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<P ALIGN="CENTER"><B>UNITED STATES</B></TD>
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<B><P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</B></TD>
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<B><P ALIGN="CENTER">WASHINGTON, D.C. 20549</B></TD>
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<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">-----------------------------------</B></TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">FORM 8-K</B></TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">CURRENT REPORT</B></TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<P ALIGN="CENTER">PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</TD>
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<P>&nbsp;</TD>
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<P ALIGN="CENTER">--------------------------------------</TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">December 29, 2000</B></TD>
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<P ALIGN="CENTER">Date of Report (Date of Earliest Event Reported)</TD>
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<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">GLADSTONE RESOURCES, INC.</B></TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</TD>
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<TR><TD WIDTH="35%" VALIGN="TOP">
<B><P ALIGN="CENTER">State of Delaware</B></TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">1-1525</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P ALIGN="CENTER">91-0234563</TD>
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<TR><TD WIDTH="35%" VALIGN="TOP">
<P ALIGN="CENTER">(State or other Jurisdiction</P>
<P ALIGN="CENTER">of Incorporation)</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(Commission File Number)</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P ALIGN="CENTER">(IRS Employer</P>
<P ALIGN="CENTER">Identification No.)</TD>
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<P>&nbsp;</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
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<P>&nbsp;</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
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<P>&nbsp;</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">3500 Oak Lawn, Suite 590, LB 49</B></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
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<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">Dallas, Texas</B></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">75219</B></TD>
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<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(Address of Principal Executive Offices)</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(Zip Code)</TD>
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<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
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<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
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<B><P ALIGN="CENTER">214-528-9710</B></TD>
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<P ALIGN="CENTER">(Registrant's Telephone Number, Including Area Code)</TD>
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<P>&nbsp;</TD>
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<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
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<P><B>ITEM 2.</B></TD>
<TD WIDTH="88%" VALIGN="TOP">
<B><P>ACQUISITION OR DISPOSITION OF ASSETS</B></TD>
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<TR><TD VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
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<P ALIGN="JUSTIFY">&#9;On December 29, 2000, Gladstone Energy, Inc. (the "Company") disposed of the remainder of the Company's 8.575% working interest in and to and to the Righthand Creek Field in Allen and Beauregard Parishes, Louisiana properties (the
"Disposition"). The purchaser of the interest was EXCO Resources, Inc., 5735 Pineland, Suite 235, Dallas, TX 75231 for a cash purchase price of $434,000.00. The Disposition represents the sale of all or substantially all of the Company's remaining assets.</TD>
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<P>&nbsp;</TD>
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<P>&nbsp;</P>
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<P><B>ITEM 7.</B></TD>
<TD WIDTH="88%" VALIGN="TOP">
<B><P>FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS</B></TD>
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<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</TD>
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<P ALIGN="RIGHT">(a.)&nbsp;&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>Financial statements - not applicable</TD>
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<P ALIGN="RIGHT">(b.)&nbsp;&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>Pro forma financial information.</TD>
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<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>1)&nbsp;&nbsp;Gladstone Energy, Inc. proforma balance sheet as of September 30, 2000 (unaudited).</TD>
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<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</TD>
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<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>2)&nbsp;&nbsp;Gladstone Energy, Inc. proforma statement of operations for the year ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 1999 (unaudited)</TD>
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<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</TD>
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<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>3)&nbsp;&nbsp;Gladstone Energy, Inc. pro forma statement of income for the six months ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2000 (unaudited).</TD>
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<P ALIGN="RIGHT">(c.)&nbsp;&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>The exhibits listed on the accompanying Exhibit Index immediately following the signature page are filed as part of, or incorporated by reference into, this Current Report of Form 8-K.</TD>
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<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">GLADSTONE ENERGY, INC. </P>
<P ALIGN="CENTER">PRO FORMA FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">SEPTEMBER 30, 2000</P>
</B><P ALIGN="JUSTIFY">On December 29, 2000, the Company disposed of the remainder of the Company's 8.575% working interest in and to and to the Righthand Creek Field in Allen and Beauregard Parishes, Louisiana properties. </P>
<P ALIGN="JUSTIFY">The transaction will be recorded as a gain on sale of assets sold at their fair values.</P>
<P ALIGN="JUSTIFY">The pro forma financial statements may not be indicative of the actual results of the sale. The accompanying proforma financial statements should be read in connection with the historical statements of Gladstone Energy, Inc.</P>
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<P ALIGN="CENTER"><B>GLADSTONE ENERGY, INC. </B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">PRO FORMA BALANCE SHEET</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">(UNAUDITED)</B></TD>
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<B><P ALIGN="CENTER">SEPTEMBER 30, 2000</B></TD>
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<B><P ALIGN="CENTER">&#9;&#9;&#9;</B></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Historical<BR>
