UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-KSB

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

                      For the year ended December 31, 2001
                         Commission File Number 0-29613


                         TIDELANDS OIL & GAS CORPORATION
                 (Name of small business issuer in its charter)


              Nevada                                      66-0549380
  (State or other jurisdiction of                     (I. R. S. Employer
   incorporation or organization)                     Identification No.)


             13330 Leopard St., Suite 26, Corpus Christi, TX 78410
                    (Address of principal executive office)

                                 (361) 241-2244
                          (Issuer's Telephone Number)

        Securities Registered Pursuant of Section 12(b) of the Act: None

          Securities Registered Pursuant of Section 12(g) of the Act:
                         Common Stock, $0.001 Par Value



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act of 1934  during the  preceding  12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes [X] No [ ]

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

The issuer had operating  revenues of $1,059,028 for the year ended December 31,
2001.

This report contains a total of _ pages. The Exhibit Index appears on page __.

As of December 31, 2001,  there were  24,154,900  shares of the issuer's  common
stock  outstanding.  The aggregate market value of the 18,175,650  shares of the
issuer's voting stock held by  non-affiliates  was $21,265,510  based on the low
bid price on that date as reported by the NASD OTC  Electronic  Bulletin  Board.
The sum excludes the shares held by officers,  directors, and stockholders whose
ownership  exceeded 10% of the outstanding  shares at December 31, 2001, in that
such persons may be deemed  affiliates  of the Company.  This  determination  of
affiliate  status  is not  necessarily  a  conclusive  determination  for  other
purposes.

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                                   FORM 10-KSB
                                December 31, 2001

                                                                            Page

PART I.......................................................................  3

ITEM 1.  Business............................................................  3
ITEM 2.  Properties..........................................................  4
ITEM 3.  Legal Proceedings...................................................  4
ITEM 4.  Submission of Matters to vote of Security Holders...................  5

PART II......................................................................  5

ITEM 5.  Market for Common Equity and Related Stockholder Matters............  5
ITEM 6.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations.............................  6
ITEM 7.  Financial Statements................................................  9
ITEM 8.  Changes In and Disagreements With Accounting and
             Financial Disclosure............................................  9

PART III.....................................................................  9

ITEM 9.  Directors, Executive Officers, Promoters, and Control
           Persons: Compliance With Section 16(a) of the Exchange Act........  9
ITEM 10. Executive Compensation.............................................. 11
ITEM 11. Security Ownership of Certain Beneficial Owners and Management...... 11
ITEM 12. Certain Relationships and Related Transactions...................... 12

PART IV...................................................................... 12

ITEM 13.  Exhibits and Reports on Form 8-K................................... 12
SIGNATURES................................................................... 13
EXHIBIT INDEX................................................................ 14


<PAGE>


                                     PART I

ITEM 1.  Business.

Business Overview

         Tidelands Oil & Gas Corporation (the  "Company"),  formerly known as C2
Technologies,  Inc., was  incorporated  under the laws of the State of Nevada on
February 25, 1997. C2 Technologies, Inc. changed its name to Tidelands Oil & Gas
Corporation  on November  19,  1998.  The Company  has five  subsidiaries  named
Tidelands Oil Corporation  (TOC) and Tidelands Gas Corporation  (TGC), Rio Bravo
Energy, LLC, Sonora Pipeline, LLC, Reef International, LLC.

         The Company's  plan of operations  has been  refocused  towards our gas
processing plant and pipeline interest along with a new  international  pipeline
crossing.

         Tidelands Oil Corporation  was formed in May 1985.  Since inception and
through the second quarter of 2001, Tidelands Oil Corporation had devoted all of
its  efforts to  acquiring  control of leases  which  comprised a portion of the
Sacatosa Field in Maverick County,  Texas.  The Company  discontinued all of its
activities related to oil and gas producing  properties during 2001.  Management
proceeded  to  dispose  all  Company  interests  in its oil and gas  properties,
terminated all leases,  disbanded all joint ventures and settled  related claims
and disputes.

         Tidelands Gas Corporation was formed on August 29, 1996.  Tidelands Gas
Corporation was formed primarily for the purpose of acquiring the Delhi Pipeline
System for use as a gas  transportation  outlet  for the  shallow  gas  reserves
underlying Tideland's leases.

         Tidelands  Gas  Corporation   organized  two  Texas  Limited  Liability
companies, Rio Bravo Energy, LLC and Sonora Pipeline, LLC.

         Rio Bravo  Energy,  LLC was  formed on August 10,  1998.  It was formed
primarily to operate the Chittim Gas Processing  Plant.  Rio Bravo Energy,  LLC.
purchased  the Chittim gas  processing  plant from Conoco,  Inc.  This plant was
purchased  by Rio Bravo in 1999 and  processes  natural  gas from  Conoco  Oil's
Sacatosa Field which  consists of  approximately  3000 wells.  It also processes
natural gas from Merit Energy's Pena Creek Field which consists of approximately
300 wells.  The gas plant has the capability to fractionate the natural gas into
commercial grade propane and butane.

         Sonora  Pipeline,  LLC  was  formed  in  January  1998.  It was  formed
primarily to operate the Sonora pipeline  network which delivers  natural gas to
the Rio Bravo Chittim Gas Processing  Plant.  Sonora's pipeline network consists
of approximately 80 miles of gas pipeline.

         Sonora will  transport  gas produced  from various gas  suppliers.  Rio
Bravo will  operate  the gas plant.  It will  process  the  natural gas into gas
products such as natural gasoline,  propane,  butane. Rio Bravo will also market
the gas products.

         Sonora  Pipeline and Rio Bravo  transport and process gas for suppliers
such as Merit Energy, Conoco, and Cuantro Petroluem,  Inc. The maximum operating
capacity  of gas  plant is 10  million  cubic  feet of gas per day.  The  Sonoro
pipeline capacity is greater than the gas processing plant's present capacity.

         Rio Bravo intends to ship all propane and butane products to Mexico and
to sell natural gasolines to domestic customers.

         The Texas Railroad Commission  regulates all aspects of the production,
transportation and processing of petroleum products.

                                       3
<PAGE>


         Reef  International,  LLC was formed to obtain permits and construct an
international  pipeline  crossing  between  Texas and Mexico.  The pipeline will
transport  natural  gas to Piedra  Negras,  Mexico for  distribution  by CONAGAS
(Cianacional DE Gas, S.A. DE C.V.).  Reef will also transport propane and butane
products  into Mexico  storage  facilities  with this  pipeline.  Reef is in the
permitting process of this project.

Competition

         Tidelands  will  compete  for  gas  suppliers  and  petroleum   product
purchasers.  This competition will be against  companies with greater  financial
and other resources.  Competitive factors will include price, contract terms and
quality  of  service,  including  pipeline  connection  times  and  distribution
efficiencies  and financial  resources.  The Company will face  competition from
other producers and suppliers,  including competition from other local and world
wide energy suppliers.

Employees

The Company has seven employees,  including the Company  officers,  two clerical
and  accounting  personnel,   three  field  personnel  and  two  contract  plant
operators.


ITEM 2.  Properties

         Rio Bravo  Energy,  LLC owns and  operates  the Chittim Gas  Processing
Plant which is located in Maverick, County, Texas.

         Sonora  Pipeline,  LLC owns the Sonora Pipeline  network  consisting of
approximately 80 miles of pipeline.

         The  Company  leases its  executive  office on a  month-to-month  basis
paying $1,350  monthly.  Its field office is leased at $400  monthly.  The field
office lease expires October 1, 2002.


ITEM 3.  Legal Proceedings

         In June 2001,  the  Company  commenced  an action in the United  States
District Court for the Southern District of Texas against Swartz Private Equity,
LLC ("Swartz").  Shortly thereafter,  Swartz commenced an action in the Superior
Court of Fulton County,  Georgia which was removed to the United States District
Court  for  the  Northern  District  of  Georgia.  The  Texas  action  has  been
transferred to the Northern District of Georgia and both actions are being dealt
with jointly for discovery purposes.

         The Company seeks declaratory and rescissionary  relief seeking to have
the Court  declare that the  agreements  between the Company and Swartz are void
and  unenforceable and rescission in amounts to be established at trial which it
alleges to be $20,000,000.

         The Swartz action seeks to enforce the agreements signed by the parties
and the  issuance  of  1,157,150  shares of common  stock,  payment of a claimed
termination fee in the amount of $200,000 and damages for the alleged failure of
the Company to issue the shares claimed by Swartz including damages arising from
any market fluctuations.  Alternatively, Swartz's complaint seeks a direction to
the Company to specifically perform the agreements.

         In addition,  Swartz's complaint seeks damages in an unspecified amount
for claimed defamation concerning Swartz.


                                       4
<PAGE>

         Further,  Swartz's complaint seeks damages in an unspecified amount for
claimed  "international  interference with contractual relations and intentional
interference with business relations".  The Swartz complaint also seeks punitive
damages.

         The above two actions are in the discovery  stages. At this preliminary
stage, no evaluation of the outcome of the  litigations can be made.  Management
is  responding  to these  litigations  by  vigorously  pressing its position and
contesting  those  taken by  Swartz.  Settlement  discussions  have been  opened
between the parties but have not resulted in any offer being made by either side
which is seriously considered by the other.


ITEM 4.   Submission of Matters to vote of Security Holders

No matters were brought to a vote of the Security Holders during the quarter
ended December 31, 2001.


                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters

         Our common stock is traded on the OTC Electronic  Bulletin  Board.  The
following  table sets forth the high and low bid prices of our common  stock for
each quarter for the years 2000 and 2001. The quotations set forth below reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.

Common Stock:

         Our common  stock  trades  Over-the-Counter  (OTC) on the OTC  Bulletin
Board under the symbol TIDE. Table1. sets forth the high and low bid information
for the past two years. These quotations reflect  inter-dealer  prices,  without
retail   mark-up,   mark-down  or  commission  and  may  not  represent   actual
transactions. These data provided by NASDAQ Historical Data Service.

Table 1.

Bid Information

Fiscal Quarter Ended                High                      Low

December 31, 2001                   1.48                      0.82
September 30, 2001                  1.80                      0.75
June 30, 2001                       1.25                      0.32
March 31, 2001                      0.50                      0.15
December 31, 2000                   0.41                      0.31
September 30, 2000                  0.47                      0.25
June 30, 2000                       0.75                      0.40
March 31, 2000                      1.81                      0.53



         The  Company  has 72  active  shareholders  of its  common  stock as of
December 31, 2001 holding 24,154,900 common shares.

Dividends and Dividend Policy

         There  are no  restrictions  imposed  on the  Company  which  limit its
ability to declare or pay dividends on its common  stock.  During the year ended
December 31, 2001,  no cash or stock  dividends  have been  declared or paid and
none are expected to be paid in the foreseeable future.

         We expect to continue to retain all  earnings  generated  by our future
operations  for the  development  and  growth  of our  business.  The  Board  of
Directors will determine  whether or not to pay dividends in the future in light
of our earnings, financial condition, capital requirements and other factors.


                                       5
<PAGE>

Recent Sales of Unregistered Securities

         During the period  October 1 through  December  31,  2001,  we sold the
following securities in exempt transactions not requiring registrations:

On November  26,  2001,  the Company  issued Milo  Resources  150,000  shares of
restricted common stock for financial consulting services at a value of $67,800.

On November  26,  2001,  the Company  issued  Marvin  Cooper  100,000  shares of
restricted common stock for financial consulting services at a value of $45,200.

On  November  26,  2001,  the  Company  issued  Shelly  Klein  50,000  shares of
restricted common stock for financial consulting services at a value of $22,600.

On November 26, 2001,  the Company issued  Stanley  Merdinger  300,000 shares of
restricted  common  stock  for  financial  consulting  services  at a  value  of
$135,600.

On November  26,  2001,  the  Company  issued  Robert  Tucker  25,000  shares of
restricted common stock for public relations services at a value of $11,300.

On December  31, 2001,  the Company  authorized  for  issuance to Guernsey  J.V.
Partners 563,809 shares of restricted  common stock to settle a contract dispute
at a value of $259,352.

On December 31, 2001, the Company  authorized for issuance to Stanley  Merdinger
250,000 shares of restricted common stock at a value of $118,000 as a additional
consideration for a $250,000 loan.

         All of the  above  described  common  stock  issued  in  these  private
transactions pursuant to Section 4(2) of the Securities Act of 1933, as amended,
and are deemed restricted securities.


ITEM 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

         The following discussion of our results of operations and liquidity and
capital resources should be read in conjunction with our condensed  consolidated
financial  statements  and related  notes  thereto  appearing  elsewhere in this
report.  All  information in the discussion and references to the years 2000 and
2001 are based on our fiscal year that ends on December 31.

         The Company has discontinued its oil and gas well producing  operations
during 2000 and 2001. We have  reclassified  2000 and 2001 operating  results as
discontinued operations where applicable.

OVERVIEW:

         The Company  completely  refocused its plan of operations  from oil and
gas  production to natural gas processing  and pipeline  transportation  and the
development of an international pipeline crossing to Mexico.


                                       6
<PAGE>


         In recent  months,  the  Company  has begun to  increase  the volume of
natural gas  processed  by  contracting  with gas  producers  in the area of our
pipeline network.  Efforts are continuing to contract additional natural gas for
processing.  The additional  gas will allow us to increase  shipments of natural
gas products to end-user customers.

         The  Company is  currently  evaluating  several  pipeline  systems  for
possible  acquisition.  We have executed an acquisition  agreement to purchase a
pipeline  system  that would add two  hundred-twenty  five (225)  miles of large
diameter pipe to our pipeline  network.  We will add all natural gas gathered in
this pipeline system to the natural gas processed by our processing facility.

         We established an additional  affiliate to obtain the necessary permits
for and to construct our proposed international pipeline crossing to Mexico. The
permitting  process  for the state of Texas  has been  completed  with  approval
granted.  Federal  approvals  needed are awaiting  execution by the  appropriate
federal officials after completing the review process.

         The international  pipeline crossing will consist of a twelve (12) inch
natural gas line and six (6) inch  propane/butane line between Texas and Mexico.
The natural gas pipeline will transport  natural gas to Piedras  Negras,  Mexico
for distribution by a qualified  existing Mexican  Company.  The  propane/butane
line will allow the  Company to  transport  propane  and  butane  products  into
storage  facilities in Mexico.  The Company is actively  exploring other similar
opportunities  to  provide  natural  gas and  it's  by-products  to  Mexico  for
distribution by Mexican organizations.

RESULTS OF OPERATIONS

         REVENUES:  The Company reported  revenues of $1,059,023 from continuing
operations  for the year ended  December 31, 2001 as compared with revenues from
continuing  operations  of $94,400 for the year ended  December 31, 2000. If the
Company's  natural gas  processing  plant and  pipeline  were 100% owned for the
entire year of 2000 instead of only December 2000,  comparable revenues would be
$1,153,109.

         TOTAL COSTS AND  EXPENSES:  Total costs and  expenses  from  continuing
operations increased from $370,484 for 2000 to $2,781,334 for 2001. The increase
of $2,410,250 includes $835,992 of cost of sales due to gas processing plant and
pipeline  activities  for 12 months during 2001,  and only December in 2000, and
costs  associated  with  establishing  further  domestic and  international  gas
processing  and pipeline  operations.  If the natural gas  processing  plant and
pipeline  were 100% owned for the entire year of 2000  instead of only  December
2000, total costs and expenses would be $1,377,014.

         COST OF SALES: The cost of sales (purchases) from continuing operations
increased  from $71,833 for 2000 to $907,825 for 2001.  The increase of $835,992
is primarily  related to the ownership  period of the gas  processing  plant and
pipeline  being the full year of 2000. If the natural gas  processing  plant and
pipeline were 100% owned for the full year of 2000, total cost of sales would be
$1,027,806.

         SELLING  GENERAL  AND  ADMINSTRATIVE  EXPENSES:   Selling  general  and
administrative  expenses from continuing  operations increased from $286,651 for
2000 to $1,737,555 for 2001. The increase of $1,450,904 in 2001 is primarily due
to salaries,  legal fees,  consulting  fees and other costs  associated with the


                                       7
<PAGE>

establishment  of an international  crossing to Mexico and related  transactions
and interest and  financing  costs of borrowings  connected  with a secured loan
obtained  in  December  2000 to acquire  the 50%  ownership  of the  natural gas
processing plant and pipeline entity owned by others.

         INCOME TAX: The pre-tax loss for the 2001 was ($2,606,265)  compared to
($954,557) for 2000, an increase of $1,651,708.

         ESTABLISHMENT OF NEW SUBSIDIARIES:  We established two new subsidiaries
during 2001; Reef  International LLC, a Texas LLC, was organized for the purpose
of obtaining the necessary  permits and to construct our proposed  international
pipeline crossing to Mexico;  and Reef Marketing LLC, a Texas LLC,  organized to
conduct the business  operations  of the  pipelines  with  Mexican  distributors
purchasing our natural gas products.

         Initially the Company owned a 47.5% interest of Reef  International LLC
which  interest  was  increased  later to 100% when the  interests  owned by our
industry  partner  and  another  small  interest  owner  were  acquired  by Reef
International LLC.

         LIQUIDITY  AND  CAPITAL  RESOURCES:  Capital  expenditures  during 2001
totaled $199,710 as compared to $653,909 during 2000.

         Total debt increased from $2,329,021 at December 31, 2000 to $3,840,674
at December  31, 2001 of which  $1,090,000  was unpaid  officer's  salaries  and
$444,105  was loans  from  officers.  Total  debt as of  December  31,  2001 and
December  31,  2000  expressed  as a  percentage  of the sum of  total  debt and
shareholder's equity was 231.6% and 149.8% respectively.

         Net loss for the year  ended  December  31,  2001 was  ($2,606,265)  an
increase of 273.0% from the net loss of ($954,557)  for the year ended  December
31, 2000. Diluted net loss per common share increased 252.2% to ($0.116) for the
year ended  December 31, 2001  compared to ($0.046) for the year ended  December
31,  2000.  The net loss per share  calculation  for the year  December 31, 2001
included an increase in actual and equivalent shares outstanding.

         We currently do not have the liquidity or capital resources to fund our
operations  without raising  capital either from  additional  borrowing and, or,
from  the  sale  of  additional  shares  of  stock.  The  Company  is  currently
negotiating a funding of $10,000,000  subject to the receipt of the approved and
executed Federal permits for the planned international crossing to Mexico.

FORWARD-LOOKING STATEMENTS:

         We have included  forward-looking  statements in this report.  For this
purpose,  any  statements  contained in this report that are not  statements  of
historical fact may be deemed to be forward looking statements. Without limiting
the foregoing, words such as "may", "will", "expect",  "believe",  "anticipate",
"estimate",  or  "continue"  or the  negative  or other  variations  thereof  or
comparable  terminology  are  intended to identify  forward-looking  statements.
These statements by their nature involve  substantial  risks and  uncertainties,
and actual  results  may differ  materially  depending  on a variety of factors.
Factors that might cause  forward-looking  statements to differ  materially from
actual  results  include,  among other  things,  overall  economic  and business
conditions,  demand  for the  Company's  products,  competitive  factors  in the
industries  in which we compete or intend to compete,  natural gas  availability
and cost and timing,  impact and other  uncertainties of our future  acquisition
plans.


                                       8
<PAGE>

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

         The Company does not issue or invest in financial  instruments or their
derivatives for trading or speculative  purposes.  The operations of the Company
are conducted  primarily in the United States,  and, are not subject to material
foreign  currency  exchange risk.  Although the Company has outstanding debt and
related  interest  expense,  market risk of interest rate exposure in the United
States is currently not material.

ITEM 7.  Financial Statements

                          Index to Financial Statements


INDEPENDENT AUDITOR'S REPORT ...........................................      17

CONSOLIDATED FINANCIAL STATEMENTS:
     Consolidated Balance Sheet .........................................     18
     Statements of  Consolidated Stockholders' (Deficit).................     19
     Statements of Consolidated Operations ..............................     20
     Statements of Consolidated Cash Flows ..............................  21-22
     Notes to Consolidated Financial Statements .........................  23-34



ITEM 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

                  None

PART III


ITEM 9.  Directors, Executive Officers, Promoters, and  Control Persons:
         Compliance With Section 16(a) of the Exchange Act

         The  following  table  lists the  names,  ages,  and  positions  of the
executive  officers and  directors  of the Company  that served  during the year
ending  December 31, 2000.  All officers and  directors  have been  appointed to
serve until their successors are elected and qualified.  Additional  information
regarding the business experience,  length of time served in each capacity,  and
other matters relevant to each individual is set forth following the table.

Name               Age        Position or officer               Appointment Date
--------------------------------------------------------------------------------

Michael Ward        46        Director, President               October 21, 1998
Royis Ward          68        Director, Secretary/Treasurer     October 21, 1998
Ahmmed Karim        30        Director, Vice President          October 21, 1998
Allen Alderson      52        Director                          November25, 1998

         Michael Ward is the President,  Chief Executive Officer and Director of
the Company and Chief Executive  Officer of Tidelands Gas  Corporation.  Michael
Ward has served in his present  capacities  since October 21, 1998. Mr. Ward has
more than 25 years of diversified experience as an oil and gas professional.  He
was educated in business  management and administration at Southwest Texas State
University and the University of Texas.  He has wide  experience in the capacity

                                       9
<PAGE>

in which he successfully served in operating oil and gas companies in the United
States.  During the past 20 years,  he has been  associated  with Century Energy
Corporation where his duties and  responsibilities  were production and drilling
superintendent and supervised 300 re-completions and new drills in Duval County,
Texas. In association with Omega Minerals, Inc., where he was vice president and
part owner,  he  operated  65 wells in 23  counties in South and West Texas:  17
wells in Seminole and Osage  Counties,  Oklahoma,  44 wells in Neosho and Wilson
Counties,  Kansas and 125 wells in Brown,  Pike,  Schuyler  and Scott  Counties.
Illinois.  He was president and owner of Major  Petroleum  Company.  He drilled,
completed  and produced 42 wells in South and West Texas  counties.  The company
was sold. With Tidelands Oil  Corporation,  his duties included  supervising and
performing  remedial  well  work,  work-overs  and  economic  evaluation  of the
corporate  properties.  The  primary  area of interest  was in Maverick  County,
Texas. He has performed  project  financing  analysis and consulting of refinery
acquisitions  for the Yemen  government.  Currently,  he is negotiating  new gas
purchase and sale contracts,  supervising and administering the sale of gas line
connections and hookups.

         Royis Ward is the Secretary/Treasurer and a Director of the Company and
the President of Tidelands Oil  Corporation.  Mr. Ward has served in his present
capacities  since  October  21,  1998.  He has been  engaged  in the oil and gas
industry  since  graduation  from Tyler Junior  College,  Tyler,  Texas in 1952.
Initially,  he was  employed  as a  production  superintendent  and  landman for
Coffield  &  Guthrie,  Inc.,  a  large  independent  oil and  gas  operator  and
thereafter placed in charge of pipeline and drilling  operations from 1952-1955.
In 1955.  he began to develop oil and gas  properties  for his own account as an
independent  oil and gas operator  throughout the southwest  until 1962. At that
time, he became President of Omega Petroleum Corporation, Shreveport, Louisiana.
Thereafter,  he  continued  as an  independent  oil  and gas  operator  drilling
individual in excess of 50 wells in the South Texas Area. In 1968, he became the
President and CEO of Omega Minerals, Inc. and was instrumental in acquiring vast
oil and gas properties by drilling,  development, and re-acquisitions.  In 1985,
Tidelands Oil Corporation,  a Texas  Corporation,  was formed for the purpose of
drilling and developing oil and gas properties in South Texas.

         Ahmmed  Karim Vice  President  and  director  of the  Company.  He is a
graduate   of  Simon   Fraser   University.   He  holds  a  degree  in  Business
Administration, specializing in marketing and international business. Since 1995
his  business   experience  includes  work  with  Quest  Investments  Group  and
Interworld  Trade and Finance  where his  responsibilities  included  marketing,
finance and investor relations.

         Mr. Allen Alderson a member of the Company's board of directors. He was
previously  President  of Falco Energy  Services,  L.L.C.  (FES),  a natural gas
marketing  and  transportation  company  formed  in 1995  with its  headquarters
located  in  Shreveport,  Louisiana.  Falco  Energy  Services  is engaged in the
marketing,  transportation  and  processing  of natural gas with emphasis on the
development and operation of natural gas pipeline systems.

         Mr. Alderson  attended  Louisiana Tech University and the University of
Texas at Austin,  graduating with a Bachelor of Science Degree in Finance. He is
a  member  of the  Independent  Petroleum  Association  of  America,  the  Texas
Independent  Producers  and  Royalty  Owners  Association,  the  Houston  Energy
Association and is a charter member of the Natural Energy Services Association.

         Royis Ward is the father of Michael Ward.


                                       10
<PAGE>

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 directors and executive officers, and persons who own more than 10% of
the Company's Common Stock, to file with the Securities and Exchange  Commission
initial  reports of  beneficial  ownership  and reports of changes in beneficial
ownership of Common Stock of the Company.  Officers,  directors and greater than
10%  shareholders  are required by the  Securities  and Exchange  Commission  to
furnish the Company with copies of all section  16(a)  reports they file.  Based
solely  on  copies  of such  forms  furnished  as  provided  above,  or  written
representations that no Forms 5 were required,  the Company believes that during
the fiscal year ended December 31, 2001,  all Section 16(a) filing  requirements
applicable to its executive  officers,  directors and beneficial  owners of more
than 10%of its Common Stock were complied  with,  except as follows:  Royis Ward
failed to file 6 Forms 4,  Statement  of  Changes  in  Beneficial  Ownership  of
Securities,  relating to various  stock sale  transactions  during  2001.  Three
Officers and Directors filed the Form 3, Initial Report of Beneficial  Ownership
after the due date for such Form.  All Officers and Directors  filed the Form 5,
Annual  Statement of Changes in  Beneficial  Ownership for the fiscal year ended
December 31, 2001, after the due date for such Form.

ITEM 10.  Executive Compensation

         The  following  sets  forth the  compensation  of the  officers  of the
Company in the year ended December 31, 2001.

Executive Officer Compensation

         The Company has three executive officers,  Michael Ward, Royis Ward and
Ahmmed Karim.  Michael  Ward's  annual  salary is $120,000.  Royis Ward's annual
salary is $120,000.  The company has not paid any of these  salaries to date and
the amounts due are accruing.

Director Compensation

The company paid Mr. Allen Alderson,  as a consultant,  compensating him $36,000
for the year ending December 31, 2001.

On April 11, 2001,  the board of directors  authorized the payment of $5,000 per
month to Ahmmed Karim, a director for his services.  For the year ended December
31, 2001,  we  compencated  him $45,000 for these  services.  There are no other
formal or informal understandings or arrangements relating to compensation.



ITEM 11. Security Ownership of Certain Beneficial Owners and Management

The  following  table sets forth the Common Stock  ownership  information  as of
December 31, 2000, with respect to(i) each person known to the Company to be the
beneficial  owner of more  than 5% of the  Company's  Common  Stock;  (ii)  each
director  of the  Company;  and  (iii) all  directors,  executive  officers  and
designated  stockholders  of the  Company  as a group.  This  information  as to
beneficial ownership was furnished to the Company by or on behalf of the persons
named.  Unless  otherwise  indicated,  each has sole voting and investment power
with respect to the shares  beneficially  owned.  The  percentages  are based on
24,154,900 shares issued and outstanding as of December 31, 2001.


                                       11
<PAGE>


Title of Class   Name and Address         Amount and Nature     Percent of Class

Common           Michael Ward             3,513,125             14.54%
                 9309 North Star
                 Corpus Christi, TX

Common           Royis Ward               2,298,625              9.52%
                 5902 Fenway
                 Corpus Christi, TX

Common           Allen Alderson             165,000              0.68%
                 6857 N. Lakeshore Dr.
                 Shreveport, LA 71107

Common           Ahmmed Karim                 2,500              0.0001%
                 1532 Woods Dr.
                 N. Vancouver, B.C.
                 Canada V7R 1A9

Directors as a group owned 24.75% of the Company's issued and outstanding stock.


ITEM 12. Certain Relationships and Related Transactions


         The  Company  granted  common  stock  options on  November  11, 1999 to
directors Allen Alderson and Danny Vines.  Danny Vines a former Company Director
resigned  earlier this year.  The options are  exercisable in three 50,000 share
blocks each at an exercise price of 45 cents per share.  Mr. Alderson  exercised
all of his options.  Mr. Vines  exercised  100,000  share  options and remaining
50,000 share options expired January 2002.

         The Board of Director of the Company previously approved the accrual of
officer salaries  totaling  $1,090,000 for services rendered by Michael Ward and
Royis Ward during 2001 and previous years. These salaries remain unpaid.

         As of December 31, 2001, the cumulative  non-interest  bearing advances
due  to  Michael  and  Royis  Ward  from  the  Company  and  its  wholly   owned
subsidiaries, totaled $ 444,105.

         In June 2000, the Company engaged Allen Alderson,  a Company  director,
to perform  consulting  services in connection with a $3,000 monthly  consulting
agreement.  For the year ending  December 31, 2001, the Company paid $36,000 for
these services.


                                     PART IV

ITEM 13. Exhibits and Reports on Form 8-K

(a)      Reports on Form 8-K.


         1.       No  Current  Reports  on Form 8-K were  filed  during the last
                  quarter of the fiscal year.


                                       12
<PAGE>


(b)      Exhibits

         *3.1     Articles of Incorporation of Tidelands Oil & Gas Corporation.,
                  a Nevada corporation, formerly C2 Technologies, Inc.
         *3.2     Articles  of  Amendment   Tidelands  Oil  &  Gas  Corporation,
                  formerly C2 Technologies, Inc.
         *3.3     Bylaws of Tidelands Oil & Gas Corporation
         21       List of Subsidiaries

*        Previously filed.


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) to the Securities  Exchange
Act of 1934,  the Company has duly caused this Form 10-KSB Report for the period
ending  December  31,  2001  to be  signed  on its  behalf  by the  undersigned,
thereunto duly authorized on this 26th day of March, 2002.


                                                 TIDELANDS OIL & GAS CORPORATION


                                                 BY: /s/ Michael Ward
                                                    ----------------------------
                                                    Michael Ward, President


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 Company and in
the capacities and on the dates indicated.


Date: March 26, 2002                   /s/ Michael Ward
                                      ------------------------------------------
                                      Michael Ward, President, Director


                                       /s/ Royis Ward
                                      ------------------------------------------
                                      Royis Ward, Secretary/Treasurer,  Director



                                       /s/ Ahmmed Karim
                                      ------------------------------------------
                                      Ahmmed Karim, Vice President, Director


                                       13
<PAGE>


                                 EXHIBIT INDEX

         *3.1     Articles of Incorporation of Tidelands Oil & Gas Corporation.,
                  a Nevada corporation, formerly C2 Technologies, Inc.
         *3.2     Articles  of  Amendment   Tidelands  Oil  &  Gas  Corporation,
                  formerly C2 Technologies, Inc.
         *3.3     Bylaws of Tidelands Oil & Gas Corporation
         21       List of Subsidiaries

*        Previously filed.




                                       14
<PAGE>







                        TIDELANDS OIL & GAS CORPORATION
                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000













                                       15

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000




                                TABLE OF CONTENTS





INDEPENDENT AUDITOR'S REPORT ...........................................      17

CONSOLIDATED FINANCIAL STATEMENTS:
     Consolidated Balance Sheet .........................................     18
     Statements of  Consolidated Stockholders' (Deficit).................     19
     Statements of Consolidated Operations ..............................     20
     Statements of Consolidated Cash Flows ..............................  21-22
     Notes to Consolidated Financial Statements .........................  23-34






                                       16




<PAGE>

                              BAUM & COMPANY, P.A.
                        1515 UNIVERSITY DRIVE, SUITE 209
                          CORAL SPRINGS, FLORIDA 33071







                          INDEPENDENT AUDITOR'S REPORT

Board of Directors
Tidelands Oil & Gas Corporation
Corpus Christi, Texas

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

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Tidelands Oil & Gas Corporation as of December 31, 2001 and the results of their
consolidated  operations and their  consolidated  cash flows for the years ended
December 31, 2001 and 2000 in conformity  with accounting  principles  generally
accepted in the United States of America.



Baum & Company, P.A.
Coral Springs, Florida
March 18, 2002

                                       17
<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001

                                     ASSETS
                                     ------
Current Assets:
      Cash                                                          $   397,491
      Accounts Receivable                                                67,675
      Inventory (Note 1)                                                  7,515
      Prepaid Expenses (Note 4)                                         304,244
                                                                    -----------
         Total Current Assets                                           776,925
                                                                    -----------

Property Plant and Equipment, Net (Notes 1,5)                           827,020
                                                                    -----------

Other Assets:
      Deposits                                                            1,776
      Intangible Assets, Net (Notes 1,3,7)                               52,910
                                                                    -----------
         Total Other Assets                                              54,686
                                                                    -----------

         Total Assets                                               $ 1,658,631
                                                                    ===========

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)
                     ---------------------------------------

Current Liabilities:
      Accounts Payable and Accrued Expenses                         $ 1,268,679
      Current Maturities of Long-Term Debt (Note 8)                     839,123
                                                                    -----------

         Total Current Liabilities                                    2,107,802

Long-Term Debt  (Note 8)                                                198,767

Due to Related Parties (Note 7)                                       1,534,105
                                                                    -----------

         Total Liabilities                                            3,840,674
                                                                    -----------

Commitments and Contingencies (Notes 13,14,15)                                --

Stockholders' (Deficit)
      Common Stock, $.001 Par Value Per Share,
        100,000,000 Shares Authorized, 24,154,900 Shares
        Issued and Outstanding                                           24,156
      Paid-in Capital in Excess of Par Value                          3,017,751
      Subscriptions Receivable                                          (18,000)
      Accumulated (Deficit)                                          (5,205,950)
                                                                    -----------
         Stockholders' (Deficit)                                     (2,182,043)
                                                                    -----------

         Total Liabilities and Stockholders' (Deficit)              $ 1,658,631
                                                                    ===========

           See Accompanying Notes to Consolidated Financial Statements
                                       18
<PAGE>
<TABLE>
<CAPTION>

                        TIDELANDS OIL & GAS CORPORATION
               STATEMENTS OF CONSOLIDATED STOCKHOLDERS' (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                    Paid-In
                                                                   Capital In
                                                                   Excess of    Accumulated
                                       Shares        Amount        Par Value     (Deficit)
                                    -----------    -----------    -----------   -----------
<S>                                 <C>            <C>            <C>           <C>
Balance December 31, 1999            17,420,489    $    17,420    $ 1,516,021   $(1,645,128)

Issuance of Common Stock              3,308,459          3,309        356,397

Net (Loss)                                    0              0              0      (954,557)
                                    -----------    -----------    -----------   -----------

Balance December 31, 2000            20,728,948         20,729      1,872,418    (2,599,685)
                                    -----------    -----------    -----------   -----------

Issuance of Common Stock              4,318,809          4,319      1,145,333

Cancellation of Previously Issued
Common Stock                           (892,857)          (892)

Net (Loss)                                                                       (2,606,265)
                                    -----------    -----------    -----------   -----------

Balance December 31, 2001            24,154,900    $    24,156    $ 3,017,751   $(5,205,950)
                                    ===========    ===========    ===========   ===========
</TABLE>


          See Accompanying Notes to Consolidated Financial Statements
                                       19
<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                      STATEMENTS OF CONSOLIDATED OPERATIONS
                                   YEARS ENDED




                                                   December 31,    December 31,
                                                        2001            2000*
                                                   ------------    ------------
Revenues:
   Gas Processing and Transportation               $  1,030,438    $     89,364
   Other                                                 28,590           5,036
                                                   ------------    ------------
     Total Revenues                                   1,059,028          94,400
                                                   ------------    ------------

Operating Expenses:
   Purchases                                            907,825          71,833
   Depreciation, Depletion & Amortization                43,937           3,818
   Interest                                              92,017           8,182
   General and Administrative                         1,737,555         286,651
                                                   ------------    ------------
      Total Operating Expenses                        2,781,334         370,484
                                                   ------------    ------------
Net (Loss) From Continuing Operations                (1,722,306)       (276,084)
    (Loss) From Discontinued Operations
     (Note 2)                                          (905,213)       (678,473)
                                                   ------------    ------------
Net (Loss)                                         $ (2,606,265)   $   (954,557)
                                                   ============    ============

Net (Loss) Per Common Share
   Basic
   -----
   Loss From Continuing Operations                 $     (0.076)   $     (0.014)
   Loss From Discontinued Operations                     (0.040)         (0.036)
                                                   ------------    ------------
      Total                                        $     (0.116)   $     (0.050)
                                                   ============    ============
Weighted Average Number of Common
   Shares Outstanding, Basic                         22,441,924      19,074,719
                                                   ============    ============

   Diluted
   -------
   Loss From Continuing Operations                 $     (0.076)   $     (0.013)
   Loss From Discontinued Operations                     (0.040)         (0.033)
                                                   ------------    ------------
      Total                                        $     (0.116)   $     (0.046)
                                                   ------------    ------------
Weighted Average Number of Common
Shares Outstanding, Diluted                          22,531,924      20,529,719
                                                   ============    ============


 *The statement of consolidated operations for the year ended December 31, 2000
    has been reclassified to conform with the December 31, 2001 presentation.






           See Accompanying Notes to Consolidated Financial Statements
                                       20

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                                   YEARS ENDED

                                                   December 31,    December 31,
                                                        2001            2000*
                                                   ------------    ------------
Cash Flows Provided (Required) By
  Operating Activities:
    Net (Loss)
      Continuing Operations                        $ (1,701,052)   $   (276,084)
      Discontinued Operations                          (905,213)       (678,473)
    Adjustments to Reconcile Net (Loss)
      to Net Cash Provided (Required) By
      Operating Activities:

    Depreciation, Depletion and Amortization
       Continuing Operations                             43,937           3,818
       Discontinued Operations                           25,612          26,291
    Company's Share of Equity Method in
       Investee's Losses                                 10,764          33,835
    Loss on Expiration of Leases                           --            24,209
    Loss on Disposal of Oil & Gas Properties             56,450         129,145
    Issuance of Common Stock
       For Services Provided                            815,300          31,895
       For Litigation Settlement                        289,352          98,000
     Officers' Salaries                                 240,000         240,000
      Changes in
       Accounts Receivable                               77,848        (131,158)
       Inventory                                         10,697         (18,212)
       Prepaid Expenses                                (201,472)        (90,921)
       Other Assets                                        (408)           (750)
       Accounts Payable and Accrued Expenses            506,210         324,010
       Current Maturities of Long-Term Debt            (202,429)        887,925
       Drilling Advances                                   --           (25,967)
                                                   ------------    ------------
Net Cash Provided (Required)
   by Operating Activities                             (934,404)        557,563
                                                   ------------    ------------
Cash Flows Provided (Required)
  By Investing Activities:
       Goodwill Arising from Acquisition
         of Investment                                     --           (57,029)
       Decrease in Investments                             --           197,086
       Capital Contributions to Investments                --          (125,943)
Acquisitions of Property, Plant & Equipment            (199,710)       (653,909)
Proceeds from Disposals of Oil
       and Gas Properties                               151,402          76,647
                                                   ------------    ------------

         Net Cash (Required)
            By Investing Activities                     (48,308)       (563,148)
                                                   ------------    ------------


                                       21

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                                   YEARS ENDED




                                                     December 31,   December 31,
                                                          2001           2000*
                                                     ------------   ------------
Cash Flows Provided by Financing Activities
      Proceeds from Issuance of Common Stock               44,108          1,886
      Decrease Stock
       Subscription Receivable                             49,500         71,575
      Proceeds Short-Term Loans                           325,000           --
      Issuance of Long-Term Debt Pursuant
        To Litigation Settlement                          198,767           --
      Proceeds of Loans From
         Related Parties                                  450,319        173,568
                                                     ------------   ------------

Net Cash Provided by Financing Activities               1,067,694        247,029
                                                     ------------   ------------

Net Increase in Cash                                       84,982        261,444
Cash at Beginning of Period                               312,509         51,065
                                                     ------------   ------------
Cash at End of Period                                $    397,491   $    312,509
                                                     ============   ============

Supplemental Disclosures of
   Cash Flow Information
      Cash Payments for Interest                     $     75,484   $      1,145
                                                     ============   ============

      Cash Payments for Income Taxes                 $        500   $          0
                                                     ============   ============
Non-Cash Financing Activities:
   Issuance of Common Stock
       Operating Activities                          $    815,300   $     31,895
       To Liquidate Short-term Debt Advances                    0        227,925
       Litigation Statement                               289,352         98,000
                                                     ------------   ------------
       Total Non-Cash Financing Activities           $  1,104,652   $    357,820
                                                     ============   ============



*The statement of  consolidated  cash flows for the year ended December 31, 2000
has  been  reclassified   (Note  2)  to  conform  with  the  December  31,  2001
presentation.


           See Accompanying Notes to Consolidated Financial Statements
                                       22
<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------   ------------------------------------------

         This summary of significant  accounting policies is presented to assist
         in  understanding   these  consolidated   financial   statements.   The
         consolidated  financial  statements  and notes are  representations  of
         management who is responsible for their integrity and objectivity.  The
         accounting  policies  used conform to  accounting  priniples  generally
         accepted  in The United  States of America  and have been  consistently
         applied in the preparation of these consolidated financial statements.

         Organization
         ------------

         Tidelands Oil & Gas Corporation  (formerly C2 Technologies,  Inc.) (the
         Company) was  incorporated in the state of Nevada on February 25, 1997.
         On  October  21,  1998  the  Company  acquired  all of the  issued  and
         outstanding  capital stock of Tidelands Oil  Corporation  and Tidelands
         Gas  Corporation.  On November 19, 1998,  the legal name of the Company
         was changed to Tidelands Oil and Gas Corporation. On April 19, 2000 the
         Company  entered  into  a  business  combination  agreement  with  OMNI
         Acquisition   Corporation.   (OMNI).   OMNI,   a  Nevada   corporation,
         incorporated  January  12,  2000,  had filed a Form 10-SB  Registration
         statement  with  the   Securities  and  Exchange   Commission  and  was
         classified as a "blank check reporting company".  On May 11, 2000 OMNI,
         a wholly owned subsidiary, was merged into the Company. The Company was
         the  surviving  corporation  and OMNI  the  dissolved  corporation.  On
         December 1, 2000 the Company acquired the remaining equity (50%) of Rio
         Bravo  Energy,   LLC.  (Rio  Bravo).   Accordingly,   Rio  Bravo  is  a
         wholly-owned subsidiary of the Company.

         Nature of Operations
         --------------------

         The Company is engaged in the  transmission  and  processing of natural
         gas in southern Texas.

         Principles of Consolidation
         ---------------------------

         The  consolidated  financial  statements  include  the  accounts of the
         Company   and   its   wholly-owned   subsidiaries.    All   significant
         inter-company accounts and transactions are eliminated.

         Fair Value of Financial Instruments
         -----------------------------------

         Statement of Financial  Accounting  Standards No. 107 "disclosure about
         fair value of financial  instruments,"  requires the  disclosure of the
         fair value of off-and-on  balance sheet financial  instruments.  Unless
         otherwise  indicated,  the  fair  values  of all  reported  assets  and
         liabilities,  which represent financial  instruments (none of which are
         held for trading  purposes),  approximate  the carrying  values of such
         amounts.

                                       23

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------   ------------------------------------------------------

         Use of Estimates
         ----------------

         The preparation of consolidated financial statements in accordance with
         accounting  principles  generally  accepted  in the  United  States  of
         America requires management to use estimates and make judgements. While
         management  has considered  all available  information,  actual amounts
         could  differ  from  those  reported  as assets,  liabilities,  related
         revenues,   costs  and   expenses   and  the   disclosed   amounts   of
         contingencies.

         Inventories
         -----------

         Inventories  consisting  of natural gas liquids are valued at the lower
         of average  cost or market  using the  first-in  and  first-out  (FIFO)
         basis.

         Property, Plant and Equipment
         -----------------------------

         Property,   plan  and  equipment  are  recorded  at  historical   cost.
         Depreciation  of  property,  plant and  equipment  is  provided  on the
         straight-line  method over the  estimated  useful  lives of the related
         assets.  Maintenance  and repairs are charged to operations.  Additions
         and  betterments,  which  extend  the  useful  lives of the  assets are
         capitalized.  Upon  retirement or disposal of the  property,  plant and
         equipment,  the cost and accumulated  depreciation  are eliminated from
         the  accounts,   and  the  resulting  gain  or  loss  is  reflected  in
         operations.

         Concentration of Credit Risk
         ----------------------------

         The  Company's  cash  balances in financial  institutions  at times may
         exceed  federally  insured limits.  At December 31, 2001, the uninsured
         cash  balances  total  $195,963.  The company has not  experienced  any
         losses  in  such  accounts  and  believes  it is  not  exposed  to  any
         significant credit risk on cash.

         Revenue  from three  customers  amounted to 100% of net gas  processing
         revenues for the year ended  December 31, 2001.  Amounts due from these
         customers included in accounts receivable were $63,296.

         Intangible Assets
         -----------------

         Intangible assets,  which primarily consist of the cost of in excess of
         the fair value of tangible assets and liabilities  acquired (goodwill),
         are amortized, by the straight-line method, over, an estimated economic
         useful life of the underlying  values of the assets acquired of fifteen
         years.

                                       24

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------   ------------------------------------------------------

         Long-Lived Assets
         -----------------

         Statement of Financial  Accounting Standards 121 (SFAS 121) "Accounting
         for the  Impairment of  Long-Lived  Assets to be Disposed Of," requires
         that  long-lived  assets to be held and used by the Company be reviewed
         for impairment  whenever  events or changes in  circumstances  indicate
         that the related carrying amount may not be recoverable. When required,
         impairment losses on assets to be held and used are recognized based on
         the fair value of the asset and long-lived assets to be disposed of are
         reported  at the lower of  carrying  amount or fair  value less cost to
         sell.

         The  requirements of SFAS 121 and the evaluation by the Company did not
         have a significant  effect on the  consolidated  financial  position or
         results of consolidated operations.

         Income Taxes
         ------------

         The Company  accounts for income taxes in accordance  with Statement of
         Financial Accounting  Standards 109 (SFAS 109).  "Accounting for Income
         Taxes,"  which  requires the  establishment  of a deferred tax asset or
         liability for the  recognition of future  deductions or taxable amounts
         and operating  loss  carryforwards,  deferred tax expense or benefit is
         recognized as a result of the change in the deferred asset or liability
         during the year. If necessary,  the Company will  establish a valuation
         allowance  to reduce any  deferred  tax asset to an amount  which will,
         more likely than not, be realized.

         Net Earnings Per Common Share
         -----------------------------

         The  Company  accounts  for  earnings  per  share  in  accordance  with
         statement of Financial  Accounting  Standard 128 ("SFAS 128") "Earnings
         per Share".  Basic  earnings  per share is based upon the net  earnings
         applicable to common shares after preferred  dividend  requirements and
         upon the weighted  average number of common shares  outstanding  during
         the  period.  Diluted  earnings  per share  reflects  the effect of the
         assumed  conversions  of  convertible  securities and exercise of stock
         options  only in the  periods  in which  such  affect  would  have been
         dilutive.

NOTE 2 - DISCONTINUED OPERATIONS
------   -----------------------

         During the year ended  December 31, 2001, the Board of Directors of the
         Company authorized  management to discontinue all activities related to
         oil and gas-producing operations.  Management then proceeded to dispose
         of oil and gas  properties,  terminate  all  leases,  disband all joint
         ventures and settle all claims and disputes.  As a result of management
         activities,  a summary of  discontinued  operations for the years ended
         December 31 are as follows:

                                       25

<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



NOTE 2 - DISCONTINUED OPERATIONS (CONTINUED)
------   -----------------------------------

                                                           2001       2000  Reclassified
                                                ------------------    ------------------
<S>                                             <C>                   <C>
         Oil and Gas Sales                      $           54,840    $           75,620
         Other                                              57,803                 5,250
                                                ------------------    ------------------
              Total Revenues                               112,643                80,870
                                                ------------------    ------------------
         Lease Operating Expenses                          322,515               216,780
         Depreciation                                       25,612                26,291
         Interest                                            5,660                 6,043
         General and Administrative                         36,858               323,040
         Company's Share of Equity in
            In Investee's Losses                            20,642                33,835
         Loss on Disposal of Oil and
            Gas Properties                                  56,450               153,354
         Litigation Settlement                             550,119                  --
                                                ------------------    ------------------
               Total Expenses                            1,017,856               759,343
                                                ------------------    ------------------
         Net (Loss) Discontinued Operations     $         (905,213)   $         (678,473)
                                                ==================    ==================
</TABLE>

NOTE 3 - ACQUISITIONS
------   ------------

         On April 19,  2000 the  company  entered  into a  business  combination
         agreement with OMNI Acquisition  Corporation (OMNI), an inactive Nevada
         corporation,  incorporated  January 12, 2000, in which the Company will
         acquire OMNI in a share exchange  transaction  followed by a short form
         merger.  On February  18,  2000,  OMNI filed a Form 10-SB  Registration
         Statement  with  the   Securities  and  Exchange   Commission  and  was
         classified as a "blank check reporting company".

         Pursuant to the business combination  agreement,  the Company exchanged
         250,000  shares  of  restricted  common  stock,  valued  at  $250,  for
         5,000,000 issued and outstanding shares of OMNI. OMNI had $-0- revenues
         and $-0- assets.  The company  accounted  for this  transaction  by the
         purchase  method.  On May 11, 2000 OMNI merged  into the  Company.  The
         Company  was the  surviving  corporation  and  OMNI  was the  dissolved
         corporation.

                                       26

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


NOTE 3 - ACQUISITIONS (CONTINUED)
------   ------------------------

         On December 1, 2000,  the Company  acquired  the  remaining  50% of its
         investment in Rio Bravo Energy,  LLC. (Rio Bravo) and its  wholly-owned
         subsidiary  Sonora  Pipeline,  LLC.,  for a  total  purchase  price  of
         $505,558.  The purchase of Rio Bravo was  accounted for by the purchase
         method,  whereby the underlying assets acquired and liabilities assumed
         are  recorded at their fair  value.  The excess of the amount paid over
         the fair value of Rio  Bravo's  identifiable  net  assets was  $57,029,
         which has been reflected in the balance sheet as goodwill.  The company
         expects to benefit from the goodwill  acquired over a period of fifteen
         years.

         In  September  2001,  the  Company  received  back  its   non-ownership
         interests in Reef International,  LLC. (Reef). Accordingly, Reef is now
         a wholly-owned subsidiary of the Company.

         In  accordance  with  Accounting   Principle  Board  Opinion  #16,  the
         unaudited proforma condensed  consolidated results of operations of the
         Company are as follows:

                         Tidelands Oil & Gas Corporation
                 Condensed Consolidated Statement of Operations
                          Year Ended December 31, 2000
                                   "Pro Forma"
                                   (Unaudited)

         Revenues                              $  1,153,109
                                               ------------

         Costs and Expenses                    $  2,138,943
                                               ------------

         Net (Loss)                            $   (985,834)
                                               ============

         Net (Loss) Per Common Share           $      (.052)
                                               ============

         Weighted Average shares Outstanding     19,074,719
                                               ============

NOTE 4 - PREPAID EXPENSES
------   -----------------

         As of December  31, 2001  prepaid  expenses  of $304,244  consisted  of
         unexpired  casualty  insurance  premiums and retainer for prepaid legal
         services.


                                       27

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
------   -----------------------------
         A summary of property,  plant and  equipment at December 31, 2001 is as
         follows:

                                                               Estimated
                                                             Economic Life
                                                             -------------

         Pipeline Pre-Acquisition Deposit   $      40,000         --
         Pre-Construction Costs-
           International Crossing                 131,199         --
         Equipment and
           Leasehold Improvements                 219,849    3-10   Years
         Pipeline                                 431,560      15   Years
         Processing Plant                         166,410      15   Years
                                            -------------
              Total                               989,018
         Less Accumulated Depreciation            161,998
                                            -------------
              Total                         $     827,020
                                             =============

NOTE 6 - INTANGIBLE ASSETS
------   -----------------

         A summary of intangible assets at December 31, 2001 is as follows:

              Goodwill                               $57,029
              Less Accumulated Amortization            4,119
                                                     -------

                                                     $52,910
                                                     =======

         The Company  evaluates the  amortization  period of  intangibles  on an
         ongoing basis, in light of any changes in business  conditions,  events
         or  circumstances,  that  may  indicate  the  potential  impairment  of
         intangible assets.

NOTE 7 - RELATED PARTY TRANSACTIONS
------   --------------------------

         The Board of  Directors  has approved  officers'  salaries for services
         provided.  At  December  31,  2001  the  cumulative  amount  of  unpaid
         officers' salaries is as follows:

                     Service Provided For
                    Year Ended December 31,         Amount
                    -----------------------      ----------

                            1997 and Prior       $  310,000
                            1998                     60,000
                            1999                    240,000
                            2000                    240,000
                            2001                    240,000
                                                 ----------
                                                 $1,090,000
                                                 ==========


                                       28
<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


NOTE 7 - RELATED PARTY TRANSACTIONS
------   --------------------------

         At December 31, 2001,  cumulative  non-interest bearing advances due to
         the officers of the Company amount to $444,105.

         In April 11,  2001 the  Company  agreed to  compensate  a director  for
         services  provided at the rate of $5,000 per month.  For the year ended
         December 31, 2001 the Company paid $45,000 for these services.

         In June 2000 the  Company  engaged a director of the Company to perform
         consulting services pursuant to a $3,000 monthly consulting  agreement.
         For the year ended December 31, 2001 the Company paid $36,000 for these
         services.

NOTE 8 - LONG-TERM DEBT
------   --------------

             A summary of notes payable at December 31, 2001 is as follows:

         Note Payable, Secured, Interest at Prime
            Rate Plus 5%, Maturing March 15, 2002                     $  457,571

         Note Payable, Unsecured, Non-Interest
            Bearing, Payable on Demand                                    19,552

         Note Payable, Unsecured, 10% Interest
            Bearing, Maturing June 30, 2002                              250,000

         Notes Payable, Unsecured, 6% Interest,
            Maturing November and December, 2002                          37,000

         Note Payable, Unsecured, 10% Interest Until
            April 17, 2001, 18% Interest Thereafter,
              Payable on Demand                                           75,000

         Note Payable, Unsecured, Interest at Prime
            Rate Plus 1%, Maturing June 2003                             198,767
                                                                      ----------
                                                                       1,037,890

         Less:  Current Maturities                                       839,123
                                                                      ----------

                   Total Long-Term Debt                               $  198,767
                                                                      ==========

NOTE   9 - INCOME TAXES
--------   ------------

         At December  31, 2001 the Company had  cumulative  net  operating  loss
         carryforwards  of  approximately  $4,305,000 to offset  against  future
         federal taxable income, that expire in the years through 2021.

                                       29

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE   9 - INCOME TAXES (CONTINUED)
--------   ------------------------

         The  company  files  a  consolidated   income  tax  return  and  timing
         differences between the recognition of certain income and expense items
         for  income  tax  purposes  and  financial  reporting  purposes  are as
         follows:

         Cumulative benefit of net operating loss
            carryforwards                                           $ 4,549,000
         Officers' salary deductions in excess of
           tax deduction                                               (240,000)
         Tax depreciation less than book depreciation                    (4,000)
                                                                    -----------

                                                                    $ 4,305,000
                                                                    ============
         Total deferred tax asset                                   $ 1,728,600
         Less valuation allowance                                    (1,728,600)
                                                                    -----------
         Net deferred tax asset                                     $         0
                                                                    ===========

         It is currently undeterminable as to when the Company will benefit from
         the deferred tax asset.

NOTE 10 - COMMON STOCK TRANSACTIONS
-------   -------------------------

         a.       The Company issued  150,000 shares of restricted  common stock
                  to settle a contract dispute at a value of $30,000.

         b.       The Company issued  360,000 shares of restricted  common stock
                  for $18,000.

         c.       The Company issued  540,000 shares of restricted  common stock
                  for $27,000.

         d.       The Company issued  200,000 shares of restricted  common stock
                  at a  value  of  $32,000  in  consideration  for  providing  a
                  three-year $1,000,000 8% interest-bearing line of credit.

         e.       The Company  issued 80,000  shares of restricted  common stock
                  for financial consulting services at a value of $12,800.

         f.       The company issued  250,000 shares of restricted  common stock
                  for legal services at a value of $20,000.

         g.       The Company issued  250,000 shares of restricted  common stock
                  for financial consulting services at a value of $20,000.

         h.       The Company issued  250,000 shares of restricted  common stock
                  for engineering consulting services at a value of $20,000.

         i.       The Company  issued  300,000  shares of common stock for legal
                  services  at a value  of  $60,000.

                                       30
<PAGE>

                              TIDELANDS OIL & GAS
             CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE 10 - COMMON STOCK TRANSACTIONS (CONTINUED)
-------   -------------------------------------

         (j)      The  Company   issued  400,000  shares  of  common  stock  for
                  financial consulting services at a value of $250,000.

         (k)      The Company  cancelled  892,857  shares of  previously  issued
                  restricted common stock at a value of $892.

         (l)      The Company issued  150,000 shares of restricted  common stock
                  for financial consulting services at a value of $67,800.

         (m)      The Company issued  100,000 shares of restricted  common stock
                  for financial consulting services at a value of $45,200.

         (n)      The Company  issued 50,000  shares of restricted  common stock
                  for financial consulting services at a value of $22,600.

         (o)      The Company issued  300,000 shares of restricted  common stock
                  for financial consulting services at a value of $135,600.

         (p)      The Company  issued 25,000  shares of restricted  common stock
                  for public relations services at a value of $11,300.

         (q)      The Company issued  563,809 shares of restricted  common stock
                  to settle litigation at a value of $259,352.

         (r)      The Company issued  250,000 shares of restricted  common stock
                  at a value of $118,000  as a  additional  consideration  for a
                  $250,000 loan.

NOTE 11 - STOCK OPTIONS
-------   -------------

         As of December 31, 2000 the Company had outstanding  previously  issued
         stock options as follows:

         Shares                   Option Price             Expiration Date
         ------                   ------------             ---------------

         50,000                      $ .45            January 10, 2002 (Expired)
         ======

                                       31

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001
NOTE 12 - LEASES
-------   ------

         The  Company  entered  into two  operating  leases  for the  rental  of
         facilities (a) executive office, monthly rent of $1,350, month to month
         (b) field office, monthly rent of $400, expiring September 30, 2001.

         In addition,  the Company leases  compressors under a monthly agreement
         for $3,845 per month.

         Future minimum lease payments required under  non-cancelable  operating
         leases are as follows:

                     Year Ending December 31,          Amount

                             2002                    $   3,600
                                                     ==========

         Rent  expense  for the  Years  Ended  December  31,  2001 and 2002 were
         $21,300 and $9,671, respectively.

NOTE 13 - COMMITMENTS AND CONTINGENCIES
-------   -----------------------------

         The  Company  is subject to the laws and  regulations  relating  to the
         protection  of the  environment.  The  Company's  policy  is to  accrue
         environmental and cleanup related costs of a non-capital nature when it
         is both probable that a liability has been incurred and when the amount
         can be  reasonably  estimated.  Although it is not possible to quantify
         with any degree of  certainty  the  financial  impact of the  Company's
         continuing   compliance   efforts,   management   believes  any  future
         remediation or other compliance  related costs will not have a material
         adverse  effect on the  financial  condition  or  reported  results  of
         operations of the Company.

NOTE 14 - OTHER

         The company, under a May 2001 agreement, continues to have available, a
         $1,000,000, unsecured, 8% interest-bearing line of credit.

NOTE 15 - LITIGATION SETTLEMENTS AND LITIGATION
-------   -------------------------------------

         Settlements
         -----------

         On March 8, 2000 the Company  settled a $98,000 prior contract  dispute
         by the  issuance of 60,000  shares of  restricted  common  stock.  This
         settlement  has  been  accounted  for as  discontinued  operations.  On
         January  22,  2001,  the  Company,  pursuant  to a mutual  release  and
         settlement agreement,  agreed to settle a contract dispute by acquiring
         a 26.68 and 20.00 ownership percentage in GT-PLA J.V. 96 and G. Halsell
         S.U. 96 joint ventures, respectively. The Company issued 150,000 shares
         of  restricted  common  stock valued at $30,000 and signed a promissory
         note  for  $75,000.   This   settlement   has  been  accounted  for  as
         discontinued  operations - litigation settlement.

                                       32

<PAGE>

                                TIDELANDS OIL &
           GAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2001


NOTE 15 - LITIGATION SETTLEMENTS AND LITIGATION (CONTINUED)
-------   -------------------------------------------------

         On  December  5, 2001 the  Company,  pursuant  to a mutual  release and
         settlement agreement,  agreed to discontinue,  terminate and settle all
         disputes in GT-PLA  J.V.96 and  G-Halsell  J.V.96 Joint  Ventures.  The
         Company  issued 563,809  shares of restricted  common stock,  valued at
         $259,352,  and signed a promissory  note for $198,767.  This settlement
         has   been   accounted   for  as   discontinued   operations-litigation
         settlement.

         In 2000,  the Company  issued  1,785,714  shares of  restricted  common
         stock, at a value of $1,886, and a warrant to purchase 2,000,000 shares
         of common stock, for financial  consulting  services.  On September 13,
         2001 to settle all claims,  the Company  reached an  agreement  for the
         cancellation  of the  warrant to  purchase  2,000,000  shares of common
         stock and the  cancellation  of  892,857  shares of  previously  issued
         restricted common stock.

         Litigation
         ----------

         In June 2001,  the  Company  commenced  an action in the United  States
         District  Court  for the  Southern  District  of Texas  against  Swartz
         Private Equity, LLC ("Swartz"). Shortly thereafter, Swartz commenced an
         action  in the  Superior  Court of  Fulton  County,  Georgia  which was
         removed to the United States  District Court for the Northern  District
         of  Georgia.  The Texas  action has been  transferred  to the  Northern
         District of Georgia and both  actions are being dealt with  jointly for
         discovery purposes.

         The Company seeks declaratory and rescissionary  relief seeking to have
         the Court  declare that the  agreements  between the Company and Swartz
         are void and  unenforceable and rescission in amounts to be established
         at trial which it alleges to be $20,000,000.

         The Swartz action seeks to enforce the agreements signed by the parties
         and the  issuance of  1,157,150  shares of common  stock,  payment of a
         claimed  termination  fee in the amount of $200,000 and damages for the
         alleged  failure of the  Company to issue the shares  claimed by Swartz
         including damages arising from any market fluctuations.  Alternatively,
         Swartz's  complaint  seeks a direction  to the Company to  specifically
         perform the agreements.

         In addition,  Swartz's complaint seeks damages in an unspecified amount
         for claimed defamation concerning Swartz.

         Further,  Swartz's complaint seeks damages in an unspecified amount for
         claimed  "international  interference  with  contractual  relations and
         intentional interference with business relations". The Swartz complaint
         also seeks punitive damages.

                                       33

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE 15 - LITIGATION SETTLEMENTS AND LITIGATION (CONTINUED)
-------   -------------------------------------------------

         The above two actions are in the discovery  stages. At this preliminary
         stage,  no  evaluation of the outcome of the  litigations  can be made.
         Management is responding to these  litigations  by vigorously  pressing
         its  position  and  contesting   those  taken  by  Swartz.   Settlement
         discussions  have been opened between the parties but have not resulted
         in any offer being made by either side which is seriously considered by
         the other.


NOTE 16 - CONCENTRATION OF CREDIT RISK
-------   ----------------------------

         The  Company's  cash  balances in financial  institutions  at times may
         exceed  federally  insured limits.  At December 31, 2001, the uninsured
         cash  balances  total  $195,963.  The Company has not  experienced  any
         losses  in  such  accounts  and  believes  it is  not  exposed  to  any
         significant credit risk on cash.

         Revenue  from three  customers  amounted to 100% of net gas  processing
         revenues for the year ended  December 31, 2001.  Amounts due from these
         customers included in accounts receivable were $63,296.


NOTE 17 - SUBSEQUENT EVENTS
-------   -----------------

         During 2002 the Company has entered into  negotiations to acquire a 225
         mile pipeline  located in Dimmit,  Frio,  Uvalde and Zavala Counties of
         Texas.  The Company  will  acquire  assets in exchange  for issuance of
         common stock and assumption of debt totaling approximately $4,700,000.

         The Company issued  4,000,000  shares of restricted  common stock at at
         value of  $1,600,000  for a  three-year  financial  services  contract.
         Management  of the  Company  believes  that  with the  signing  of this
         contract,  funding sources will be made available for the  construction
         of the  informational  crossing  facility  locatedin Eagle Pass, Texas,
         along with significant working capital for the Company.

         The  Company,  under a February 28, 2002  agreement  has arranged a ten
         month $1,500,000, unsecured, 10% interest-bearing line of credit.




                                       34