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 SEPTEMBER 30, 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)                        
                         
     50-B Peninsula Center Drive, #109, Rolling Hills Estates, CA 90274-3506
     -----------------------------------------------------------------------
     Address of principal executive office

     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 September 30, 1998
   -----                ----------------------------
Common stock,
no par value                    8,800,386


                                                                               1

<PAGE>


<TABLE>
PART I.  FINANCIAL INFORMATION

Geo Petroleum, Inc.
Unaudited Balance Sheets

<CAPTION>
                                                                                                September 30,          December 31,
                                                                                                    1998                   1997
                                                                                                 -----------            -----------
<S>                                                                                              <C>                    <C>        
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of
$160,000 in 1997 and 1998)                                                                       $   133,712            $   418,393

Accounts receivable:
Accrued oil and gas revenues (net of allowance for doubtful                                           18,886                 53,204
Joint interest and other (net of allowance for doubtful                                               82,673                 69,809
Prepaid expenses and other, net                                                                      116,895                127,718
                                                                                                 ----------------------------------
Total current assets                                                                                 352,166                669,124

Due from Capitan Resources, Inc. (net of valuation allowance
of $500,000 in 1997 and 1998)                                                                        516,230                213,545

Property and equipment:
Oil and gas properties                                                                             6,425,277              6,342,986
Office furniture and equipment                                                                       159,500                155,338
                                                                                                 ----------------------------------
                                                                                                   6,584,777              6,498,324
Accumulated depletion and depreciation                                                            (1,253,001)            (1,201,602)
                                                                                                 ----------------------------------
                                                                                                   5,331,776              5,296,722
                                                                                                 ----------------------------------
Total assets                                                                                     $ 6,200,173            $ 6,179,391
                                                                                                 ==================================

                                                                                                                                   2
</TABLE>

<PAGE>


<TABLE>
Geo Petroleum, Inc.
Unaudited Balance Sheets

<CAPTION>
                                                                                               September 30,           December 31,
                                                                                                   1998                    1997
                                                                                                -----------------------------------
<S>                                                                                             <C>                     <C>        
Liabilities and stockholders' equity

Current liabilities:

Accounts payable:
Accrued royalties                                                                               $   348,591             $   361,326
Trade and other                                                                                     414,056                 258,193
Accrued expenses                                                                                    139,504                 139,504
Current portion of bank notes payable                                                               631,500                 622,500
Current portion of capitalized lease obligation                                                       4,583                   4,583
Notes payable to officers                                                                           185,000                 240,000
Other notes payable                                                                                  20,897                  23,070
                                                                                                -----------------------------------
Total current liabilities                                                                         1,744,131               1,649,176

Long-term portion of notes payable                                                                   75,080                    --
Capitalized lease obligation                                                                         13,747                  13,747
10% convertible debentures                                                                             --                    39,400

Stockholders' equity:
Common stock, no par value; authorized 50,000,000 shares;
issued and outstanding 8,800,386 at September 30, 1998 and
7,900,432 shares at December 31, 1997                                                             7,065,899               7,049,399
Accumulated deficit                                                                              (2,698,685)             (2,572,331)
                                                                                                -----------------------------------
Total stockholders' equity                                                                        4,367,215               4,477,068
                                                                                                -----------------------------------
Total liabilities and stockholders' equity                                                      $ 6,200,173             $ 6,179,391
                                                                                                ===================================

                                                                                                                                   3
</TABLE>

<PAGE>


<TABLE>
Geo Petroleum, Inc.
Unaudited Statements of Operations
<CAPTION>
                                                                                                         Three months ended
                                                                                                            September 30,
                                                                                                    1998                    1997(1)
                                                                                                  ---------                ---------
<S>                                                                                               <C>                      <C>      
Revenues:
Oil and gas sales                                                                                 $  14,022                $ 149,450
Waste disposal services (from related party)                                                        196,507                  187,217
Other revenue                                                                                         1,200                  227,071
Interest income                                                                                       1,471                    7,795
                                                                                                  ---------                ---------
                                                                                                    213,200                  571,533

Expenses:
Lease operating expenses                                                                             85,756                  106,038
Depletion and depreciation                                                                           25,699                   37,787
General and administrative                                                                           63,272                   84,090
Valuation allowance on receivable from related party                                                   --                    195,000
Interest expense                                                                                    (40,336)                  18,798
                                                                                                  ---------                ---------
                                                                                                    134,391                  441,713
                                                                                                  ---------                ---------
Gain before income taxes                                                                             78,809                  129,820
Provision for income taxes                                                                             --                       --
                                                                                                  ---------                ---------
Net income applicable to common stock                                                             $  78,809                $ 129,820
                                                                                                  =========                =========

