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

                                   Form 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

                                BUSINESS ISSUERS

                         Commission File Number 0-20915
                         ------------------------------

                               GEO PETROLEUM, INC.
                               -------------------
                 (Name of Small Business Issuer in its charter)

            California                              33-0328958
            ----------                              ----------
         (State or other                         (I.R.S. Employer
         jurisdiction of                         Identification No.)
         incorporation or
          organization)

                        501 Deep Valley Drive, Suite 300
                        --------------------------------
                  Rolling Hills Estates, California       90274
             ------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (310) 265-0721
                                              --------------

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

Yes  X   No
    ----

The issuer became a reporting company when its Form 10-SB registration statement
was cleared on August 12, 1996.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.

   Class                Outstanding at March 31, 1998
   -----                ----------------------------
Common stock,
 no par value                    8,243,323

<PAGE>

PART I.  FINANCIAL INFORMATION

Geo Petroleum, Inc.
unaudited Balance Sheets


                                                        March 31,   December 31,
                                                          1998          1997
                                                     ---------------------------
Assets
Current assets:
         Cash and cash  equivalents                  $   177,410    $   418,393
         (includes restricted cash of
          $160,000 in 1998 and 1997)                

Accounts receivable:
         Accrued oil and gas  revenues  (net of           46,939         53,204
         allowance for doubtful accounts
         of $6,942 in 1998 and 1997)
         Joint interest and other (net of                 74,116         69,809
         allowance for doubtful accounts
         of $48,835 in 1998 and 1997)
Prepaid expenses and other, net                          129,088        127,718
                                                     ---------------------------
Total current assets                                     427,554        669,124

Due from Capitan  Resources,  Inc.                       308,179        213,545
(net of valuation  allowance
of $500,000 in 1998 and 1997)

Property and equipment:
         Oil and gas properties                        6,432,306      6,342,986
         Office furniture and equipment                  156,127        155,338
                                                     ---------------------------
                                                       6,588,433      6,498,324
         Accumulated depletion and depreciation       (1,227,302)    (1,201,602)
                                                     ---------------------------
                                                       5,361,132      5,296,722

Total assets                                         $ 6,096,865    $ 6,179,391
                                                     ===========    ============

                                                                               2
<PAGE>
<TABLE>

Geo Petroleum, Inc.
unaudited Balance Sheets
<CAPTION>
                                                                      March 31,      December 31,
                                                                        1998             1997
                                                                    ----------------------------
<S>                                                                 <C>             <C>         
Liabilities and stockholders' equity Current liabilities:
         Accounts payable:
             Accrued royalties                                      $    361,313    $    361,326
             Trade and other                                             335,405         258,193
         Accrued expenses                                                139,504         139,504
         Current portion of bank notes payable                           615,000         622,500
         Current portion of capitalized lease obligation                   4,583           4,583
         Notes payable to officers                                       185,000         240,000
         Other notes payable                                              22,466          23,070
                                                                    ----------------------------
Total current liabilities                                              1,663,271       1,649,176

Capitalized lease obligation                                              13,747          13,747
10% convertible debentures                                                39,400          39,400

Stockholders' equity:
         Common  stock,  no par  value;  authorized 50,000,000         7,049,399       7,049,399
         shares;  issued and outstanding 8,243,323 at March 31,
         1998 and 7,900,432 shares at December 31, 1997
Accumulated deficit                                                   (2,668,953)     (2,572,331)
                                                                    ----------------------------
Total stockholders' equity                                             4,380,447       4,477,068
                                                                    ----------------------------
Total liabilities and stockholders' equity                          $  6,096,865    $  6,179,391
                                                                    ============    ============
</TABLE>

                                                                               3
<PAGE>

Geo Petroleum, Inc.
Unaudited Statements of Operations


                                                        Quarter ended March 31
                                                          1998          1997 1
                                                       ------------------------
Revenues:
         Oil and gas sales                             $  97,517      $ 241,203
         Waste disposal services (from related party)    105,707         63,520
         Other revenue                                     8,722         43,472
         Interest income                                   4,898         17,664
                                                       ------------------------
                                                         216,844        365,859