<U>statements</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">1st RHC Sale <BR>
Pro Forma<BR>
<U>adjustments</U> (1)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">San Juan Sale <BR>
Pro Forma<BR>
<U>adjustments</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">2nd RHC Sale <BR>
Pro Forma<BR>
<U>&nbsp;&nbsp;adjustments&nbsp;</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Pro Forma</P>
<U><P ALIGN="CENTER">Results&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>ASSETS:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>CURRENT ASSETS:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Cash</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;111,793&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;267,000&nbsp;&nbsp;(4)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;434,000&nbsp;&nbsp;(6)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;812,793&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Accounts receivable</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,908&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19,097)&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,811&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Deferred Tax Benefit</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;148,487</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(54,829</U>)&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(85,354</U>)&nbsp;(7)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,304</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL CURRENT ASSETS</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">281,188&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">212,171&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">329,549&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">822,908&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>PROPERTY AND EQUIPMENT:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Gas and oil properties (successful efforts method)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">829,484&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(534,757)&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(237,323)&nbsp;(7)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">57,404&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Field equipment</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,628</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,628</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,112&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(534,757)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(237,323)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">76,032&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Accumulated depletion and depreciation</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;(498,448</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;425,930</U>&nbsp;&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 54,365</U>&nbsp;&nbsp;&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(18,153</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL PROPERTY AND EQUIPMENT</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">349,664&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(108,827)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(182,958)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">57,879&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>OTHER ASSETS:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Cost in excess of amount assigned to net assets<BR>
&nbsp;&nbsp;in New Mexico at date of acquisition, net of <BR>
&nbsp;&nbsp;amortization</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,921&nbsp;</U>&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(32,921</U>)&nbsp;&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL OTHER ASSETS</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;32,921</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(32,921</U>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>TOTAL ASSETS</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;663,773</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 70,423</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;146,591</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;880,787</U>&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>LIABILITIES AND STOCKHOLDERS' EQUITY:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>CURRENT LIABILITIES:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Accounts payable</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,176</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,176</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL CURRENT LIABILITIES</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">13,176&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">13,176&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>STOCKHOLDERS' EQUITY:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Common stock</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">849&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">849&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Capital in excess of stated value</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,379,271&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,379,271&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Retained earning (deficit)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(729,523</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 70,423</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;146,591</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;(512,509</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;650,597</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 70,423</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;146,591</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;867,611</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;663,773</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp; 70,423</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;146,591</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;880,787</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">See Notes to Pro Forma Financial Statements (Unaudited)</P>
<P ALIGN="CENTER">&nbsp;</P></B>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=805>
<TR><TD VALIGN="TOP" COLSPAN=8>
<P ALIGN="CENTER"><B>GLADSTONE ENERGY, INC. </B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">PRO FORMA STATEMENT OF OPERATIONS</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">(UNAUDITED)</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">FOR THE YEAR ENDING DECEMBER 31, 1999</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Historical<BR>
<U>statements</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">1st RHC Sale <BR>
Pro Forma<BR>
<U>adjustments (1)</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">San Juan Sale <BR>
Pro Forma<BR>
<U>adjustments (5)</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">2nd RHC Sale<BR>
Pro Forma<BR>