Basic and diluted net loss per share of common stock                                              $    0.01                $    0.02
                                                                                                  =========                =========

<FN>
(1) Restated per Ernst & Young LLP
</FN>

                                                                                                                                   4
</TABLE>


<PAGE>

<TABLE>
Geo Petroleum, Inc.
Unaudited Statements of Operations
<CAPTION>
                                                                                                        Nine months ended
                                                                                                           September 30,
                                                                                                  1998                     1997(1)
                                                                                               -----------              -----------
<S>                                                                                            <C>                      <C>        
Revenues:
Oil and gas sales                                                                              $   159,410              $   564,894
Waste disposal services (from related party)                                                       446,446                  305,142
Other revenue                                                                                       13,122                  335,672
Interest income                                                                                      7,487                   34,054
                                                                                               -----------              -----------
Interest income                                                                                    626,465                1,239,762

Expenses:
Lease operating expenses                                                                           385,039                  480,055
Depletion and depreciation                                                                          77,098                  101,520
General and administrative                                                                         329,361                  332,039
Valuation allowance on receivable from related party                                                  --                    396,000
Interest expense                                                                                   (12,980)                  58,375
                                                                                               -----------              -----------
                                                                                                   778,518                1,367,989
                                                                                               -----------              -----------
Loss before income taxes                                                                          (152,054)                (128,227)
Provision for income taxes                                                                            --                       --
                                                                                               -----------              -----------
Net loss applicable to common stock                                                            $  (152,054)             $  (128,227)
                                                                                               ===========              ===========

Basic and diluted net loss per share of common stock                                           $     (0.02)             $      0.03
                                                                                               ===========              ===========

<FN>
(1) Restated per Ernst & Young LLP
</FN>

                                                                                                                                   5
</TABLE>


<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  and  abandonments.  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, 

                                                                               6

<PAGE>

excluding future estimated costs and related proved  undeveloped oil reserves at
the Vaca  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  customers.  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:

                                                                               7

<PAGE>


                                                   September 30,    December 31,
                                                       1998             1997
                                                   ----------------------------
Numerator:
   Net loss                                        $  (152,054)     $  (768,406)
   Preferred stock dividends                              --             (3,744)
                                                   ----------------------------
   Numerator for basic and diluted loss
     per common share                                 (152,054)        (772,150)

Denominator:
   Denominator for basic and diluted loss
     per common share-weighted-average
     shares                                          8,800,386        7,732,989
                                                   ----------------------------
Basic and diluted loss per common shares           $     (0.02)     $     (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 anti-dilutive:

      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

                                                                               8


<PAGE>

      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

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  invest 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 invest 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
investments. 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:

                                                                               9

<PAGE>


                                                 September 30,   December 31,
                                                     1998            1998
                                                   ------------------------
Note payable to bank                               $615,000        $622,500
Notes payable to investors                           26,500          10,000
Notes payable to officers                           185,000         240,000
10% convertible debentures                           39,400          39,400
Long-term portion of notes payable                   35,478            --
Automobile loan                                      11,099          13,070
                                                   ------------------------
                                                    912,477         924,970
Less current portion                                837,397         885,570
                                                   ------------------------
Total long-term debt                               $ 75,080        $ 39,400
                                                   ========================


Note Payable to Bank

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 3.0%.  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 

                                                                              10


<PAGE>

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.

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.

                                                                              11


<PAGE>

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.

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.

                                                                              12



<PAGE>

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.

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:

                                                                              13

<PAGE>

                                                                    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 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  September  30,  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 

                                                                              14

<PAGE>


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.

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,  1999.   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

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 

                                                                              15



<PAGE>

<TABLE>
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)



                                                                Three Months ended June 30, 1997
                                                     -------------------------------------------------------
                                                       As Originally                           Restated
                                                         Reported           Adjustment          Amount
                                                     -------------------------------------------------------

     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)



                                                             Three Months ended September  30, 1997
                                                     -------------------------------------------------------
                                                       As Originally                           Restated
                                                          Reported          Adjustment          Amount
                                                     -------------------------------------------------------

     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

                                                                              16



<PAGE>

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.

                                                                              17


<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  September 30,
1998, and September 30, 1997,  are to be read in combination  with the Financial
Statements presented elsewhere herein.

RESULTS OF OPERATIONS

THIRD QUARTER 1998 COMPARED WITH THIRD QUARTER 1997

During the  quarter  ended  September  30,  1998,  Geo had a net gain of $78,809
compared to a net gain of $129,820 for the comparable  1997 period.  Oil and gas
revenues decreased to $14,022 for the 1998 period,  compared to $149,450 for the
1997  period.  During  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.  Additionally,  world
oil prices plummeted,  further damaging oil revenue.  These two factors combined
to severely depress the Company's oil revenue for the quarter and for the year.

Lease operating expenses for the third quarter of 1998 decreased to $85,756,  as
compared to $106,038 in the comparable 1997 period, as the result of the shut-in
of its oil and gas  production at all of its property  locations  except for the
Vaca Tar Sands property,  lay-offs of field and office staff, and a Company-wide
decrease in activity.

The Company's provision for depletion and depreciation  decreased to $25,699 for
the third quarter of 1998, as compared to $37,787 for the 1997 period.  This was
due to lower depreciation  associated with the sale of certain equipment and the
shutting-in of production.

General and administrative  expenses for the 1998 third quarter were $63,272, as
compared to $84,090 for the 1997 period.
The  decrease  was largely due to lay-offs  and a drop in  administrative  costs
associated with shut-in production.

Interest  expense  for the 1998 third  quarter  was  ($40,336),  as  compared to
$18,798 for the  comparable  1997 period.  This  decrease was due primarily to a
re-calculation  of interest expenses as a result of certain payments made to the
Company's  lenders,  ongoing  negotiations  with  the  bank,  and a  preliminary
agreement with a Joint Venture partner to carry all of the Company's bank debt.

CAPITAL RESOURCES AND LIQUIDITY

FINANCIAL POSITION

At  September  30,  1998,  the  Company  had a  working  capital  deficiency  of
$1,391,965, compared to a working capital deficiency of $980,052 at December 31,
1997. The increase was due primarily to an increase in trade debt and a decrease
in cash as a result of declining revenues.

The net cash flow from the  properties of the Company has been  

                                                                              18


<PAGE>

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 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 $124,773 and $230,629,  respectively. This decrease is due to
a decrease in oil and gas production and revenues.

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
envisions a situation  where  reductions in prices will create an operating loss
from its properties at the field level.  Severe drops in prices would strain the
Company's ability to conduct remedial work using its revenues.

RESULTS OF OPERATIONS

FIRST NINE MONTHS 1998 COMPARED WITH FIRST NINE MONTHS 1997

During the nine month period  ended  September  30, 1998,  Geo had a net loss of
$152,054 compared to a net loss of $128,227 for the comparable 1997 period.  Oil
and gas revenues decreased to $159,410 for the 1998 period, compared to $564,894
for the 1997 period. During 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.  Additionally,  world
oil prices plummeted,  further damaging oil revenue.  These two factors combined
to severely depress the Company's oil revenue for the period and for the year.

Lease  operating  expenses  for the  nine  month  period  of 1998  

                                                                              19


<PAGE>

decreased to $385,039, as compared to $480,055 in the comparable 1997 period, as
the result of the shut-in of its oil and gas  production  at all of its property
locations  except for the Vaca Tar Sands property,  lay-offs of field and office
staff, and a Company-wide decrease in activity.

The Company's provision for depletion and depreciation  decreased to $77,098 for
the nine month period of 1998, as compared to $101,520 for the 1997 period. This
was due to lower depreciation  associated with the sale of certain equipment and
the shutting-in of production.

General  and  administrative  expenses  for the  1998  nine  month  period  were
$329,361,  as compared to $332,039 for the 1997 period. The decrease was largely
due to lay-offs  and a drop in  administrative  costs  associated  with  shut-in
production.

Interest  expense for the 1998 nine month period was  ($12,980),  as compared to
$58,375 for the  comparable  1997 period.  This  decrease was due primarily to a
re-calculation  of interest expenses as a result of certain payments made to the
Company's  lenders,  ongoing  negotiations  with  the  bank,  and a  preliminary
agreement with a Joint Venture partner to carry all of the Company's bank debt.

CAPITAL RESOURCES AND LIQUIDITY

FINANCIAL POSITION

At  September  30,  1998,  the  Company  had a  working  capital  deficiency  of
$1,391,965, compared to a working capital deficiency of $980,052 at December 31,
1997. The increase was due primarily to an increase in trade debt and a decrease
in cash as a result of declining revenues.

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 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 nine month period of
1998 and 1997 were $220,817 and $389,981,  respectively. This decrease is due to
a decrease in oil and gas production and revenues.

INFLATION

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

TRENDS

                                                                              20


<PAGE>


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
envisions a situation  where  reductions in prices will create an operating loss
from its properties at the field level.  Severe drops in prices would strain the
Company's ability to conduct remedial work using its revenues.

                                                                              21



<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)

January 20, 1999


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


                                                                              22