Expenses:
         Lease operating expenses                        172,752        150,751
         Depletion and depreciation                       25,699         22,149
         General and administrative                       88,748        145,811
         Valuation allowance on receivable                     -         99,000
         from related party                               
         Interest expense                                 26,267         22,846
                                                       ------------------------
                                                         313,466        440,557
                                                       ------------------------
Loss before income taxes                                 (96,622)       (74,698)
Provision for income taxes                                     -              -
                                                       ------------------------
Net loss                                                 (96,622)       (74,698)
Preferred stock dividends                                      -              -
                                                       ------------------------
Net loss applicable to common stock                    $ (96,622)     $ (74,698)
                                                       =========      =========
Basic and diluted net loss per share
of common stock                                        $   (0.01)     $   (0.01)
                                                       =========      =========

1 Restated per Ernst & Young LLP

                                                                               4

<PAGE>


1. Organization and Summary of Significant Accounting Policies

Organization

Geo Petroleum,  Inc. (the Company) is an oil and gas production  company founded
in 1986 and incorporated in the state of California.  The Company engages in the
development,  production  and  management of oil and gas  properties  located in
California.  A well on one of the  Company's  oil  properties  is used for waste
disposal  services.  These operations are conducted by a related party (see Note
4) and the Company has a 75% revenue interest in such operations.

Common Stock Split

On  April  30,  1996,  the  Company's  common  stock  was  split  at a  rate  of
2.5505-for-1  in  accordance  with  a  resolution  of  the  Company's  Board  of
Directors.  All  references  to the number of common stock  shares  contained in
these financial statements have been adjusted to reflect the stock split.

Cash and Cash Equivalents

Cash equivalents include certificates of deposit with original maturity dates of
less than three months. The Company maintains a $100,000  certificate of deposit
for state of California authorization purposes to perform additional oil and gas
well recompletions.  These funds are subject to certain withdrawal  restrictions
until  completion of the work.  The Company also has $60,000 in restricted  cash
held in government bonds,  $50,000 with the city of Los Angeles and $10,000 with
Ventura  County,  for  the  purposes  of  paying  for any  future  environmental
liabilities that could arise.

Investment in Partnership

Included in oil and gas  properties is an  investment  in a general  partnership
that  was  created  in  1991  to  produce  oil at a well  located  on one of the
Company's oil and gas  properties.  The Company is the managing  partner in this
general  partnership,  and this  investment  is accounted for under the pro rata
consolidation method.

Property and Equipment

The  Company  follows  the  full-cost  method  of  accounting  for  oil  and gas
properties. Accordingly, all costs associated with the acquisition,  exploration
and development of oil and gas reserves are  capitalized as incurred.  The costs
of oil and gas properties are  accumulated in a cost center and are subject to a
cost  center  ceiling  which  such  costs do not  exceed.  The  Company  has not
capitalized any of its internal costs in oil and gas properties.

All capitalized costs of oil and gas properties,  including the estimated future
costs to develop proved  reserves,  are depleted over the estimated useful lives
of the  properties by application  of the  unit-of-production  method using only
proved oil and gas reserves, excluding future estimated costs and related proved
undeveloped oil reserves at the Vaca 

                                                                               5
<PAGE>

Tar Sands property,  which relate to a major  development  project  involving an
enhanced  recovery  process.  The  evaluations  of the oil and gas reserves were
prepared by Sherwin D. Yoelin, a petroleum engineer.  Depletion expense recorded
for the year ended December 31, 1997 was $88,157.

Substantially all additions to oil and gas properties in 1998 and 1997 relate to
recompletions of existing producing or previously  producing wells. During 1997,
the Company  received  proceeds of $91,000  from the sale of certain oil and gas
interests which were credited to property and equipment.

The Company's oil and gas  producing  properties  are estimated by the Company's
independent petroleum engineer to have remaining producing lives in excess of 17
years. The Company's policy for accruing site restoration and environmental exit
costs related to its oil and gas production is that such costs are accounted for
in the Company's calculation of depletion expense.

Depreciation   of  office   equipment  and  furniture  is  computed   using  the
straight-line  method, with depreciation rates based upon their estimated useful
lives,  which  range  between  five and seven  years.  Depreciation  expense was
$14,340 for the year ended December 31, 1997.

Revenue

Revenue from oil and gas sales is recognized upon delivery of the oil and gas to
the  Company's  customer.  Such revenue is recorded net of royalties and certain
other  costs  that the  Company  incurs  to bring  the oil and gas into  salable
condition.

The Company had two significant customers for its oil and gas production in 1998
and 1997  that  accounted  for  approximately  88% and 82% of gross  oil and gas
sales,  respectively.  All of the Company's revenue from waste disposal services
arises from a related  party (see Note 4) which  operates  the  Company's  waste
disposal  well. The Company  recognizes its share of waste disposal  revenues as
the services are provided by the related party.

Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings per
share adjusted for the stock split described above:

                                                   March 31,    December 31, 
                                                     1998           1997
                                                 -----------------------------

Numerator:
   Net loss                                      $ (96,622)      $ (768,406)
   Preferred stock dividends                             -           (3,744)
                                                 -----------------------------
   Numerator for basic and diluted loss
     per common share                              (96,622)        (772,150)


                                                                               6
<PAGE>

Denominator:
   Denominator for basic and diluted loss
     per common share-weighted-average
     shares                                      8,243,323        7,732,989
                                                 -----------------------------
Basic and diluted loss per common shares         $   (0.01)      $    (0.10)
                                                 =============================

The following  additional  potential common shares were outstanding  during 1998
and 1997,  but were not  included in the  computation  of diluted loss per share
because such assumptions are antidilutive:

      At  December  31,  1996,  $101,289  of  convertible  preferred  stock  was
      outstanding,  convertible  into shares of the  Company's  common  stock at
      $2.50 per share, or 40,516 shares. In addition,  at the time the preferred
      stock is converted, the shareholder also receives common stock warrants to
      purchase  shares  totaling  one-half of the number of common  stock shares
      converted,   or  20,258  shares.  At  December  31,  1997,  there  was  no
      convertible preferred stock outstanding.

      At December 31, 1996,  $145,022 of notes payable to investors  convertible
      into  shares of the  Company's  common  stock at $2.50 per share or 58,009
      shares were outstanding. In addition, at the time the notes are converted,
      the  shareholder  also receives  common stock warrants to purchase  shares
      totaling one-half of the number of common stock shares converted or 29,005
      shares.  At December 31, 1997, all of these notes had either been redeemed
      or converted.

      At December 31, 1997, $39,400 of convertible  subordinated debentures were
      outstanding.  These  debentures are convertible  into the Company's common
      stock  at a 10%  discount  off the  closing  price  at the  date of  these
      debentures and mature in July 2000.

      Options to purchase  500,000 shares of the Company's common stock at $2.07
      per share and 125,000  shares of the Company's  common stock at $4.125 per
      share were outstanding during 1997.

      At December 31, 1997 and 1996, the Company had an aggregate of 997,361 and
      957,946  warrants  outstanding,  respectively,  to purchase  shares of its
      common stock at $3.00 per share which expire at various  dates during 1999
      through 2001.

Subsequent to December 31, 1997, the Company has issued a total of 66,763 common
stock  shares  as  compensation  to its  employees,  officers,  consultants  and
vendors.

Use of Estimates in the Preparation of Financial Statements

                                                                               7
<PAGE>

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

2. Farm-Out of Vaca Tar Sands Property

On December 23, 1996, the Company entered into an agreement with Saba Petroleum,
Inc. (Saba) to farm-out  two-thirds  (2/3) of the Company's rights and interests
in the Vaca Tar Sands  property  in  exchange  for Saba to  expend a minimum  of
$10,000,000 in operating and developing the property over a two-year period from
the date of the  agreement.  Saba had the right to receive all revenues from the
properties until its costs are recouped.  Subsequent thereto, the Company was to
participate  as to its  one-third  (1/3)  interest  in the  property  and  shall
co-operate the property with Saba.

If Saba did not expend the agreed sum of $10,000,000 within the two-year term or
ceased  operations  at the  property  for a  period  of 90 days  after  assuming
operations,  Saba was to re-assign  all interests in the property to the Company
except for any property interests acquired by Saba and spacing units, as defined
in the agreement, around each well Saba wishes to retain.

On November 1, 1997,  the  contract  agreement  with Saba was  renegotiated  and
modified  so that the  Company's  interest  would  increase  from  one-third  to
two-thirds,  as  Saba  did  not  make  the  required  operating  and  developing
expenditures.  The  modification  requires  Saba  to  pay  for  one-half  of the
operating and developing costs until they expend $5,000,000. At that point, Saba
will have earned a one-third  interest  and the Company will retain a two-thirds
interest  in the  property  and these two  parties  will  share in the costs and
revenues based on their respective interests.

