plant, and all ancillary buildings and improvements.

         The properties include:

         a.       The real property  consists of 6.09 acres of industrial  zoned
                  property   in  three   industrial   lots,   with  all  of  the
                  improvements constructed and presently contained on two of the
                  lots, and the other is unimproved.


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<PAGE>



         b.       The administration building includes approximately 3300 square
                  feet with  approximately  1800 square feet of office  space on
                  two  floors,  and  approximately  1400 square feet of shop and
                  warehouse   area  for  storage  and  inventory  of  parts  and
                  equipment.

         c.       The tank farm consists of a concrete  floor area and retaining
                  walls to control any  spillage,  and now has 25 metal  storage
                  tanks,   together   with   piping,   pumps  and  controls  for
                  circulating  the  contents of the tanks.  The present  storage
                  area of the tanks is approximately 477,769 gallons and will be
                  used to contain and store used oil,  water,  diesel,  naphtha,
                  and residuum.

         d.       The processing  plant is the Company's  Model 600, which has a
                  design  flow  rate of  approximately  365  BPD  (approximately
                  15,370  gallons  per day),  and is known in the  industry as a
                  "thermal cracking vacuum distillation process plant".

         e.       The Company's rolling stock (trucks and trailers)  consists of
                  four  10-wheeler  vacuum  trucks,  two  transport  trucks  and
                  trailers, one dump truck and two cargo trucks.

         f.       The Company has under lease 5 additional storage tanks located
                  in  different  parts of the  service  area to  facilitate  the
                  gathering  and storing of waste oil.  The monthly cost of such
                  tanks is $2,475.

         g.       The  real  estate,  improvements,  and  processing  plant  are
                  subject  to a deed of trust in favor of Lewis & Clark  College
                  securing  a  promissory  note  and  interest  earned,  in  the
                  principal amount of $10,500,000.

2.       EOPT Reno Project.

         The Company has  acquired  fee title to  approximately  20 acres in the
Reno Industrial Park located in the Reno, Nevada, vicinity. The real property is
unimproved  with on site  development  presently in progress.  Approximately  15
acres  is  planned  for  oil  refining   plants  and  related   equipment,   and
approximately   5  acres  is  planned  and  permitted  for  the   generation  of
electricity.  The  property  is  subject  to a deed of trust in favor of Lewis &
Clark College securing a promissory note and interest  earned,  in the principal
amount of $10,500,000.

3.       Artesian Oil Recovery.

         In May of  2001  the  Company  acquired  the  assets  of  Artesian  Oil
Recovery,  Inc. located in Oakland,  California.  The assets included a lease on
the premises at 2306 Magnolia Street, Oakland, California, which lease continues
until September  2005.  Tenant has the option to extend the lease for two 5 year
periods.  The rent on the  premises  is $1,250  per month.  Other  assets of the
Company include a 1985 GMC 7000 Tanker Truck,  1979  International  S1854 Tanker
Truck,  office  equipment,  four storage tanks i.e. 9400 gal, 2-2,000 gal. and a
1,500 gal tank, and miscellaneous operating equipment.


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<PAGE>

ITEM  3. LEGAL PROCEEDINGS.

1.       On September 14, 2001, Project  Development  Industries,  L.L.C. (PDI),
         the Company's wholly owned subsidiary and several  individuals who were
         former owners of PDI,  including former director Grayson Evans, filed a
         federal  district  court  complaint  against  the Company in the United
         States  Court of  Colorado,  Case No.  EDCV01WM-1714.  PDI was  seeking
         rescission of the Company's purchase of PDI for 7 million shares of the
         Company's stock and a $6 million  promissory note. The Company asserted
         counterclaims  for breach of contract and negligent  misrepresentation.
         The matter was dismissed with  prejudice on March 4, 2002,  following a
         settlement under which the Companyt paid a $155,000 invoice  previously
         tendered by PDI and the former owners of PDI returned 4 million  shares
         of stock and cancelled the $6 million promissory note.

2.       On  September  24, 2001,  the Company  filed a federal  district  court
         complaint  against LM  Alternative,  Inc.  (LMA) in the  United  States
         District Court, Central District of California,  Eastern Division, Case
         Ano.  EDCV  01-0699 VAP  (SGLx).  The  Company  seeks a money  judgment
         against  LMA  for  breach  of  contract  for  failure  to   manufacture
         generators in accordance  with contract  specifications  and failure to
         deliver the  products.  The Company seeks  compensatory  damages in the
         amount of  $2,620,000,  incidental  damages  incurred  in the amount of
         $1,035,340, and consequential damages in the amount of $16,000,000. The
         Complaint  was served on LMA on September  28, 2001. On March 20, 2002,
         LMA filed its Answer denying any liability arising from the allegations
         in the Complaint,  and counterclaims for $10,000,000 in damages arising
         from the  alleged  breach of contract  by the  Company.  The Company is
         unable to comment on the  probability  of a mutual  settlement  at this
         time.

3.       On February 25, 2002, American Moistening Company,  Inc. (AMCO) filed a
         Complaint  in  North   Carolina  in  the  Superior  Court  Division  of
         Mecklenburg County, Case No. 01- CVS-3321.  AMCO seeks a money judgment
         against the Company  for  $165,840  for  services  and goods  allegedly
         performed or  manufactured  for the Company  during 2001. The Complaint
         was  served on the  Company on March 4, 2002.  The  Company  intends to
         timely file an answer and will assert  that the  Company  canceled  its
         purchase order and that AMCO failed to mitigate its damages.

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

         None


                                     PART II

ITEM  5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

         1.  Market for Common Stock.

Registrant's  common  stock  started  trading in January  2001 and is  currently
traded on the NASDAQ over-the-counter Bulletin Board under the symbol "EVOP".The
following  quotations  reflect  inter-dealer  prices,  without  retail  mark-up,
mark-down or commission and may not represent actual transactions. The source of
the quotes is Big Charts, Tabular Java Chart.

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<PAGE>


         Year 2001                                 High             Low

         First Quarter........................     $9.10            $0.30
         Second Quarter.......................     $1.42            $0.30
         Third Quarter........................     $0.65            $0.16
         Fourth Quarter.......................     $0.35            $0.16

         b. Holders of Common Stock. The approximate number of holders of record
of the Registrant's common stock was 5,550 as of March 22, 2002. A number of the
Company's record  shareholders are  broker/dealers  who are holding record title
for other customers,  and accordingly  management  believes the actual number of
beneficial   holders  of  its  common  stock  is  greater  than  the  number  of
shareholders of record.

         c. Dividends.   There  have  been  no cash or  other  distributions  or
dividends.

         d. Unregistered  Equity Securities Sold by Registrant During the Fourth
Quarter of 2001.

         There  were no sales  of  unregistered  securities  during  the  Fourth
Quarter of 2001.

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

During 2001 Registrant secured a $10,500,000 loan from a non-shareholder private
lender  which was used to purchase  and begin  development  and  engineering  of
approximately  20  acres  in the Reno  Industrial  Park  for the  Reno  Project,
approximately  $500,000 to acquire  Artesian  Oil  Recovery  company in Oakland,
California,  to recover  oil for the Reno  Project,  and to finance  the the new
fractionating column and other modifications in the Nampa refining plant.

The Reno Project  presently  consists of completing land development on 15 acres
of land for the refining plants and preliminary  engineering for construction of
two refining  plants.  The site  preparation  has been nearly  completed and the
engineering and design work is in the advanced stages.  Engineering for the Reno
project  is being  completed  by PC&E of St.  Louis,  a  subsidiary  of  Emerson
(formerly  Emerson  Electric)  and Redd  Engineering  in Salt Lake  City,  Utah.
Approximately  $30,000,000  is needed to construct,  locate and start up the two
plants which could be  operating  by the second  quarter of 2003 if financing is
soon  obtained.  . Management  plans on raising  $55,000,000  from either a debt
offering or from an offering of common stock to retire the original  $10,500,000
loan and raise the funds necessary to complete the Reno Project. The remaining 5
acres originally  intended for the generation of electricity is presently "fully
permitted" for that purpose both on the state and federal level.  The 5 acres is
presently for sale for $20,500,000 with several  inquiring  parties.  Registrant
has not totally ruled out proceeding with the co-generation facility, contingent
on the most favorable source of financing.

Approximately  $500,000  was used to acquire the assets of Artesian Oil Recovery
in Oakland California, to gather oil for the Reno Project. Pending completion of
the Reno plant,  the oil is being  transported to Nampa for processing  when the
plant is operational,  and until that time, the oil is being resold to customers
who burn oil.

The modifications of the Nampa plant are expected to be completed by mid 2002 at
which  time the  plant  will  commence  refining  the  used  oil into  petroleum
products,  which  will  enhance  the  revenues.  Management  anticipates  having
positive cash flow from operations when the plant is operating.


                                        9
<PAGE>

Registrant's  former  subsidiary  PDI was disposed of in 2001. The former owners
filed  a  lawsuit  for  rescission  of  the  acquisition  of  PDI  based  on the
acquisition  agreements,  and a  settlement  agreement  was reached  under which
Registrant  received back  4,000,000  shares of the 7,000,000  shares issued for
PDI. (See "Legal  Proceedings"  page 8, Item 1). As a result of the  disposition
Registrant's   financial  statements  have  been  restated  to  reflect  PDI  as
discontinued operations.  This means that Registrant's financial statements only
reflect its core business of used oil gathering and refining after recognizing a
significant loss for discontinued operations.