<U>adjustments (7)</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Pro Forma<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;results&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>SALES:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Gas and oil</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;223,943&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(48,360)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(56,031)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(112,840)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6,712&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>COST OF SALES:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Production taxes</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;24,346&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(4,388)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(4,419)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(15,130)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">409&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Well operating expense</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;72,242</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(14,947</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19,686</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(34,876</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp; &nbsp; 2,733</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL COST OF SALES</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 96,588</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(19,335</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(24,105</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(50,006</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,142</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>GROSS PROFIT ON SALES</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;127,355</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(29,025</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(31,926</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp; (62,834</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 3,570</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>EXPENSES:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Oil and gas prospect expense</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">24,491 &nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">24,491&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Dry hole and abandonment loss </B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">114,388 &nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">114,388&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Depletion</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">56,973&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(9,768)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(21,710)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(22,791)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,704&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Depreciation and amortization</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">8,724&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(6,338)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,386&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>General and administrative</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">43,115&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">43,115&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Interest</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">9,862&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(2,958)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">6,904&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Taxes</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">8,050&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">8,050&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Legal, auditing and accounting</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;75,501</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;75,501</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL EXPENSES</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;341,104</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;(12,726</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;(28,048</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;(22,791</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;277,539</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(213,749)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(16,299)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(3,878)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(40,043)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(273,969)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>OTHER INCOME</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Interest and dividend income</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,683</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,683</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Income (loss) before taxes</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(204,066)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(16,299)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(3,878)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(40,043)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(264,286)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Income taxes</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>NET INCOME (LOSS)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;(204,066</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(16,299</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;(3,878</U>)&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(40,043</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;(264,286</U>)&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>EARNINGS/(LOSS) PER SHARE:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Basic:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.24</U>)&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.31</U>)&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Diluted:</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.24</U>)&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.31</U>)&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Basic weighted average common shares<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,791&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,791&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Basic weighted average common equivalent<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares outstanding</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,791&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,791&nbsp;&nbsp;</B></FONT></TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">See Notes to Pro Forma Financial Statements (Unaudited)</P>
</B><P ALIGN="JUSTIFY">&nbsp;</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=798>
<TR><TD VALIGN="TOP" COLSPAN=8>
<P ALIGN="CENTER"><B>GLADSTONE ENERGY, INC. </B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">PRO FORMA STATEMENT OF OPERATIONS</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">(UNAUDITED)</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<B><P ALIGN="CENTER">FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2000</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=8>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Historical<BR>
<U>statements</B></U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">1st RHC Sale <BR>
Pro Forma<BR>
<U>adjustments (1)</B></U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">San Juan Sale <BR>
Pro Forma<BR>
<U>adjustments (5)</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">2nd RHC Sale <BR>
Pro Forma<BR>