3. Notes Payable

Notes payable consist of the following:

                                         March 31,         December 31,
                                           1998               1997
                                       --------------------------------

Note payable to bank                     $ 615,000         $ 622,500
Notes payable to investors                  10,000            10,000
Notes payable to officers                  185,000           240,000
10% convertible debentures                  39,400            39,400
Automobile loan                             12,466            13,070
                                       --------------------------------
                                           861,866           924,970
Less current portion                       822,466           885,570
                                       --------------------------------
Total long-term debt                     $  39,400         $  39,400
                                         =========         =========

Note Payable to Bank

                                                                               8
<PAGE>

In 1990,  the  Company  issued  273,669  shares  of common  stock,  an option to
purchase  180,660  additional  shares of  common  stock at $2.35 per share and a
recorded  deed of trust on 20% of the  Company's  interest in its Vaca Tar Sands
property  to  certain  parties  in  exchange  for those  parties  providing  the
collateral, 35,000 shares of Union Pacific Corp. common stock, for the Company's
note payable to a bank.  The  consideration  issued was valued at $300,000,  its
estimated  fair market value,  and was  amortized as additional  loan costs over
five years. The 35,000 shares of Union Pacific Corp.  common stock are held in a
trust and had an  approximate  value of  $2,191,875 at December 31, 1997. In the
event of default on the bank note payable,  the parties providing the collateral
may take steps to recover from the Company the value of any collateral  taken by
the bank.  The collateral  agreements  and the stock purchase  option expired on
September  11,  1995.  During  1997,  in  connection  with the  extension of the
maturity  date of the bank note  payable  to January  1,  1998,  the  collateral
agreement was extended to January 1, 1998. As  compensation  for this extension,
the Company issued 51,040 shares of the Company's  common stock to the owners of
the collateral.  The parties agreed that the stock issued had a value of $53,592
or $1.05 per share.  During 1997,  the recorded  deed of trust on the  Company's
interest in its Vaca Tar Sands property to certain parties in exchange for those
parties providing the collateral was changed to 33% of the Company's interest.

The note  payable to bank bears  interest at prime plus 2.0%.  At  December  31,
1997, the prime rate was 8.50%.  Interest payments are due monthly.  During 1997
and 1996, the bank extended the maturity of the note several  times.  On October
11, 1996,  retroactive  to June 15, 1996,  the bank  amended  certain  terms and
extended  the  maturity  date of the note from June 15, 1996 to January 1, 1998,
including a $750,000  principal  payment due January 15,  1997,  and  subsequent
principal  payments  in the amount of $20,000  per month due on the 15th of each
month  beginning  April 15, 1997. In October 1997,  the bank amended the monthly
payments from $20,000 per month to $7,500 per month.

On January 30, 1998,  the Company  signed an extension  agreement  with the bank
that  extended the due date of the note to either June 30, 1998,  or December 1,
1998, if the Company receives certain  investment  capital by June 30, 1998. The
extension  agreement  requires the Company to make  monthly  payments of $10,000
starting February 1, 1998 through May 1, 1998, and a lump-sum  principal paydown
of 30% of the net investment  proceeds  received by the Company from any capital
financing.  Unless the entire  obligation  becomes  due and  payable on June 30,
1998, the remaining  principal balance is to be repaid in six equal installments
starting  July 1, 1998.  As  compensation  for the  extension of this note,  the
Company issued 25,000 shares of the Company's  common stock to the owners of the
collateral.  On January  30,  1998,  the date of the  extension  agreement,  the
Company's  stock had a market price of $1 per share valuing the 25,000 shares at
a cost of $25,000.

During 1998,  the bank also  released  27,500  shares of the Union Pacific Corp.
common stock used as collateral  reducing the  collateral  to 7,500  shares.  In
addition to the 7,500 shares of Union  Pacific Corp.  common stock,  the loan is
also secured by 7,642 shares of Union  Pacific  Resource  common stock which was
spun-off from Union Pacific Corp. and $328,260 in cumulative dividends earned on
these two stocks.

                                                                               9
<PAGE>

Notes Payable to Investors

The  Company at  various  times has issued  notes  payable to various  investors
bearing an interest rate of 10% and a guaranteed oil and gas production  payment
equal to 20% of the  outstanding  principal  amount  per annum.  The  holders of
certain of the notes had extended the  maturities  of the notes to various dates
in 1997, and all of the notes were secured by interests in the Company's oil and
gas  properties.  During 1997,  $71,300 of new notes  payable to  investors  was
issued,  $179,181 of notes payable was repaid, and $102,428 of notes payable and
accrued interest was exchanged for shares of the Company's common stock.