The Company's  operations as of the year end December 31, 2001,  reflected sales
of used oil products of approximately  $1,258,000  compared to $783,000 in 2000.
Cost of sales were approximately  $262,000 in 2001, which relates to the cost of
collecting oil in California and  transporting  it to Idaho. In 2000 the Company
did not  collect  used oil in  California.  This is an increase in sales of 61%,
which is the result of  approximately  $273,000  of new  revenues  generated  by
Artesian and $202,000 of additional revenues from the Nampa refinery.  Operating
expenses increased by approximately $10,918,000 in 2001 over 2000. $9,372,000 of
this  increase is the value of 1,200,000  shares of the  Company's  common stock
which were issued to a  consultant  for  consulting  services,  $300,000 for the
value of options issued to non-employees,  and $561,000 for the value of options
issued to employees.  Generally Accepted Accounting  Principles require that the
issuance  of non cash  compensation  in the form of stock and stock  options  be
valued at fair value, which approximates market value.  Excluding these non cash
expenses  Operating  Expenses  increased  by  approximately  $685,000.  Material
components of this increase are legal fees of about $150,000 in connection  with
the PDI termination and $275,000  increased payroll.  Approximately  $157,000 of
the  increased  Operating  Expenses  relate to  Artesian,  of which  $74,000 was
payroll.  The balance of the  increased  overhead is due to the operation of the
Nampa refinery in 2001, which was not at full time capacity.

The Company  recorded a loss of  discontinued  operations  of $2,570,000 in 2001
compared  to  $355,000  in  2000.  The 2001  loss  includes  $3,047,000  for the
impairment  of  goodwill  and its net  assets in excess of  liabilities  of PDI.
Subsequently in 2002, the Company recovered 4,000,000 shares of its common stock
from the former owners of PDI.

Liquidity and Capital Resources.

The Company  used  $380,000 of cash in its  operations  during 2001  compared to
$1,431,000 in 2000. This reduction is due to an increase in accounts payable and
accrued  expenses of  $1,268,000  compared to a decrease of $50,000 in the prior
year.  Accounts  receivable  increased  by $353,000 and  inventory  increased by
$170,000 due to the addition of Artesian and the increased operations in Nampa.

The Company used cash in its investing activities of $8,175,000 in 2001 compared
to $128,000 in 2000. The $128,000 was used in 2000 for improvements at the Nampa
facility. In 2001 $1,674,000 was used for Nampa plant improvements,  $485,000 to
purchase Artesian and $5,978,000 was invested in the Reno Project.

The source of these funds was primarily  $10,500,000  borrowed from a college in
2001. The Company received $1,490,000 from the issuance of common stock in 2000.
The Company used  $533,000 to  repayment of outside  loans and $759,000 to repay
shareholder loans in 2001.

The  Company  had  approximately  $1,000,000  in cash at the  end of  2001.  The
Company's negative cash flow from operations averaged $15,000 per month in 2001,
and is expected to be positive  by mid 2002.  Accordingly,  Management  believes

                                       10
<PAGE>

that it has sufficient  reserves to meet its operating needs for the next twelve
months.  However, in order to complete the Reno Project an estimated $30,000,000
is  required.  The  Company  is  seeking  these  funds  through a debt or equity
financing as explained above. Also the $10,500,000  borrowed from the college is
due on March 31, 2002. Preliminary discussion with the College indicate that the
loan term will be extended.  There is no assurance that the funds the Company is
seeking will be available or that if available will be under terms acceptable to
the Company. If the investment funds are not received, Management intends to use
the sale proceeds from the excess property in Reno to repay the college loan.

Forward Looking Statements.

The foregoing  statements in this MD&A  concerning the activity,  operations and
plans of the  Company,  and  particularly  the planned  development  of the Reno
facilities  and the  future  of the  "permitted  property"  are  forward-looking
statements as well as any other  statements that are not historical in context..
The statements  provided are based on information  available to Management as of
the date hereof,  and the Company assumes no obligation to revise or update such
forward-looking  statements.  Readers are  cautioned  that such  forward-looking
statements  involve risk and  uncertainties  that may cause the Company's actual
results to differ materially from such forward-looking statements.

ITEM  7. FINANCIAL STATEMENTS.

         Included  herewith are the audited  Financial  Statements of Registrant
for the years ended December 31, 2001, and December 31, 2000.

                                       11
<PAGE>

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

              None.

                                    PART III

ITEM  9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

              The  Management of EVOP is under the direct  control of a board of
directors consisting of three directors who are elected at the annual meeting of
shareholders. Following the annual meeting of shareholders after the election of
the directors,  the board of directors is to hold the organizational  meeting at
which time the officers are appointed.

     9.1      Directors and Officers.
<TABLE>
<CAPTION>

                  Name      Age              Position                           Date
                  -----     ---              --------                           ----
Appointed
---------
<S>                         <C>    <C>                                 <C>
Norvin T. (Tod) Tripple     65     Director, President and CEO         February 14, 2000
Leo B. (Tony) Tripple       59     Director  and Vice Pres.            February 14, 2000
Marilyn J. Tripple          65     Director and Secretary              February 14, 2000
</TABLE>


The  directors  of the  Company  are  elected  to serve  until  the next  annual
shareholder's  meeting or until  their  respective  successors  are  elected and
qualified. Officers of the Company hold office

                                       12
<PAGE>

until the meeting of the Board of Directors after the next annual shareholders's
meeting or until removal by the Board of Directors. There are no arrangements or
understandings  among the Officers and  Directors  pursuant to which any of them
were elected as Officers and Directors.

Family Relationships:

Tod Tripple and Marilyn  Tripple are husband and wife,  and Tod Tripple and Tony
Tripple are brothers. .

Business Experience of Officers and Directors:

Norvin T. (Tod)  Tripple.  Mr. Tod Tripple has been in senior  management of the
Company and its  predecessors  since the latter  part of 1994,  and has been the
President and CEO of the Company and its immediate  predecessor  since  December
1997.  He was Idaho  Division  Sales  Manager  for Harbor Oil of  Portland  from
1992-1994, and President of Touch Technologies, Inc. from 1984-1992.

Leo B. (Tony) Tripple. Mr. Tony Tripple is Vice President and CFO of the Company
and its predecessor  effective  September of 1999. He was comptroller of Graphic
Arts  Publishing of Boise from January 1999 to September 1999. He had a leave of
absence for illness from November 1994 to January of 1999. Mr. Tripple served as
President and CEO of predecessor  Environmental Oil Services  Company,  LLC from
December 1993 to November  1994, and was President of Harbor Oil Co. in Portland
from  January  1992  to  February  1993.  Mr.  Tripple  is  a  Certified  Public
Accountant, and graduated from BYU with a BS degree in 1965.

Marilyn J.  Tripple . Mrs.  Tripple has served as Office  Manager and  Executive
Secretary  for the  Company  and  its  predecessors  since  inception  in  1994.
Previously  she was Office  Manager and  Secretary  for  Rangen's,  Buhl,  Idaho
1993-1994,  and for H & A Land & Cattle,  Inc.,  of  Dietrich,  Idaho  from 1988
-1993.

Compliance with Section 16(a) of the Exchange Act:

         No officer,  director or 10% holder (all 10% holders are  officers  and
directors) filed either Form 4 or Form 5 for calendar year 2001.

ITEM  10.        EXECUTIVE COMPENSATION.

The year 2001  salary  and stock  remuneration  paid or  accrued  by EVOP to the
officers and directors and other benefits received by each of them are set forth
below:

The financial  statements do not reflect any executive  compensation  for N. Tod
Tripple nor for Marilyn Tripple for the fiscal year ended December 31, 2001, nor
is there any executive compensation presently established for either of them for
the  current  year 2002.  During the twelve  months  ended  December  31,  2001,
Environmental   Oil  Processing   Technology,   Inc.  ("EOPT"  a  subsidiary  of
Registrant)  paid  $759,055  to Mr.  Tod  Tripple in  payment  of  interest  and
repayment of loans he previously made to EOPT. The Company paid  compensation of
$36,000 to Leo B. (Tony) Tripple.

There is no agreement for the payment of any salary or compensation at this time
for the  directors  of EOPT,  or for the  executive  officers  or  directors  of

                                       13
<PAGE>

Environmental  Oil Processing  Technology  Corporation (the parent  company).  .
However,  the Company  anticipates  that any out of pocket expenses of directors
will be paid,  and that directors who are not employed by either the EOPT or the
Registrant will receive  compensation  for attendance and other duties performed
as directors.

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

         The following table reflects the ownership by the persons  indicated as
of December 31, 2001.

a:       Beneficial Owners,  known to Registrant,  owning more than 5% of voting
securities:
<TABLE>
<CAPTION>
         Name and Address                   Amount & Nature
         of Beneficial Owner                of Benef. Owner            Catagory                  Percent
         -------------------                ---------------            --------                  -------
<S>                                          <C>                       <C>                       <C>
         N. Tod and Marilyn Tripple          8,254,634                 Director, Officer         11.27%
         2801 Brandt Ave.
         Nampa, Idaho 83687

         Leo B. (Tony) Tripple               9,533,822                 Director, Officer         12.87%
         2801 Brandt Ave.
         Nampa, Idaho 83687


         Officers and Directors as a        17,788,456                                           24.29%
         Group
</TABLE>

Note:    On October 1, 2001,  N. Tod  Tripple  was granted an option to purchase
         3,600,000  shares  of  common  stock at the  strike  price of $0.17 per
         share, said option to expire on November 1, 2004.