<U>adjustments (7)</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Pro Forma<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;results&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>SALES:</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Gas and oil</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;295,643&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(53,733)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(52,814)&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(185,600)&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; 3,496&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>COST OF SALES:</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Production taxes</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;33,080&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(6,476)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(3,983)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(22,391)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">230&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Well operating expense</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51,911</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,618</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(14,880</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(26,647</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp; &nbsp;&nbsp;&nbsp; 1,766</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL COST OF SALES</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;84,991</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(15,094</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(18,863</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(49,038</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,996</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>GROSS PROFIT ON SALES</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;210,652</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(38,639</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(33,951</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;(136,526</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 1,500</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>EXPENSES:</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Dry hole and abandonment loss </B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">87,475 &nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">87,475&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Depletion</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">53,921&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(11,082)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(13,930)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(27,153)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,756&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Depreciation and amortization</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">12,759&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(312)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(4,563)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(728)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">7,156&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>General and administrative</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">35,401&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">35,401&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Interest</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">14,376&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(14,376)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Taxes</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,452&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,452&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Legal, auditing and accounting</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;19,458</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;19,458</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><FONT SIZE=1><P>TOTAL EXPENSES</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;225,842</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;(25,770</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(18,493</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(27,881</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;153,698</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(15,190)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(12,869)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(15,458)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(108,681)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(152,198)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>OTHER INCOME</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Gain on sale of assets</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">122,640&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(122,640)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Interest and dividend income</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Income (loss) before taxes</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">107,469&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(135,509)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(15,458)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(108,681)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">(152,174)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Income taxes (benefits)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;(148,487</U>)&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 54,829</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;85,354</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp; &nbsp;&nbsp;&nbsp;(8,304</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>NET INCOME (LOSS)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;255,956</U>&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>(135,509</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;(70,287</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;(194,035</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(143,875</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>EARNINGS/(LOSS) PER SHARE:</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Basic:</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.30&nbsp;</U>&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.17</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P>Diluted:</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.30&nbsp;</U>&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.17</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Basic weighted average common shares<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,782&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,782&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>Diluted weighted average common equivalent&nbsp;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares outstanding</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,782&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">848,782&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">See Notes to Pro Forma Financial Statements (Unaudited)</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=638>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER"><B>GLADSTONE ENERGY, INC. </B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">NOTES TO PRO FORMA FINANICAL STATEMENTS</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">SEPTEMBER 30, 2000</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(1)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 30% of the Righthand Creek oil property as of September 30, 2000, and the nine month period ending September 30, 2000.</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(2)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the cash proceeds from the 1<SUP>st</SUP> RHC Sale.