SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.

                             Commission File Number

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

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

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

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

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

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

Indicate by check mark whether the issuer (1) has filed all reports  required to
be filed by  Section 13 or 15(d) of the  Exchange  Act during the past 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes X No____

The issuer's revenues for its most recent fiscal year were $384,729.

The  aggregate  market value on September  30th,  2001, of common shares held by
non-affiliates  was  approximately  $122,640 based on the average of the closing
bid and asked prices of the  registrant's  common shares on such date, as quoted
by the National Quotation Bureau.

As of December 31st,  2001,  the issuer had 11,741,812  shares of its $0.001 par
value common stock issued and outstanding.

<PAGE>

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

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

                                     PART I

ITEM 1 - BUSINESS

HISTORY AND OVERVIEW

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

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

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

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

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

<PAGE>

The  Company's  entry  into  the oil and gas  business  came  from  its  initial
acquisition of majority  working  interests in properties  consisting of oil and
gas leases,  wells, and equipment containing proven developed reserves producing
oil in Young  County,  Olney,  Texas.  Additionally,  the Company owns  minority
interests in two unproven oil and gas leases  located in Runnells  County Texas.
The Company is not yet set up for or engaged in natural gas production.

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

On October 30,  2000 the Company  entered  into a purchase  agreement  with Life
Energy Technology Holdings,  Ltd. of Ireland ("Life Energy"). The purpose was to
bring  consistent  and dependable  capitalization  to the Company on a quarterly
basis  beginning  December 31, 2000, and  facilitate  acquisition of oil and gas
leases,  equipment,  and producing  reserves with revenues.  The agreement would
provide the working capital  allowing for potential  expansion and growth of our
business and the acquisition or development of potential business segments.  The
Company  envisioned a long-term  relationship and positioning for  international
business.  Life Energy agreed to acquire 49% of the Company. The transaction has
not been consummated at the date of this filing,  Life Energy is in breach,  and
has been inactive as to any subsequent arrangements proposed by them.

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

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

RECENT DEVELOPMENTS:

Since December 31, 2000 the Company has been focusing on obtaining prospects for
the  exploration  of oil and gas and  continuing  the  operations of its current
producing oil and gas properties in Young County, Texas.

<PAGE>

During the fiscal year ending  December  31,  2001 the Company  incurred  normal
expenses in repairing  pumps,  casing leaks,  and other remedial work on various
wells in our  producing  oil  leases in Young  County,  Texas.  Expenditures  of
$11,750  was  spent  plugging  off the  producing  deep  Mississippian  zone and
re-completing the Caddo formation up pipe in our Wiechman #1 deep well.

The Company also obtained a $15,000 loan for its Producers Supply,  Inc. segment
in 2001,  which was spent to repair and  upgrade its roof,  and provide  working
capital.

The Company has  retained  ARBOC,  LC of Florida as a  financial  consultant  to
assist with structuring and financing presentations.

The presentations  include potentials for acquisition of The Harlow Corporation,
which includes leasehold  development of 3,500 to 7,500 acres for natural gas in
Texas and Oklahoma;  an exploration and  development  program in Australia being
conducted  by  Harlow  Australia  Pty.;  technology  related  to  oil  and  gas;
development of Arkansas based Nacatoch sand for oil production-initial  test and
mid term  development;  and other prospects and projects  including real estate;
bio solids processing and technology related thereto (see additional  discussion
in section on "Business").

We are also working on approval for a potential  real estate related bridge type
financing with Berkshire Capital Group, LLC of New York .

In addition the Company is seeking  financing  for our Young County  properties,
including  recompletions,  the  drilling  of 2 new wells.  We also seek funds to
refinance or renegotiate a portion or all of the Company's  secured loan held by
Baseline Capital, Inc. which includes a secured interest on our Young County oil
properties held by First American Bank of Midland Texas.  Management  believes a
successful  work  program  and  negotiated  restructuring  of  the  note  on the
Company's Young County property interests could potentially improve cash flow.

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

THE BUSINESS

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

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

<PAGE>

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

Our entry into the oil and gas business and the initial  production of oil began
on September 29, 2000 and came from the acquisition of an 87.5% working interest
and corresponding net revenue interest in oil and gas properties  comprised of 6
leases,  equipment, 2 salt water disposal wells, oil purchase contracts, and all
other  associated  interests in 10 operating oil wells.  Prior to acquisition of
these  interests,  the Company had  obtained  two third party  reports to verify
reserve estimates, lifting cost averages per barrel, rates of decline, and other
factors.  A later report from Russell K. Hall and  Associates of Midland,  Texas
was  required  for  verification  in order to obtain the  financing  the Company
received  from  Baseline  Capital,  Inc.  We are  presently  not  engaged in the
production of natural gas, but may develop this in the future.

The Olney interests were acquired from Rogers Drilling Company (Rogers) in Olney
Texas. Crown Quest Operating Company operated the properties until approximately
April 4, 2001 until March 2002 Rogers operated the leases, equipment,  wells and
reserve interests for the Company on a month-to-month contract basis. Roger's is
experienced in the area with staff available for oversight and monitoring of the
Company's interests. Rogers has once again turned over operations to Crown Quest
Operating Company effective March,  2002. Crown Quest will continue to utilize a
pumper operator familiar with the area. Baseline Capital,  Inc. in Midland Texas
administrates  monthly  activities  including  the  Company's  lock  box for oil
production  income,  issuing  monthly note,  management,  consulting,  and lease
operating expense payments, collecting and compiling.

<PAGE>

In May and June of 2000 the Company participated in the attempted completion of
one development well. The one well was a dry hole. The well was located in
Runnels County, Texas and the Company owned a 29.3333335% working interest in
the well. The Company consequently owns this same minority interest in an
unproved 257 acres on two leases held for development, including associated
interests in all equipment and fixtures located on or used in connection with
the leases on a well-to-well basis. The two leases are both located in Runnels
County, Texas. Although the leases are believed to contain reserves of oil and
gas, we have not attributed proved reserves to these leases. The Company
recently has been attempting to sell its interests to industry partners or to
develop them. The leasehold interests unless renewed or developed successfully
will expire approximately May and June of 2002.

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

Customers/Delivery Commitments: The Company presently sells and receives monthly
payment for its  production of oil in Young County,  Texas by its division order
with  Conoco,  Inc.  The Company  believes  that there would be other  customers
available willing to purchase its oil production when its current contract ends.
By  division  order,  Conoco  Inc.  purchases  all of the  Company's  crude  oil
pertaining to its interests owned based on a month-to-month  contract, which can
be terminated  upon thirty (30) days notice by either party.  The Company has no
commitment that obligates us to produce any set amount of.

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

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

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

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

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

<PAGE>

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

The Company had entered into a letter of intent with The Harlow Corporation,  an
oil and gas concern,  which has  administrative  offices in Amarillo,  Texas and
district operations office in Sayre,  Oklahoma.  Operations include 55 producing
gas  wells,  and  presently  1  producing  oil well all of which are  located in
Oklahoma, Kansas and Texas. The Harlow Corporation owns and operates 90 miles of
gas gathering system in Oklahoma.  It maintains  warehousing and yard facilities
for its well service equipment and inventory,  and has a comprehensive  research
library including maps, surveys, engineering studies, logs, and other historical
data that would be available  for use by the  Company.  The letter of intent has
been twice  verbally  extended,  expired on or about July 30,  2001 The  Company
considers  this project  unlikely to be completed  unless  finances are arranged
(see further business discussion this section).

To update a Company press release of March 28, 2001 regarding  potential efforts
in Australia: we have no final arrangement and the letter of intent has expired.
William V. Harlow, Jr. remains an advisor to the Company. The Harlow Corporation
entered into agreements for conducting  geophysical  and geological  exploration
activities  in  Queensland,  Australia,  with permit  holders and as an approved
applicant,  on 5,872,494  acres.  We have the  opportunity to acquire  available
working interests up to approximately 49% at present in the initial work program
at total cost estimates of USD $800,000 required. Later phases of the full-scale
development project contemplated  anticipate an additional  $1,000,000 financial
requirement  needed by  January  of 2003.  Preparation  for the work  program is
currently  planned by Mr. Harlow to commence second quarter 2002 and our initial
financial  requirement  is  needed  short  term  prior  to  commencement  or  as
acceptable to Mr. Harlow. Although the Company is actively working on financing,
funding for this opportunity has not been closed or committed by the Company.

The written  letter of intent  with The Harlow  Corporation  was twice  verbally
extended  expired on or about July 30, 2001. The Company issued 10,000 shares of
its  restricted  common stock in behalf of signing the initial  letter of intent
with the  Harlow  Corporation  and has  issued an  additional  10,000  shares of
restricted  common  stock for an  additional  extension of the letter of intent,
which extension has also expired. The principal fulfillment terms for the letter
of intent  included 1) $135,000 down payment 2.) A $2,365,000  production  loan,
interest  only at 10%  interest,  all due with  principal  and interest in three
years,  and 3)  approximately  2.5MM shares of the Company's  common  restricted
stock with certain rights to file for  registration  of the shares in any public
offering by the Company.  Although the letter of intent has expired, the parties
are continuing discussions and negotiations. This is now subject to prior sale.