ITEM  12.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:


Management is not aware of any material transaction,  or a proposed transaction,
to  which  the  Registrant  was or is to be a  party,  in  which  any  director,
executive officer, nominee for directorship, security-holder or immediate family
member  had a direct or  indirect  material  interest  as defined by Rule 404 of
Regulation S-B, except for the transaction between  Environmental Oil Processing
Technology, Inc.

ITEM  13.        EXHIBITS AND REPORTS ON FORM 8-K

         There are no exhibits  and there were no Form 8Ks filed  during the 4th
quarter.


                                       14
<PAGE>


SIGNATURES

         In accordance  with  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                           Environmental Oil Processing Technology Corporation


Date: March 28, 2002       By /s/ Norvin T. (Tod) Tripple
                           ------------------------------
                                  Norvin T. (Tod) Tripple, President


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

         By: /s/ Norvin T. (Tod) Tripple                       March 28, 2002.
         -------------------------------
                 Norvin T. (Tod) Tripple
                 President, CEO & Director

         By: /s/ Leo B. (Tony) Tripple                         March 28, 2002
         -----------------------------
                 Leo B. (Tony) Tripple
                 Vice President & Director

         By: /s/ Marilyn J. Tripple                            March 28, 2002
         --------------------------
                 Marilyn J. Tripple
                 Secretary & Director




                                       15



                          ENVIRONMENTAL OIL PROCESSING
                             TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2001


                                      F-1
<PAGE>


                                 C O N T E N T S


Independent Auditors' Report............................................... F-3

Consolidated Balance Sheet................................................. F-4

Consolidated Statements of Operations...................................... F-6

Consolidated Statements of Stockholders' Equity (Deficit).................. F-7

Consolidated Statements of Cash Flows...................................... F-8

Notes to Consolidated Financial Statements.................................F-10


                                      F-2
<PAGE>

                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors
Environmental Oil Processing Technology Corporation and Subsidiaries
Nampa, Idaho

We have audited the accompanying consolidated balance sheet of Environmental Oil
Processing  Technology  Corporation and Subsidiaries as of December 31, 2001 and
the  related  consolidated   statements  of  operations,   stockholders'  equity
(deficit) and cash flows for the years ended  December 31, 2001 and 2000.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Environmental  Oil Processing  Technology  Corporation  and  Subsidiaries  as of
December  31,  2001  and  the   consolidated   results  of  their  operations  ,
stockholders' equity (deficit) and their cash flows for the years ended December
31, 2001 and 2000, in conformity with accounting  principles  generally accepted
in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial statements,  the Company has incurred significant losses
and has a working capital deficit of $11,033,264, which raises substantial doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters  are also  described  in Note 2.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


By: /s/ HJ & Associates, LLC
----------------------------
HJ & Associates, LLC
Salt Lake City, Utah
March 20, 2002,  except for the third paragraph under the litigation  heading in
Note 7 as to which the date is March 26, 2002


                                      F-3
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                           Consolidated Balance Sheet

                                     ASSETS

                                                    December 31,
                                                        2001
                                                   ------------
CURRENT ASSETS

   Cash                                            $  1,076,799
   Trade accounts receivable, less allowance for
     doubtful accounts of $10,000                       129,285
   Inventories                                          190,943
   Other current assets                                  48,358
                                                   ------------

     Total Current Assets                             1,445,385
                                                   ------------

PROPERTY, PLANT AND EQUIPMENT (Note 3)                3,878,670
   Less accumulated depreciation                       (237,193)
                                                   ------------

     Property, Plant and Equipment, Net               3,641,477
                                                   ------------

OTHER ASSETS

   Construction in progress (Note 4)                  5,978,012
   Deposits                                                  40
   Intangible assets, net (Note 5)                      394,800
   Net assets in excess of liabilities of
     discontinued operations (Note 13)                     --
   Unamortized debt issue costs (Note 6)                 52,500
                                                   ------------

     Total Other Assets                               6,425,352
                                                   ------------

     TOTAL ASSETS                                  $ 11,512,214
                                                   ============

                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-4
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                     Consolidated Balance Sheet (Continued)


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                               December 31,
                                                                   2001
                                                                ------------
CURRENT LIABILITIES

   Accounts payable                                             $    506,676
   Accrued expenses                                                1,236,081
   Notes payable - related parties (Note 9)                          210,000
   Notes payable (Note 8)                                         10,525,892
                                                                ------------

     Total Current Liabilities                                    12,478,649
                                                                ------------

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS' EQUITY (DEFICIT)

   Common stock, no par value; 200,000,000 shares authorized;
     and 73,220,116 shares issued and outstanding                 23,176,950
   Accumulated deficit                                           (24,143,385)
                                                                ------------

     Total Stockholders' Equity (Deficit)                           (966,435)
                                                                ------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)       $ 11,512,214
                                                                ============

                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-5
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                   For the Years Ended
                                                       December 31,
                                                   2001           2000
                                              ------------    ------------
NET SALES                                     $  1,258,099    $    782,765

COST OF GOODS                                      262,274            --
                                              ------------    ------------

GROSS MARGIN                                       995,825         782,765
                                              ------------    ------------

OPERATING EXPENSES

   Amortization of debt issue costs                157,500            --
   Consulting                                    9,428,502          40,869
   Depreciation and amortization                   122,209          77,448
   Selling, general and administrative           3,574,651       2,246,664
                                              ------------    ------------

     Total Operating Expenses                   13,282,862       2,364,981
                                              ------------    ------------

LOSS FROM OPERATIONS                           (12,287,037)     (1,582,216)
                                              ------------    ------------

OTHER INCOME (EXPENSES)

   Interest expense                                (42,832)        (38,971)
   Interest income                                  11,826          17,288
                                              ------------    ------------

     Total Other Income (Expense)                  (31,006)        (21,683)
                                              ------------    ------------

INCOME TAX EXPENSE                                    --              --
                                              ------------    ------------

LOSS FROM CONTINUING OPERATIONS                (12,318,043)     (1,603,899)

LOSS FROM DISCONTINUED OPERATIONS (Note 13)     (2,570,226)       (354,898)
                                              ------------    ------------

NET LOSS                                      $(14,888,269)   $ (1,958,797)
                                              ============    ============

BASIC LOSS PER SHARE

   Loss from continuing operations            $      (0.17)   $      (0.02)
   Loss from discontinued operations                 (0.03)          (0.01)
                                              ------------    ------------

   Basic loss per share                       $      (0.20)   $      (0.03)
                                              ============    ============

WEIGHTED AVERAGE SHARES OUTSTANDING             73,203,678      70,746,911
                                              ============    ============

                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-6
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
            Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
                                                                   Stock                       Stockholders'
                                         Common Stock           Subscription    Accumulated        Equity
                                     Shares         Amount       Receivable       Deficit         (Deficit)
                                  ------------   ------------   ------------    ------------    ------------
<S>                                 <C>          <C>            <C>             <C>             <C>
Balance, December 31, 1999          69,683,870   $ 11,443,277   $   (400,000)   $ (7,296,319)   $  3,746,958

Performance on stock
   subscription                           --             --          400,000            --           400,000

Fractional shares issued                   116           --             --              --              --

Common stock issued for cash         2,106,130      1,090,000           --              --         1,090,000

Common stock issued for
   services                            230,000        230,000           --              --           230,000

Forgiveness of note payable
   as contribution of capital             --          179,934           --              --           179,934

Net loss for the year ended
   December 31, 2000                      --             --             --        (1,958,797)     (1,958,797)
                                  ------------   ------------   ------------    ------------    ------------

Balance, December 31, 2000          72,020,116     12,943,211           --        (9,255,116)      3,688,095

Common stock issued
   for services                      1,200,000      9,372,000           --              --         9,372,000

Stock options issued to
   employees below market value           --          561,400           --              --           561,400

Stock options issued to
   nonemployees below
   market value                           --          300,339           --              --           300,339

Net loss for the year ended
   December 31, 2001                      --             --             --       (14,888,269)    (14,888,269)
                                  ------------   ------------   ------------    ------------    ------------

Balance, December 31, 2001          73,220,116   $ 23,176,950   $       --      $(24,143,385)   $   (966,435)
                                  ============   ============   ============    ============    ============
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-7
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                      For the Years Ended
                                                                          December 31,
                                                                      2001            2000
                                                                  ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                               <C>             <C>
   Net loss                                                       $(14,888,269)   $ (1,958,797)
   Adjustments to reconcile net loss to net cash
    used by operating activities:
     Amortization of debt issue costs                                  157,500            --
     Depreciation and amortization                                     299,773         449,611
     Loss on impairment of goodwill                                  2,752,222            --
     Loss on impairment of net assets in excess of liabilities
       of Project Development Industries                               294,746            --
     Common stock issued for services                                9,372,000         230,000
     Stock options issued below market value                           861,739            --
   Changes in operating assets and liabilities:
     Accounts receivable                                              (352,621)             58
     Inventories                                                      (177,395)         (7,084)
     Other assets                                                       32,589         (95,763)
     Accounts payable and accrued expenses                           1,267,501         (49,898)
                                                                  ------------    ------------

       Net Cash (Used) by Operating Activities                        (380,215)     (1,431,873)
                                                                  ------------    ------------

CASH FLOWS USED IN INVESTING ACTIVITIES

   Cash forfeited in disposal of Project Development Industries        (37,932)           --
   Construction in progress                                         (5,978,012)           --
   Capital expenditures                                             (1,673,943)       (127,993)
   Purchase of Artesian Oil Recovery                                  (485,000)           --
                                                                  ------------    ------------

       Net Cash (Used) by Investing Activities                      (8,174,887)       (127,993)
                                                                  ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES

   Issuance of common stock for cash                                      --         1,490,000
   Borrowings from notes payable - related parties                     125,055         179,934
   Payments on notes payable - related parties                        (759,055)           --
   Proceeds from notes payable                                      10,525,892            --
   Payments on notes payable                                          (533,206)        (29,860)
                                                                  ------------    ------------

       Net Cash Provided by Financing Activities                     9,358,686       1,640,074
                                                                  ------------    ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                              803,584          80,208

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                         273,215         193,007
                                                                  ------------    ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                          $  1,076,799    $    273,215
                                                                  ============    ============
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-8
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
                                                        For the Years Ended
                                                             December 31,
                                               --------------------------------------
                                                      2001                  2000
                                               -------------------  -----------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION
<S>                                            <C>                  <C>
   Cash paid for interest                      $            32,730  $          77,929
   Cash paid for taxes                         $              --    $            --
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH
   FINANCING ACTIVITIES

Year ended December 31, 2000:

   The  President  of the Company  forgave a $179,934  note  payable to him as a
   contribution of capital to the Company.

Year ended December 31, 2001:

   The Company entered into a $210,000 promissory note for debt issue costs paid
   on behalf of the Company by the President of the Company.

                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-9
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              a.  Organization

              The  consolidated  financial  statements  presented  are  those of
              Environmental Oil Processing  Technology  Corporation  (EOPT), its
              wholly-owned    subsidiaries,    Environmental    Oil   Processing
              Technology,  Inc. (EOPTI), EOPT Power Group-Nevada,  Inc. (Power),
              EOPT Oil Recovery,  Inc.  (Recovery)  and EOPT Refining of Nevada,
              Inc. (Refining).  Project Development  Industries,  LLC (PDI) is a
              wholly-owned subsidiary of EOPTI. Collectively,  they are referred
              to herein as the "Company."

              On February 7, 2000,  EOPT and EOPTI  completed an  Agreement  and
              Plan of  Reorganization  whereby EOPT issued  64,083,870 shares of
              its common  stock in exchange  for all of the  outstanding  common
              stock of EOPTI.  Immediately  prior to the  Agreement  and Plan of
              Reorganization,  EOPT had 5,600,000  shares of common stock issued
              and outstanding.

              The acquisition was accounted for as a  recapitalization  of EOPTI
              because  the   shareholders   of  EOPTI  control  EOPT  after  the
              acquisition.  Therefore, EOPTI is treated as the acquiring entity.
              There was no  adjustment  to the  carrying  value of the assets or
              liabilities of EOPTI in the exchange. EOPT is the acquiring entity
              for  legal  purposes  and  EOPTI  is  the  surviving   entity  for
              accounting   purposes.   Accordingly,   the  historical  financial
              statements  of EOPTI  are  presented  as  those of EOPT.  EOPT has
              adopted a December 31, year end.

              On May 4,  2001,  the  Company  entered  into  an  Asset  Purchase
              Agreement  to only  purchase  certain  assets  from  Artesian  Oil
              Recovery,  Inc. (Artesian) for $485,000. The assets are located in
              Oakland,  California.  These assets acquired were transferred into
              the  Company's  wholly-owned  subsidiary,   Recovery.  The  assets
              acquired were  inventory,  property and equipment,  and intangible
              assets that  included an oil transfer  facility  permit,  customer
              lists,  marketing  and  mailing  lists,  supplier  lists,  product
              literature  and sales  material,  and the Artesian name. The asset
              acquisition  was  accounted  for as a purchase and  qualifies as a
              business combination. (see Note 11)

              Subsidiaries:

              EOPT was  incorporated  in the State of Utah on December  21, 1999
              under  the name of TMI  Holding  Corporation  for the  purpose  of
              holding  records and documents  relating to a specific oil and gas
              project.  In July 2000, EOPT amended its articles of incorporation
              and changed its name to  Environmental  Oil Processing  Technology
              Corporation.

              EOPTI is a reseller of waste oil products. The EOPTI customer base
              is in Idaho,  Washington  and Oregon.  EOPTI  operates a waste oil
              refinery  plant to  produce  naphtha  and  diesel  fuel and  other
              petroleum products from waste oil.

              PDI was formed and began operations in September 1993 as a Project
              Development,  Inc. At January 1, 1995,  PDI was  reorganized as an
              LLC. PDI performs professional engineering,  design,  procurement,
              fabrication and  installation  services.  Services are provided to
              the oil refining, natural gas, pipeline,  chemical,  minerals, and
              power generation industries.  PDI is a wholly-owned  subsidiary of
              EOPTI. (see Note 13)


                                      F-10
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1-       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              a.  Organization (Continued)

              Subsidiaries (Continued):

              Power was  incorporated  in the State of Nevada on April 24, 2001.
              Power was incorporated to engage in any lawful activity  permitted
              under  the laws of the  State of  Nevada.  Power  has had  minimal
              activity during 2001.

              Recovery was  incorporated  in the State of  California on May 23,
              2001 for the purpose of  acquiring  all of the assets of Artesian.
              Recovery has a facility in Oakland,  California  where it collects
              waste oil and transports it to the Company's Nampa, Idaho facility
              from where it is resold and  transported to other users.  Recovery
              is doing business as Artesian Oil Recovery.

              Refining  was  incorporated  in the  State of  Nevada on August 7,
              2001.  Refining was  incorporated to engage in any lawful activity
              permitted under the laws of the State of Nevada.  Refining has had
              minimal activity during 2001.

              b.  Merger

              In August 1999, EOPTI acquired substantially all of the assets and
              liabilities  of PDI in  exchange  for  7,000,000  shares of EOPT's
              common stock. All of the PDI shareholders  became  shareholders in
              EOPT.  The  acquisition  was  accounted  for as a purchase.  These
              financial  statements  include  the  operations  of PDI  from  the
              effective  date of the purchase of March 31, 1999.  The assets and
              liabilities  of PDI were  recorded  at their  fair  value with the
              excess recorded as goodwill. PDI has subsequently been returned to
              its original owners. (see Note 13)

              c.  Accounting Method

              The Company's consolidated financial statements are prepared using
              the  accrual  method of  accounting.  The  Company  has  elected a
              December 31 year end.

              d.  Cash & Cash Equivalents

              Cash equivalents  include  short-term,  highly liquid  investments
              with   maturities   of  three  months  or  less  at  the  time  of
              acquisition.

              e.  Basic Loss Per Share

              The basic loss per share of common  stock is based on the weighted
              average number of shares issued and outstanding during the period.


                                      F-11
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              e.  Basic Loss Per Share (Continued)
<TABLE>
<CAPTION>
                                                                                  For the Years Ended
                                                                                       December 31,
                                                                         ----------------------------------------
                                                                               2001                  2000
                                                                         -----------------     ------------------
              Loss per share from continuing operations:
<S>                                                                      <C>                   <C>
                 Loss (numerator)                                        $     (12,318,043)    $      (1,603,899)
                 Shares (denominator)                                           73,203,678            70,746,911
                 Per share amount                                        $           (0.17)    $           (0.02)


                                                                                  For the Years Ended
                                                                                       December 31,
                                                                         ----------------------------------------
                                                                               2001                  2000
                                                                         -----------------     ------------------
              Loss per share from discontinued operations:

                 Loss (numerator)                                        $      (2,570,226)    $        (354,898)
                 Shares (denominator)                                           73,203,678            70,746,911
                 Per share amount                                        $           (0.03)    $           (0.01)
</TABLE>

              Potential shares that could be issued from the exercise of options
              (6,450,000  and -0- options  outstanding  at December 31, 2001 and
              2000,  respectively)  are not included in the  computation  of the
              diluted  loss per share  because  they would have an  antidilutive
              effect on the net loss per common  share.  As a result,  basic and
              diluted  loss per share are the same for the years ended  December
              31, 2001 and 2000.

              f.  Use of Estimates

              The  preparation  of the financial  statements in conformity  with
              generally accepted  accounting  principles  requires management to
              make estimates and assumptions that affect the reported amounts of
              assets,  liabilities,  and  disclosure  of  contingent  assets and
              liabilities  at the  date  of the  financial  statements  and  the
              reported  amounts of revenues  and expenses  during the  reporting
              period. Actual results could differ from those estimates.

              g.  Provision for Taxes

              No provision for income taxes has been accrued because the Company
              has net operating  losses from  inception.  The net operating loss
              carry  forwards of  approximately  $8,910,000 at December 31, 2001
              expire in 2021.  No tax benefit has been reported in the financial
              statements  because the Company is uncertain if the  carryforwards
              will expire  unused.  Accordingly,  the potential tax benefits are
              offset by a valuation account of the same amount.


                                      F-12
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              g.  Provision for Taxes (Continued)

              The income tax benefit differs from the amount computed at federal
              statutory rates of approximately 39% as follows:
<TABLE>
<CAPTION>
                                                                                    For the Years Ended
                                                                                         December 31,
                                                                            --------------------------------------
                                                                                    2001               2000
                                                                            ------------------  ------------------
<S>                                                                         <C>                 <C>
              Income tax benefit at statutory rate                          $        1,814,000  $          586,000
              Change in valuation allowance                                         (1,814,000)           (586,000)
                                                                            ------------------  ------------------

                                                                            $                -  $           -
                                                                            ==================  ==================

              Deferred tax assets (liabilities) are comprised of the following:

                                                                                    For the Years Ended
                                                                                         December 31,
                                                                            --------------------------------------
                                                                                    2001               2000
                                                                            ------------------  ------------------
              Income tax benefit at statutory rate                          $        3,475,000  $        1,662,000
              Change in valuation allowance                                         (3,475,000)         (1,662,000)
                                                                            ------------------  ------------------

                                                                            $                -  $           -
                                                                            ==================  ==================
</TABLE>

              Due to the change in ownership provisions of the Tax Reform Act of
              1986,  net operating  loss  carryforwards  for Federal  income tax
              reporting  purposes  are subject to annual  limitations.  Should a
              change in ownership occur, net operating loss carryforwards may be
              limited as to use in future years.

              h.  Inventory

              Inventory,  valued  at  lower  of  cost  or  market,  consists  of
              unrefined waste oil products and related supplies and is accounted
              for using the average cost method of accounting.

              i.  Concentrations of Risk

              The   Company    maintains   several   accounts   with   financial
              institutions.  The  accounts  are insured by the  Federal  Deposit
              Insurance Corporation up to $100,000.  The Company's cash balances
              exceeded the insured amount by $974,799 as of December 31, 2001.

              Credit losses,  if any, have been provided for in the consolidated
              financial  statements and are based on management's  expectations.
              The  Company's  accounts   receivable  are  subject  to  potential
              concentrations  of credit risk.  The Company does not believe that
              it is subject to any unusual,  or significant  risks in the normal
              course of its business.


                                      F-13
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


              j.  Operating Segment Information

              For years ended December 31, 2001 and 2000,  the Company  operated
              in two industry segments,  (1) waste oil products at the Company's
              headquarters  in  Nampa,  Idaho,  and  (2)  petroleum  engineering
              services  at  the  Company's  offices  in  Denver,  Colorado.  The
              operations of the Company's subsidiary located in Denver, Colorado
              have been  reflected  as  discontinued  operations  (see Note 13).
              Accordingly,  at December 31, 2001,  the Company only  operated in
              one industry segment.
<TABLE>
<CAPTION>
                                                   For the
                                                  Year Ended
                                                  December 31,    PDI               EOPTI           Total
--------------------------------------------------------------   ---------        ----------      ---------
<S>                                                 <C>          <C>               <C>            <C>
              Net Sales                             2000         2,934,018         782,765        3,716,783
                                                    2001                -        1,258,099        1,258,099

              Operating income (loss)
                Applicable to industry              2000          (290,206)     (1,582,216)      (1,872,422)
                                                    2001                -      (12,287,037)     (12,287,037)

              General corporate                     2000                -                -                -
                                                    2001                -                -                -

              Other Income (Expense)                2000           (64,692)        (21,683)         (86,375)
                                                    2001                 -         (31,006)         (31,006)

              Operating Assets                      2000         3,356,104       2,408,454        5,764,558
                                                    2001                -       11,512,214       11,512,214
</TABLE>

              k.  Property, Plant and Equipment

              Property and equipment are stated at cost.  The refinery  facility
              is stated at fair market value as of the date that it was acquired
              by EOS, Inc. (June 1998),  based upon an  independent  third party
              appraisal.  Additions to the refinery facility after June 1998 are
              stated  at  cost.   Depreciation  on  property  and  equipment  is
              calculated on the  straight-line  method over the estimated useful
              lives of the assets.

                  Manufacturing equipment and Machinery        5 to 40 years
                  Office furniture and equipment               7 to 10 years
                  Vehicles                                     3 to 10 years
                  Leasehold Improvements                       39 years
                  Real Property                                40 to 50 years

              Depreciation  expense  for the years ended  December  31, 2001 and
              2000 was $89,009 and $77,448, respectively.


                                      F-14
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000

NOTE 1-       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              l.  Revenue Recognition

              The Company recognizes  revenues and the related costs for its oil
              and gas sales and collection fees when  persuasive  evidence of an
              arrangement exists,  delivery or collection has occurred,  the fee
              is  fixed  or  determinable,   and  collection  of  the  resulting
              receivable is probable.  Amounts invoiced and collected in advance
              of product  delivery or  collection  would be recorded as deferred
              revenue. The Company has not experienced returns and allowances in
              the past and  therefore  has not accrued for any returns and other
              allowances at this time.

              m.  Fair Value of Financial Instruments

              Based on borrowing  rates  currently  available to the Company for
              bank loans with similar  terms and  maturities,  the fair value of
              the Company's  long-term  debt  approximates  the carrying  value.
              Furthermore, the carrying value of all other financial instruments
              potentially  subject to valuation risk  principally  consisting of
              accounts  receivable and accounts payable also  approximates  fair
              value.

              n.  Goodwill

              The excess of the purchase price over the fair value of the assets
              and liabilities  acquired in the purchase of PDI of $3,551,256 has
              been  recorded as goodwill.  The  goodwill is amortized  using the
              straight-line  method  over 10  years.  Amortization  expense  was
              $355,126 for the year ended  December  31,  2000.  During the year
              ended December 31, 2001, the Company  recorded an impairment  loss
              of  $2,752,222.  The  Company  recorded  the loss  because  it had
              determined  that the value of its goodwill had become impaired due
              to the discontinued operations of PDI.

              o.  Advertising

              The  Company   follows  the  policy  of  charging   the  costs  of
              advertising  to expense as incurred.  Advertising  expense for the
              years ended  December  31, 2001 and 2000 was $15,684 and  $13,650,
              respectively.

              p.  Principles of Consolidation

              The   consolidated   financial   statements   include   those   of
              Environmental  Oil  Processing  Technology   Corporation  and  its
              wholly-owned    subsidiaries,    Environmental    Oil   Processing
              Technology,  Inc. (EOPTI), EOPT Power Group-Nevada,  Inc. (Power),
              and EOPT Refining of Nevada, Inc. (Refining).  Project Development
              Industries,  LLC (PDI) is a wholly-owned  subsidiary of EOPTI. All
              significant  intercompany  accounts  and  transactions  have  been
              eliminated.


                                      F-15
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              q.  Newly Issued  Accounting Pronouncements

              SFAS No.'s 141 and 142 -- In June 2001,  the Financial  Accounting
              Standards Board (FASB) adopted  Statement of Financial  Accounting
              Standards SFAS No. 141 is effective as to any business combination
              occurring  after June 30, 2001 and certain  transition  provisions
              that affect accounting for business combinations prior to June 30,
              2001 are  effective  as of the date that SFAS No.142 is applied in
              its entirety, which was September 30, 2001.

              SFAS No.  141  provides  standards  for  accounting  for  business
              combinations.  Among  other  things,  it  requires  that  only the
              purchase method of accounting be used and that certain  intangible
              assets acquired in a business  combination (i.e. those that result
              from  contractual  or other  legal  rights  or are  separable)  be
              recorded  as  an  asset  apart  from   goodwill.   The  transition
              provisions require that an assessment be made of previous business
              combinations and, if appropriate,  reclassifications be made to or
              from goodwill to adjust the  recording of  intangible  assets such
              that the  criteria  for  recording  intangible  assets  apart from
              goodwill  is applied to the  previous  business  combinations  The
              adoption of this principle had no material effect on the company's
              financial statements.

              SFAS No. 142  provides,  among other  things,  that  goodwill  and
              intangible assets with indeterminate lives shall not be amortized.
              Goodwill  shall be  assigned  to a  reporting  unit  and  annually
              assessed for impairment.  Intangible assets with determinate lives
              shall be amortized  over their  estimated  useful lives,  with the
              useful lives  reassessed  continuously,  and shall be assessed for
              impairment  under the provisions of SFAS No. 121,  "Accounting for
              the  Impairment of Long-Lived  Assets to be Disposed of." Goodwill
              is also  assessed for  impairment  on an interim basis when events
              and  circumstances  warrant.  Upon  adoption of SFAS No. 142,  the
              Company  will  assess   whether  an  impairment   loss  should  be
              recognized  and  measured  by  comparing  the  fair  value  of the
              "reporting unit" to the carrying value, including goodwill. If the
              carrying  value exceeds fair value,  then the Company will compare
              the  implied  fair value of the  goodwill  (as defined in SFAS No.
              142) to the  carrying  amount  of the  goodwill.  If the  carrying
              amount of the goodwill  exceeds the implied  fair value,  then the
              goodwill be adjusted to the implied fair value.

              SFAS No. 143 -- On August 16, 2001,  the FASB issued SFAS No. 143,
              "Accounting for Asset Retirement  Obligations," which is effective
              for fiscal years  beginning  after June 15, 2002. It requires that
              obligations   associated   with  the   retirement  of  a  tangible
              long-lived asset be recorded as a liability when those obligations
              are incurred,  with the amount of the liability initially measured
              at  fair  value.   Upon  initially   recognizing  for  an  accrued
              retirement  obligation,  an  entity  must  capitalize  the cost by
              recognizing  an  increase  in the  carrying  amount of the related
              long-lived  asset.  Over time,  the  liability  is accreted to its
              present value each period, and the capitalized cost is depreciated
              over the useful life of the related asset.  Upon settlement of the
              liability,  an  entity  either  settles  the  obligation  for  its
              recorded amount or incurs a gain o loss upon settlement.


                                      F-16
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              q.  Newly Issued Accounting Pronouncements (Continued)

              While the Company has not completed the process of determining the
              effect of this new accounting  pronouncement  on its  consolidated
              financial  statements,  the  Company  currently  expects  that the
              effect of SFAS No. 143 on the Company's financial statements, when
              it becomes effective, will not be significant.

              SFAS No.  144 - On  October  3,  2001,  the  Financial  Accounting
              Standards   Board  issued  SFAS  No.  144,   "Accounting  for  the
              Impairment  or Disposal of  Long-Lived  Assets" which is effective
              for financial  statements  issued for fiscal years beginning after
              December 15, 2001 and, generally, its provisions are to be applied
              prospectively.  SFAS 144  supercedes  SFAS  Statement No. 121 (FAS
              121),  "Accounting for the Impairment of Long-Lived Assets and for
              Long-Lived  Assets to Be  Disposed  Of." SFAS 144  applies  to all
              long-lived   assets   (including   discontinued   operations)  and
              consequently  amends  Accounting  Principles  Board Opinion No. 30
              (APB 30), "Reporting Results of Operations - Reporting the Effects
              of Disposal of a Segment of a Business."

              SFAS 144 develops one accounting model (based on the model in SFAS
              121) for long-lived  assets that are to be disposed of by sale, as
              well as addresses the principal  implementation  issues.  SFAS 144
              requires that long-lived assets that are to be disposed of by sale
              be  measured at the lower of book value or fair value less cost to
              sell. That  requirement  eliminates the requirement of APB 30 that
              discontinued  operations  be measured at net  realizable  value or
              that  entities  include  under  "discontinued  operations"  in the
              financial  statements  amounts for operating  losses that have not
              yet  occurred.   Additionally,  SFAS  144  expands  the  scope  of
              discontinued  operations  to include all  components  of an entity
              with operations that (1) can be distinguished from the rest of the
              entity and (2) will be eliminated  from the ongoing  operations of
              the entity in a disposal transaction.

              While the Company has not completed the process of determining the
              effect of this new accounting  pronouncement  on its  consolidated
              financial  statements,  the  Company  currently  expects  that the
              effect of SFAS No.  144 on the  Company's  consolidated  financial
              statements, when it becomes effective, will not be significant.

              r.  Impairment of Long-Lived Assets

              The Company reviews long-lived assets and identifiable intangibles
              whenever  events  or  circumstances  indicate  that  the  carrying
              amounts of such assets may not be fully  recoverable.  The Company
              evaluates the recoverability of long-lived assets by measuring the
              carrying amounts of the assets against the estimated  undiscounted
              cash  flows  associated  with  these  assets.  At  the  time  such
              evaluation  indicates that the future  undiscounted  cash flows of
              certain  long-lived  assets  are not  sufficient  to  recover  the
              assets'  carrying  value,  the assets are  adjusted  to their fair
              values (based upon discounted  cash flows).  During the year ended
              December  31, 2001,  the Company  recorded an  impairment  loss of
              $3,046,968.   The  Company   recorded  the  loss  because  it  had
              determined that the value of its goodwill ($2,752,222) and its net
              assets in excess  of  liabilities  of PDI  ($294,746)  had  become
              impaired due to the discontinued operations of PDI.


                                      F-17
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              s.  Stock Options and Warrants

              As permitted by FASB  Statement  123  "Accounting  for Stock Based
              Compensation"  (SFAS No. 123), the Company  elected to measure and
              record  compensation  cost  relative to employee  stock option and
              warrant  costs in  accordance  with  Accounting  Principles  Board
              ("APB")  Opinion 25,  "Accounting  for Stock Issued to Employees,"
              and related  interpretations and make proforma  disclosures of net
              income  and  earnings  per  share as if the fair  value  method of
              valuing  stock  options and warrants had been  applied.  Under APB
              Opinion 25,  compensation cost is recognized for stock options and
              warrants  granted to employees when the option or warrant price is
              less than the market price of the  underlying  common stock on the
              date of grant.

NOTE 2 -      GOING CONCERN

              The Company  presently has in the bank  approximately  $1,000,000.
              The Company's negative cash flow from operations  averages $15,000
              per month.  Therefore  the  Company is  currently  able to pay its
              bills from its reserves.  As oil collection by Artesian  continues
              to grow the Company  expects  this will  increase  oil sales.  The
              Company is modifying its refining plant in Nampa, Idaho and adding
              a new column  that is expected to be  completed  in May 2002,  the
              Company   expects  this  to  produce   positive  cash  flows  from
              operations by mid 2002.  The  Company's  loan with Lewis and Clark
              College is due on March 31, 2002 but the  agreement  provides that
              the college may extend the loan.  The  Company  believes  that the
              college  will  extend the loan based upon  conversations  with the
              college's  president.  The Company is building an additional plant
              in Reno,  Nevada.  The Company is seeking financing for the plant.
              If the financing  does not become  available  soon enough then the
              construction  will be slowed so that the  Company  does not become
              over extended. However, there can be no assurance that the Company
              will  be  successful  in  its  plans.   Because  the  Company  has
              experienced  substantial  losses from operations and has a working
              capital deficit of $11,033,264,  there is substantial  doubt about
              the Company's ability to continue as a going concern.

NOTE 3 -      PROPERTY, PLANT AND EQUIPMENT

              Property, plant and equipment consist of:
                                                              December 31,
                                                                    2001

              Office equipment                             $           21,871
              Refinery equipment                                    1,819,672
              Vehicles                                                118,982
              Land                                                  1,789,336
              Buildings                                               110,263
              Leasehold improvements                                   18,546
                                                           ------------------

              Total property and equipment                          3,878,670


                                      F-18
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 3 -      PROPERTY, PLANT AND EQUIPMENT (Continued)

                                                           December 31,
                                                                 2001

              Total property and equipment                       3,878,670
              Less accumulated depreciation                       (237,193)
                                                        ------------------

              Property and equipment, net               $        3,641,477
                                                        ==================

NOTE 4 -      INTEREST COST

              The total  interest cost incurred  during the years ended December
              31, 2001 and 2000 was  $1,631,851 and $103,681,  respectively,  of
              which $1,562,732 and $-0-,  respectively,  was capitalized as part
              of the cost of the Reno, Nevada project.

NOTE 5 -      INTANGIBLE ASSETS

              Intangible assets consist of:
                                                           December 31,
                                                                 2001

              Waste oil transfer facility permit        $          144,000
              Other intangible assets                              284,000
                                                        ------------------

              Total intangible assets                              428,000
              Less accumulated amortization                        (33,200)
                                                        ------------------

              Intangible assets, net                    $          394,800
                                                        ==================

              Other  intangible  assets include  customer  lists,  marketing and
              mailing lists, supplier lists, product literature, sales material,
              and the Artesian name.

NOTE 6 -      UNAMORTIZED DEBT ISSUE COSTS

              Costs  incurred in connection  with the Lewis & Clark College note
              payable are deferred and amortized to expense over the life of the
              corresponding  note.  The Company  incurred costs of $210,000 that
              related to the fair market value of 600,000 shares of common stock
              transferred  from the  President  of the  Company to Lewis & Clark
              College  which was a fee paid to enter into the loan.  At December
              31, 2001,  the Company had  amortized  nine months and charged the
              amount  to  expense  for  a  total  of  $157,500.   The  remaining
              unamortized balance at December 31, 2001 was $52,500.


                                      F-19
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 7 -      COMMITMENTS AND CONTINGENCIES

              Operating Leases

              The  Company  leases  various  oil  storage  tanks  in  Idaho  and
              Washington under five operating lease agreements.

              Four of the  five  leases  are  month-to-month  requiring  30 days
              cancellation  notice by either party. The four agreements  require
              monthly payments totaling $2,125.

              Total lease expense under these agreements was $33,542 and $29,360
              for the years ended December 31, 2001 and 2000.

              The  Company   leases  an  oil   transfer   facility  in  Oakland,
              California.  The  facility  has a five-year  lease that expires on
              September  30, 2005 with monthly  payments of $1,250.  The Company
              has two five year options to extend the lease.

              The Company is committed to future  minimum lease  payments are as
              follows:

                         2002                    $           15,000
                         2003                                15,000
                         2004                                15,000
                         2005                                11,250
                         2006                                     -
                         Thereafter                               -
                                                 ------------------

                         Total                   $           56,250
                                                 ==================

              Stock Bonus

              The Company  will grant a stock  bonus of up to 220,000  shares of
              common stock to seven  employees  of the Company  upon  successful
              completion of the  construction  and commencement of operations of
              the two refineries in Reno, Nevada.

              The  Company  will also grant a stock  bonus of 100,000  shares of
              common  stock  to one  employee  of the  Company  upon  successful
              completion  of the sale of the  electrical  power project in Reno,
              Nevada.

              Litigation

              The Company is involved in various  lawsuits that management feels
              will not have a material outcome.