</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Gross proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;&nbsp;&nbsp;201,000</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Note Payoff</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp;&nbsp;<U>(200,000</U>)</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Net proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,000</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(3)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the gain for proforma financial statement purposes for the 1<SUP>st</SUP> RHC Sale:</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Sales price</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;&nbsp;&nbsp;201,000</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost of 30% of property</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp;&nbsp;(102,022)</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated depletion and depreciation</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp; <U>&nbsp;&nbsp; &nbsp;&nbsp;23,662</U>&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Estimated gain</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;<U>&nbsp;&nbsp;122,640</U>&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(4)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the cash proceeds from the San Juan Sale:</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Gross proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;<U>&nbsp;&nbsp;267,000</B></U></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Net proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;&nbsp;&nbsp;267,000</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(5)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the San Juan Sale on October 10, 2000, but effective for production purposes as of August 1, 2000, and for the nine months ended September 30, 2000.
</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(6)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the estimated gain for proforma financial statement purposes for the San Juan Sale:</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Sales price</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;&nbsp;&nbsp;267,000</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost of property</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp;&nbsp;(534,757)</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost in excess of assets purchased</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp;&nbsp;(337,000)</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated depletion and depreciation</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;429,018</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated amortization</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp; <U>&nbsp;&nbsp; &nbsp;304,079</U>&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Estimated gain</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;<U>&nbsp;&nbsp;128,340</U>&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(7)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 2<SUP>nd</SUP> RHC Sale, effective for production purposes as of September 1, 2000, and for the nine months ended September 30, 2000.<BR>

</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(8)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the estimated gain for proforma financial statement purposes for the 2<SUP>nd</SUP> RHC Sale:</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Sales price</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;&nbsp;&nbsp;434,000</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost of 30% of property</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp;&nbsp;(237,323)</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated depletion and depreciation</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>&nbsp;&nbsp;&nbsp; <U>&nbsp;&nbsp; &nbsp;&nbsp;54,365</U>&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Estimated gain</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P>$&nbsp;&nbsp;<U>&nbsp;&nbsp;251,042</U>&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">SIGNATURES</P>
</B><P ALIGN="JUSTIFY">&#9;Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<B><P ALIGN="JUSTIFY">GLADSTONE ENERGY, INC.</P>
</B><P ALIGN="JUSTIFY">&nbsp;</P>
<P>By:&#9;<U>&#9;&#9;&#9;&#9;&#9;&#9;<BR>
</U>&#9;Johnathan M. Hill<BR>
&#9;<I>President</P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>

</I><B><P ALIGN="CENTER">EXHIBIT INDEX</P></B>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=637>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY"><B><U>EXHIBIT NO.</U>&#9;</B></TD>
<TD WIDTH="82%" VALIGN="TOP" HEIGHT=25>
<B><U><P ALIGN="JUSTIFY">DESCRIPTION</B></U></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY">2.1&#9;&#9;&#9;</TD>
<TD WIDTH="82%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY">Purchase and Sale Agreement made and entered into as of the 25<SUP>th</SUP> day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser.</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P></BODY>
</HTML>
[{"type": "8-K", "sequence": "1", "filename": "0001.htm", "secsgml_size_bytes": 85185}]
{"company-data": {"conformed-name": "GLADSTONE ENERGY INC", "cik": "0000041656", "assigned-sic": "1311", "irs-number": "910234563", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-01525", "film-number": "1508337"}, "business-address": {"street1": "3500 OAK LAWN AVE", "street2": "SUITE 590", "city": "DALLAS", "state": "TX", "zip": "75219", "phone": "2145289710"}, "mail-address": {"street1": "3500 OAK LAWN AVE", "street2": "SUITE 590", "city": "DALLAS", "state": "TX", "zip": "75219"}, "former-company": [{"former-conformed-name": "GLADSTONE RESOURCES INC", "date-changed": "19920703"}, {"former-conformed-name": "GLADSTONE MOUNTAIN MINING CO", "date-changed": "19730307"}]}
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------
December 29, 2000
Date of Report (Date of Earliest Event Reported)
GLADSTONE RESOURCES, INC.
State of Delaware
1-1525
91-0234563
(State or other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
3500 Oak Lawn, Suite 590, LB 49
Dallas, Texas
75219
(Address of Principal Executive Offices)
(Zip Code)
214-528-9710
(Registrant's Telephone Number, Including Area Code)
ITEM 2.
ACQUISITION OR DISPOSITION OF ASSETS
On December 29, 2000, Gladstone Energy, Inc. (the "Company") disposed of the remainder of the Company's 8.575% working interest in and to and to the Righthand Creek Field in Allen and Beauregard Parishes, Louisiana properties (the
"Disposition"). The purchaser of the interest was EXCO Resources, Inc., 5735 Pineland, Suite 235, Dallas, TX 75231 for a cash purchase price of $434,000.00. The Disposition represents the sale of all or substantially all of the Company's remaining assets.
ITEM 7.
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a.)
Financial statements - not applicable
(b.)
Pro forma financial information.
1)  Gladstone Energy, Inc. proforma balance sheet as of September 30, 2000 (unaudited).
2)  Gladstone Energy, Inc. proforma statement of operations for the year ending      December 31, 1999 (unaudited)
3)  Gladstone Energy, Inc. pro forma statement of income for the six months ending      September 30, 2000 (unaudited).
(c.)
The exhibits listed on the accompanying Exhibit Index immediately following the signature page are filed as part of, or incorporated by reference into, this Current Report of Form 8-K.
GLADSTONE ENERGY, INC.
PRO FORMA FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
On December 29, 2000, the Company disposed of the remainder of the Company's 8.575% working interest in and to and to the Righthand Creek Field in Allen and Beauregard Parishes, Louisiana properties.
The transaction will be recorded as a gain on sale of assets sold at their fair values.
The pro forma financial statements may not be indicative of the actual results of the sale. The accompanying proforma financial statements should be read in connection with the historical statements of Gladstone Energy, Inc.
GLADSTONE ENERGY, INC.