To update  Company  press  release of March 28, 2001 with  respect to  potential
projects in the Republic of Kazakhstan we have now terminated  all  involvement.
The Company had  received for its review a 53 page  summary  information  report
containing  geological and geophysical  studies regarding the Kokaral Concession
between the  government of the Republic of  Kazakhstan  and Kokoral Munai LLP, a
Joint Venture  Limited  Liability  Partnership  majority owned by the Kazakhstan
Development  Corporation  and U.S.  interests.  The  report  indicated  that The
Kokaral Joint Venture  obtained from the  government of Kazakhstan on July 31 of
1997,  an  exclusive  petroleum  exploration  license for a program in the 2,750
square  kilometers  (655,000 acres)  provided by the concession,  located in the
Kokaral   Peninsula,   Turgay  Basin,   the  North  Koral   Region.   PetroQuest
International, Inc., an option holder in the Kazakhstan Development Corporation,
introduced   the   Company  to  the   opportunity.   The   Company's   potential
participation,  if any, was to involve provision of potential finances, via Life
Energy,  for  acquisition  of  interests in the  project,  to provide  funds for
shooting  additional  seismic  geological and geophysical  studies,  drilling of
exploration  wells  and  infrastructure,   as  part  of  the  work  program  and
exploration   scheduled.   The  report  indicated  that  subsurface   structures
identified  could have the  potential for  significant  oil reserves in multiple
Jurassic and Cretaceous  sandstone  reservoirs at depths of approximately  5,000
and 8,000 feet. There was indicated an additional  potential for gas reserves in
both the Cretaceous and Paleocene  sandstone.  The Company determined,  however,
that any  consideration  and  participation  in the  program  is not in its best
interests  financially and otherwise due to historical  turmoil in the area. The
Company also felt such a project  ultimately  would experience  difficulty,  and
even if  successful,  have  relatively  high  potential  exposure  and danger or
difficulties  in  transportation  and export of reserves short to long term. The
option  holder has  notified  the Company  that the  Kazakhstan  Government  has
revoked the Kokaral Concession.

<PAGE>

On October 30,  2000 the Company  entered  into a Purchase  Agreement  with Life
Energy  Technology  Holdings,  Ltd.  of Ireland in which Life  Energy  agreed to
acquire in accordance with the agreement, 49% of the then issued and outstanding
shares for $20,000,000  investment in the Company.  Scheduled payments under the
agreement were to be made by Life Energy on a quarterly basis beginning December
31, 2000 and continue for 3 years. Life Energy breached the Agreement and failed
to provide funds.  In its March 28, 2001 press release the Company  indicated it
was working  together with Life Energy by  identifying  certain oil and gas, and
other  related  prospects  for  acquisition  by the Company.  Prior to the press
release,  Life Energy had agreed to promptly schedule a meeting with the Company
in  Scottsdale,  Arizona  and move  forward.  The  purpose of the meeting was to
resolve all issues regarding the  consummation of scheduled  funding and discuss
the Company's  acquisition of the proposed  assets sent to Life Energy for their
review.  It was on this basis  proposed for the meeting and agenda,  to not hold
Life Energy in  violation  or breach of the  agreement,  and that Life  Energy's
performance was merely  pending.  The Company did not receive any indication for
scheduling  the meeting due upon its last press  release.  The Company having no
substantial correspondence since will move to terminate this arrangement.

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

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

Phase  One  Acquisition  and  Development:  The  commencement  of our  phase-one
acquisition  and  development  program began in part with the acquisition of the
Company's  interests in the producing oil wells in Young County,  Texas. We have
been focused on building an initial platform and  infrastructure  for our future
growth.  We were  slowed  down in our 2001  attempts  for  financing  and growth
activities in part due to prevailing  economic  conditions,  and declines in oil
prices.  We also plan to start a  test-drilling  program  and  expand the supply
operations in Arkansas. Our plans include development of potential gas wells, to
establish  operations  in  Oklahoma,   and  further  develop  our  Young  County
interests.  The  projects  can be  activated  at  present,  one or all,  and not
necessarily in any required  order,  depending on funding.  The Company has been
looking  for  bank  financing  for  acquisitions  of  producing  oil  and  a gas
interests,  working capital through potential real estate asset based loans, and
discussing  one or more of the  opportunities  with potential  working  interest
partners.  The Company  will  attempt to secure a future  private  placement  or
offering of its equity to finance  some or all of its proposed  operations.  The
Company may reduce or increase its requirement as circumstances dictate.

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

<PAGE>

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

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

SALES AND MARKETABILITY

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

The Company will evaluate  strategies to improve upon  performance in year 2002.
The Company plans presently are to further build its Producers  Supply clientele
base by attempting to structure  development  projects in the southern  Arkansas
core area of operation.  The Company will require  significant  capital infusion
and success in marketing certain available  project  interests.  The Company may
need a line of credit  sufficient for development and to provide needed staffing
and marketing  necessary to implement  potential  growth of its  operation  (see
earlier "business discussions" and "future plans" segment).

BUSINESS RISKS

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

Development  Stage  Company and New Business  Activities:  Due to the  Company's
limited  operating  history,  it is a  development  stage  company  and  will be
difficult to predict accurately future revenues.  This may result in one or more
future  quarters  where  the  Company's  financial  results  may fall  below the
expectation of management and investors.  However firmly  management may believe
in its prospects,  the Company could fail. Operating results may vary, depending
upon a number of  factors,  many of which are  outside  the  Company's  control.
Material  factors  expected to impact the Company's  operating  results include,
decline and stabilization of oil and gas prices at an unprofitable  level, legal
costs  associated with  registration  of options and other filing  requirements,
expansion  activities,  increased  interest  and  expenses  for  borrowings  and
possible  hiring  of  additional  full time  employees.  Every  investor  should
evaluate  the  risks,   uncertainties,   expenses  and  difficulties  frequently
encountered  by  companies  in the  early  stage  of  development,  particularly
companies in the oil and gas industry. The past performance of Energy Producers,
Inc. cannot be used to predict the future performance of the Company.

<PAGE>

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

Operating  Losses:  The Company  expects to incur increased  operating  expenses
during the next year.  The  amount of net losses and the time  required  for the
Company to reach and sustain profitability are uncertain.  The likelihood of the
Company's  success  must be  considered  in  light  of the  problems,  expenses,
difficulties,  and  delays  frequently  encountered  in  connection  with  a new
business,  including,  but not  limited to  uncertainty  as to  development  and
acquisitions  and the time  required for the  Company's  planned  production  to
become available in the marketplace.  There can be no assurance that the Company
will ever generate  product  revenue or achieve  profitability  at all or on any
substantial  basis. Our net losses through  September 30, 2001 are approximately
$143,528.

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

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

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

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

At this time no regulatory or additional regulatory approvals are necessary and,
to the best knowledge of the officers, we have complied with all laws, rules and
regulations.

Officers And Directors Beneficially Own 64.38% Majority Of Shares: The executive
officers and directors of the Company  currently  beneficially own approximately
64.38% of the  outstanding  Common Stock  representing a majority.  Accordingly,
such persons will effectively  control the Board of Directors of the Company and
will direct the affairs of the Company.

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

OBLIGATIONS AND CONTINGENCIES

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

OTHER

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

<PAGE>

Future performance will be substantially  dependent on the continued services of
management at no cost and the ability to retain and motivate  them.  The loss of
the services of any officers or senior  managers could affect  activities of our
business  and its  operations  until  additional  personnel  can be retained and
trained to perform some of the management tasks. At the present time the Company
does not have long-term  employment  agreements  with any key personnel and does
not maintain any life insurance policies.

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

ITEM 2 - DESCRIPTION OF PROPERTY

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

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

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

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

<TABLE>
<CAPTION>
Lease Name                 Well Names                County   Lease Code        Working          Net Revenue
                           Under Leases                                         Interest(%)      Interest(%)
<S>                        <C>                       <C>      <C>               <C>              <C>
Griffon                                              Young    TX3297000          87.5            68.359370
                           Griffon #1                Young                       87.5            68.359370
                           Griffon #2 (SWD)          Young                       87.5            68.359370
K-W Unit                                             Young    TX7240200          87.5            69.692910
                           K-W Unit                  Young                       87.5            69.692910
McClatchy "B"                                        Young    TX7065200          87.5            71.750000
                           McClatchy B               Young                       87.5            71.750000
Wiechman Deep                                        Young    TX6951800          87.5            70.000000
                           Wiechman#1                Young                       87.5            70.000000
Wechman Shallow                                      Young    TX7078500          87.5            70.000020
                           Wiechman#2                Young                       87.5            70.000020
                           Wiechman#4                Young                       87.5            70.000020
                           Wiechman#5                Young                       87.5            70.000020
                           Wiechman#8                Young                       87.5            70.000020
                           Wiechman#10               Young                       87.5            70.000020
Weichman "B"                                         Young    TX9257100          87.5            70.000000
                           Wiechman B                Young                       87.5            70.000000
                           Wiechman (SWD)            Young                       87.5            70.000000

</TABLE>

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

<PAGE>

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

The Company has recently  re-completed the Wiechman #1 deep well and is reported
by our operator to be producing  oil in the Caddo  Formation  and gas,  which is
being vented off. As facilities  are not  presently  available in the area where
this well is located, gas production is uneconomical at the present time.

The table above  represented  is the  Company's  current  interest in the leased
wells and equipment that principally produce our revenues from the production of
oil, and is not all inclusive of our interests in the properties.  The interests
are subject to certain  rights and  limitations of Baseline  Capital,  Inc. that
presently receives at payout (55%) retained back in working interest that can be
exchanged all or part by Baseline Capital,  Inc. and certain Baseline  investors
for certain  options  granted to Baseline  Capital,  Inc. which vest upon payout
with expiration three years after the vesting (see "Stock Options").

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

The Company  attempts to maintain  all of its  operating  wells in good  working
condition.  Rogers Drilling  Company of Olney Texas is familiar with the oil and
gas business in the area.  Rogers (through March of 2002) operates the Company's
interests  in  the  properties  with   overseeing   production  and  maintenance
activities for its oil wells, equipment and other development activities for the
leases.

The Material terms of the 2001 Operating Agreement with the Company include:

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

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

<PAGE>

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

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

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

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

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

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

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

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

<PAGE>

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

The aggregate  property  considered  within the appraisal is  approximately  .36
acres.  The retail space,  warehouse,  offices and baths within the appraisal is
approximately 5,000 square feet.

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

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

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

</TABLE>

EXPLORATION AND PRODUCTION

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

The  Company  did not  participate  in the  drilling  of a well or  wells  since
May/June of 2000 through 2001 and to the present date of this filing.

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

PROVED RESERVES

The following table sets forth the estimated total proved  developed  producing,
and total proved  developed  nonproducing  oil  reserves,  net to the  Company's
interest. The reserve information is based on excerpts of the independent report
prepared by Russell K. Hall Texas P.E.  no. 69926 at the request of the Company.
The  reserve   information   presented  evaluates  the  Company's  interests  in
properties located in Young County, Texas operated currently as of March 1, 2002
by Crown Quest Operating.  The following table summarizes  Proved Reserves using
an  effective  date of March 1, 2002 with an oil price of $19.25 per barrel (WTI
posted) for same date. The table does not include Proved  Undeveloped  Reserves.
As per SEC guidelines,  prices and costs remain unescalated  throughout the life
of the  properties.  For each  lease,  oil  prices  were  compared  to  Scurlock
Permian's West Texas Intermediate  posted price.  Differences between historical
prices and this reference price were used to adjust for  transportation,  bonus,
and gravity adjustments.

<TABLE>
                (1) Present Value of Estimated Future Net Revenues
<CAPTION>


                                    Proved           Proved
                                    Developed        Developed         Total
                                    Producing        Non-Producing     Proved
                                    ---------        -------------     ------
<S>                                 <C>              <C>               <C>
Reserves (Net)
         Oil (bbl)                     76,104           51,743           100,085
         Gas (Mcf)                          0                0                 0
Revenue ($)                         1,060,262        1,126,146         2,186,408
Expenses ($)                          354,043          151,332           505,375
Investments ($)                             0           40,000            40,000
Future Net Income ($)
         Undiscounted                 706,219          934,814         1,641,033
         Discounted @ 10%             523,726          590,749
1,114,475

</TABLE>

<PAGE>

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

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

The  actual  amount  of  the  Company's  proved  reserves  is  dependent  on the
prevailing  price for oil,  which is beyond the Company's  control or influence.
World oil prices declined significantly during 1997 and 1998 from previous years
and increased  significantly during the 1999 and 2000. In 2001 prices again have
been extremely volatile.  There can be no assurance that oil prices will decline
or  increase  in the  future.  Oil and gas  prices  have been and are  likely to
continue to be volatile and subject to wide  fluctuations  in response to any of
the following factors:  relatively minor changes in the supply of and demand for
oil and gas;  market  uncertainty;  political  conditions in  international  oil
producing regions; the extent of domestic production and importation of oil; the
level of consumer demand; weather conditions; the competitive position of oil as
a source  of  energy  as  compared  with  natural  gas,  coal,  nuclear  energy,
hydroelectric  power,  and  other  energy  sources;  the  refining  capacity  of
prospective  oil purchasers;  the effect of federal and state  regulation on the
production,  transportation and sale of oil; and other factors, all of which are
beyond the control or influence of the Company.

WELLS AND ACREAGE

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

Set fourth below is information respecting the developed and undeveloped acreage
owned by the Company in Young County and Runnells  County Texas  respectively as
of December 31, 2001.

<TABLE>
<CAPTION>

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

</TABLE>

<PAGE>

PRODUCTION AND SALE OF OIL AND GAS

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

<TABLE>
<CAPTION>

                                                      Year Ended December 31,
                                                      ----------------------
                                                      2000       2001
                                                      -------    -------
<S>                                                   <C>        <C>
Average net daily production of oil (Bbl)             49.47      37.72
Average net daily production of gas (MCF)               -0-       -0-
Average sales price of oil ($ per Bbl)                31.66      25.16
Average sales price of gas ($ per MCF)                  -0-       -0-
Average lifting cost ($ per bbl) oil equivalent        2.59       4.69

</TABLE>

ITEM 3 - LEGAL PROCEEDINGS

The Company is not a party in any litigation at the present time.


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

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


                                     PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE AND DIVIDENDS OF COMPANY

The  Company is listed on the  over-the-counter,  NASD NQB Pink  Sheets.  It was
initially listed January 20, 2000. The range of high and low bid information for
the shares of the Company's  stock for the last two complete  fiscal  years,  as
reported by the OTC National Quotation Bureau,  Pink Sheets, is set forth below.
Such quotations  represent prices between dealers, do not include retail markup,
markdown or commission, and do not represent actual transactions.

<TABLE>
<CAPTION>

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

</TABLE>

<TABLE>
<CAPTION>
Year Ended December 31, 2000                        High             Low
----------------------------                        ----             ---
<S>                                                 <C>              <C>
First Quarter                                       $0.125           $0.125
Second Quarter                                       0.125            0.125
Third Quarter                                        0.125            0.125
Fourth Quarter                                       0.70             0.125

</TABLE>

As of December  31,  2001,  the Company  had issued and  outstanding  11,741,812
common shares held by approximately 134 holders of record.

<PAGE>

There have been no cash  dividends  declared by the Company since its inception.
Further, there are no restrictions that would limit the Company's ability to pay
dividends on its common equity or that would be likely to do so in the future.

At the present time the Company plans to file for  registration  of common stock
reserved for issuance under an initial stock option and payout option  agreement
with Baseline  Capital,  Inc. and related  parties dated September 29, 2000 (see
"Stock  Options").   The  Company  may  become  required  to  file  for  an  SB2
registration  statement  in  accordance  with its  agreement  with  Life  Energy
Technology  Holdings,  Ltd.  and other (see  "Material  Contracts"  "Life Energy
Technology Holdings, Ltd.").

RECENT SALES OF UNREGISTERED SECURITIES

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

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

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

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

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

</TABLE>

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

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

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

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

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

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

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

</TABLE>

<PAGE>

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

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

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

     (7) Mr.  Harlow is on our advisory  board,  is a  shareholder  and owns The
     Harlow Corporation.

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

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

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

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

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

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

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

<TABLE>
                     Option Grants in the Fiscal Year 2000
<CAPTION>
                                            Number of                  % of Total
                                            Securities Underlying      Options Granted    Exercise or Base   Expiration
Name                                        Options Granted (#)        in Fiscal Year     Price ($/sh)       Date
----                                        -------------------        --------------     ------------       ----
<S>                                         <C>                        <C>                <C>                <C>
Baseline Capital, Inc.                      2,000,000 (1)              Totals, 30.303%    $0.85              See Note (1)
500 W. Wall, Suite 302
Midland, Texas 79101

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

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

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

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

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

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

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

</TABLE>

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

</TABLE>

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

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

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

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

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

<PAGE>

The Company entered into an agreement with Life Energy Technology Holdings, Ltd.
of Ireland under which Life Energy  agrees to purchase 49% of Energy  Producers,
Inc.'s stock for twenty  million U.S.  Dollars.  One Million shares of Preferred
Series B  convertible  stock with a stated value of $20 per share are being held
in  escrow  pending  receipt  of  the  monies,   and  other  related   technical
clarifications and  understandings.  The contract with Life Energy, upon release
issuance of the shares,  if any, is  significant,  and would result in a related
party transaction and change of control.

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

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

<TABLE>
                      Option Grants in the Fiscal Year 2001
<CAPTION>
                    Number of % of Total
                    Securities Underlying      Options Granted    Exercise or Base   Expiration
Name                Options Granted (#)        in Fiscal Year     Price ($/sh)       Date
----                -------------------        --------------     ------------       ----
<S>                 <C>                        <C>                <C>                <C>
Garrett S. Lipski   100,000                    100%               $1.00              3/23/05
421 E. Oraibi Drive
Phoenix, Arizona 85024

</TABLE>

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

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

SUMMARY RESULTS OF OPERATIONS

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

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

<PAGE>

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

One of the ways plans for growth  could be altered if current  acquisitions  now
available become unavailable:

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

GENERAL

Energy  Producers,  Inc.  derives its revenues  from retail sales of oil and gas
field inventory  equipment,  service, and supply items primarily in the southern
Arkansas area.  Additional  revenues effective for the period ended December 31,
2000 have been  derived from the  acquisition  of the  producing  oil wells with
revenues in Olney, Young County,  Texas. The Company is focused on evaluation of
the market  potential for further  development of its subsidiary  operations and
revenues  in fiscal  2002,  and other  potential  proved  producing  oil and gas
properties available to the Company for acquisition.

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

RESULTS OF OPERATIONS - 2001 Compared to 2000

Total revenue for oil production and retail sales segments in calendar year 2001
was $384,729 as compared to total revenue for the year 2000 of $169,068.  Retail
sales increased  during 2001 as compared to 2000.  Total oil and sales increased
from $143,374 to $354,608  accounting for a majority of the Company's  revenues.
The increase in oil revenues was due  primarily to the reporting of oil revenues
for the full year in 2001 as opposed to only the last quarter of 2000 commencing
on the  effective  date of the  acquisition  October  1, 2000.  Expenditures  of
$11,725  were  made to plug  and  come up  pipe  on our  Wiechman  Deep  well to
re-complete  and  produce  the  Caddo  formation.  Results  for  increasing  the
production on this  particular well were less than expected due to an unexpected
increase in the natural gas ratio.  This created a variable result and had to be
tuned and adjusted over several  weeks.  At this time there are no  economically
feasible ways to produce  natural gas in this  location.  Overall in fiscal 2001
the average oil price  decreased  21% percent  from $31.66 per barrel in 2000 to
$25.16 per barrel.

Producers Supply, Inc. retail sales income increased from $25,694 to $30,121 due
to  a  minor  increased  demand  for  supplies  in  the  Stephens  Arkansas  and
surrounding area.

Costs of operations  for oil increased from $14,010 for the three months in 2000
to $78,878 in the twelve months of 2001.  This item includes all well  operating
expenses  and  any  amounts  paid  to  the  property  manager  and  consultants.
Increasing  disbursements made due to higher oil production volume accounted for
most of the increase.

<PAGE>

General and administrative  costs increased from $152,214 in 2000 to $214,927 in
2001 due to increased operational expenses.

The Company's total stockholders'  equity decreased from ($33,002) to ($83,460).
This  decrease in  shareholder's  equity  during fiscal 2001 was the result of a
failure of a  potential  stockholder  to  complete  the  acquisition  of a stock
subscription. The current ratio decreased from 1.3(Yr 2000) to 1.5 (Yr 2001).

Income from  operations  increased  from  ($7,481) in 2000 to $81,129 due to the
increase in revenues from operations of the oil wells for a full year.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow  provided  by  operating  activities  was  $13,955  for the year ended
December  31,  2001,  as  compared  to  $22,050  in cash flow used by  operating
activities for the twelve-month period ended December 31, 2000.

The increase in cash from operating activities was primarily due to commencement
of oil and gas  operations  for 12  months in 2001 as  opposed  to only the last
quarter of 2000.  At the same time we had a  substantial  decrease  in  accounts
payable.

Cash flow from investing  activities was $92,957 for the year ended December 31,
2001, compared to ($61,127) for the twelve-month period ended December 31, 2000.

Cash flow from  financing  activities was ($129,719) for the year ended December
31, 2001,  compared to ($56,668) for the twelve-month  period ended December 31,
2000. This was due to substantial repayment of notes payable.

Outstanding Capital Commitments For 2001 include:

a.) Note to Royal Crest, LLC                                    $  371,915
issued September 20, 2000 with
interest at 20% per annum. Monthly
payments are interest only with full
payment due on October 31, 2003.
(The note is current)

b.) Note to Baseline Capital, Inc.                              $  691,800
Note was issued September 29, 2000 and is
a non-interest bearing note.  Minimum monthly
payments of $25,000 or 80% of net production
proceeds from specified properties. (*The note is current)
(If a default occurred, Young County oil property interests
owned by the Company would be sold)
(See also other discussions contained elsewhere in this document)

c.) Note to J.C. Wilson Pipe and Supply, Inc.                   $  245,000
Note was issued August 15, 1999 and accrues
interest at the rate of 9.5% per annum and,
with extensions is due on or before June 1, 2002. (An extension was granted on
the terms of the note, and negotiations are underway to restructure the debt.)
(If a default occurred, subsidiary assets would be sold whose value is in excess
of the obligation).

d.) Note to Bennett Family Trust                                $   50,000
Note was issued June 12, 2001 and accrues
interest at the rate of 12% per annum and
Is due on or before June 12, 2002. Principal
To be paid at maturity.
(The note is pending negotiations for extension
payment or payoff)

e.) There are several small notes that in the aggregate are immaterial.

The  Company  must  generally  undertake  certain and  ongoing  expenditures  in
connection with preservation of its property interests,  to maintain its oil and
gas  development  rights,  and develop its business  prospects,  acquisition and
interests in accordance with its plan.

Management has estimated that such cost for reasonably  activating a development
of its current  plans will  require  $500,000  more during the first six to nine
months of fiscal 2002.  Financing and full project  development could require up
to  $5,000,000.   The  Company  may  reduce  or  increase  its   requirement  as
circumstances  dictate.  We may elect to revise these plans and requirements for
funds depending on factors including; oil and gas price activities;  the markets
as a whole;  the  availability,  interest,  and timing  indicated from potential
sources of capital; structure, and status of availability of any of our targeted
acquisitions and interests.

<PAGE>

In one area for  planned  expenditures  have been  working  on  location  of and
presentation for financing as regards the upside  potential  development of work
programs for our Young County properties,  including recompletions, the drilling
of 2 new wells. We have also looked into and been presenting for refinancing and
renegotiation of a portion or all of the Baseline  Capital,  Inc.'s secured loan
and note balance which  includes a secured  interest on the  properties  held by
First American Bank of Midland Texas.  The requirements and the preferred timing
anticipated for this development and note restructuring are as follows: drilling
and recompletions  approximately and note restructuring $292,000 to $672,000. We
estimate  these  activities  can  take up to 6  months.  Management  believes  a
successful  work  program  and  negotiated  restructuring  of  the  note  on the
Company's Young County property interests could potentially improve cash flow.

The Company  cannot  predict  how the oil and gas  industry  and its  collective
markets  and  pricing as a whole will vary during 2002 and what effect they will
ultimately have on the Company.

Dividends
---------

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

Insurance
---------

The Company intends to maintain insurance coverage that it believes is customary
in the industry.  It is not aware of any environmental claims as of December 31,
2001, which would have a material impact upon the Company's  present or proposed
financial position.

OIL AND GAS PROPERTIES

The  Company  as of the date of this  filing is the  primary  owner of  majority
interests in oil producing properties consisting of 6 leases, wells,  equipment,
and reserves  located in Young County,  Olney Texas.  The Company operates these
properties on a  month-to-month  contract with local  operators in the area. The
Company  currently sells its oil production by Division Order to Conoco Oil. The
standardized  measure of discounted  future net cash flows for all the Company's
properties as of December 31, 2000 is $1,114,475.

INCOME TAXES

At December 31, 2000, the Company has a federal  operating loss  carryforward of
$779,997 for financial  accounting and federal income tax purposes.  Utilization
of the net operating loss in any taxable year during the carryforward period may
be subject  to an annual  limitation  due to the  ownership  change  limitations
imposed by the tax law. The net operating  losses will expire  commencing in the
year 2010.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

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

<PAGE>

ITEM 7 - FINANACIAL STATEMENTS




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


                                     CONSOLIDATED
                                 FINANCIAL STATEMENTS


                        DECEMBER 31, 2001 AND DECEMBER 31, 2000

<PAGE>

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

                              FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>
<S>                                                                          <C>
Accountant's Report. . .. . . . . . . . . . . . . . . . .  . . . . . . . . . . 2

Financial Statements

Balance Sheets B Assets . . . . . . . . . . .  . . . . . . . . . . . . . . . . 3
Liabilities and Stockholders= Equity  . .  . . . . . . . . . . . . . . . . . . 4
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . .. . . . .5
Statement of Stockholders= Equity . . . . . . . . . . . . . . . . . . . .. . . 6
Statements of Cash Flows  . . . . . . . . . . . . . . . . . . . . . .. . . . . 7
Notes to Consolidated Financial Statements . . . . .  . . . . . . . . . . . .  8
Supplemental Oil and Gas Information. . . . . . . . . . . . . . . . .. . . . .18

</TABLE>

<PAGE>

                               ACCOUNTANT'S REPORT



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

I have audited the accompanying  consolidated balance sheet of Energy Producers,
Inc.,  (formerly Sterling Market Positions,  Inc.) at December 31, 2001 and 2000
and the related consolidated statements of operations, stockholders' equity, and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Company's  management.  My responsibility is to express an
opinion on these financial statements based on my audit.

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

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

/s/ Henry Schiffer
------------------
Henry Schiffer, C.P.A.
Beverly Hills, California
March 26, 2002

<PAGE>


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

                                 BALANCE SHEETS
                     Years ended December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                             ASSETS

                                                        Year ended             Year ended
                                                        December 31,           December 31,
                                                        2001                   2000
                                                        ----                   ----
<S>                                                     <C>                    <C>
Current Assets:
Cash                                                    $  24,803              $  47,610
Accounts receivable                                        15,907                 53,711
Inventory                  (Note 1)                        50,507                 52,194
Advances to shareholders                                        -                 12,579
Notes and other receivables(Note 2)                         2,500                 55,500
Deferred income tax        (Note 1)                             -                  1,026
                                                         --------                 ------

     Total current assets                                  93,717                222,620
                                                         --------                -------

Property and Equipment:    (Note 1)
Land                                                        9,000                  9,000
Building/Improvements                                      47,184                 42,184
Equipment                                                  92,247                 92,247
   Less: accumulated depreciation                        (106,717)              (105,362)
                                                        ---------               --------
     Net Property and Equipment                            41,714                 38,069
                                                         --------               --------

Oil and Gas Leases:        (Note 1)                     1,340,428              1,385,385
   Less: accumulated amortization                          (3,402)                  (851)
                                                        ---------             ----------
     Net Oil and Gas Leases                             1,337,026              1,384,534
                                                        ---------              ---------

Total Net properties and equipment                      1,378,740              1,422,603
                                                        ----------             ---------

        Total Assets                                   $1,472,457             $1,645,223
                                                       ==========             ==========
</TABLE>

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

<PAGE>

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

                                 BALANCE SHEETS

                     Years ended December 31, 2001 and 2000

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                     Year ended         Year ended
                                                     December 31,       December 31,
                                                     2001               2000
                                                     ----               ----
<S>                                                  <C>                <C>
Current Liabilities:
Accounts payable                                     $ 53,489           $114,716
Taxes payable                                             498                  -
Notes payable      (Note 3)                           389,776            368,509
Accrued interest                                       38,536
                                                     --------

  Total current liabilities                           482,299            483,225
                                                      -------            -------

Long Term Liabilities:
Notes Payable      (Note 3)                           400,164            679,817
Due to Shareholders(Note 5)                           673,454            515,183
                                                    ---------            -------
  Total long term liabilities                       1,073,618          1,195,000
                                                    ---------         ----------
         Total Liabilities                          1,555,917          1,678,225
                                                    ---------         ----------

Stockholders' Equity:
Common stock:
  Authorized 200,000,000 shares at $0.001
  par value; issued and outstanding
  11,741,812 shares at December 31, 2001;
  10,891,812 shares at December 31,
  2000; and 10,881,812 shares at December 31, 1999
  and 1,250,000 at December 31, 1998 and 1997          11,742             10,892
Preferred stock:  authorized 50,000,000
  shares at $0.001 par value;  issued
  and outstanding:  none
Paid in capital                                       684,795            627,828
Stock Subscription                                          -            100,000
Accumulated deficit                                  (779,997)          (771,722)
                                                    ---------           --------

     Total Stockholders' Equity                      ( 83,460)           (33,002)
                                                  ------------       ------------

         Total Liabilities and
           Stockholders' Equity                    $1,472,457         $1,645,223
                                                  ===========        ===========

</TABLE>

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

<PAGE>

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

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                     Years ended December 31, 2001 and 2000

                                                   Year ended         Year ended
                                                   December 31,       December 31,
                                                   2001               2000
                                                   ----               ----
<S>                                                <C>                <C>
Revenues:
  Oil Revenues                                     $  354,608         $  143,374
  Cost of Sales                                       (78,878)           (14,010)
                                                     --------           --------
                                                      275,730            129,364

Retail Sales:                                          30,121             25,694
  Cost of Goods Sold                                   (9,795)           (10,325)
                                                    ----------          --------
     Net Retail Sales                                  20,326            (15,369)
                                                    ----------          --------
Total Net Revenues                                    296,056            144,733

Operating Expenses:
Selling, General and
  Administrative expenses                            (214,927)          (152,214)
                                                     ---------         ----------

Gain(Loss)from operations(Note 3)                      81,129             (7,481)
                                                     ---------           --------

Other Income (Expense):
 Gain on sale of securities                                 -             81,461
 Investment income                                          -             14,661
 Income tax benefit                                         -                168
 Other income                                             330                  -
 Interest expense                                     (89,734)           (43,992)
                                                     ---------                 -

     Total Other Income (Expense)                     (89,404)            52,298
                                                     ---------           -------

Income before provision
for Income Taxes                                       (8,275)            44,817
Provision for Income Taxes                                -0-                -0-
                                                      --------               ---

Net Income (Loss)                                    $ (8,275)         $  44,817
                                                     =========         =========
Number of outstanding shares                       11,741,812         10,891,812

Net Gain (Loss) per share(Note 6)                       (nil)               .004

</TABLE>

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

<PAGE>

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

                      STATEMENT OF STOCKHOLDERS' EQUITY
         From October 4, 1995 (date of inception) to December 31, 2001

<TABLE>
<CAPTION>
                                Common     Stock    Paid in      Accumulated
                                Shares     Amount   Capital      Deficit      Totals
                                ------     ------   -------      -------      ------
<S>                             <C>        <C>      <C>          <C>          <C>
Shares issued at inception
  to initial shareholders       1,250,000    1,250                               1,250

Capital contributed by
 shareholder                    _________    _____   71,920        _______      71,920

Balance December 31, 1995       1,250,000    1,250   71,920        (31,096)    (42,074)

Capital contributed by
 shareholder                                        290,087                    290,087

Net(loss)for the year1996        ________   ______  _______       (332,088)   (332,088)

Balance December 31, 1996       1,250,000    1,250  362,007       (363,184)         73

Capital contributed by
 shareholder                                         51,046                     51,046

Net(loss)for the year1997        ________    _____   ______        (51,046)    (51,046)

Balance December 31, 1997       1,250,000    1,250  413,053       (414,230)         73

Capital contributed by
 shareholder                                         71,913                     71,913

Net(loss)for the year1998         ______    _____   _______        (71,986)    (71,986)

Balance December 31, 1998       1,250,000    1,250  484,966       (486,216)        -0-

Stock surrendered by
 Shareholder and
 retired to treasury                               (189,023)          (189)        189

Issuance of stock for
 Reverse acquisition of
 Energy Producers
 Group, Inc.                    9,820,835    9,821  111,108                     23,929

Capital contributed by
 shareholder                                         27,325                     27,325

Net(loss)for the year1999      __________    ______  ______       (330,323)   (330,323)

Balance December 31,1999       10,881,812   10,882  626,588       (816,539)   (179,069)

Stock issued as
 Consideration for loans
 and other services                10,000       10    1,240                      1,250
Net gain for the year ended
 December 31, 2000             __________   ______   ______         44,817      44,817

Balance December 31,2000       10,891,812   10,892  627,828       (771,722)   (133,002)

Capital contributed by
 shareholders                     105,000      105   13,125                     13,230
Stock issued as
  Consideration for loans
  and other services              745,000      745   43,842                     44,587

Net(loss)for the year ended
  December 31, 2001             _________   ______   _______        (8,275)   ( 8,275)

Balance December 31,2001       11,741,812   11,742  684,795       (779,997)  ( 83,460)
                               ==========   ======  =======       =========  =========

</TABLE>

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

<PAGE>


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


                             STATEMENT OF CASH FLOWS
                     Years ended December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                      Year ended         Year ended
                                                      December 31,       December 31,
                                                      2001               2000
                                                      ----               ----
<S>                                                   <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit                                            $ (8,275)          $ 44,817
Non-cash adjustments to reconcile net income
to net cash provided by operating activities
   Depreciation and amortization                         3,906                936
   Gain on sale of securities                                -            (81,461)
Change in assets and liabilities
   (Increase) decrease in accounts receivable           37,804            (50,973)
   (Increase) decrease in inventory                      1,687               (199)
    Increase (decrease) in accounts payable            (60,729)           112,975
    Increase (decrease) in accrued expenses             39,562             (4,045)
                                                       -------             -------
Net cash provided(used)by operating activities          13,955             22,050
                                                       -------            -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  (Increase)decrease in notes receivable                53,000            (40,000)
  Proceeds from sale (cost) of securities                    -            199,149
  Purchase of property and equipment                    (5,000)           (29,154)
  Purchase of oil leases                                44,957           (191,122)
Net cash provided (used) by Investing Activities        92,957            (61,127)
                                                       -------            --------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase)decrease in advances to shareholder           12,579              3,860
 Proceeds from notes payable                            84,868                  -
 Repayment of notes payable                           (343,254)          (195,937)
 Increase in shareholder notes payable                 158,271            147,495
 Stock issued                                              850                 10
Contributed capital                                     56,967              1,240
Increase (decrease) in deferred subscriptions         (100,000)           100,000
                                                      --------            -------
Net cash provided(used)by Financing Activities        (129,719)          ( 56,668)
                                                      --------            --------

NET INCREASE (DECREASE) IN CASH                        (22,807)            17,591

CASH BALANCE BEGINNING OF PERIOD                      $ 47,610           $ 30,019
                                                      --------           --------

CASH BALANCE END OF PERIOD                            $ 24,803           $ 47,610
                                                      ========           =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year:
  Interest                                              89,734             43,992
  Income Taxes                                             -0-                -0-

</TABLE>

  The accompanying notes are an integral part of these financial statements

<PAGE>


                            ENERGY PRODUCERS, INC.
                  (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 1 Summary of Significant Accounting Policies:

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

(1)  Organization and Business Activities:

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

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

The Company has focused its business on oil and gas exploration, development and
production and acquiring  existing  production  facilities with proven reserves.
The Company=s wholly owned subsidiary,  Producers Supply,  Inc., has been in the
oil and gas field equipment service and supply business for 25 years. On October
26, 2000 Article 3 of the Articles of Incorporation were amended to increase the
number of authorized  common shares to 200,000,000  and to authorize  50,000,000
preferred shares.

(2)      Depreciation:

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

<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 1 Summary of Significant Accounting Policies (Continued):

(c)  Fiscal Year:

     The Company operates on a Calendar Year basis.

(d)  Inventories:

     Inventories  are  stated at the lower of cost or market  determined  by the
     FIFO method.

(e)  Income Taxes:

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

(f)  Oil and Gas Properties:

     The Oil and gas properties  include  operating  leases,  equipment  leases,
     production  sales,  processing  agreements,  transportation  agreements and
     other contracts,  equipment,  improvements,  materials, supplies, fixtures,
     wells,  pumping  units,  well head  equipment,  other  movable or immovable
     property, easements,  servitudes,  rights-of-way,  surface leases and other
     surface rights.

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

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

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

<PAGE>

                             ENERGY PRODUCERS, INC.
                   (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 1    Summary    of    Significant    Accounting    Policies    (Continued):

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

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

Cont'd: (f) Oil and Gas Properties:

<TABLE>
                   Statement of Revenues and Direct Expenses
<CAPTION>

                                                2001
                                                ----
<S>                                             <C>
Revenues:
Oil Sales                                       $ 354,608
Expenses:

Lease Operating                                    62,486
Management                                         24,000
Severence Taxes                                    16,392
                                                   ------
Total Expenses                                    102,878
                                                  -------
Net Income (loss)                               $ 251,730
                                               ==========
</TABLE>

(g)  Comprehensive Income:

     The Company has adopted Financial  Accounting Standards Board Statement No.
     130 which  requires  reporting  of  Comprehensive  Income in the  financial
     statements  in the period in which it is  recognized.  The  Company  has no
     Comprehensive Income in the reporting year.

(h)  Derivative Instruments and Hedging Activities:

     The  Company  has  adopted  Financial  Standards  Board  Statement  No. 133
     "Accounting  for Derivative  Instruments  and Hedging  Activities"  and the
     amendments  thereto,  SFAS No. 137 and SFAS No. 138.  The Company  believes
     that the adoption of these SFAS' will not have any  material  affect on the
     financial statements of the Company.

<PAGE>

                            ENERGY PRODUCERS, INC.
                  (formerly Sterling Market Positions, Inc.)
                        NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 1 Summary of Significant Accounting Policies (Continued):

     (i)  Impairment of Long-Lived Assets:

          The Company has adopted Financial Accounting Standards Board Statement
          No. 139  "Rescission  of FASB Statement No. 53" which also amends FASB
          Statements Nos. 63, 89 and 121. The Company believes that the adoption
          of SFAS  139  will  not have  any  material  affect  on the  Company's
          financial statements.

Note 2 Notes/Loans Receivable

<TABLE>
<CAPTION>

<S>                                                     <C>
Note Receivable - David Irwin                           $ 2,500

Issued to Producers Supply, Inc.
(wholly owned Subsidiary)unsecured,
demand note dated June 9, 1999.

Total Notes/Loans Receivable                            $ 2,500

</TABLE>

Note 3 Notes Payable

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

     (b)  Note to Baseline Capital,  Inc. $691,800 Note was issued September 29,
          2000 and is a non-interest  bearing note.  Minimum monthly payments of
          $25,000 or 80% of net production  proceeds from specified  properties.
          Aggregate amount of such required  payments at December 31, 2001 is as
          follows:
<TABLE>
<CAPTION>


<S>      <C>
2002     $300,000
2003      300,000
2004       91,800
        ---------
         $691,800
</TABLE>

     (c)  Note to  CitiCapital,  Digital Copier as  collateral.  $ 13,273 Issued
          November  28,  2000.  Aggregate  amount of Such  required  payments at
          December 31, 2001 is as follows:

<TABLE>
<CAPTION>
<S>         <C>
2002        $ 5,100
2003          5,100
2004          3,073
              -----
            $13,273
</TABLE>

     (d)  Note to Buddenberg  Trust $ 10,000 Note was issued  December 23, 2001.
          Interest only payments at 9.5% per annum,  due monthly.  Principal and
          interest due at maturity, June 23, 2002.

<PAGE>

                             ENERGY PRODUCERS, INC.
                  (formerly Sterling Market Positions, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 3 Notes Payable (Continued)

     (e)  Note to Bud Hirk $ 10,000 Note was issued  January 16, 2001.  Interest
          only  payments at 18% per annum,  due monthly.  Principal and interest
          due at maturity, April 3, 2002.

     (f)  Note to Stevens Security Bank $ 14,867 Demand note dated June 25, 2001
          with  Interest at 8.5% per annum,  due June 25, 2002.  Terms:  One (1)
          interest only payment due December 26, 2001 and remaining interest and
          principal payable June 25, 2002.


<TABLE>
<CAPTION>
<S>                              <C>
Current portion                    389,776
Long term portion                  400,164
                                   -------
Total Notes Payable              $ 789,940

</TABLE>

Note 4 Contracts

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

<TABLE>
<CAPTION>

Entity                     Related Party               2001              2000
------                     -------------               ----              ----
<S>                        <C>                         <C>               <C>
Academy Research           Mel Herzog                  $ 3,000           $84,500
Global Media
Network USA,Inc.           Dennis R. Alexander         $45,001           $92,750
Melvena Alexander, CPA     Melvena Alexander           $13,550           $46,900

</TABLE>

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

Note 5 Related Party Transactions Due to Shareholders

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

     Unsecured  demand note payable to J. C. Wilson Pipe $ 500 and Supply,  Inc.
     J. C. Wilson,  a Director and beneficial  shareholder of Energy  Producers,
     Inc., is also owner of J. C. Wilson Pipe & Supply, Inc.

<PAGE>


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

                        NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 5 Related Party Transactions (Continued: Due to Shareholders

     Note Payable to Royal Crest,  LLC. $ 371,915 Note was issued March 31, 2001
     with  interest at 20% per annum.  Monthly  payments are interest  only with
     full  payment due January 31,  2003.  David J.  Kronenberg,  a Director and
     shareholder, is the beneficial owner and manager of Royal Crest, LLC.

     Promissory Note Payable to Larry W. Trapp. $ 14,200 Note was issued June 1,
     2001 with interest at 12% per annum.  Due August 1, 2002. Larry W. Trapp is
     a Director and shareholder.

     Promissory  Note Payable to Thomas J. Richards $ 13,150 issued  December 6,
     2001 with interest at 18% per annum after due date, December 17, 2001, plus
     $700  origination  fee and $1,315 point  penalty.  Thomas J. Richards is an
     advisor/consultant and shareholder.

     Unsecured,  Demand  Note  Payable to Mel  Herzog,  $ 18,461 a Director  and
     shareholder.

     Unsecured, Demand Note Payable to Dennis R. Alexander , $ 10,228 a Director
     and shareholder.

     Total Due to Shareholders $673,454

Note 6 Earnings Per Share

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

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

     Earnings  per  share  are  based on net  losses  as the  Company  showed an
     operating loss in 2000 and a net loss in 2001.

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 6 Earnings Per Share (Continued):

<TABLE>
<CAPTION>
                                  For the Year Ended December 31, 2001
                                 Income (Loss)     Shares        Per Share
                                (Numerator)       (Denominator)  Amount
                                -----------       ------------   -------
<S>                             <C>               <C>            <C>
Loss to Common
Stockholders                    $ (8,275)         11,741,812     $.00069

</TABLE>

     Options to  purchase  3,800,000  shares of common  stock at $0.95 per share
     were  outstanding  at  December  31,  2000  but  were  not  included  in  a
     computation  of diluted  earnings  per share  because  the effect  would be
     anti-dilutive.

Note 7 Dividend Policy

     The Company has not yet adopted a policy regarding dividends

Note 8 Depreciation and Amortization

     Depreciation  on property and  equipment is  calculated  using the straight
     line method over the estimated useful life. Depreciation taken on equipment
     in 2001 was $1,355 and $85 in 2000.

     Under the full cost method,  all capitalized costs within a cost center are
     amortized on the unit-of-production basis, using proved oil reserves in the
     cost center.  Oil is converted to a common unit of measure based on current
     and future  gross  revenues.  Amortization  for 2001 was $2,551 and $851 in
     2000.

Note 9 Income Taxes

     At December 31, 2001, the Company has a federal operating loss carryforward
     of $779,997  for  financial  accounting  and federal  income tax  purposes.
     Utilization  of the net  operating  loss in any  taxable  year  during  the
     carryforward  period  may be  subject  to an annual  limitation  due to the
     ownership  change  limitations  imposed by the tax law.  The net  operating
     losses will expire commencing in the year 2010.

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

<TABLE>
<CAPTION>
                         1995     1996       1997      1998     1999       2000     2001
                         ----     ----       ----      ----     ----       ----     ----
<S>                      <C>      <C>        <C>       <C>      <C>        <C>      <C>
Pre-Tax Financial
 Income (Loss)           (31,096) (332,188)  (51,046)  (71,986) (330,323)  (44,817)   (8,275)
Temporary Difference          -0-       -0-       -0-       -0-       -0-       -0-       -0-
Loss Carryforward             -0-  (31,096) (363,184) (414,230) (486,216) (816,539) (771,722)
                           -----  -------- --------- --------- --------- --------- --------
TaxableIncome(Loss)      (31,096) (363,184  (414,230) (486,216) (816,539) (771,722) (779,997)
                         ======== ========  ========   =======  ========  ========= ========
Tax Payable
(refundable)                  -0-       -0-       -0-       -0-       -0-       -0-       -0-

</TABLE>

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2001

Note 10 Sales to Major Customers

     The Company had sales to one major customer,  Conoco,  Inc. during the year
     ended  December 31, 2001 of $354,608 which were in excess of ten percent of
     total sales.

Note 11 Concentration of Credit Risk

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

Note 12 Segment and Related Information

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

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

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

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

<TABLE>
<CAPTION>

                                       OIL             EQUIPMENT
                                       WELLS           AND SUPPLIES   TOTAL
                                       -----           ------------   -----
<S>                                    <C>             <C>            <C>
Revenues from external customers       $  354,608      $ 30,120       $ 384,728
Inter-segment revenues                         -0-           -0-             -0-
Gain on sale of hedges                        630            -0-            630
Depreciation and amortization               2,731         1,175           3,906
Segment (loss) profit                      14,545       (22,820)         (8,275)
Segment assets                          1,390,542        81,915       1,472,457
Expenditures for segment assets                -0-           -0-             -0-

</TABLE>

Note 12 Segment and Related Information (Continued):

<TABLE>
<CAPTION>
<S>                                                                  <C>
REVENUES
Total revenues for reportable segments                                $  384,728
Other revenues                                                                -0-
Elimination of inter-segment revenues                                         -0-
Total Consolidated Revenues                                              384,728
                                                                        ========
PROFIT OR LOSS
Total loss for reportable segments                                        (8,275)
Other profit or loss                                                          -0-
Elimination of inter-segment profits                                          -0-
Unallocated amounts                                                           -0-
                                                                            -----
Total Consolidated Profit (loss)                                          (8,275)
                                                                        =========
ASSETS
Total assets for reportable segments                                  $1,472,457
Other assets                                                                  -0-
Other unallocated amounts                                                     -0-
                                                                             ----
Total Consolidated Assets                                             $1,472,457
                                                                      ==========
</TABLE>

     Both segments are in the same geographical area.

Note 13 Options and Warrants:

     Energy  Producers,  Inc. has reserved  6,600,000 shares of its Common Stock
     for  issuance  under an  Initial  Stock  Option  and  Payout  Stock  Option
     agreement with Baseline  Capital,  Inc.,  dated  September 29, 2000,  which
     covers key officers,  directors,  advisors, and consultants of the Company.
     The Company has additionally  reserved 100,000 shares for an option granted
     to a  non-affiliate  individual.  The  exercise  price of the  options  and
     warrants is equal to or in excess of the fair market  value of the stock on
     the day of the grant.  The following  table  summarizes  information  about
     stock options outstanding at December 31, 2001:

<TABLE>
<CAPTION>
         Outstanding   Contractual   Average    Exercisable    Average
Exercise at            Life          Exercise   at             Exercise
Price    12/31/01     (Years)        Price      12/31/01       Price
-----    --------     -------        -----      --------       -----
<S>      <C>          <C>            <C>        <C>            <C>
 .95     3,800,000    5-11/12         .95       3,800,000         .95
 .95       200,000    2-1/4           .95         200,000         .95
1.05       200,000    2-3/4          1.05         200,000        1.05
1.00       100,000    2-14           1.00         100,000        1.00

</TABLE>

Note 14 Fair Value of Financial Instruments:

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

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

Note 15  Subsequent Events:

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

     The Company is  assisting  in  obtaining a bridge  loan,  expected in April
     2002,  as part of the  acquisition  of a 50%  interest in  commercial  real
     estate  presently  worth  $2,300,000.  The  property  is  expected to begin
     producing income about 18 months from receipt of the construction loan.

<PAGE>

                            ENERGY PRODUCERS, INC.

                      SUPPLEMENTAL OIL AND GAS INFORMATION
                                    Unaudited

                     Years ended December 31, 2001 and 2000

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

<TABLE>
            Capitalized Costs Relating to Oil and Gas Producing Activities
                           December 31, 2001 and 2000
<CAPTION>

                                                         2001          2000
                                                         ----          ----
<S>                                                      <C>          <C>
         Proved Oil Leases                                1,308,428    1,353,385
         Unproved Oil Leases                                 32,000       32,000
                                                           ---------   ---------
                  Sub total                               1,340,428    1,385,385

         Accumulated Depreciation,
          Depletion and amortization,
          and valuation allowances                           (3,402)        (851)
                                                            --------    ---------
                  Net capitalized costs                  $1,337,026   $1,384,534
                                                         ==========   ==========

</TABLE>


<PAGE>


                            ENERGY PRODUCERS, INC.

               COSTS INCURRED IN OIL AND GAS LEASE ACQUISITION,
                     EXPLORATION AND DEVELOPMENT ACTIVITIES
                                    Unaudited

                     Years ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                      2001            2000
                                                      ----            ----
<S>                                                   <C>             <C>
Acquisition of Oil Leases:

         Proved                                       1,308,428       1,353,385

         Unproved                                        32,000          32,000
Exploration Costs                                            -0-             -0-
Development Costs                                            -0-             -0-

         Total Costs Incurred                        $1,340,428      $1,385,385
                                                     ==========    =============
</TABLE>

<PAGE>

                            ENERGY PRODUCERS, INC.

          RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES
                                    Unaudited

                     Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                  2001          2000
                                                                  ----          ----
<S>                                                               <C>           <C>
Oil Sales                                                         $354,608      $143,374
Production Costs                                                  (102,878)      (13,159)
Exploration Costs                                                      -0-           -0-
Depreciation, Depletion, Amortization
  and Valuation Provisions                                         (2,551)          (851)
                                                                    ------       --------
Net Income (loss) before Income Taxes                             249,179        129,364

Income Tax (provision) benefit                                        -0-            -0-
                                                                      ---            ---
Results of Operations from Oil and Gas
  Producing Activities                                           $249,179       $129,364
                                                                 ========       ========
</TABLE>

(excluding corporate overhead and interest costs)

<PAGE>


                            ENERGY PRODUCERS, INC.

                          RESERVE QUANTITY INFORMATION
                                    Unaudited

                     Years Ended December 31, 2001 and 2000


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

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

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

<TABLE>
<CAPTION>
                                                                           2001                2000
                                                                           ----                ----
                                                                        OIL   GAS          OIL     GAS
                                                                        ---   ---          ---     ---
<S>                                                                     <C>   <C>          <C>     <C>
PROVED DEVELOPED AND UNDEVELOPED RESERVES                                (bbls)               (bbls)

         Beginning of Year                                              127,847  -0-       -0-      -0-
         Revision in previous estimates                                 (11,545) -0-       -0-      -0-
                           Discoveries and extension                        -0-  -0-       -0-      -0-
         Purchase in place                                                  -0-  -0-       132,398  -0-

         Production                                                     (13,765) -0-        (4,551) -0-

         Sales in place                                                    (-0-) -0-           -0-  -0-

         End of Year                                                    102,537  -0-       127,847  -0-

PROVED DEVELOPED RESERVES:

         Beginning of Year                                              127,847  -0-           -0-  -0-

         End of Year                                                    102,537  -0-       127,847  -0-
                                                                       ========  ===       =======  ===
</TABLE>

<PAGE>

                            ENERGY PRODUCERS, INC.

                  STANDARDIZED MEASURE OF DISCOUNTED FUTURE
                NET CASH FLOWS AND CHANGES THEREIN RELATING TO
                           PROVED OIL AND GAS RESERVES
                                    Unaudited

                          At December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                       2001            2000
                                                                       ----            ----
<S>                                                                    <C>             <C>
Future Cash Flows                                                      $2,186,408      $3,400,730
Future Production and Development Costs                                  (545,375)       (801,563)
Future Income Tax Expenses                                                     -0-       (105,300)
                                                                        ----------     -----------
Future Net Cash Flows                                                   1,641,033       2,493,867

10% Annual Discount for Estimated Timing of Cash Flows                    526,558         800,207
                                                                        ---------       ---------

Standardized measure of Discounted Future Net Cash Flows               $1,114,475      $1,693,660
                                                                       ==========      ==========
</TABLE>


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

*Values for 2000 have been restated, eliminating proved undeveloped properties

<PAGE>

                                     ENERGY PRODUCERS, INC.

                              CHANGES IN THE STANDARDIZED MEASURE
                               OF DISCOUNTED FUTURE CASH FLOWS
                                           Unaudited

                                  At December 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                                          2001           2000
                                                                                          ----           ----
<S>                                                                                       <C>            <C>
Balance, Beginning of Year:                                                               $1,693,660     $      -0-
Sales of Oil Produced Net of Production Costs                                               (249,179)     (129,364)

Net Changes in Prices and Production Costs                                                  (607,273)     (257,268)

Extensions and Discoveries, less Related Costs                                                   -0-            -0-


Purchase and Sales of Oil in Place                                                         1,385,385

Revisions of Estimated Development Costs                                                    (354,591)           -0-

Accretion of Discount                                                                        526,558       800,207
                                                                                            --------      --------

Net Changes in Income Taxes                                                                  105,300      (105,300)
                                                                                            --------      ---------

         Balance, End of Year                                                             $1,114,475    $1,693,660
                                                                                          ==========   ============
</TABLE>

<PAGE>

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

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

                                    PART III

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

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

<TABLE>
<CAPTION>
                                       POSITION
NAME                     AGE           WITH COMPANY
----                     ---           ------------
<S>                       <C>          <C>
Mel Herzog,               81           Chairman, and Chief Executive Officer
Dennis R. Alexander,      47           President, and Director
Patrick B. Hammons,       41           Director
Jay C. Wilson,            72           President and Director of Producers Supply Inc.
Larry W. Trapp,           60           Vice President, Treasurer, and Director
David J. Kronenberg,      47           Director, and Assistant Secretary
Melvena Alexander,        68           Secretary and Comptroller
Thomas J. Richards,       56           Advisory Board Member
William V. Harlow Jr.,    62           Advisory Board Member
William A. Sanders,       73           Advisor

</TABLE>

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

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

Dennis R.  Alexander  has served the Company as President  and Director from May
18, 1999 to the present.  In September  1998 he was a founder,  and from January
19,  1999  through its  acquisition  with the Company  served as  President  and
Director of Energy  Producers  Group,  Inc.  From April 1997 through March 1998,
serving as CEO,  Director,  Consultant  of Miner  Communications,  Inc., a media
communications  company.  From  April  26,  1997  through  March,  1998 he was a
director of Rockline, Inc., a private mining, resource company, and a founder of
World Wide Bio Med, Inc., a private  health-bio  care,  start up company.  Since
March 1996 to the present he has owned Global Media Network USA, Inc., which has
included  management  consulting,   advisory  services.  Mr.  Alexander  devotes
approximately  60 to 80 hours per week  minimum,  and more as  required,  to the
business of the Company.

<PAGE>

Patrick B.  Hammons has been a director of the Company  since  August 20,  2001.
From 1998 to the  present  he has been  Managing  Partner of  Claremont  Capital
Partners of Mesa, Arizona.  From 1985 to present, Mr. Hammons has been President
of TFG Advisors, Inc. Mesa Arizona. Mr. Hammons received an M.S.,  International
Business from St. Mary's College in Moraga, California, a Bachelor of Science in
Business  Administration/Accounting  from Eastern  Oregon State  University,  La
Grande Oregon.

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

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

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

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

<PAGE>

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

William V. Harlow Jr. was  appointed  as a member of the  Advisory  Board of the
Company April 2, 2001. Since May 2001 he is the Founder, President, and Director
of Harlow  Australia  Pty Ltd.,  which  explores for oil and gas. Mr.  Harlow is
President  and  Chairman  of the Board of The  Harlow  Corporation,  a  Delaware
Corporation,  a company he founded in 1987,  and a successor to a personal Texas
corporation he founded in 1975.  The Harlow  Corporation  commercially  produces
natural gas and owns and operates  several  natural gas gathering  systems.  The
company owns and operates oil and gas properties in Oklahoma,  Texas and Kansas.
The Harlow  Corporation has a wholly owned subsidiary with non-operating oil and
gas interests known as Eagle Investment  Corporation.  Mr. Harlow founded and is
Chairman of the Board of Aerie  Development  Corporation,  a Texas  corporation,
which has commercial real estate  investments,  and Talon  Exploration,  Inc., a
Texas corporation, which has non-operating oil and gas interests. Mr. Harlow has
been active in the oil and gas business since 1956 and is a Certified  Petroleum
Geologist with the American  Association of Petroleum Geologists and a Certified
Professional Geologist with American Institute of Professional Geologists. He is
a graduate of Oklahoma University with a B.S. degree in Geology and is qualified
an expert to testify before the Texas Railroad Commission,  Oklahoma Corporation
Commission and New Mexico Oil Conservation Division. Thomas J. Richards has been
a member of the Advisory Board of Energy Producers Inc., since February 4, 2000.
From  July  1999  until  February  4,  2000 he began  informally  assisting  Mr.
Alexander in advisory  capacity  toward areas of research and project review for
Energy Producers,  Inc. and has provided additional  evaluations for a number of
potential  projects  requested  for  review  by the  Company's  Directors.  From
September   through  July  1999  Mr.   Richards  began   assisting   Management,
participating  initially as an advisor on an informal  basis.  From January 1996
until  December  1998,  he was self  employed,  involved  in  rehabilitation  of
residential Real Estate. Mr. Richards holds a BA degree in Economics from Beloit
College.

William A. Sanders has been an Executive  Advisor and  Consultant to the Company
since May 7, 2000,  having served as a Director and Executive  Advisor since May
18, 1999. In September 1998 he was a founder,  and from January 19, 1999 through
the  acquisition  processes  with the  Company  served as a  Director  of Energy
Producers Group, Inc. Mr. Sanders  originally founded the Mecca Drilling Co. and
Magnum  Drilling  Co.  These  companies  engaged  in buying  oil  production  in
Louisiana and Arkansas.

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

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

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

For the year end  December 31, 2001 the Company was not in  compliance  with the
filing requirements under Section 16(a).

<PAGE>

ITEM 10 - EXECUTIVE COMPENSATION

The following summary Compensation Table sets fourth all cash compensation paid,
distributed  or  accrued  for  services,  rendered  in all  capacities  based on
agreements with consulting firms providing for the Company's  Management  during
the fiscal years ended,  December 31, 2001 and 2000. The Company  presently does
not retain any employees  and payments are made for services as  available.  All
other tables  required to be reported  have been  omitted,  as there has been no
compensation  awarded  to,  earned  by or paid to any of the  executives  of the
Company that is required to be reported other than what is stated below.

<TABLE>
                           Summary Compensation Table
<CAPTION>

                                                          Other            Restricted   Securities   All
Name and                                                  Annual           Stock        Underlying   Other
Principal Position             Year     Salary   Bonus    Compensation     Awards       Options      Compensation
------------------             ----     ------   -----    ------------     ------       -------      ------------
<S>                            <C>      <C>      <C>      <C>              <C>          <C>          <C>
Academy Research (1)               2001     0        0        $  3,000         0                  0       0
                                   2000     0        0        $ 84,500         0                  0       0
Mel Herzog (CEO) and (1)
Charlotte Herzog TTEE UA
DTD Jan 31, 1994 Herzog            2001     0        0        $      0         0                  0       0
Revocable Living Trust JT          2000     0        0        $      0         0            600,000       0
Grantors

Dennis R. Alexander (2)            2001     0        0        $      0         0                  0       0
President                          2000     0        0        $      0         0            600,000       0

Global Media Network               2001     0        0        $ 45,001
USA, Inc. (2)                      2000     0        0        $ 92,500         0                  0       0

Melvena Alexander (3)              2001     0        0        $      0         0                  0       0
Secretary                          2000     0        0        $      0         0            500,000       0

Melvena Alexander (3)              2001     0        0        $ 13,550         0                  0       0
CPA                                2000     0        0        $ 46,900         0                  0       0

</TABLE>

(1) Academy  Research is owned by and provides  the services of Mel Herzog,  our
Chairman and CEO. Mr. Herzog, our Chairman and CEO and his wife Charlotte Herzog
are both Trustors and Trustees of the Mel and Charlotte Herzog TTEE (Trustee) UA
("Uniform Agreement" or "Unitrust Agreement") DTD ("Declaration of Trust Dated")
January 31, 1994 Herzog Revocable Living Trust JT Grantors. The beneficiaries of
the Trust are Steven Paul Herzog MD, and Michael  Alan Herzog (also see "Certain
Relations and Related Transactions" for additional discussion on agreements with
individual consulting firms).

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

(3)  Melvena  Alexander  CPA is owned by and  provides  the  services of Melvena
Alexander,  our  Secretary  and  Comptroller  (also see "Certain  Relations  and
Related  Transactions"  for additional  discussion on agreements with individual
consulting firms).

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

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

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

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

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

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

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

</TABLE>

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

<PAGE>

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

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

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

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

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

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

<PAGE>

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the Company's Common Stock by each person or group that is known by
the  Company  to be the  beneficial  owner  of more  than  five  percent  of its
outstanding Common Stock, each director of the Company, each person named in the
Summary  Compensation  Table,  and all directors  and executive  officers of the
Company as a group as December 31, 2001. Unless otherwise indicated, the Company
believes  that  the  persons  named in the  table  below,  based on  information
furnished by such owners,  have sole voting and investment power with respect to
the Common Stock beneficially owned by them, where applicable.

<TABLE>
<CAPTION>

Title of          Name and Address                 Beneficial                 Percent
Class             Beneficial Owner                 Owner                      of Class
-----             ----------------                 -----                      ----------
<S>               <C>                              <C>                        <C>
Common            Jay C. Wilson                     1,870,335 (1)             10.37%
                  124 South First Street
                  Stephens, Arkansas 71764
Common            Larry W. Trapp                    2,620,000 (2)             14.42%
                  7944 E. Beck Lane, Suite 200
                  Scottsdale, Arizona 85260-1774
Common            Mel Herzog                        1,792,500(3)               9.935%
                  P.O. Box 15666
                  Scottsdale, Arizona 85267-5666
Common            David J. Kronenberg               1,670,000(4)               9.25%
                  7944 E. Beck Lane, Suite 200
                  Scottsdale, Arizona 85260-1774
Common            William A. Sanders                  510,000                  2.82%
                  3202 W. Bell Road Apt#1177
                  Phoenix, Arizona 85053
Common            Melvena Alexander                   790,000 (5)              4.37%
                  6564 Smoke Tree Lane
                  Scottsdale, Arizona 85253
Common            Dennis R Alexander (5)            1,512,500 (6)              8.38%
                  5423 E. Piping Rock Road
                  Scottsdale, Arizona 85254
Common            Thomas J. Richards                  830,000 (7)              4.60%
                  7944 E. Beck Lane, Suite 200
                  Scottsdale, Arizona 85260-1774
Common            William V. Harlow, Jr.               20,000                  0.01%
                  119 West 15th Street
                  Amarillo, Texas 79101
Common            All Officers and Directors
                  as a Group                         11,615,335                 64.38%

</TABLE>

(1) Jay C.  Wilson has voting  power for the shares  owned by Leanna  Wilson his
daughter and the owner of 1,755,915 shares. Lenna Jenson is also the daughter of
Jay C. Wilson and sister to Leanna Wilson,  and holder of 84,695.  Juanita Whitt
is Manager at Producers Supply, Inc. and owns 29,725 shares.

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

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

(4)  Includes  1,137,500  owned  by  the DJ and  SM  Kronenberg  Family  Limited
Liability Limited Partnership (LLLP) that Mr. Kronenberg is a Limited Partner of
with his wife Sheryl M.  Kronenberg.  Also included are 500,000 shares of common
restricted  stock  under  presently  exercisable  stock  options,  which  may be
purchased by Mr.  Kronenberg,  and 2,500 shares owned  indirectly  through Royal
Crest,  LLC,  which is managed by him. Not reflected are 40,000 shares gifted to
Ronald  and Marie  Mencaraelli,  sister  and  brother-in-law;  40,000  gifted to
Anthony and Clare Fernandez, sister and brother-in-law; and 20,000 shares gifted
to Rita Kronenberg,  sister; 62,500 shares gifted to Thomas J. Richards, advisor
(5); and 25,000 shares gifted to Melvena Alexander, Secretary (7).

<PAGE>

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

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

(7) Includes 80,000 shares owned directly by Mr. Richards, and 250,000 shares as
the total of all gifts  aggregated,  as equally  received by him from Mel Herzog
(3),  Dennis  Alexander  (6),  David  Kronenberg  (4), and Larry Trapp (2). Also
included  are  500,000  shares  of  common   restricted  stock  under  presently
exercisable stock options, which may be purchased by Mr. Richards.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

<PAGE>

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

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

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

Note to Royal Crest, LLC                                              $371,915
issued September 20, 2000 with
interest at 20% per annum. Monthly
payments are interest only with full
payment due on October 31, 2003.
(The note is current)

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

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

The  Company  is sub  leasing  to a  David  J.  Kronenberg,  indirectly  through
Kronenberg Tax and Management LLC, half of the Company's  subleased office space
on a month-to-month basis. The Company's arrangement for sub leased office space
is with a non affiliated party (a co-sharing basis)  approximately  2,000 square
feet of office space for its corporate  headquarters at 7944 E. Beck Lane, Suite
200, Scottsdale, Arizona 85260-1774, and its telephone number is (480) 778-0488.
The terms of the  sub-lease  are  monthly  at the rate of  $1,200.00  per month.
Duration of the lease is within the non-affiliate party's 2-year renewable lease
provisions.  The Company has the same terms as to duration and roll over options
at its election and is current in its payments.

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

<PAGE>

Note to Baseline Capital, Inc.                                 $ 691,800
Note was issued September 29, 2000 and is
a non-interest bearing note.  Minimum monthly
payments of $25,000 or 80% of net production
proceeds from specified properties. (*The note is current)
(See also other discussions
contained elsewhere in this document)

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

Promissory Note payable to Larry W. Trapp.                    $   14,200
Note was issued June 1, 2001 with interest at 12% per annum. Due August 1, 2002.

Larry W. Trapp is a Director and shareholder of the Company.

Promissory Note payable to Thomas J. Richards.                $   13,150
Note was issued December 6, 2001 with interest at 18% per annum after due date
December 17, 2001, plus $700 origination fee and $1,315 penalty.

Thomas J. Richards is an advisor/consultant and shareholder of the Company.

Unsecured, Demand Note Payable to Mel Herzog,                 $   18,461
a Director and shareholder.

Unsecured,  Demand Note Payable to Dennis R.  Alexander,  $10,228 a Director and
shareholder.

Contracts
---------

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

<TABLE>
<CAPTION>
Entity                                      Related Party              2001     2000
------                                      -------------              ----     ----
<S>                                         <C>                        <C>      <C>
Academy Research                            Mel Herzog (1)             $ 3,000  $84,500
Global Media Network USA, Inc.              Dennis R. Alexander (2)    $45,001  $92,750
Melvena Alexander, CPA                      Melvena Alexander (3)      $13,550  $46,900

</TABLE>

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

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

<PAGE>

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

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

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

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

</TABLE>

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

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

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

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

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

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

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

</TABLE>

<PAGE>

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

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

The agreement  calls for the filing of a  registration  statement  including the
option  shares  within  six months of the date of the  agreements  or all of the
option shares shall be immediately  issued to optionee  without payment by or at
cost to optionee, and shall be restricted stock of the Company under rule 144 of
the Securities act of 1933, as amended and the Company shall then be required to
file for the  registration of the option shares within twelve months of the date
of the  agreements.  The  provision  in  the  immediately  preceding  paragraph,
whereas;  the option  agreements  call for the immediate  issuance of the option
shares  without  payment  by or at  cost to the  optionees  if the  filing  of a
registration of the option shares has not occurred within six months of the date
of the  agreements;  this  provision  requirement  has been waived by all of the
individuals  and entities  listed in the option  table under the Section  titled
"Executive  Compensation"  table and footnotes "Option Grants in the Last Fiscal
Year To Officers, Consultants, Directors, and Advisors", and further to the best
knowledge  of  the  Company  this  provision  has  been  waived  by  all  of the
individuals covered by option agreements listed in the table above and elsewhere
in this  document  including  Baseline  Capital,  Inc.  and  individuals  and or
entities covered under the Baseline  Capital,  Inc.  agreement with the Company.
This  initial  requirement  has been  fulfilled by the  Company's  filing of its
initial Form 10SB registration statement on April 2, 2001.

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

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

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

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


                                       3
<PAGE>

                                     PART IV

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

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

PART F/S                   FINANCIAL STATEMENTS

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

                                   SIGNATURES

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


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

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

/s/ Mel Herzog
--------------
Mel Herzog,  Chairman and CEO

/s/ Dennis R. Alexander
-----------------------
Dennis R. Alexander, Director/President

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

/s/ David J. Kronenberg
-----------------------
David J. Kronenberg, Director

/s/ Jay C. Wilson
-----------------
Jay C. Wilson, Director

/s/ Pat B. Hammons
------------------
Pat B. Hammons, Director