Officer Loans

During 1997, the Company borrowed  $240,000 from two of its officers.  A loan of
$50,000  from one of the  officers  bears  interest  at a rate of 8.25% with the
principal  and accrued  interest due on demand.  The Company  received the other
loan of  $190,000  from the other  officer  which  bears  interest  at a rate of
10.25%,  accrued interest due monthly  commencing January 1, 1998, and principal
and any unpaid interest due on or before July 1, 1998.

Convertible Debentures

During 1997, the Company issued 10% convertible subordinated debentures totaling
$39,400 to various  investors which are due in July 2000.  These  debentures are
convertible  into shares of the  Company's  common  stock  convertible  at a 10%
discount  off the  closing  price  at the  date of  these  debentures.  Interest
payments are due monthly.

4. Related Party Transactions

Capitan Resources, Inc.

The Company has certain  agreements with Capitan  Resources,  Inc.  (Capitan) to
sell gas  produced  from wells owned by the Company and to offer waste  disposal
services on sites owned by the Company. The principal officer/shareholder of the
Company  is  also  the  principal  officer/shareholder  of  Capitan.  Under  the
agreements,  the Company is to receive 70% of Capitan's  gross revenues from gas
sales and 75% of Capitan's  gross  revenues from waste  disposal  services.  The
waste disposal  services are operated by Capitan and the costs of gas production
and of operating the waste disposal services are borne by Capitan.

As of December 31, 1997,  Capitan does not have sufficient  liquidity to pay the
entire amounts due the Company in the foreseeable future. Although the Company's
management  believes that the fair market value of Capitan's  net assets,  which
consists  primarily of Capitan's revenue interests in the Company's  properties,
exceeds  amounts  owed to the  Company,  the  Company  has  recorded a valuation
allowance of $500,000  during the year ended  December  31, 1997,  to reduce the
carrying value of the accounts receivable due from Capitan.

                                                                              10
<PAGE>

Other

During  1997 and  1996,  notes  payable  by the  Company  to a  relative  of the
principal officer/shareholder totaling $12,014 and $121,850,  respectively, were
converted into 4,806 and 48,740 shares,  respectively,  of the Company's  common
stock aggregating $12,014 and $121,850, respectively.  Additionally,  24,505 and
23,740 warrants,  respectively, were issued to purchase a share of the Company's
common  stock at $3.00 per share,  which  expire at various  dates  during  1999
through 2001.

At December 31, 1997, the Company had notes payable and  convertible  debentures
to relatives of the principal officer/shareholder totaling $24,000.

5. Redeemable Convertible Preferred Stock

During 1994, the Company authorized 100,000 shares of preferred stock with a par
value of $1,000 per share.  The series of preferred  stock  issued,  carrying an
annual dividend of 30%, was callable by the Company at par at any time on notice
to the holder.  If the Company has not called the preferred stock for redemption
by January 1, 1997,  the holder may require the Company to redeem the  preferred
stock. As originally  issued,  the preferred  stock was convertible  into common
stock,  at the  option of the  holder,  at a price  equal to 80% of the price at
which the common stock may be sold in an initial  public  offering of the common
stock of the Company.  During the year ended  December 31, 1996, the Company and
the holders of the preferred stock agreed that each share of the preferred stock
could be  converted  into 400  shares  of the  Company's  common  stock  and 200
warrants to purchase a share of the  Company's  common  stock at $3.00 per share
which expire at various dates during 1999.

In January 1996, the Company  issued 23.5 shares of its  redeemable  convertible
preferred stock to two investors for cash totaling $23,500.

During 1996,  three holders of notes payable  totaling  $66,250  converted  such
notes into 66.25 shares of the Company's redeemable convertible preferred stock.

During 1997 and 1996,  91.18 and 347.69 shares,  respectively,  of the Company's
redeemable   convertible   preferred   stock  totaling   $91,183  and  $347,668,
respectively,  were converted into 36,473 and 139,067 shares,  respectively,  of
the  Company's  common stock and 14,717 and 69,534  warrants,  respectively,  to
purchase a share of the  Company's  common stock at $3.00 per share which expire
at various dates during 1999 through 2001.

During 1997 and 1996, accrued dividends on the Company's redeemable  convertible
preferred stock totaling $17,596 and $44,204, respectively,  were converted into
7,038 and 17,682 shares,  respectively,  of the Company's common stock and 3,519
and 8,841  warrants to purchase a share of the  Company's  common stock at $3.00
per share which expire at various dates during 1999 through 2001.

                                                                              11
<PAGE>

6. Common Stock

During 1996, the Company's Articles of Incorporation were amended to provide for
an authorized capital of fifty million shares of common stock.

In December 1996, the Company sold 522,000 shares of the Company's  common stock
attached with 522,000 warrants to purchase a share of the Company's common stock
at $3.00 per share,  which expire at various  dates  during 1999 and 2000,  at a
price  of  $2.50  per  share  for  cash  totaling  $1,305,000,   before  related
commissions, costs and expenses of $187,301.

On December 31, 1996, the Company sold 1,764,000  shares of the Company's common
stock to  private  parties  at a price  of $1.50  per  share  for cash  totaling
$2,646,000,  before  related  costs and expenses of  $155,659.  The Company sold
300,000 warrants at a price of $15,000,  in connection with services provided to
the Company  related to the sale of the stock.  Each  warrant  provides  for the
purchase of a share of the Company's common stock at $3.00 per share and expires
on December 31, 1999.

At December 31, 1997 and 1996,  an  aggregate  of 997,361 and 957,946  warrants,
respectively,  to purchase a share of the  Company's  common  stock at $3.00 per
share which expire at various dates during 1999 through 2001 were outstanding.

7. Income Taxes

Deferred  income taxes result from temporary  differences in the  recognition of
revenues and expenses for financial  accounting and tax reporting purposes.  Net
deferred income taxes were composed of the following:

                                                              December 31, 
                                                                  1997
                                                              ------------
Deferred income tax asset - operating loss
   carryforwards                                              $  2,000,000
Deferred income tax liability - differences between
   book and tax basis of property                               (1,100,000)
Valuation allowance                                               (900,000)
                                                              ------------
Net deferred income taxes                                     $          -
                                                              ============

As  of  December  31,  1997,  the  Company  had  estimated  net  operating  loss
carryforwards  available  in future  periods to reduce  income taxes that may be
payable at those dates.  For federal  income tax purposes,  net  operating  loss
carryforwards  amounted to approximately  $5,100,000 for 1997, and expire during
the years 2001 through 2009.  For state income tax purposes,  net operating loss
carryforwards  amounted to approximately  $3,400,000 for 1997, and expire during
the years 2004 through 2010. Due to the "change in ownership"  provisions of the
Tax  Reform  Act of  1986,  utilization  of the  Company's  net  operating  loss
carryforwards  may be subject to a substantial  limitation if a greater than 

                                                                              12
<PAGE>

50% ownership  change,  as defined,  occurs  subsequent to the incurrence of the
losses.  The  Company  is  delinquent  in filing  its 1995 and 1996  income  tax
returns.

8. Commitments and Contingencies

Future Minimum Rental Payments

Total rental  expense  incurred  under all lease  agreements was $78,368 for the
year ended  December 31, 1997. At March 31, 1998,  the Company had the following
future lease commitments:

                      1998                           $    25,200
                      1999                                33,600
                      2000                                33,600
                      2001                                33,600
                      2002                                 8,400
                                                     ------------
                      Total                          $   134,400
                                                     ============

The Company is currently  delinquent  in paying their  1994/1995,  1995/1996 and
1996/1997 property taxes.

Litigation

The Company is  involved  in certain  legal  matters in the  ordinary  course of
business. In one particular case, an interlocutory  judgment was awarded against
the Company by the court hearing litigation in which the Company is a defendant.
The  judgment  requires  the  Company  to  incur  the  expense  of  clean up and
abandonment of two idle wells.  Additionally,  if the Company fails to do so the
courts may also award damages for these costs including  attorneys'  fees. These
costs  are not  possible  to  determine  at this  time,  but the  plaintiff  has
requested  damages of up to  $300,000.  The  Company is  considering  whether to
appeal the decision of the court.

9. Events Subsequent to December 31, 1997

Extension of Officer Loan

The $190,000 loan from an officer due on or before July 1, 1998 was subsequently
extended to July 1, 1999.  No other  changes to the terms or  conditions of this
officer loan have been made.

Litigation

During July 1998, the court hearing  litigation  issued a final judgment against
the  Company  requiring  it to clean up and  abandon  two idle  wells and to pay
$32,000 in damages to the plaintiff.  The Company plans to proceed with the well
clean up and  abandonment;  however,  it has filed an appeal with respect to the
damages awarded the plaintiff.

                                                                              13
<PAGE>

Shut-in of Certain Oil and Gas Production

During June 1998,  the Company  decided to shut-in its oil and gas production at
all of its  property  locations  except  for the Vaca Tar  Sands  property.  The
Company  plans to focus its resources on the  development  of the Vaca Tar Sands
property and other waste disposal projects.

Planned Merger with Capitan Resources, Inc.

The Company is planning  for the merger of Capitan  into the Company by December
31,  1998.   Capitan  is  an  entity  under  common  control  of  the  principal
officer/shareholder  of  the  Company.  The  only  compensation  related  to the
transaction  would  be  the  issuance  of  approximately  70,000  shares  of the
Company's  common  stock  to an  unrelated  third  party  in  exchange  for  the
cancellation  of their  overriding  net  profits  interest  in Capitan and their
$28,000  note  due from  Capitan.  No  other  compensation  is to be paid to the
shareholders  of Capitan.  If this  transaction is  consummated as planned,  the
assets and  liabilities  of Capitan will be recorded on the  Company's  books at
their historical cost.

The Company's  valuation of the  discounted  present value of Capitan's  revenue
interests in the Company's gas wells,  based upon the estimates  included in the
Company's  independent  petroleum  engineer's report, and in the Company's waste
disposal well is in excess of $1,000,000.

10. Quarterly Financial Information
<TABLE>

As of December  31,  1997,  the Company has  recorded a valuation  allowance  of
$500,000  to reduce  the  carrying  value of the  accounts  receivable  due from
Capitan.  The recording of this valuation allowance results in certain quarterly
information  previously  reported by the Company  during  fiscal 1997 under Form
10-QSB to be different. Such amounts are as follows:
<CAPTION>

                                                                Three Months ended March 31, 1997
                                                       -------------------------------------------------
                                                         As Originally                       Restated
                                                           Reported       Adjustment          Amount
                                                       ---------------- ---------------- ---------------

<S>                                                    <C>              <C>                 <C>       
       Revenues                                        $    365,859     $        -          $  365,859
       Gross profit (loss)                                   90,452              -              90,452
       Valuation allowance on receivable from 
       related party                                              -        (99,000)            (99,000)
       Net income (loss)                                     24,302        (99,000)            (74,698)
       Net income (loss) applicable to common stock          24,302        (99,000)            (74,698)
       Net income (loss) per share of common stock     $       0.00     $    (0.01)          $   (0.01)
</TABLE>
                                                                          
                                                                            14
<PAGE>

<TABLE>
<CAPTION>
                                                              Three Months ended June 30, 1997
                                                     -----------------------------------------------------
                                                       As Originally                           Restated
                                                          Reported          Adjustment          Amount
                                                     ------------------- ----------------- ---------------
<S>                                                  <C>                   <C>                <C>       
       Revenues                                      $   342,213           $          -       $  342,213
       Gross profit (loss)                               (55,337)                     -          (55,337)
       Valuation allowance on receivable from                           
          related party                                        -               (102,000)        (102,000)
       Net income (loss)                                 (56,389)              (102,000)        (158,389)
       Net income (loss) applicable to common stock      (56,389)              (102,000)        (158,389)
       Net income (loss) per share of common stock   $     (0.01)          $      (0.01)      $    (0.02)
                                                                    
</TABLE>
<TABLE>
<CAPTION>

                                                           Three Months ended September  30, 1997
                                                     ----------------------------------------------------
                                                       As Originally                           Restated
                                                          Reported          Adjustment          Amount
                                                     ------------------- ----------------- --------------
<S>                                                  <C>                 <C>                <C>       
       Revenues                                      $   571,533         $         -        $  571,533
       Gross profit (loss)                                43,412                   -            43,412
       Valuation allowance on receivable from
          related party                                        -            (195,000)         (195,000)
       Net income (loss)                                 324,820            (195,000)          129,820
       Net income (loss) applicable to common stock      324,820            (195,000)          129,820
       Net income (loss) per share of common stock   $      0.04         $     (0.02)       $     0.02
</TABLE>

11. Year 2000 Issue

The Company's  accounting software and other applications used in its operations
were purchased from outside vendors. It is management's understanding that these
applications  are Year 2000  compliant.  As a result,  management of the Company
does not  believe  that the Year  2000  will  have an  impact  on its  financial
statements or on its operations.

                                                                              15
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis for the two quarters ended March 31, 1998,
and March 31, 1997, are to be read in combination with the Financial  Statements
presented elsewhere herein.

RESULTS OF OPERATIONS

FIRST QUARTER 1998 COMPARED WITH FIRST QUARTER 1997

During the quarter ended March 31, 1998, Geo had a net loss of $96,622  compared
to a net loss of $74,698 for the  comparable  1997 period.  Oil and gas revenues
decreased  to $97,517 for the 1998  period,  compared  to $241,203  for the 1997
period. This was attributable to a significant drop in the price of oil. Average
oil prices decreased to $13.44 per barrel in the 1998 period, compared to $22.05
per barrel in the 1997 period.

Lease operating expenses for the first quarter of 1998 increased to $172,752, as
compared to $150,751 in the comparable  1997 period,  as the result of increased
repairs and maintenance and increased insurance coverage and costs.

The Company's provision for depletion and depreciation  increased to $25,699 for
the first quarter of 1998, as compared to $22,149 for the 1997 period.  This was
due to higher depreciation associated with the heavy infrastructure  investments
the Company made in 1997.

General and administrative  expenses for the 1998 first quarter were $88,748, as
compared to $145,811  for the 1997  period.  The  decrease was largely due to an
extensive cost cutting program and decreased executive  compensation,  primarily
to  Gerald  T.  Raydon,  who  has  voluntarily  taken  a 50%  reduction  in  his
compensation.

Interest expense for the 1998 first quarter was $26,267,  as compared to $22,846
for the  comparable  1997 period.  This  increase was due  primarily to interest
costs associated with the leasing of certain field vehicles.

CAPITAL RESOURCES AND LIQUIDITY

FINANCIAL POSITION

At March 31, 1998, the Company had a working  capital  deficiency of $1,235,717,
compared to a working  capital  deficiency of $980,052 at December 31, 1997. The
increase was due primarily to an increase in trade debt.  The Bank Notes Payable
is due either  June 30,  1998,  or December  1, 1998,  if the  Company  receives
certain investment capital by June 30, 1998.

The net cash flow from the  properties of the Company has been  insufficient  to
fund its costs of operations and its debt servicing requirements.

The Company's  primary  sources of liquidity  and capital  resources in the near
term will consist of working capital derived from its oil and gas production and
industrial  waste  disposal  operations,  augmented  by any such funds as may be
derived from the sale of equity in the Company and of participating interests


                                                                              16
<PAGE>

in its operations, and the sale of certain non-strategic assets and equipment.

The Company's net revenues from industrial  waste disposal and oil and gas sales
in excess of production and operating  expenses during the three-month period of
1998 and 1997 were $30,472 and $153,972, respectively. This decrease is due to a
significant drop in oil prices.

INFLATION

In recent years inflation has not had a significant  impact on the Company,  its
operations or financial condition.

TRENDS

The  collapse  of the Asian and  Russian  economies  has had a  significant  and
prolonged negative impact on oil prices.  Average oil prices decreased $8.61 per
barrel to $13.44 per barrel in the 1998 period, compared to $22.05 per barrel in
the 1997 period.  This weak product price  structure will have a negative impact
on oil and gas revenues.

The  weakness  in oil  prices  has caused  widespread  consolidation  in the oil
industry. Geo is actively pursuing merger and acquisition opportunities.

The Company will be subject to variations in cash flow depending upon changes in
prices paid for oil and gas. Based upon historical swings in prices, the Company
does not  envision  a  situation  where  reductions  in  prices  will  create an
operating  loss from its  properties at the field level.  Severe drops in prices
would, however,  strain the Company's ability to conduct remedial work using its
revenues.



                                                                              17
<PAGE>


PART II.  OTHER INFORMATION

The Company hereby  incorporates by reference its discussion in Form 10-SB, Part
I, Item 1, Description of Business of the Agreement to Merger dated December 20,
1995, between it and Drake Investment Corporation.

Geo's Articles of Incorporation  were amended  December 5, 1995,  authorizing an
increase in the number of preferred  shares to 100,000 and the common  shares to
50,000,000, and the split of each outstanding common share into 2.5505 shares.

The Boards of Directors and  Shareholders of both companies  approved the merger
on April 9, 1996,  which was the  effective  date of the merger.  The merger was
authorized  by a Permit  issued  by the  Department  of  Corporations,  State of
California.  The merger had no significant or appreciable effect on the Company,
its operations, or financial condition.

Pursuant to the requirements of the Securities Exchange Act of 1934,  Registrant
has duly  caused  this  report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.

                               GEO PETROLEUM, INC.
                                  (Registrant)

September 28, 1998


                                   /s/ GERALD T. RAYDON
                                   ---------------------------
                               By  Gerald T. Raydon, Chairman and CEO



                                   /s/ ALYDA L. RAYDON
                                   ---------------------------
                                   By  Alyda L. Raydon, Secretary and
                                   Treasurer