PRO FORMA BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 2000
Historical
statements
1st RHC Sale
Pro Forma
adjustments
(1)
San Juan Sale
Pro Forma
adjustments
2nd RHC Sale
Pro Forma
adjustments
Pro Forma
Results
ASSETS:
CURRENT ASSETS:
Cash
$       111,793
$           -
$   267,000  (4)
$   434,000  (6)
$     812,793
Accounts receivable
20,908
-
-
(19,097)
1,811
Deferred Tax Benefit
148,487
-
(54,829
) (5)
(85,354
) (7)
8,304
TOTAL CURRENT ASSETS
281,188
-
212,171
329,549
822,908
PROPERTY AND EQUIPMENT:
Gas and oil properties (successful efforts method)
829,484
-
(534,757) (5)
(237,323) (7)
57,404
Field equipment
18,628
-
-
-
18,628
848,112
-
(534,757)
(237,323)
76,032
Accumulated depletion and depreciation
(498,448
)
-
425,930
(5)
54,365
(5)
(18,153
)
TOTAL PROPERTY AND EQUIPMENT
349,664
-
(108,827)
(182,958)
57,879
OTHER ASSETS:
Cost in excess of amount assigned to net assets
in New Mexico at date of acquisition, net of
amortization
32,921
-
(32,921
)  (5)
-
-
TOTAL OTHER ASSETS
32,921
-
(32,921
)
-
-
TOTAL ASSETS
$
663,773
$
-
$
70,423
$
146,591
$
880,787
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
13,176
$
-
$
-
$
-
$
13,176
TOTAL CURRENT LIABILITIES
13,176
-
-
-
13,176
STOCKHOLDERS' EQUITY:
Common stock
849
-
-
-
849
Capital in excess of stated value
1,379,271
-
-
-
1,379,271
Retained earning (deficit)
(729,523
)
-
70,423
146,591
(512,509
)
TOTAL STOCKHOLDERS' EQUITY
650,597
-
70,423
146,591
867,611
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
663,773
$
-
$
70,423
$
146,591
$
880,787
See Notes to Pro Forma Financial Statements (Unaudited)
GLADSTONE ENERGY, INC.
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDING DECEMBER 31, 1999
Historical
statements
1st RHC Sale
Pro Forma
adjustments (1)
San Juan Sale
Pro Forma
adjustments (5)
2nd RHC Sale
Pro Forma
adjustments (7)
Pro Forma
results
SALES:
Gas and oil
$       223,943
$       (48,360)
$       (56,031)
$       (112,840)
$         6,712
COST OF SALES:
Production taxes
24,346
(4,388)
(4,419)
(15,130)
409
Well operating expense
72,242
(14,947
)
(19,686
)
(34,876
)
2,733
TOTAL COST OF SALES
96,588
(19,335
)
(24,105
)
(50,006
)
3,142
GROSS PROFIT ON SALES
127,355
(29,025
)
(31,926
)
(62,834
)
3,570
EXPENSES:
Oil and gas prospect expense
24,491
-
-
-
24,491
Dry hole and abandonment loss
114,388
-
-
-
114,388
Depletion
56,973
(9,768)
(21,710)
(22,791)
2,704
Depreciation and amortization
8,724
-
(6,338)
-
2,386
General and administrative
43,115
-
-
-
43,115
Interest
9,862
(2,958)
-
-
6,904
Taxes
8,050
-
-
-
8,050
Legal, auditing and accounting
75,501
-
-
-
75,501
TOTAL EXPENSES
341,104
(12,726
)
(28,048
)
(22,791
)
277,539
(213,749)
(16,299)
(3,878)
(40,043)
(273,969)
OTHER INCOME
Interest and dividend income
9,683
-
-
-
9,683
Income (loss) before taxes
(204,066)
(16,299)
(3,878)
(40,043)
(264,286)
Income taxes
-
-
-
-
-
NET INCOME (LOSS)
$
(204,066
)
$
(16,299
)
$
(3,878
)
$
(40,043
)
$
(264,286
)
EARNINGS/(LOSS) PER SHARE:
Basic:
$
(.24
)
$
(.31
)
Diluted:
$
(.24
)
$
(.31
)
Basic weighted average common shares
outstanding
848,791
848,791
Basic weighted average common equivalent
shares outstanding
848,791
848,791
See Notes to Pro Forma Financial Statements (Unaudited)
GLADSTONE ENERGY, INC.