                                      F-20
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)

              Litigation (Continued)

              On September  14, 2001,  Project  Development  Industries,  L.L.C.
              (PDI),  the  Company's   wholly-owned   subsidiary,   and  several
              individuals  filed a federal district court complaint  against the
              Company,  in  the  United  States  Court  of  Colorado,  Case  No.
              EDCV01WM-1714.  In their complaint,  PDI was seeking rescission of
              the  Company's  purchase  of  PDI  for 7  million  shares  of  the
              Company's stock and a $6 million  promissory note. PDI argued that
              the terms of the purchase  agreement  permitted PDI to rescind the
              agreement  and keep all 7 million  shares of the  Company's  stock
              given in payment for PDI,  provided  that no payments had yet been
              made on the promissory  note. The Company  asserted  counterclaims
              for the breach of contract and  negligent  misrepresentation.  The
              matter was dismissed  with  prejudice on March 4, 2002 following a
              settlement  under  which  the  Company  paid  a  $155,000  invoice
              previously  tendered by PDI and PDI  returned 4 million  shares of
              stock and cancelled the $6 million promissory note.

              On September 24, 2001, the Company filed a federal  district court
              complaint  against LM Alternative,  Inc.,  ("LMA"),  in the United
              States District  Court,  Central  District of California,  Eastern
              Division,  Case No. EDCV 01-0699 VAP (SGLx).  The Company  seeks a
              money  judgment  against LMA for breach of contract for failure to
              manufacture generators in accordance with contract  specifications
              and  failure  to  deliver   the   products.   The  Company   seeks
              compensatory  damages  in the  amount  of  $2,620,000,  incidental
              damages  incurred in the amount of $1,035,340,  and  consequential
              damages in the amount of $16,000,000.  The complaint was served on
              LMA on September 28, 2001. On March 20, 2002, LMA filed its answer
              denying  any  liability   arising  from  the  allegations  in  the
              complaint,  and  counterclaims  for $10,000,000 in damages arising
              from the alleged breach of contract by the Company. The Company is
              unable to comment on the  probability  of a mutual  settlement  at
              this time.

              Retirement Benefits

              PDI maintains a participatory  profit sharing plan under the rules
              of  Internal  Revenue  Code  section  401 (k).  There have been no
              Company  contributions  for the periods ended December 31, 2001 or
              2000.

              Significant Contracts & Agreements

              In January 2001 the Company  entered  into a consulting  agreement
              whereby it agreed to issue  6,564,999  shares of its common  stock
              and options to purchase an  additional  1,250,000  shares at $3.00
              per share.  The  Company has  entered  into an amended  consulting
              agreement as of March 2001 where by 5,364,999 shares of its common
              stock  were  surrendered  and  the  options  were  cancelled  upon
              termination of the consulting services.  The remaining shares were
              valued at $7.81 per share for a total consideration of $9,372,000.


                                      F-21
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 7 -      COMMITMENTS AND CONTINGENCIES (Continued)

              Significant Contracts & Agreements (Continued)

              On October 3, 2001, the Company  entered into a contract with PC&E
              as a  division  of Emerson  (formerly  Emerson  Electric)  for the
              preliminary  design and  engineering of two oil processing  plants
              for the Reno Project.  The total amount of the contract  shall not
              exceed $300,000 with monthly payments made as work is performed.

              On October 16, 2001, the Company entered into a contract with REDD
              Engineering  for the  engineering  and  fabrication  of three  new
              columns  designed for the  production  of diesel and naphtha which
              are to be used in the Nampa plant and the two Reno Project plants,
              and for the  redesign  of the  Nampa  plant  existing  column  for
              processing  trans-mix  as well as for a new column for  processing
              trans-mix in one of the Reno Project Plants.
<TABLE>
<CAPTION>
NOTE 8 -      NOTES PAYABLE

              Notes payable are comprised of the following:
                                                                                                    December 31,
                                                                                                        2001
                                                                                                ------------------
<S>                                                                                             <C>
              Note  payable  to  insurance   finance  company,   9.5%  interest,
                principal and interest payments of $8,760 due monthly
                through March 2002, unsecured.                                                  $           25,892

              Note payable to Lewis & Clark College, 12% interest, principal and
                accrued  interest  due on March 31,  2002,  secured by assets of
                Company including real property
                in Nampa, ID and Reno, NV and certain contract rights.                                  10,500,000
                                                                                                ------------------

              Less current portion                                                                     (10,525,892)
                                                                                                ------------------

              Long-term portion                                                                 $                -
                                                                                                ==================

              Interest  accrued for all notes  payable was  $594,082 at December
31, 2001.

              Minimum  required  principal  payments  on  long-term  debt  as of
December 31, 2001 are as follows:

                         2002                                                                   $       10,525,892
                         2003                                                                                    -
                         2004                                                                                    -
                         2005                                                                                    -
                         2006                                                                                    -
                         Thereafter                                                                              -
                                                                                                ------------------

                         Total                                                                  $       10,525,892
                                                                                                ==================
</TABLE>


                                      F-22
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 9 -      NOTES PAYABLE - RELATED PARTIES

              At December 31, 2001, the Company has an unsecured note payable to
              an officer of $210,000 that is due upon demand and bears  interest
              at 9.5% per annum.  The Company has  accrued  interest  payable of
              $136,116  at  December  31,  2001  that  is  included  in  accrued
              expenses.

NOTE 10 -     MAJOR CUSTOMERS

              Net sales for the years ended  December  31, 2001 and 2000 include
              sales  to  the  following  major   customers   together  with  the
              receivables due from those customers:

                                                Amount of Net Sales
                                                For the Year Ended
                                                    December 31,
                                      --------------------------------------
                                              2001                2000
                                      --------------------------------------

              Customer A              $          349,227  $                -
              Customer B                         219,481             157,486
              Customer C                         130,279              79,178
                                      ------------------  ------------------
                                      $          698,987  $          236,664
                                      ==================  ==================

                                                Accounts Receivable
                                                   Balance as of
                                                    December 31,
                                      --------------------------------------
                                              2001                2000
                                      --------------------------------------

              Customer A              $           48,029  $               -
              Customer B                          27,672              61,183
              Customer C                               -                   -
                                      ------------------  ------------------
                                      $           75,701  $          61,183
                                      ==================  ==================

              Because  of  the  nature  of the  Company's  business,  the  major
              customers may vary between years.

NOTE 11 -     ASSET ACQUISITION OF ARTESIAN OIL RECOVERY

              On May 4,  2001,  the  Company  entered  into  an  Asset  Purchase
              Agreement  to only  purchase  certain  assets  from  Artesian  Oil
              Recovery,  Inc. (Artesian) for $485,000. The assets are located in
              Oakland, California. The assets acquired were transferred into the
              Company's wholly-owned  subsidiary,  Recovery. The assets acquired
              were inventory, property and equipment, and intangible assets that
              included  an  oil  transfer   facility  permit,   customer  lists,
              marketing and mailing lists,  supplier lists,  product literature,
              sales material,  and the Artesian name. The asset  acquisition was
              accounted   for  as  a  purchase  and   qualifies  as  a  business
              combination.  The  allocation of the purchase price to the various
              assets are shown as follows:


                                      F-23
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 11 -     ASSET ACQUISITION OF ARTESIAN OIL RECOVERY (Continued)

              ACQUISITION OF SUBSIDIARY:

              Inventory                                    $            1,000
              Property and Equipment                                   56,000
              Intangible assets                                       428,000
                                                           ------------------

                  CASH USED FOR ACQUISITION                $          485,000
                                                           ==================

              Historical   consolidated   financial   statements  and  unaudited
              proforma  consolidated  financial statements relating to the asset
              acquisition  of Artesian  are not  presented  because the acquired
              business  did  not  meet  either  of  the  ten or  twenty  percent
              requirements of the investment, asset, and income tests.

NOTE 12 -     OUTSTANDING STOCK OPTIONS

              The Company applies  Accounting  Principles  Board ("APB") Opinion
              25,  "Accounting  for Stock  Issued  to  Employees,"  and  related
              Interpretations  in accounting  for all stock option plans.  Under
              APB Opinion 25,  compensation cost is recognized for stock options
              granted to employees when the option price is less than the market
              price of the underlying common stock on the date of grant.

              As a result of applying APB Opinion 25 to stock options granted to
              employees,  the Company  recorded  an expense of $561,400  for the
              year ended  December  31,  2001.  The  expense is  included in the
              selling,  general and  administrative  amount in the  statement of
              operations.

              FASB  Statement 123,  "Accounting  for  Stock-Based  Compensation"
              ("SFAS  No.  123"),  requires  the  Company  to  provide  proforma
              information  regarding  net  income and net income per share as if
              compensation  costs for the Company's stock option plans and other
              stock awards had been determined in accordance with the fair value
              based method prescribed in SFAS No. 123. The Company estimates the
              fair  value of each  stock  award at the  grant  date by using the
              Black-Scholes  option  pricing model with the  following  weighted
              average assumptions used for grants, respectively;  dividend yield
              of zero  percent  for all years;  expected  volatility  of 2.114%;
              risk-free  interest  rates of 2.869 percent and expected  lives of
              3.0 years.

              As a result of applying SFAS No. 123 to stock  options  granted to
              nonemployees,  the Company recorded an expense of $300,339 for the
              year ended  December  31,  2001.  The  expense is  included in the
              selling,  general and  administrative  amount in the  statement of
              operations.

              Had  compensation  cost for the Company's stock options granted to
              employees  been  determined  based on the fair  value at the grant
              date under the accounting  provisions of SFAS No. 123, the Company
              would have recorded an additional  expense of $56,313.  Also under
              these same provisions,  the Company's net income (loss) would have
              been changed by the pro forma amounts indicated below:


                                      F-24
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 12 -     OUTSTANDING STOCK OPTIONS (Continued)

                                                   December 31,
                                     ---------------------------------------
                                            2001                 2000
                                     ------------------  -------------------
              Net income (loss):
                As reported          $      (14,888,269) $        (1,958,797)
                Pro forma            $      (14,944,582) $        (1,958,797)

                                                    December 31,
                                     ---------------------------------------
                                            2001                 2000
                                     ------------------- -------------------
              Basic income (loss) per share:
                As reported          $            (0.20) $             (0.03)
                Pro forma            $            (0.20) $             (0.03)

              A summary of the status of the Company's  stock option plans as of
              December 31, 2001 and changes during the year is presented below:
                                                              Weighted
                                                               Average
                                                 Shares     Exercise Price
                                               ----------  ----------------
              Outstanding, December 31, 2000            -                 -

                  Granted                       6,450,000   $          0.18
                  Canceled                              -                 -
                  Exercised                             -                 -
                                               ----------  ----------------

              Outstanding, December 31, 2001    6,450,000  $           0.18
                                               ----------  ----------------

              Exercisable, December 31, 2001    6,050,000  $           0.17
                                               ----------  ----------------
<TABLE>
<CAPTION>
                                                           Outstanding                        Exercisable
                                         -------------------------------------------- --------------------------
                                                          Weighted
                                                           Average        Weighted                   Weighted
                                            Number       Remaining         Average       Number       Average
                                         Outstanding  Contractual         Exercise    Exercisable    Exercise
              Exercise Prices            at 12/31/01         Life            Price    at 12/31/01      Price
              ---------------            -----------------------------  ------------  ----------- --------------

<S>                                          <C>                  <C>   <C>              <C>        <C>
              $ 0.17                         6,270,000            3.00  $       0.17     5,960,000  $       0.17
                0.35                           180,000            3.00          0.35        90,000          0.35
                                         -------------  --------------  ------------  ------------  ------------

              $ 0.17 - 0.35                  6,450,000            3.00  $       0.18     6,050,000  $       0.17
                                         =============  ==============  ============  ============  ============
</TABLE>

              On October 1, 2001, the Board of Directors of the Company approved
              the 2001 Stock Option Plan,  under which  employees,  consultants,
              officers,  directors,  and other  individuals may be granted stock
              options.  The total  number of shares of common  stock as to which
              options may be granted  under the plan is  7,500,000.  The Company
              has granted 6,450,000 options under this plan.


                                      F-25
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 12 -     OUTSTANDING STOCK OPTIONS (Continued)

              On October 1, 2001, the Company granted 4,320,000 stock options to
              officers and  employees of the Company.  These options were issued
              with an  exercise  price of $0.17 per  share.  4,010,000  of these
              options vest  immediately  and have a maturity of three years from
              the grant date. The remaining  310,000  options vest on October 1,
              2002 and have maturity of three years from the vesting date.

              On October 1, 2001, the Company granted 1,950,000 stock options to
              consultants and other individuals.  These options were issued with
              an  exercise  price  of  $0.17  per  share.   These  options  vest
              immediately and have maturity of three years from the grant date.

              On October 1, 2001, the Company  granted  180,000 stock options to
              employees  of the  Company.  These  options  were  issued  with an
              exercise  price of $0.35 per share.  90,000 of these  options vest
              immediately  and have maturity of three years from the grant date.
              The  remaining  90,000  options  vest on  October 1, 2002 and have
              maturity of three years from the vesting date.

NOTE 13 -     DISCONTINUED OPERATIONS

              On September 14, 2001, Project Development Industries,  LLC (PDI),
              the Company's  wholly-owned  subsidiary,  and several  individuals
              filed a complaint in a federal district court against the Company.
              In March  2002,  the  Company  and PDI  reached  an  agreement  of
              separation,  settlement  and  mutual  release.  Both  PDI  and the
              Company  agreed and  consented  to  separate  PDI from the Company
              completely and to rescind the original  share  purchase  agreement
              subject to the terms and  conditions of the  settlement  (see Note
              7).  The  Company  has  accounted  for  the  operations  of PDI as
              discontinued  and has used PDI's  financial  statements as of June
              30,  2001.  At June 30,  2001,  PDI had net  assets  in  excess of
              liabilities of $294,746. An allowance has been established for the
              net assets in excess of liabilities of PDI, thus, the value of the
              net assets of PDI at December 31, 2001 was $-0-.  The following is
              a summary of loss from discontinued  operations resulting from the
              litigation between PDI and the Company. The consolidated financial
              statements have been retroactively restated to reflect this event.

                                              For the Years Ended
                                                 December 31,
                                       ---------------------------------
                                            2001               2000
                                       ---------------  ----------------

              NET SALES                $     2,026,190  $      2,934,018

              COST OF SALES                          -                 -
                                       ---------------  ----------------

              GROSS MARGIN                   2,026,190         2,934,018
                                       ---------------  ----------------


                                      F-26
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 13 -     DISCONTINUED OPERATIONS (Continued)
<TABLE>
<CAPTION>
                                                                                        For the Years Ended
                                                                                            December 31,
                                                                                 ---------------------------------
                                                                                      2001               2000
                                                                                 ---------------  ----------------
<S>                                                                                       <C>              <C>
              OPERATING EXPENSES
                Consulting                                                                76,226           159,288
                Depreciation and amortization                                            183,888           372,162
                Selling, general and administrative                                    1,263,050         2,692,774
                                                                                 ---------------  ----------------

                Total Other Income (Expense)                                           1,523,164         3,224,224
                                                                                 ---------------  ----------------

              INCOME (LOSS) FROM OPERATIONS                                              503,026          (290,206)
                                                                                 ---------------  ----------------

              OTHER INCOME (EXPENSE)

                Interest expense                                                         (26,287)          (64,710)
                Interest income                                                                3                18
                Loss on impairment of goodwill                                        (2,752,222)                -
                Loss on impairment of net assets in excess
                  of liabilities of Project Development Industries                      (294,746)                -
                                                                                 ---------------  ----------------

                  Total Other Income (Expense)                                        (3,073,252)          (64,692)
                                                                                 ---------------  ----------------

              INCOME TAX EXPENSE                                                               -                 -
                                                                                 ---------------  ----------------

              LOSS FROM DISCONTINUED OPERATIONS                                  $    (2,570,226) $       (354,898)
                                                                                 ===============  ================
</TABLE>

NOTE 14 -     SUBSEQUENT EVENTS

              During  February  2002,  the Company  issued  2,333,333  shares of
              common  stock  for the  conversion  of the  note  payable  from an
              officer  of the  Company  based  on the  market  price  on date of
              conversion for a total of $210,000.

              On February 25, 2002,  American  Moistening  Company,  Inc. (AMCO)
              filed a complaint in North Carolina in the Superior Court Division
              of Mecklenburg County, Case No. 01-CVS-3321. AMCO seeks a monetary
              judgment  against the Company as prayed for in the  Complaint.  In
              particular,  AMCO  claims  that  the  Company  owes  $165,840  for
              services and goods  performed or  manufactured  for the Company in
              2001.  The  summons  and  complaint  were served on the Company on
              March 4, 2002. The Company will file an answer within 30 days from
              service of the summons and complaint. The Company will assert that
              the Company  canceled its  purchase  order and that AMCO failed to
              mitigate the damages.  In addition to their respective  underlying
              causes of action, both the Company and AMCO are seeking attorney's
              fees and costs of  litigation  as against  the other.  The Company
              intends to vigorously defend its position.  Due to the early stage
              of litigation, it is not possible to evaluate the likelihood of an
              unfavorable outcome or estimate the extent of potential loss.


                                      F-27
<PAGE>

               ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 14 -     SUBSEQUENT EVENTS (Continued)

              On March 7, 2002,  Transwood,  Inc.  filed an Idaho State District
              court  complaint  against the Company in the District Court of the
              Third Judicial  District of the State of Idaho,  in Canyon County,
              Case No.  CV02-2187.  Transwood  claims that the  Company  owes it
              $18,689 for goods and services  provided to EOPT during the period
              of August  2001 and  November  2001.  Transwood  seeks a  monetary
              judgment  against the Company as prayed for in the complaint.  The
              summons  and  complaint  were  served on the  Company on March 11,
              2002. The Company will file an answer and  counterclaim  within 20
              days from service of the summons and complaint. In particular, the
              Company  will assert that the  Company  and  Transwood  reached an
              accord  and  satisfaction  with  regard  to all  sums  owed by the
              Company  to  Transwood,  and that the  Company  suffered  monetary
              damages as a result of Transwood's breach of contract. In addition
              to their respective  underlying causes of action, both the Company
              and Transwood are seeking  attorney's fees and costs of litigation
              as against the other.  Transwood has  requested a jury trial.  The
              Company  intends to  vigorously  defend its  position.  Due to the
              early stage of  litigation,  it is not  possible  to evaluate  the
              likelihood  of an  unfavorable  outcome or estimate  the extent of
              potential loss.


                                      F-28
<PAGE>