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2000
Historical
statements
1st RHC Sale
Pro Forma
adjustments (1)
San Juan Sale
Pro Forma
adjustments (5)
2nd RHC Sale
Pro Forma
adjustments (7)
Pro Forma
results
SALES:
Gas and oil
$        295,643
$        (53,733)
$       (52,814)
$       (185,600)
$         3,496
COST OF SALES:
Production taxes
33,080
(6,476)
(3,983)
(22,391)
230
Well operating expense
51,911
(8,618
)
(14,880
)
(26,647
)
1,766
TOTAL COST OF SALES
84,991
(15,094
)
(18,863
)
(49,038
)
1,996
GROSS PROFIT ON SALES
210,652
(38,639
)
(33,951
)
(136,526
)
1,500
EXPENSES:
Dry hole and abandonment loss
87,475
-
-
-
87,475
Depletion
53,921
(11,082)
(13,930)
(27,153)
1,756
Depreciation and amortization
12,759
(312)
(4,563)
(728)
7,156
General and administrative
35,401
-
-
-
35,401
Interest
14,376
(14,376)
-
-
-
Taxes
2,452
-
-
-
2,452
Legal, auditing and accounting
19,458
-
-
-
19,458
TOTAL EXPENSES
225,842
(25,770
)
(18,493
)
(27,881
)
153,698
(15,190)
(12,869)
(15,458)
(108,681)
(152,198)
OTHER INCOME
Gain on sale of assets
122,640
(122,640)
-
-
-
Interest and dividend income
19
-
-
-
19
Income (loss) before taxes
107,469
(135,509)
(15,458)
(108,681)
(152,174)
Income taxes (benefits)
(148,487
)
-
54,829
85,354
)
(8,304
)
NET INCOME (LOSS)
$
255,956
$
(135,509
)
$
(70,287
)
$
(194,035
)
$
(143,875
)
EARNINGS/(LOSS) PER SHARE:
Basic:
$
.30
$
(.17
)
Diluted:
$
.30
$
(.17
)
Basic weighted average common shares
outstanding
848,782
848,782
Diluted weighted average common equivalent
shares outstanding
848,782
848,782
See Notes to Pro Forma Financial Statements (Unaudited)
GLADSTONE ENERGY, INC.
NOTES TO PRO FORMA FINANICAL STATEMENTS
SEPTEMBER 30, 2000
(1)
To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 30% of the Righthand Creek oil property as of September 30, 2000, and the nine month period ending September 30, 2000.
(2)
To reflect the cash proceeds from the 1
st
RHC Sale.
Gross proceeds
$    201,000
Note Payoff
(200,000
)
Net proceeds
$        1,000
(3)
To reflect the gain for proforma financial statement purposes for the 1
st
RHC Sale:
Sales price
$    201,000
Cost of 30% of property
(102,022)
Accumulated depletion and depreciation
23,662
Estimated gain
$
122,640
(4)
To reflect the cash proceeds from the San Juan Sale:
Gross proceeds
$
267,000
Net proceeds
$    267,000
(5)
To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the San Juan Sale on October 10, 2000, but effective for production purposes as of August 1, 2000, and for the nine months ended September 30, 2000.
(6)
To reflect the estimated gain for proforma financial statement purposes for the San Juan Sale:
Sales price
$    267,000
Cost of property
(534,757)
Cost in excess of assets purchased
(337,000)
Accumulated depletion and depreciation
429,018
Accumulated amortization
304,079
Estimated gain
$
128,340
(7)
To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 2
nd
RHC Sale, effective for production purposes as of September 1, 2000, and for the nine months ended September 30, 2000.
(8)
To reflect the estimated gain for proforma financial statement purposes for the 2
nd
RHC Sale:
Sales price
$    434,000
Cost of 30% of property
(237,323)
Accumulated depletion and depreciation
54,365
Estimated gain
$
251,042
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GLADSTONE ENERGY, INC.
By:
Johnathan M. Hill
President
EXHIBIT INDEX
EXHIBIT NO.
DESCRIPTION
2.1
Purchase and Sale Agreement made and entered into as of the 25
th
day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser.