SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 1998                       File No. 0-09482

                        COLORADO WYOMING RESERVE COMPANY
         (Name of Small Business Issuer as Specified in its Charter)


                 WYOMING                              83-0246080
     (State of other jurisdiction                  (I.R.S. Employer
           of incorporation)                      Identification No.)


          751 HORIZON COURT, SUITE 205, GRAND JUNCTION, COLORADO 81506
                    (Address of Principal Executive Office)


Issuer's telephone number including area code:  (970) 255-9995

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act:

                          COMMON STOCK; $.01 PAR VALUE
                                 Title of Class

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

           YES         NO  X

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

State Issuer's revenues for its most recent fiscal year:   $32,798

As of December 16, 1998, 2,491,694 shares of common stock $.01 par value were
outstanding. The aggregate market value of voting stock held by non-affiliates
of the Registrant was $2,527,315 based on the average bid and ask price of
the Company's Common Stock of $1.531, as reported by the NASD on the OTC
Bulletin Board System on December 16, 1998.


<PAGE>

                                     PART I

ITEM 1.    BUSINESS

(a)   Business Development. Colorado Wyoming Reserve Company (formerly Mystique
Developments, Inc.) ("CWYR" or the "Company"), with its mailing address at 751
Horizon Court, Suite 205, Grand Junction, Colorado 81506, telephone number (970)
255-9995, was incorporated as a Wyoming corporation on November 7, 1979. CWYR
was organized for the purpose of engaging in oil and gas activities including
exploration for and development and production of oil and gas reserves.

(b)   Business of Issuer


GENERAL

The Company is an oil and natural gas exploration and production company with a
geographical focus in the Rocky Mountain region of the western United States.
Management's primary objective is the acquisition of interests in undeveloped
oil and gas properties, and the location and development of economically
attractive accumulations of hydrocarbons in such properties through the use of a
highly-integrated, interpretive approach to the application of 3-D geophysical
data (seismic data acquired and processed to yield a three-dimensional picture
of the subsurface). The Company's acquisitions of undeveloped oil and gas
properties are accomplished primarily by the acquisition of direct mineral
leasehold interests from private, state and federal lands.

The Company is currently focusing its exploratory efforts in the central Paradox
Basin area of southeastern Utah (the "Paradox Basin Project"), having sold its
North Dakota properties in November 1998. See Item 12 - "Certain Relationships
and Related Transactions" and Note 8 to the Financial Statements "Subsequent
Events." The Paradox Basin Project will utilize geoscientists and technology
that have had previous success in the Paradox Basin, and will focus on areas
previously under-explored by conventional methodology. CWYR has access to
results of exploratory drilling in the Project area which will supply a database
of subsurface geologic information to assist the Company in determining the best
location for a 3-D seismic survey.

Currently, however, the Company has no revenue stream to finance a 3-D seismic
survey, and is continuing to incur financial obligations for general and
administrative expense items. Since it had less than $10,000 cash at December
14, 1998, the Company's development of the Paradox Basin Project and continued
existence is dependent upon its ability to raise additional capital in the
immediate future. Accordingly, the Company is considering various financing
alternatives. See Item 6 "Management's Discussion and Analysis of Financial
Condition and Results of Operations."


EQUIPMENT, PRODUCTS AND RAW MATERIALS

CWYR owns no drilling rigs, and drilling, if any, will be accomplished by
independent contractors, typically on a footage or day rate basis, for which the
Company may bear the risks of fire, blowout or other catastrophe to its
property.

As of June 30, 1998, only one of the Company's oil and gas wells was producing.
As noted above, subsequent to the fiscal year end, the Company sold all of its
developed acreage and currently owns only leasehold interests in undeveloped
acreage in the Paradox Basin.

The existence of commercial oil and gas reserves is essential to the ultimate
realization of value from the Company's presently-undeveloped properties. The
acquisition, development, production and sale of oil and gas is subject to many
factors which are outside the Company's control. These factors include national
and international economic conditions, market forces, transportation
constraints, geologic anomalies, production limitations, availability of
drilling rigs, casing, pipe and other fuels, and regulation by federal and state
governmental authorities. CWYR acquires leasehold interests in oil and gas
properties from landowners, other owners of interests in such properties, or
governmental entities. For information relating to specific properties of CWYR,
see Item 2.


                                       -2-

<PAGE>

COMPETITION

There is significant competition for the acquisition of properties capable of
producing oil and gas, as well as for the equipment and labor required to
develop and operate such properties. Many of the Company's competitors have
financial resources and exploration and development budgets that are
substantially greater than those of the Company, which may adversely affect the
Company's ability to compete with those companies in the acquisition of
attractive oil and gas properties on terms it considers acceptable. In addition,
the Company will face competition for the sale of its oil and gas, should such
be produced, from a substantial number of companies, many of which have greater
financial or other resources than the Company.


REGULATION

If the Company is successful in developing the Paradox Basin Project, the
availability of a ready market for its oil and gas production will depend upon
numerous factors beyond the Company's control. These factors include regulation
of natural gas and oil transportation, federal and state regulations governing
environmental quality and pollution control, the amount of natural gas and oil
available for sale, the availability of adequate pipeline and other
transportation and processing facilities and the marketing of competitive fuels.
State and federal regulations generally are intended to prevent waste of natural
gas and oil, protect rights to produce natural gas and oil between owners in a
common reservoir, and control contamination of the environment.

Sales of crude oil, condensate and gas liquids are currently not subject to
federal regulation and are made at market prices. The state of Utah, in which
the Company's properties are located, regulates the production and sale of
natural gas and oil, including requirements for obtaining drilling permits, the
method of developing new fields, the spacing and operation of wells and the
prevention of waste of natural gas and other resources. Such provisions may
restrict the number of wells that may be drilled on a particular lease or in a
particular field. Recent trends indicate increased state and local regulation of
oil and gas activities and pipeline operations which may impact the Company's
operations; however, these impacts are not expected to be significant.


ENVIRONMENTAL LAWS

The Company's operations are subject to numerous laws and regulations governing
the discharge of materials into the environment or otherwise relating to
environmental or cultural resource protection. These laws and regulations may
(a) require the acquisition of a permit prior to constructing a drill site,
commencing drilling or constructing pipelines; (b) restrict the types,
quantities and concentration of various substances that can be released into the
environment in connection with drilling and production activities; (c) limit or
prohibit drilling activities on certain lands lying within wilderness, wetlands,
culturally sensitive and other protected areas; and (d) impose substantial
liabilities for pollution resulting from the Company's operations. Moreover, the
recent trend toward stricter standards in environmental legislation and
regulations is likely to continue. Existing, as well as future legislation and
regulations, could cause additional expense, capital expenditures, restrictions
and delays in the development of properties, the extent of which cannot be
predicted. Management believes that the Company is in substantial compliance
with current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse impact on
the Company. Since inception, the Company has not been required to make any
material expenditures with respect to compliance with environmental laws and
does not expect to make any material expenditures during the current and
following fiscal year.


EMPLOYEES

As of June 30, 1998, the Company had one part-time employee. The Company employs
consultants as needed.


                                       -3-

<PAGE>

ITEM 2.    PROPERTIES

The Company's principal office is located at 751 Horizon Court, Suite 205, Grand
Junction, Colorado 81506.

PRODUCING WELLS AND ACREAGE.  The following table sets forth CWYR's total gross 
and net productive oil and gas wells and developed acreage:


                          PRODUCTIVE WELLS AND ACREAGE
                                  JUNE 30, 1998

                                               WELLS
                                -----------------------------------
                  ACREAGE             GROSS               NET
              ---------------   -----------------   ---------------
               GROSS    NET       OIL      GAS        OIL     GAS
              -------  ------   -------  --------   -------  ------
North Dakota    241     227       7*        0        6.30     0.00

      *  Only one of the seven wells is currently producing.



                               UNDEVELOPED ACREAGE

                                         GROSS        NET
                                       --------    ---------
              North Dakota               3,766        2,922
              Utah                      52,918       52,918
                                       --------    ---------
                                        56,684       55,840
                                       ========    =========

CWYR's oil and gas properties are in the form of mineral leases. As is customary
in the oil and gas industry, a preliminary investigation of title is made at the
time of acquisition of undeveloped properties. Title investigations are
generally completed, however, before commencement of drilling operations. CWYR
believes that its methods of investigating are consistent with practices
customary in the industry and that it has generally satisfactory title to the
leases covering its proved reserves. In connection with a financing transaction
subsequent to the fiscal year end, the Company granted an interest in all of its
remaining properties to secure the repayment of a bridge loan in the principal
amount of $120,000 from The James E. Moore Revocable Trust, u/d/t dated July 28,
1994 (the "Trust"). If the loan is not repaid by its due date of January 15,
1999 or if the Company defaults under any provision of the loan agreement, the
Trust may foreclose on all of the Company's properties and force a sale of such
properties to repay the Company's indebtedness. For additional discussion about
the terms of the bridge loan, see Note 8 to the Financial Statements "Subsequent
Events," and Item 12 - "Certain Relationships and Related Transactions."

During fiscal 1998 and 1997:

o     There have been no reserve estimates filed with any other United States
      federal authority or agency.

o     The Company was not a party to any long-term supply or similar agreements
      with foreign governments or authorities in which CWYR acted as a producer.

o     The Company drilled no productive or dry exploratory or development wells.

o     The Company was not (nor is it currently) obligated to provide a fixed and
      determinable quantity of oil and gas pursuant to any contracts or
      agreements.


                                       -4-

<PAGE>

<TABLE>
<CAPTION>
                              AVERAGE SALES PRICE AND PRODUCTION COST
          ------------------------------------------------------------------------------
                                                                    1998          1997
                                                                ---------     ----------
          <S>                                                   <C>           <C>

          Average sales price per equivalent barrel of oil       $  15.49     $  19.77
          Average production (lifting) cost per equivalent       $  15.96     $  20.12
             barrel of oil (1)
</TABLE>
---------------------

(1)Natural gas equivalents are determined using a ratio of six MCF of natural
gas to one BBL of crude oil.


ITEM 3.    LEGAL PROCEEDINGS

None.


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

During the fourth quarter of the fiscal year covered by this Annual Report, no
matter was submitted to a vote of CWYR's security holders through the
solicitation of proxies or otherwise.


                                     PART II

ITEM 5.    MARKET FOR COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
           MATTERS

PRICE RANGE OF COMMON STOCK

The Common Stock of CWYR is traded on the OTC Bulletin Board System. The
following table sets forth the high and low bid prices of the Common Stock as
reported by the NASD in the over-the-counter market for the periods indicated.
The bid prices represent prices between dealers, without retail markups,
markdowns or commissions, and may not represent actual transactions. Public
trading in the Common Stock of CWYR is minimal.


                 FOR THE QUARTER ENDED        LOW        HIGH
               --------------------------   --------   --------
               September 30, 1996            No Bid     No Bid
               December 31, 1996            $ 0.75     $2.00
               March 31, 1997               $ 2.00     $4.25
               June 30, 1997                $ 3.00     $3.37
               September 30, 1997           $ 2.00     $3.00
               December 31, 1997            $ 1.13     $2.00
               March 31, 1998               $ 1.13     $3.56
               June 30, 1998                $ 1.44     $3.13

The number of record holders of Common Stock of CWYR as of December 16, 1998,
was approximately 2,744. The closing price as of that date, as quoted by the
NASD OTC Bulletin Board under the symbol "CWYR," was $1.375.

Holders of Common Stock are entitled to receive dividends as may be declared by
the Board of Directors out of funds legally available therefor. No dividends
have been declared to date by CWYR, nor does CWYR anticipate declaring and
paying cash dividends in the foreseeable future.


                                       -5-

<PAGE>

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1998, CWYR had no cash and, after the fiscal 1999 property sale
described below and short term financing obtained by the Company during November
1998, had less than $10,000 cash at December 14, 1998. Further, the Company
currently has no revenues and continues to incur obligations related to certain
general and administrative expense items. The Company's existence is contingent
upon its ability to raise additional capital in the very near future.

The Company is currently reviewing financing alternatives with the view to
raising that capital. Continued development of the Company's only significant
asset, the Paradox Basin Project (see below) is dependent on success of the
capital raising efforts. Since the Company has negative operating cash flow, the
capital raised must be sufficient to cover day-to-day operations as well as
development of the Paradox Basin Project. Failure to raise the capital could
lead to liquidation of the CWYR's assets on terms unfavorable to the Company. No
firm commitment from a capital source presently exists.

During the fiscal year ended June 30, 1997, the Company pursued a strategy of
identifying and acquiring Rocky Mountain natural gas producing properties with
development potential. However, relatively high Rocky Mountain natural gas
prices together with perceptions of a strong future pricing environment, created
a situation that precluded the Company from consummating a producing property
purchase on terms which would allow for an adequate return on the Company's
capital.

Given the preceding, during fiscal 1998 the Company revised its strategy and
entered into an exploration joint venture and a merger agreement. In conjunction
with the merger agreement, the Company amassed a block of exploratory acreage in
the Paradox Basin (Utah). To date, the Company has acquired a total of
approximately 53,000 acres and, subject to financing, could acquire additional
acreage. The project will require 3-D seismic surveys in order to determine if
the acreage is likely to contain hydrocarbons and whether drilling will be
economically feasible. Initially, a 26-square mile seismic shoot would be
conducted. CWYR has undertaken discussions with several seismic companies in an
effort to arrange a financing plan which would provide for the Company's
financial obligation to be conditioned upon successful identification and
definition of a well site(s). It is anticipated that the Company would have
complete access to (although not ownership of) the seismic data.

Pursuant to the joint venture mentioned in the preceding paragraph, the Company
purchased a once producing field in North Dakota from a financially distressed
entity. The purchase included seven producing wells, a saltwater disposal well
and a total of 1,300 acres. Subsequently, an additional 1,700 developmental
acres have been acquired. However, in order to raise cash for its short term
obligations, the Company sold the property subsequent to June 30, 1998. See Item
12 "Certain Relationships and Related Transactions" for additional discussion
about the sale of such property.

OPERATIONS.  Increases in general and administrative expense during fiscal 1998,
combined with lower 1998 revenues, resulted in the higher 1998 deficit.

INVESTING. The asset sale proceeds realized during fiscal 1998 were derived from
the sale of the Company's undeveloped Canadian property and various producing
properties. The purchase of the Paradox Basin acreage and the North Dakota
property accounted for the fiscal 1998 property acquisition expenditures.

RESULTS OF OPERATIONS

OIL AND GAS OPERATIONS. The Company's producing properties operated at virtually
breakeven cash flow in both fiscal 1998 and 1997; at the present oil price, they
would operate at a loss. Given the marginal nature of the properties, all but
one were put up for sale during fiscal 1998 and the last property was sold
during November 1998. The fiscal 1998 exploration cost reflects the exploratory
activity undertaken by the Company during the past year.


                                       -6-

<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSE. Prior to the quarter ended December 31, 1996
(the second quarter of fiscal 1997), the Company's common stock had not traded
for a number of years. During fiscal 1997's second quarter, the Company raised
private equity capital and the Company's new management undertook to increase
awareness of the Company in the investment community. As a result, the Company's
shares began trading on a limited basis.

Additionally, the Company hired a president and began actively pursuing its
business strategy of developing 3-D seismic projects in the Rocky Mountain and
northern plains regions.

The effect of running a more active company is reflected in the increase in
general and administrative expense during fiscal 1998 versus fiscal 1997.
Specifically, salary expense, professional fees and management fees all were
significantly higher during fiscal 1998. The Company printed and distributed its
June 30, 1997 annual report to shareholders in conjunction with its annual
meeting held in October 1997 and negotiated and closed a merger during fiscal
1998; no comparable costs were incurred during fiscal 1997.

Equity issued as compensation totaled $792,500 and $345,000 during fiscal 1998
and 1997, respectively. The expense consisted of charges related to stock
options and warrants granted to non-employees of $755,000 and $287,000 during
fiscal 1998 and 1997, respectively, made pursuant to Statement of Financial
Accounting Standard 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. Additional
amounts of $37,500 and $58,000 during fiscal 1998 and 1997, respectively, are
included in general and administrative expense. This amount represents the fair
market value of shares of the Company's common stock issued for services
rendered by consultants.

OTHER.  Interest income derives from the investment of the proceeds of the
private equity offering.

YEAR 2000. The Company does not anticipate incurring any costs associated with
modifying its computer system to be year 2000 compatible. The initial design of
the system used to process the Company's accounting data and well operations
information incorporated year 2000 capability. The Company currently has no
electronic data processing systems other than the accounting/well operations
system.

Since the Company currently has no significant field operations it has no
material relationships with third parties. Accordingly, the Company has limited
exposure regarding year 2000 issues related to third party companies.

EFFECT OF CHANGES IN PRICES

The Company's results of operations and cash flow are affected by changing oil
and gas prices which are largely out of its control. Inflation has virtually no
effect on the Company and it is not possible to predict what, if any, future
effect inflation might have on the Company.

EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME, in June
1997. This statement, which is effective for fiscal years beginning after
December 15, 1997, establishes standards for reporting of comprehensive income
and its components. The FASB also issued SFAS No. 131, SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION, in June 1997. This statement, which is effective for
fiscal years beginning after December 15, 1997, establishes standards for the
way the public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders.

In June 1998, SFAS 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, was issued. SFAS 133 establishes new accounting and reporting
standards for derivative instruments and for hedging activities. This statement
requires an entity to establish at the inception of a hedge the method it will
use for assessing the effectiveness of the hedging derivative and the
measurement approach for determining the ineffective aspect of the hedge. Those
methods must be consistent with the entity's approach to managing risk. SFAS 133
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999.


                                       -7-

<PAGE>

The Company believes that the adoption of these statements will have no material
effect on the Company's financial statements.


ITEM 7.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Included at Pages 10 through 24 hereof.


ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURES

CWYR has not had any reported or material disagreement with its accountants on
any matter of accounting principles, practices or financial statement
disclosure.


                                       -8-

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and
Shareholders of Colorado Wyoming Reserve Company


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Colorado
Wyoming Reserve Company and its subsidiary at June 30, 1998 and 1997, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring negative cash flows
from operations and has no available funds. These items raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.






PricewaterhouseCoopers LLP
Denver, Colorado
December 23, 1998


                                       -9-

<PAGE>

<TABLE>
<CAPTION>
                        COLORADO WYOMING RESERVE COMPANY
                           CONSOLIDATED BALANCE SHEETS
                          AS OF JUNE 30, 1998 AND 1997

                                                               1998           1997
                                                            ----------     ----------
<S>                                                         <C>            <C>
CURRENT ASSETS:
   Cash and cash equivalents                               $       --     $  748,459
   Trade accounts receivable                                    3,593          3,918
   Related party receivable                                        --         11,095
                                                           -----------    -----------
                                                                3,593         15,013

   Assets held for sale                                        10,000         37,000
   Prepaid expenses                                             5,686            850
                                                           -----------    -----------
         Total current assets                                  19,279        801,322

PROPERTY AND EQUIPMENT:
   Unproved oil and gas properties                            653,250             --
   Proved oil and gas properties, net of accumulated
      impairments of $0 and $157,509 at June 30, 1998
      1997, respectively                                       64,460        127,513
   Other property and equipment                                13,645         11,346
                                                           -----------    -----------
                                                              731,355        138,859

   Less accumulated depreciation, depletion and 
      amortization:
      Proved properties                                           --         (72,301)
      Other property and equipment                             (6,383)        (2,421)
                                                           -----------    -----------
                                                               (6,383)       (74,722)
                                                           -----------    -----------
         Net property and equipment                           724,972         64,137
                                                           -----------    -----------
                                                           $  744,251     $  865,459
                                                           ===========    ===========


CURRENT LIABILITIES:`
   Trade accounts payable                                  $   67,017     $    9,325
   Bank overdrafts                                             19,444             --
   Accrued payroll taxes                                           --         11,309
   Other accrued liabilities                                   30,067         25,250
   Property remediation                                        64,000             --
   Related party payables                                      46,596          2,490
                                                           -----------    -----------
                                                              227,124         48,374

Commitments (Note 9)

EQUITY:
   Common stock, $.01 par value:  authorized--                             
      75,000,000 shares; issued and outstanding--     
      2,467,694 and 1,595,076 shares at June 30, 1998,                     
      and 1997, respectively                                   24,677         15,951 
   Additional paid-in capital                               4,283,320      3,175,545
   Accumulated deficit                                     (3,790,870)    (2,374,411)
                                                           -----------    -----------
                                                              517,127        817,085
                                                           -----------    -----------
                                                           $  744,251     $  865,459
                                                           ===========    ===========
</TABLE>

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


                                      -10-

<PAGE>

<TABLE>
<CAPTION>
                        COLORADO WYOMING RESERVE COMPANY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       YEARS ENDED JUNE 30, 1998 AND 1997

                                                  1998             1997
                                              -----------     ------------
<S>                                           <C>             <C>
REVENUES:
   Oil and gas sales                          $    32,798     $     62,644
   Other                                               --            3,150
                                              -----------     ------------
Total revenues                                     32,798           65,794

EXPENSES:
   Operation of producing properties               33,794           63,743
   Production taxes                                 3,871            3,679
   Exploration cost                                28,796               --
   Depreciation, depletion and amortization         3,962           20,108
   Impairment expense                              45,212          588,998
   Bad debt expense                                 1,694               --
   General and administrative                   1,367,399          616,962
                                              -----------     ------------
Total expenses                                  1,484,728        1,293,490
                                              -----------     ------------

Operating loss                                 (1,451,930)      (1,227,696)

OTHER INCOME
   Interest income                                 19,135           15,539
   Gain on sale of assets                          16,336               --
                                              -----------     ------------
Loss before income taxes                      $(1,416,459)    $ (1,212,157)
                                              -----------     ------------

Provision for income taxes                             --               --
                                              -----------     ------------
Net loss                                      $(1,416,459)    $ (1,212,157)
                                              ===========     ============

   Basic and diluted loss per share           $   (0.73)      $    (1.04)
                                              ===========     ============

   Weighted average common shares               1,941,494        1,163,638
      outstanding
                                              ===========     ============
</TABLE>

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


                                      -11-

<PAGE>

<TABLE>
<CAPTION>
                                            COLORADO WYOMING RESERVE COMPANY
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                           YEARS ENDED JUNE 30, 1998 AND 1997



                                         ---COMMON STOCK---        ADDITIONAL
                                     --------------------------     PAID-IN        ACCUMULATED
                                        SHARES       PAR VALUE      CAPITAL          DEFICIT            TOTAL
                                     ------------   -----------   ------------   ---------------   --------------
<S>                                  <C>            <C>           <C>            <C>               <C>        
BALANCE, JUNE 30, 1996                    550,076   $     5,501   $  1,866,867   $    (1,162,254)  $      710,114

Equity issued as compensation              60,000           600        344,400                --          345,000
Sale of common stock                      985,000         9,850        964,278                --          974,128
Net (loss) for the year ended                                                                                    
   June 30, 1997                               --            --             --        (1,212,157)      (1,212,157)
                                     ------------   -----------   ------------   ---------------   --------------
BALANCE, JUNE 30, 1997                  1,595,076   $    15,951   $  3,175,545   $    (2,374,411)  $      817,085

Equity issued as compensation              25,000           250        792,250                --          792,500
Common stock issued in merger             797,618         7,976        266,025                --          274,001
Sale of common stock                       50,000           500         49,500                --           50,000
Net (loss) for the year ended                                                                                    
   June 30, 1998                               --            --             --        (1,416,459)      (1,416,459)
                                     ------------   -----------   ------------   ---------------   --------------
BALANCE, JUNE 30, 1998                  2,467,694   $    24,677   $  4,283,320   $    (3,790,870)  $      517,127
                                     ============   ===========   ============   ===============   ==============

</TABLE>


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


                                      -12-

<PAGE>

<TABLE>
<CAPTION>
                        COLORADO WYOMING RESERVE COMPANY
                        CONSOLIDATED CASH FLOW STATEMENTS
                       YEARS ENDED JUNE 30, 1998 AND 1997

                                                        1998            1997
                                                    -----------     -----------
<S>                                                 <C>             <C>
Cash flows from operating activities:
Net loss income                                     $(1,416,459)    $(1,212,157)
Adjustments to reconcile net loss to
  net cash used in operating activities:     

Depletion, depreciation and amortization                  3,962          20,108
Gain on asset sale                                      (16,337)             --
Impairment expense                                       45,212         588,998
Equity issued as compensation for                       792,500         345,000
    consulting services
Other                                                        --          (1,653)

Changes in current assets and liabilities:
    Receivables                                          11,420           1,606
    Payables                                            114,750          18,852
    Other                                                (4,832)           (850)
                                                    -----------     -----------
Net cash used in operating activities                  (469,784)       (240,096)

Cash flows used in investing activities:
    Additions to unproved properties                   (326,250)             --
    Additions to proved properties                      (53,460)             --
    Equipment purchases                                  (2,300)        (10,544)
    Proceeds from asset sales                            53,335              --
                                                    -----------     -----------
Net cash used in investing activities                  (328,675)        (10,544)

Cash flows from financing activities:
    Sale of common stock                                 50,000         974,128
                                                    -----------     -----------
Net cash provided by financing activities                50,000         974,128
                                                    -----------     -----------

Net increase (decrease) in cash and equivalents        (748,459)        723,488
Cash and equivalents at beginning of period             748,459          24,971
                                                    -----------     -----------

Cash and equivalents at end of period               $        --     $   748,459
                                                    ===========     ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.

Supplemental schedule of non-cash investing and financing activities:

FISCAL 1998
The Company issued 25,000 common shares to its management company for services
rendered. The shares issued were valued at $1.50 per share, the market price at
the date of issuance. Additionally, the Company issued 797,618 common shares
valued at $.34 per share for all of the outstanding shares of Shoreline Resource
Company, Inc.

FISCAL 1997
The Company issued 50,000 shares to a financial consulting company for services
rendered. An additional 10,000 shares were issued to a former officer in
satisfaction of an outstanding liability. In both instances, the shares issued
were valued at $1 per share, the market price at the date of issuance.


                                      -13-

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       GENERAL:

       The Company operates principally in the exploration, development and
       production of oil and gas properties.

       GOING CONCERN:

       The Company currently has no funds available to pay its obligations or to
       fund further exploration and development of its only significant asset,
       the Paradox Basin property. The Company continues to incur obligations
       with respect to certain general and administrative items. These factors
       raise substantial doubt about the Company's ability to continue as a
       going concern. Management's plans with respect to these issues consist of
       attempting to raise additional capital through a private placement and
       looking at other financing alternatives for exploration of the Paradox
       Basin property. Failure to raise additional funds could result in the
       liquidation of the Company.

       The financial statements do not include any adjustments that might result
       from the outcome of this uncertainty.

       CASH AND CASH EQUIVALENTS:

       The Company considers all highly liquid investments purchased with an
       initial maturity of three months or less to be cash equivalents. The
       carrying value of cash and cash equivalents approximates fair value
       because the instruments have maturity dates of three months or less.

       CONCENTRATION OF CREDIT RISK:

       Substantially all of the Company's trade receivables are within the oil
       and gas industry, primarily from purchasers of oil and gas and joint
       venture participants, and collectibility is dependent upon the general
       economic conditions of the industry. The receivables are not
       collateralized.

       The Company generally invests its excess cash in money market funds
       having minimal credit risk.

       OIL AND GAS PRODUCING ACTIVITIES:

       The Company follows the successful efforts method of accounting for its
       oil and gas properties. Under this method of accounting, all property
       acquisition costs and costs of exploratory and development wells are
       capitalized when incurred, pending determination of whether the well has
       found proved reserves. If an exploratory well has not found proved
       reserves, the costs of drilling the well are charged to expense. The
       costs of development wells are capitalized whether productive or
       nonproductive.

       Geological and geophysical costs on exploratory prospects and the costs
       of carrying and retaining unproved properties are expensed as incurred.
       An impairment allowance is provided to the extent that capitalized costs
       or unproved properties, on a property-by-property basis, are considered
       to be not realizable. Depletion, depreciation and amortization ("DD&A")
       of capitalized costs of proved oil and gas properties is provided on a
       property-by-property basis using the units of production method based
       upon proved reserves. The computation of DD&A takes into consideration
       restoration, dismantlement and abandonment costs and the anticipated
       proceeds from equipment salvage.

       The Company tests for impairment of its producing properties by comparing
       expected undiscounted future net revenues on a property-by-property basis
       with the related net capitalized costs at the end of each period. When
       the net capitalized costs exceed the undiscounted future net revenues,
       the cost of the property is written down to "fair value," which is
       estimated using discounted future net revenues from the producing
       property. Gains


                                      -14-

<PAGE>

       and losses are recognized on sales of entire interests in proved and
       unproved properties. Sales of partial interests are generally treated as
       recoveries of costs. With regard to properties held for sale, the Company
       uses the estimated net sales proceeds as its estimate of fair value.

       OTHER PROPERTY AND EQUIPMENT:

       Other property and equipment is depreciated using the straight line
       method over the estimated useful life of the property.

       PRINCIPLES OF CONSOLIDATION:

       The consolidated financial statements include the accounts of the
       Company's wholly-owned subsidiary. Inter-company transactions and
       accounts are eliminated in consolidation.

       INCOME TAXES:

       Deferred income taxes are provided on the difference between the tax
       basis of an asset or liability and its reported amount in the financial
       statements. This difference will result in taxable income or deductions
       in future years when the reported amount of the asset or liability is
       recovered or settled, respectively.

       NET LOSS ATTRIBUTABLE TO COMMON SHARES:

       The Company adopted Statement of Financial Accounting Standard 128,
       EARNINGS PER SHARE ("SFAS 128") during fiscal 1998. SFAS 128 requires the
       presentation of basic and diluted earnings per share. Basic earnings per
       share are calculated by dividing income available to common shareholders
       by the weighted average number of common shares outstanding. Diluted
       earnings per share is calculated by taking into account all potentially
       dilutive securities. The Company has not included potentially dilutive
       securities consisting of options to purchase 1.715 million shares and
       1.375 million shares in 1998 and 1997, respectively, because they would
       be anti-dilutive.

       RECLASSIFICATIONS:

       Certain amounts in the accompanying consolidated financial statements for
       1997 have been reclassified to conform to the classifications used in
       1998.

       RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS:

       The FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME, in June
       1997. This statement, which is effective for fiscal years beginning after
       December 15, 1997, establishes standards for reporting of comprehensive
       income and its components. The FASB also issued SFAS No. 131, SEGMENTS OF
       AN ENTERPRISE AND RELATED INFORMATION, in June 1997. This statement,
       which is effective for fiscal years beginning after December 15, 1997,
       establishes standards for the way the public business enterprises report
       information about operating segments in annual financial statements and
       requires that those enterprises report selected information about
       operating segments in interim financial reports issued to shareholders.

       In June 1998, SFAS 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
       ACTIVITIES, was issued. SFAS 133 establishes new accounting and reporting
       standards for derivative instruments and for hedging activities. This
       statement requires an entity to establish at the inception of a hedge,
       the method it will use for assessing the effectiveness of the hedging
       derivative and the measurement approach for determining the ineffective
       aspect of the hedge. Those methods must be consistent with the entity's
       approach to managing risk. SFAS 133 is effective for all fiscal quarters
       of fiscal years beginning after June 15, 1999.

       The Company believes that these statements will have no material effect
       on the Company's financial statements.


                                      -15-

<PAGE>

       USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:

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

       ENVIRONMENTAL LIABILITIES:

       The Company estimates the costs associated with plugging and abandoning
       its producing oil and gas wells and accrues such costs, net of any
       expected equipment salvage value, as a liability. The cost is amortized
       over the life of the wells. Liabilities of this nature are disclosed as
       property remediation liabilities in the balance sheet. The Company does
       not use discounting in the determination of these liabilities.

2.     MERGER WITH SHORELINE RESOURCE COMPANY

       On February 6, 1998, the Company entered into an Agreement and Plan of
       Merger, dated as of February 6, 1998 (the "Merger Agreement") with
       Shoreline Resource Company, Inc., a Colorado corporation ("Shorco"),
       CWSub, Inc., a wholly-owned subsidiary of the Company, incorporated in
       the state of Colorado ("CWSub") and F. Robert Tiddens, Cindy L. Stewart
       and John F. Greene, the shareholders of Shorco (the "Shorco
       Shareholders"). Pursuant to the terms of the Merger Agreement, CWSub was
       merged with and into Shorco, with Shorco surviving the Merger and
       becoming a wholly-owned subsidiary of the Company at the Merger Effective
       Time (as defined in the Merger Agreement). The financial year-end of
       Shorco following the Merger was June 30, 1998.

       The Merger consideration consisted of issuance by the Company of 797,618
       shares of its common stock, $.01 par value per share ("Common Stock") in
       exchange for all of the issued and outstanding common stock of Shorco. As
       a result of the Merger, the Shorco Shareholders, collectively, owned
       approximately 33% of the outstanding Common Stock of the Company.

       At the time of the Merger, Shorco's only assets consisted of unproved
       oil, gas and mineral leasehold interests in approximately 20,300 acres in
       a targeted area in southern Utah, along with a team of geo-scientists
       having access to state-of-the-art "3-D" seismic processing techniques for
       use in developing a "3-D" seismic exploration project in such area.
       Shorco had no operating activity prior to the Merger. Accordingly, no pro
       forma results of operations showing the effect on the Company of the
       Shorco Merger have been prepared.

3.     INCOME TAXES

       No tax benefits from the losses incurred during fiscal 1998 and 1997 were
       recognized due to the substantial uncertainty as to their eventual
       utilization.

       Effective tax rates differ from the Federal income tax rate as shown in
       the following table.


                                      -16-

<PAGE>

<TABLE>
<CAPTION>
                                                       PERCENT OF PRETAX (LOSS) INCOME

                                                             1998           1997
                                                           ---------     ----------
<S>                                                        <C>           <C>  
          Federal statutory rate                             (34)%         (34)%
          State income taxes                                  (3)%          (3)%
          Change in valuation allowance                        30%           27%
          Expiration of prior year loss carryforwards           7%           10%
                                                           ---------     ----------
          Effective rate                                       --            --
                                                           =========     ==========
</TABLE>

       Deferred income taxes reflect the impact of temporary differences between
       amounts of assets and liabilities for financial reporting purposes and
       such amounts as measured by tax laws. The tax effect of the temporary
       differences and carryforwards giving rise to the Company's deferred tax
       assets and liabilities at June 30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                 1998        1997
                                                              ---------    --------
          <S>                                                 <C>          <C>
          Deferred tax assets
            Oil and gas properties                            $      --    $226,000
            Net operating loss and tax credit carryforward      885,000     492,000
                                                              ---------    --------
                                                                885,000     718,000

          Valuation allowance                                  (885,000)   (704,000)
                                                              ---------    --------
            Deferred tax assets                                      --      14,000
          Deferred tax liabilities
            Depletion, depreciation and amortization of
            property and equipment                                   --     (14,000)
                                                              ---------    --------
              Net deferred tax assets                         $      --          --
                                                              =========    ========
</TABLE>

       SFAS No. 109 requires that a valuation allowance be provided if it is
       more likely than not that some portion or all of a deferred tax asset
       will not be realized. The Company's ability to realize the benefit of its
       tax assets will depend on the generation of future taxable income through
       profitable operations and expansion of the Company's oil and gas
       producing properties. The market, capital, and environmental risks
       associated with that growth requirement are considerable, resulting in
       the Company's conclusion that a full valuation allowance be provided,
       except to the extent that the benefit of operating loss carry forwards
       can be used to offset future reversals of existing deferred tax
       liabilities. The Company increased its valuation allowance by $181,000
       and $348,000 during fiscal 1998 and 1997, respectively.

       At June 30, 1998, the Company had tax basis net operating loss carry
       forwards available to offset future taxable income of $2.3 million, which
       expire from 1999 to 2012. Of that amount, approximately $956,000 can
       never be used by the Company and the usage of $363,000 is limited to
       certain maximum yearly amounts over a 15- year period, as a result of the
       change in control occurring during fiscal 1998 and 1997.

4.     MAJOR CUSTOMERS

       The following are considered major customers which account for ten
       percent or more of total operating revenues in 1998 and 1997.


                                      -17-

<PAGE>

                                              1998      1997
                                             -------   ------
               Conoco Oil Company              23%       60%

               Penroc Oil Corporation           --       24%

               Texaco Oil Company              17%       12%

               Phillips Company                41%        --

               Duke Energy                     19%        --


5.     RELATED PARTIES

       During the fiscal year ended June 30, 1996, the Company received property
       valued at $490,000 in exchange for a receivable from a company of which a
       former president of the Company served as an officer. During the fiscal
       year ended June 30, 1997, the Company recognized an impairment expense of
       $453,000 on such property.

       Effective January 1, 1998, the Company entered into an Agreement for
       Administrative Services (the "Trinity Agreement") with Trinity Petroleum
       Management LLC, a Colorado limited liability company ("Trinity").
       Pursuant to the terms of the Trinity Agreement, Trinity performs certain
       management functions for the Company for a fee of $3,000 per month and
       reimbursement of third party expenses. The Trinity Agreement is for a
       term of one year, continuing thereafter on a month-to-month basis,
       terminable upon 60 days written notice by either party. J. Samuel Butler,
       a member of the Board of Directors of the Company, currently serves as
       President of Trinity and owns approximately 24 percent of Trinity through
       his ownership of Butler Resources, LLC. In connection with certain
       additional services provided to the Company by Trinity pursuant to the
       Agreement, on January 22, 1998 the Company issued to Trinity 25,000
       restricted shares of Common Stock as well as an option to purchase up to
       100,000 shares of the Company's Common Stock at an exercise price of
       $1.50 per share.

       Effective as of January 1, 1998, the Company entered into an Agreement
       for Consulting Services (the "SCI Agreement") with Sayed Consulting,
       Inc., a Nevada corporation ("SCI"). Pursuant to the terms of the SCI
       Agreement SCI performs certain investor and public relations functions
       for the Company for a fee of $1,000 per month and reimbursement of third
       party expenses. The SCI Agreement is for a term of one year, but may be
       terminated by either party with or without cause upon 30 days written
       notice to the other party. On January 30, 1998 in connection with the SCI
       Agreement, the Company issued to SCI an option to purchase up to 200,000
       shares of the Company's Common Stock at an exercise price of $1.75 per
       share, which options have been repriced as of December 4, 1998 to $1.00
       per share pursuant to the Bridge Loan Extension described below. Coupled
       with its prior ownership of the Company's Common Stock, SCI beneficially
       owns approximately 11.1 percent of the Company. Waseem A. Sayed owns 100
       percent of SCI and serves as its President. Mr. Sayed's brother, Rafiq A.
       Sayed, was appointed as a member of the Company's Board of Directors
       effective September 4, 1998. Dr. Syed A. Daud, a recently-appointed
       member of the Board of Directors, serves as Vice President of Investor
       Relations & Communications for SCI.

       The Company entered into a Contract Operator Agreement and Operating
       Agreement, effective March 13, 1998 with ST Oil Company, a Nevada
       corporation ("ST"), pursuant to which ST serves as managing agent and
       attorney-in-fact for the Company, and as operator of record of the
       Companies properties located in North Dakota (the "ST Agreement"). In
       return for its services, ST is entitled to receive, at payout, a five
       percent working interest in the leases and wells. Mr. Butler owns
       approximately 52 percent of ST and serves as its President and Chief
       Executive Officer. Subsequent to the fiscal year-end, however, the ST
       Agreement was assigned by the Company to FM Energy, LLC in connection
       with the North Dakota Agreement. See Note 8.

       For related-party transactions occurring subsequent to June 30, 1998, see
       Note 8.


                                      -18-

<PAGE>

6.     OPTIONS, WARRANTS AND RESERVED SHARES

       On October 18, 1996 the Board of Directors of the Company adopted the
       Incentive Stock Option Plan ("the ISO Plan"). On April 5, 1997 the Board
       adopted the Equity Incentive Plan ("the Equity Plan"). Both plans were
       approved by stockholders at the Company's 1997 annual meeting. On
       February 11, 1998, the Equity Plan was amended to delete the automatic
       six-month vesting requirement for options granted thereunder to allow the
       Board of Directors or committee broad discretion in determining such
       requirements.

       The ISO Plan was established for the purpose of providing an option to
       purchase the Company's common stock to one key employee of the Company,
       while the Equity Plan allows option grants to various employees,
       non-employees, directors, consultants and advisors.

       Options under both the plans may have a term of up to ten years; the
       actual term and any vesting requirements are set at the discretion of the
       Board of Directors or a Committee thereof. The maximum number of shares
       authorized for issuance under the ISO Plan is 500,000 shares; under the
       Equity Plan the maximum is 2.5 million shares.

       The following is a summary of the Company's option activity for the years
       ended June 30, 1998 and June 30, 1997:

<TABLE>
<CAPTION>
                                                      1998                        1997
                                          --------------------------  ----------------------------
                                                           WEIGHTED                     WEIGHTED
                                                           AVERAGE                       AVERAGE
                                                           EXERCISE                     EXERCISE
                                             OPTIONS        PRICE         OPTIONS        PRICE
                                          -------------   ----------   -----------   ------------
<S>                                       <C>             <C>          <C>            <C>

Options outstanding, beginning of year       1,375,000    $   1.00             --            N/A
Granted
 Exercise price same as market price           200,000    $   3.25      1,275,000     $     1.00
 Exercise price less than market price         315,000    $   1.59        100,000     $     1.00
 Exercise price greater than market price      125,000    $   1.50             --             --
Expired                                        (50,000)   $   1.00             --             --
Exercised                                      (50,000)   $   1.00             --             --
                                          ------------    --------    -----------     ----------
Options outstanding, end of year             1,915,000    $   1.36      1,375,000     $     1.00
                                          ============    ========    ===========     ==========
Exercisable at end of year                   1,690,000    $   1.14      1,375,000     $     1.00
                                          ============    ========    ===========     ==========
</TABLE>


       Exercise prices for options outstanding as of June 30, 1998:

<TABLE>
<CAPTION>
                          OPTIONS
        EXERCISE        OUTSTANDING        WEIGHTED AVERAGE     OPTIONS EXERCISABLE
          PRICE        JUNE 30, 1998       CONTRACTUAL LIFE        JUNE 30, 1998
       -----------   ----------------     ------------------   ---------------------
       <S>               <C>                   <C>               <C>    

       $     1.00        1,325,000               7.92            1,325,000
       $     1.50          175,000               9.48              150,000
       $     1.75          215,000               9.60              215,000
       $     3.25          200,000              10.00                   --
                     ----------------     ------------------   ---------------------
                         1,915,000               8.92            1,690,000
</TABLE>

                                      -19-

<PAGE>

       In October 1995, the FASB issued SFAS No. 123, "Accounting for
       Stock-Based Compensation." This Statement establishes a fair value method
       of accounting for stock-based compensation plans either through
       recognition or disclosure. The Company has elected to continue following
       Accounting Principles Board Opinion No. 25 ("APB No. 25"), ACCOUNTING FOR
       STOCK ISSUED TO EMPLOYEES, and has elected to adopt SFAS No. 123
       through compliance with the disclosure requirements set forth in the
       Statement. Pro forma information regarding net income and earnings per 
       share is required by SFAS No. 123 and has been determined as if the 
       Company had accounted for its employee stock options under the fair 
       value method of that Statement. The fair value of these options was 
       estimated at the date of grant using the Black-Scholes option pricing 
       model with the following weighted-average assumptions.

<TABLE>
<CAPTION>
                                                                        YEARS ENDED JUNE 30,
                                                                 --------------------------------
                                                                     1998                1997
                                                                 -------------     --------------
         <S>                                                     <C>               <C> 

         Risk free interest rate                                  5.9% to 6.5%       5.4% to 5.6%
         Volatility factor                                                160%                60%
         Dividend yield                                                     0%                 0%
         Expected term of options                                     10 years      5 to 10 years
         Weighted average fair value of options granted:
           Exercise price equals market price                    $        3.23     $         0.54
           Exercise price less than the market price             $        1.85     $         2.57
           Exercise price greater than the market price          $        1.36                 --
</TABLE>

       The Black-Scholes option valuation model was developed for use in
       estimating the fair value of traded options which have no vesting
       restrictions and are fully transferable. In addition, option valuation
       models require the input of highly subjective assumptions including
       the expected stock price volatility. Because the Company's employee
       stock options have characteristics significantly different from those
       of traded options, and because changes in the subjective input
       assumptions can materially affect the fair value estimate, it is
       management's opinion that the existing models do not necessarily
       provide a reliable single measure of the fair value of its employee
       stock options.

       Had compensation cost been determined based on the fair value at grant
       dates for all stock option awards consistent with SFAS No. 123, the
       Company's net loss and net loss per share would have been increased to
       the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                 FOR THE YEAR ENDED JUNE 30,
                                            -----------------------------------
                                                 1998                 1997
                                            --------------       --------------
               <S>                          <C>                  <C>
               Net loss as reported         $  (1,416,459)       $  (1,212,157)
               Pro forma                    $  (2,061,935)       $  (1,870,581)

               Net loss per share
                 as reported                $       (0.73)       $       (1.04)
               Pro forma                    $       (1.06)       $       (1.61)
</TABLE>


                                      -20-

<PAGE>

7.     SUPPLEMENTAL OIL AND GAS INFORMATION

       Capitalized costs relating to oil and gas producing activities at
       June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
                                                       1998             1997
                                                    -----------      -----------
          <S>                                       <C>              <C>
          Unproved oil and gas properties            $  653,250      $        --
          Proved oil and gas properties                  64,460          127,513
          Less accumulated depreciation                      --         (72,301)
            and depletion
                                                    -----------      -----------
          Net capitalized cost                      $   717,710      $    55,212
                                                    ===========      ===========
</TABLE>

       Costs incurred in oil and gas property acquisition, exploration, and
       development activities for the years ended June 30, 1998 and 1997 are
       as follows:

<TABLE>
<CAPTION>
                                                       1998              1997
                                                    ----------       -----------
          <S>                                       <C>              <C>
          Acquisition of unproved properties        $  653,250       $        --
          Acquisition of proved properties              64,460                --
                                                    ----------       -----------
          Net capitalized cost                      $  717,710       $        --
                                                    ==========       ===========
</TABLE>

       Results of operations for oil and gas producing activities for the
       years ended June 30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                           1998            1997
                                                        ---------      ----------
          <S>                                            <C>            <C>      
          Revenues                                       $ 32,798       $  62,644
          Production costs                                 37,665          67,422
          Depreciation, depletion and impairments          45,212         607,361
                                                        ---------      ----------
                                                           82,877         674,783
                                                        ---------      ----------
          Results of operations from producing
            activities (excluding corporate overhead 
            and interest costs)                          $(50,079)    $ (612,139)
                                                        =========      ==========
</TABLE>

       The following information relates to the Company's estimates of proved
       reserves of oil and gas, changes in proved reserves of oil and gas,
       standardized measure of discounted future net cash flows and changes
       therein relating to proved oil and gas reserves. All reserves are
       located in the United States.

       RESERVES (UNAUDITED)

       The estimates of the Company's proved oil and gas reserves and the
       changes in those reserves include only "proved developed" reserves.
       Proved developed reserves are reserves which can be expected to be
       recovered from existing wells using existing equipment and operating
       methods.


                                      -21-

<PAGE>

       The estimates of proved reserves for 1998 and 1997 were determined by
       the Company's management company. Both estimates take into account the
       effect of past performance and existing economic conditions. Reserve
       estimates vary from year to year because they are based upon
       judgmental factors involved in interpreting and analyzing production
       performance, geological and engineering data and changes in prices,
       operating costs, and other economic, regulatory and operating
       conditions. Changes in such factors can have a significant impact on
       the estimated future recoverable reserves and estimated future net
       revenue by changing the economic life of the properties.

       The Company considers these reserve estimates to be reasonable in
       light of past operating results and other data available. However,
       there can be no assurance that actual production in the future will
       not vary substantially from such estimates.

       The following table shows the Company's total proved reserves, all of
       which are developed, at June 30, 1998 and 1997.


                           1998                           1997
                --------------------------     ---------------------------
                    OIL            GAS             OIL             GAS
                ------------   -----------     ------------    -----------
                     --            --             31,308          6,881

       As of June 30, 1998, the Company had no economically recoverable
       reserves as determined using the guidelines of Statement of Financial
       Accounting Standards No. 69, described below.

       Changes in net proved reserves of oil and gas for the years ending
       June 30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                1998                      1997
                                        ---------------------    -----------------------
                                           OIL         GAS          OIL          GAS
                                        ----------   --------    ----------  -----------
       <S>                               <C>          <C>         <C>        <C>      
       Beginning                          31,308       6,881       54,600     1,366,100
       Revision of previous estimate     (25,277)         --      (18,720)   (1,356,181)
       Sale of reserves                  (29,592)     (6,881)      (2,011)           --
       Purchase of reserves in place      25,678          --           --            --
       Discoveries                            --          --           --            --
       Production                         (2,117)         --       (2,561)       (3,038)
                                        ----------   --------    ----------  -----------
       Ending                                 --          --       31,308         6,881
                                        ==========   ========    ==========  ===========
</TABLE>

       STANDARDIZED MEASURE OF FUTURE NET CASH FLOWS (UNAUDITED)

       Statement of Financial Accounting Standards No. 69 prescribes
       guidelines for computing a standardized measure of future net cash
       flows and changes therein relating to estimated proved reserves. The
       Company has followed these guidelines which are briefly discussed
       below.

       Future cash inflows and future production and development costs are
       determined by applying year-end process and costs to the estimated
       quantities of oil and gas to be produced. Estimated future income
       taxes are computed using current statutory income tax rates including
       consideration for estimated future statutory depletion and investment
       tax credits. The resulting future net cash flows are reduced to
       present value amounts by applying a 10 percent annual discount factor.

       The assumptions used to compute the standardized measure are those
       prescribed by the Financial Accounting Standards Board and, as such,
       do not necessarily reflect the present worth. The limitations inherent
       in the


                                      -22-

<PAGE>

       reserve quantity estimation process, as discussed previously, are
       equally applicable to the standardized measure computations since
       these estimates are the basis for the valuation process.

       Standardized measure of discounted future net cash flows and changes
       therein relating to proved oil and gas reserves at June 30, 1998 and
       1997 are as follows:

<TABLE>
<CAPTION>
                                                            1998         1997
                                                          ---------   ----------
        <S>                                                  <C>       <C>
        Future cash inflows                                  --        $ 561,000
        Future production costs                              --         (448,000)
                                                          ---------   ----------
        Future net cash flows                                --          113,000
        Less 10% annual discount for estimated
          timing of cash flows                               --          (47,000)
                                                          ---------   ----------
        Standardized measure of discounted
           future net cash flows                             --        $  66,000
                                                          =========   ==========
</TABLE>

       No future income tax provision is made due to the Company's tax loss
       carryforward.

       The following are principal sources of change in the standardized
       measure of discounted future net cash flows during the years ending
       June 30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                  1998         1997
                                                                ---------   ----------
        <S>                                                     <C>          <C>      
        Beginning of year                                       $  66,000    $ 795,000
        Sales of oil and gas produced, net of production            3,000        5,000
          cost
        Net changes in prices                                          --     (106,000)
        Extensions and discoveries less related costs                  --           --
        Revisions of previous quantity estimates                  (49,000)    (697,000)
        Accretion of discount                                       7,000       79,000
        Sale of reserves                                          (37,000)     (10,000)
        Purchase of reserves in place                              10,000           --
                                                              -----------   ----------
        End of year                                             $      --     $ 66,000
                                                              ===========   ==========
</TABLE>

8.     SUBSEQUENT EVENTS

       On September 2, 1998, the Company completed a financing transaction with
       the James E. Moore Revocable Trust, u/d/t dated July 28, 1994 (the
       "Trust"), by executing a Loan Agreement, dated as of August 25, 1998 (the
       "Loan Agreement"), pursuant to which the Trust loaned $120,000 (the
       "Bridge Loan") to the Company to be repaid on or before October 31, 1998.
       In return for the Bridge Loan, the Company granted the Trust a security
       interest in its properties located in the Paradox Basin of southern Utah,
       and a ten-year warrant to purchase up to 180,000 shares of the Company's
       Common Stock at an exercise price of $1.00 per share. In addition, Mr.
       Rafiq A. Sayed was appointed to serve on the Company's Board of Directors
       as a designee of the Trust in connection with the Bridge Loan. As of
       September 2, 1998, the Trust beneficially owned approximately 9.4 percent
       of the Company's Common Stock. However, effective as of November 23,
       1998, the Trust conveyed warrants to purchase up to 150,000 shares of the
       Company's Common Stock to various third parties in private transactions,
       thereby reducing the Trust's beneficial ownership in the Company to
       approximately four percent. The repayment date of the Bridge Loan was
       subsequently extended to November 30, 1998 in connection with the North
       Dakota Agreement (as defined and described herein below).


                                      -23-

<PAGE>

       Effective as of November 1, 1998, the Company accepted an Offer to
       Purchase certain of its properties located in North Dakota (the "North
       Dakota Agreement") submitted by FM Energy, LLC ("FM"), a California
       limited liability company collectively owned by the Company's President,
       Kim M. Fuerst, and the Trust. Pursuant to the North Dakota Agreement, the
       Company sold its interest in certain properties located in North Dakota
       in return for (a) a cash payment to the Company of $50,000; (b)
       extinguishment of the Company's $50,000 obligation to Kim M. Fuerst as
       compensation for his services as President of the Company for the months
       of June through October 1998; and (c) an extension of the repayment date
       for the Bridge Loan from October 31, 1998 to November 30, 1998. The
       Company acquired the North Dakota properties during fiscal 1998 for
       $113,392. See Item 6 - "Management's Discussion and Analysis of
       Financial Condition and Results of Operations."

       On December 4, 1998, the Board of Directors of the Company approved an
       agreement with the Trust to extend the repayment date for the Bridge Loan
       from November 30, 1998 to January 15, 1999 (the "Bridge Loan Extension").
       As partial consideration therefore, the Trust received an additional
       warrant for the purchase of up to 100,000 shares of Common Stock at a
       price per share of the lower of (i) $1.00 or (ii) the lowest price per
       share of Common Stock or Common Stock equivalent issued by the Company in
       any offering of its securities occurring prior to April 1, 1999, thereby
       increasing the beneficial ownership by the Trust to approximately 7.6
       percent. As additional consideration, the Bridge Loan Extension agreement
       provided that the Company (a) reprice the warrants to purchase 180,000
       shares of Common Stock previously granted to the Trust at $1.00 in
       accordance with the price described above for the newly-granted warrants;
       (b) reprice the options held by SCI from $1.75 to $1.00 per share; and
       appoint Dr. Daud as a member of the Board of Directors.


9.     COMMITMENTS

       The Company entered into an employment contract with Mr. Fuerst on
       October 1, 1996 pursuant to which Mr. Fuerst receives a salary of $10,000
       per month and was granted incentive stock options to purchase up to
       500,000 shares of the Company's common stock at an exercise price of
       $1.00 per share. The contract is for an initial term of three years
       commencing October 1, 1996 and may be terminated by Mr. Fuerst upon 90
       days prior written notice to the Company, and by the Company without
       prior notice to Mr. Fuerst, if for Cause (as defined in the contract).
       The Company's salary obligation to Mr. Fuerst of $10,000 per month for
       the months of June through October 1998 was extinguished in connection
       with the purchase by FM Energy, LLC (of which Mr. Fuerst owns 50 percent
       and serves as co-manager) of the Company's properties located in North
       Dakota. The satisfaction of the Company's salary obligation for such
       months served as partial consideration for the purchase.


                                      -24-

<PAGE>

                                   PART III

ITEM 9.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and titles of the executive
officers and the members of the Board of Directors of the Company.


          NAME                  AGE                       POSITION
------------------------    ------------    ------------------------------------
Kim M. Fuerst...........         48         President, Chief Executive Officer,
                                            Chief Financial Officer and Director

Faisal Chaudhary........         26         Secretary and Director

J. Samuel Butler........         53         Director

John F. Greene..........         58         Director

F. Robert Tiddens.......         44         Director

Rafiq A. Sayed..........         45         Director

Dr. Syed A. Daud........         35         Director

      KIM M. FUERST, 48, has been President, Chief Executive Officer and
Director since September 1996, and Treasurer and Chief Financial and Accounting
Officer since October 17, 1997. From 1994 to 1996 he was a Vice President and
head of the energy group of Van Kasper and Company, an investment banking firm.
From 1989 to 1994 he served in various capacities at Great Northern Gas Company
including Vice President of Finance and as a Director. From 1982 to 1990 he was
President and Chief Operating Officer of Karen Oil Company which, during this
period, drilled over 100 wells and operated those wells that were producing
wells. Over the past 25 years he has worked in a variety of energy related
positions, both as an independent producer and as an investment banker.

      FAISAL CHAUDHARY, 26, has been Secretary and a Director since September
1996. He is presently President of Capco Development, Inc. in Santa Maria,
California. He is a graduate of Chapman University with a degree in Commerce,
and is working on his degree in law

      J. SAMUEL BUTLER, 53, Director, formed Trinity Petroleum Management, LLC
and ST Oil Company in 1996 and serves as President and Chief Executive Officer
of both companies. During 1998, Mr. Butler was instrumental in organizing
Professional Energy Advisors, LLC, and serves on the Board of Managers thereof.
In addition, he became a member of the Board of Directors of Greystone Energy,
Inc., a Colorado corporation, in 1998. From 1989 to 1994, he served as Director,
President and Chief Executive Officer of Sterling Energy Corp. and the Chief
Executive Officer of Sheffield Exploration Company, Inc. from September 1990 to
May 1996. Also during the period of September, 1989 to December, 1994, Mr.
Butler was a founding principal in Petrie Parkman & Co., an investment banking
firm specializing in upstream energy financing. Previously, he was President and
Chief Operating Officer of Columbus Energy Corp. (Denver, Colorado) from 1985 to
1989, and today, continues to serve as a director at Columbus. Mr. Butler joined
the predecessor of Columbus, Consolidated Oil and Gas, Inc., in 1974 and held
the position of Vice President of Exploration, Senior Vice President of Oil and
Gas Operations and Executive Vice President and Chief Operating Officer. After
receiving a degree in Petroleum Engineering from the Colorado School of Mines,
Mr. Butler pursued graduate studies in the field of Mineral Economics at that
institution. He is a past Director of the Independent Petroleum Association of
America and past Director of the Independent Petroleum Association of the
Mountain States.

      DR. SYED ASLAM DAUD, 35, a Director since December, 1998, is currently 
Vice President, Investor Relations & Communications of Sayed Consulting Inc. in
Toronto, Ontario, Canada, a position he has held since January 1996.


                                      -25-

<PAGE>

During a nine-month period from December 1997 to September of 1998, Dr. Daud was
also an Investor Relations and Communications officer of Trivalence Mining
Corporation. Prior to joining Sayed Consulting, Inc., he worked from September
1990 to October 1995 in various capacities at Shoppers Drug Mart and Shoppers
Home Health Care (a division of Iamsco, Inc.), including Pharmacy System Trainer
and Corporate Manager. Since 1994, Dr. Daud has served as national President of
a non-profit youth organization. Dr. Daud received his M.B.B.S. degree in
Medicine and Surgery from Dow Medical College, University of Karachi, Pakistan.
Dr. Daud has also completed various certificate courses in computers and adult
education.

      JOHN F. GREENE, 58, Director, has over 25 years experience in the oil and
gas exploration and production industry. From 1985 until his retirement in 1995,
Mr. Greene served as executive vice president of worldwide exploration and
production for the Louisiana Land and Exploration Company, where he served on
the board of directors from 1989 until his retirement. From 1981 to 1985, Mr.
Greene was president and chief executive officer for Milestone Petroleum and
then executive vice president of exploration for Meridian Oil and Gas Company
via its merger with Milestone. He began his career at Continental Oil Company
holding various positions including director of exploratory projects for onshore
and offshore offices and a division exploration manager for the western United
States. Mr. Greene has been a director of Basin Exploration, Inc. since February
1996 and a director of CWYR since February 1998.

      RAFIQ A. SAYED, 45, Director since September, 1998, is a technology
executive with over 22 years of experience in the global telecommunications and
energy industries and broad based technical management experience. He has been
recognized for identifying core business needs and applying state-of-the-art
technology solutions. Presently, Mr. Sayed is consulting for Enron Energy
Services where he supports the Chief Information Officer in defining business
processes relative to deregulation. He served on the Board of Directors of
Meteor Industries, Inc., a position he held from April 1996 until September
1998. From 1981 to 1997 Mr. Sayed was with Nortel Technology in various
positions of increasing responsibility, and most recently as Senior Director
managing over 300 professionals and a budget in excess of $30 million, and where
he was the architect in charge of the design of a state-of-the-art automation
platform for large telephony switching platforms and for re-engineering of the
feature processing environment for the DM8-100. Mr. Sayed graduated from
Southbank College in London, England in 1975 with an H.N.D. in
Electrical/Electronic Engineering (equivalent of a BSEE). He also attended Essex
University in London, England where he was enrolled in an advanced computer
science program with an emphasis in Operating Systems, Software Engineering and
Programming.

      F. ROBERT TIDDENS, 44, Director, has over 20 years experience in oil and
gas exploration, production and acquisition activities in all producing states
in the continental United States. Since 1995, Mr. Tiddens was President and
Chief Executive Officer of Shoreline Resource Company, Inc., a Denver based
private oil and gas exploration concern he founded and subsequently merged into
a subsidiary of the Company in February 1998, at which time he became a director
of the Company. From 1990 to 1995, Mr. Tiddens was a consultant advising client
companies in all facets relating to the oil and gas industry. Prior thereto, Mr.
Tiddens was Vice President of Land & Acquisitions for Presidio Oil Company, a
rapidly-growing American Stock Exchange Company based in Denver and New York.
Mr. Tiddens is a graduate of the University of Wisconsin with a
finance/economics degree.

      All directors of the Company serve one year terms and hold office until
the annual meeting in the year in which their respective terms expire or until
their respective successors are duly elected and qualified. Mr. Sayed and Dr.
Daud were selected to serve on the Board of Directors pursuant to certain
agreements between the Company and The James E. Moore Revocable Trust, u/d/t
dated July 28, 1994 (the "Trust") in connection with a loan from the Trust to
the Company, and an extension of the repayment due date of such loan. See Item
12 "Certain Relationships and Related Transactions" for additional discussion
regarding the loan and related documents. All officers of the Company serve at
the discretion of the Board of Directors and until the next annual meeting of
directors of the Company. There are no family relationships between any
director, officer or person nominated or chosen to become a director or officer
and any other such persons.

COMMITTEES AND MEETINGS

      During the fiscal year ended June 30, 1998, the Board of Directors held
five meetings. Faisal Chaudhary attended less than 75% of such meetings. The
Board of Directors of the Company has no established committees to which it has
delegated any authority.


                                      -26-

<PAGE>

ITEM 10.   EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

      The following table sets forth the aggregate compensation paid by the
Company to the individuals serving as the Company's chief executive officers for
each of the Company's last three fiscal years:

                           SUMMARY COMPENSATION TABLE

                                              ANNUAL COMPENSATION

     NAME AND POSITION(1)          YEAR      SALARY($)    BONUS($)    OTHER($)
------------------------------   --------   ----------   ---------  ----------
Kim M. Fuerst, President & CEO     1998      110,000          0      10,000(2)
                                   1997       90,000(3)       0           0

Dennis R. Staal, former President  1996       19,250          0      10,000(4)

-----------------------

(1)   No other executive officer of the Company received more than $100,000
      during the fiscal year ended June 30, 1998. 
(2)   Represents extinguishment of June salary obligation of the Company to 
      Mr. Fuerst as partial payment for the purchase of the Company's North 
      Dakota properties by FM Energy, LLC, of which Mr. Fuerst owns 50 percent. 
      See Item 12.
(3)   Represents payment for nine months of service.
(4)   Represents 10,000 shares of Common Stock valued at $1.00 per share that
      were issued in August 1996 for service by Mr. Staal to the Company.

OPTION GRANTS

      There were no grants of stock options made during the fiscal year ended
June 30, 1998 to the Company's named executive officers.

      The following table shows the number of shares covered by all exercisable
and unexercisable stock options held by the named executive officers as of June
30, 1998, as well as the value of unexercised "in the money" options at such
date. No named executive officer exercised stock options during the last fiscal
year.

<TABLE>
<CAPTION>
                         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                                AND FISCAL YEAR-END OPTION/SAR VALUES


                                           NUMBER OF SECURITIES      VALUE OF UNEXERCISED IN THE
                             SHARES       UNDERLYING UNEXERCISED        MONEY OPTIONS/SARS AT
                            ACQUIRED    OPTIONS/SARS AT FY-END (#)             FY-END
          NAME            ON EXERCISE   EXERCISABLE/UNEXERCISABLE    EXERCISABLE/ UNEXERCISABLE
------------------------  ------------  --------------------------   ----------------------------
<S>                         <C>                <C>                        <C> 

Kim M. Fuerst                -0-               500,000/0                   $312,500/0 *
</TABLE>
------------------------

(*)   Amount shown represents aggregated fair market value based upon the mean
      of the closing bid and asked price on June 30, 1998 of $1.625 per
      share less aggregate exercise price of $1.00 per share for the
      unexercised in-the-money options held. These values have not been, and
      may never be, realized. Actual gains, if any, on exercise will depend
      on the value of the Common Stock on the date of exercise.


                                      -27-

<PAGE>

EMPLOYMENT CONTRACTS

      The Company entered into an employment contract with Mr. Fuerst on
October 1, 1996 pursuant to which Mr. Fuerst receives a salary of $10,000 per
month and was granted incentive stock options to purchase up to 500,000 shares
of the Company's common stock at an exercise price of $1.00 per share. The
contract is for an initial term of three years commencing October 1, 1996 and
may be terminated by Mr. Fuerst upon 90 days prior written notice to the
Company, and by the Company without prior notice to Mr. Fuerst, if for Cause (as
defined in the contract). The Company's salary obligation to Mr. Fuerst of
$10,000 per month for the months of June through October 1998 was extinguished
in connection with the purchase by FM Energy, LLC (of which Mr. Fuerst owns 50
percent and serves as co-manager) of the Company's properties located in North
Dakota. The satisfaction of the Company's salary obligation for such months
served as partial consideration for the purchase. See Item 12 - "Certain
Relationships and Related Transactions."

COMPENSATION OF DIRECTORS

      The Directors of CWYR, who do not receive annual salaries from CWYR, may
receive reimbursement for travel expenses. Other than the director options set
forth below, no consulting fees, finder's fees or commissions were paid to
Directors of the Company during the fiscal year ended June 30, 1998.

<TABLE>
<CAPTION>
                     DIRECTOR COMPENSATION FOR LAST FISCAL YEAR

                                            SECURITY GRANTS
                               --------------------------------------
                                                NUMBER OF SECURITIES
                                  NUMBER OF          UNDERLYING
                  NAME            SHARES (#)      OPTIONS/SARS (#)
          -------------------  --------------  ----------------------
          <S>                       <C>               <C>
          J. Samuel Butler          --                      --
          Faisal Chaudhary          --                      --
          John F. Greene            --                100,000*
          F. Robert Tiddens         --                100,000*
</TABLE>
-------------------------

*  Director option to purchase common stock granted on February 11, 1998
   pursuant to the Company's Equity Incentive Plan. The options are exercisable
   at $3.25, the fair market value at the date of grant, and will vest on
   February 11, 1999.

      During fiscal 1998, the Board of Directors and Shareholders approved an
Equity Incentive Plan (the "Equity Plan") in which Directors are eligible to
participate. A total of 2,500,000 shares of Common Stock have been reserved for
issuance under the Equity Plan, subject to adjustments to reflect changes in the
Company's capitalization resulting from stock splits, stock dividends and
similar events. The Equity Plan currently is administered by the Board of
Directors, but may be administered by a committee appointed by the Board.

      Options granted to directors under the Equity Plan expire ten years from
the date of grant. The option exercise price for non-statutory options is
determined by the Board of Directors and may be paid in cash or by surrendering
to the Company outstanding Common Stock already owned by the optionee, valued at
fair market value, by delivering a promissory note, or by a combination of such
means of payment, as may be determined by the Board. Options granted pursuant to
the Equity Plan may not be exercised more than three months after the option
holder ceases to be a director of the Company, except that in the event of the
death or permanent and total disability of the option holder, the option may be
exercised by the holder (or his estate, as the case may be), for a period of up
to one year after the date of death or permanent or total disability. Options
granted to directors under the Equity Plan are treated as non-statutory stock
options under the Internal Revenue Code. On February 11, 1998, the Board of
Directors amended the Equity Plan to delete the automatic six-month vesting
requirement for options granted thereunder to allow the Board of committee broad
discretion in determining such requirements.


                                      -28-

<PAGE>

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information as to the number of
shares of Common Stock of the Company beneficially owned as of December 15,
1998, by (i) each person who is known to the Company to be the beneficial owner
of more than five percent of the Common Stock of the Company; (ii) each of the
Company's directors; (iii) the five most highly compensated executive officers,
including the Chief Executive Officer; and (iv) all of the executive officers
and directors of the Company as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such holders, have sole investment and voting
power with respect to such shares, subject to community property laws, where
applicable.

<TABLE>
<CAPTION>
                                                                  PERCENTAGE
                                                 NUMBER OF       BENEFICIALLY
              NAME AND ADDRESS                   SHARES(a)          OWNED(b)
--------------------------------------------   -------------    ----------------
<S>                                             <C>                 <C>  
Kim M. Fuerst...............................    612,500(c)          20.4%
       751 Horizon Court, Ste. 205
       Grand Junction, Colorado  81506

Faisal Chaudhary............................    612,500(d)          20.4%
       151 Toby Lane
       Anaheim Hills, California  92807

J. Samuel Butler............................    325,000(e)          11.6%
       1801 Broadway, Suite 600
       Denver, Colorado  80202

Syed A. Daud................................    100,000(f)           3.8%
       64 Hainsworth Ct.
       Markham, Ontario  L3S1T5
       Canada

John F. Greene..............................    345,303(f)          13.3%
       1569 Royal Buffalo Drive
       Silverthorne, Colorado  80498

Rafiq A. Sayed..............................    108,600(f)           4.1%
       102 Avenue of the Estates
       Cary, North Carolina  27511

F. Robert Tiddens...........................    437,030(f)          16.8%
       8360 East Hinsdale Avenue
       Englewood, Colorado  80112

The James E. Moore Revocable Trust,.........    200,000(g)           7.6%
       u/d/t dated July 28, 1994
       7827 Berger Avenue
       Playa del Rey, California  90293

Cindy L. Stewart............................    239,285              9.6%
       8101 E. Dartmouth Avenue, Suite 71
       Denver, Colorado  80231

Sayed Consulting, Inc.......................    300,000(h)          11.1%
       11800 Central Avenue, Suite 100
       Chino, California  91710-7202

All Officers and Directors as a Group 
   (7 persons) .............................  2,540,933             60.6%
</TABLE>

                                      -29-
<PAGE>

---------------------

(a)   All shares are owned both of record and beneficially unless otherwise
      specified by footnote to this table.
(b)   Based on 2,491,694 shares of Common Stock outstanding at December 16,
      1998.
(c)   Includes 500,000 shares issuable upon exercise of stock options granted 
      under an Incentive Stock Option Plan.
(d)   Includes 500,000 shares issuable upon exercise of stock options granted
      under a Director Stock Option Plan.
(e)   Includes 200,000 shares issuable upon exercise of stock options granted
      under a Director Stock Option Plan; 100,000 shares issuable upon exercise
      of a stock option granted to Trinity Petroleum Management LLC, of which
      Mr. Butler owns approximately 24 percent and serves as the President and
      CEO; and 25,000 restricted shares owned by ST Oil Company, of which
      Mr. Butler owns approximately 52 percent and serves as the President and
      CEO.
(f)   Includes 100,000 shares issuable upon exercise of director stock options
      granted under the Equity Incentive Plan.
(g)   Includes 130,000 shares issuable upon exercise of warrants granted in
      connection with Bridge Loan and extension thereof.
(h)   Includes 200,000 shares issuable upon exercise of options granted under
      the Equity Incentive Plan in connection with consulting services.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Set forth below is a description of transactions entered into between the
Company and certain of its officers, directors, and/or employees during the last
two fiscal years.

      TRANSACTIONS WITH MANAGEMENT AND OTHERS. No Director or Officer of CWYR,
nominee for election as a Director, security holder who is known to CWYR to own
of record or beneficially more than five percent of any class of Company's
voting securities, or any relative or spouse of any of the foregoing persons, or
any relative of such spouse, who has the same home as such person or who is a
director or officer of any parent or subsidiary of CWYR, has had any transaction
or series of transactions exceeding $60,000 during the last two fiscal years, or
has any presently proposed transaction, to which CWYR was or is to be a party,
in which any of such persons had or is to have any direct or indirect material
interest, except the following:

      The Company entered into an employment contract with Mr. Fuerst on October
1, 1996 pursuant to which Mr. Fuerst receives a salary of $10,000 per month and
was granted incentive stock options to purchase up to 500,000 shares of the
Company's common stock at an exercise price of $1.00 per share. The contract is
for an initial term of three years commencing October 1, 1996 and may be
terminated by Mr. Fuerst upon 90 days prior written notice to the Company, and
by the Company without prior notice to Mr. Fuerst, if for Cause (as defined in
the contract).

      Effective January 1, 1998, the Company entered into an Agreement for
Administrative Services (the "Trinity Agreement") with Trinity Petroleum
Management LLC, a Colorado limited liability company ("Trinity"). Pursuant to
the terms of the Trinity Agreement, Trinity performs certain management
functions for the Company for a fee of $3,000 per month and reimbursement of
third party expenses. The Trinity Agreement is for a term of one year,
continuing thereafter on a month-to-month basis, terminable upon 60 days written
notice by either party. J. Samuel Butler, a member on the Board of Directors of
the Company, currently serves as President of Trinity and owns approximately 24
percent of Trinity through his ownership of Butler Resources, LLC. In connection
with certain additional services provided to the Company by Trinity pursuant to
the Agreement, on January 22, 1998 the Company issued to Trinity 25,000
restricted shares of Common Stock as well as an option to purchase of up to
100,000 shares of the Company's Common Stock at an exercise price of $1.50 per
share.

      Effective as of January 1, 1998, the Company entered into an Agreement for
Consulting Services (the "SCI Agreement") with Sayed Consulting, Inc., a Nevada
corporation ("SCI"). Pursuant to the terms of the SCI Agreement SCI performs
certain investor and public relations functions for the Company for a fee of
$1,000 per month and reimbursement of third party expenses. The SCI Agreement is
for a term of one year, but may be terminated by either party with or without
cause upon 30 days written notice to the other party. On January 30, 1998 in
connection with the SCI Agreement, the Company issued to SCI an option to
purchase up to 200,000 shares of the Company's Common Stock at an exercise price
of $1.75 per share, which options have been repriced as of December 4, 1998 to
$1.00 per share pursuant


                                      -30-

<PAGE>

to the Bridge Loan Extension described below. Coupled with its prior ownership
of the Company's Common Stock, SCI beneficially owns approximately 11.1 percent
of the Company. Waseem A. Sayed owns 100 percent of SCI and serves as its
President. Mr. Sayed's brother, Rafiq A. Sayed, was appointed as a member of the
Company's Board of Directors effective September 4, 1998. Dr. Syed A. Daud, a
recently-appointed member of the Board of Directors, serves as Vice President of
Investor Relations & Communications for SCI.

      On September 2, 1998, the Company completed a financing transaction with
the James E. Moore Revocable Trust, u/d/t dated July 28, 1994 (the "Trust"), by
executing a Loan Agreement, dated as of August 25, 1998 (the "Loan Agreement"),
pursuant to which the Trust loaned $120,000 (the "Bridge Loan") to the Company
to be repaid on or before October 31, 1998. In return for the Bridge Loan, the
Company granted the Trust a security interest in its properties located in the
Paradox Basin of southern Utah, and a ten-year warrant to purchase up to 180,000
shares of the Company's Common Stock at an exercise price of $1.00 per share. In
addition, Mr. Rafiq A. Sayed was appointed to serve on the Company's Board of
Directors as a designee of the Trust in connection with the Bridge Loan. As of
September 2, 1998, the Trust beneficially owned approximately 9.4 percent of the
Company's Common Stock. However, effective as of November 23, 1998, the Trust
conveyed warrants to purchase up to 150,000 shares of the Company's Common Stock
to various third parties in private transactions, thereby reducing the Trust's
beneficial ownership in the Company to approximately four percent. The repayment
date of the Bridge Loan was subsequently extended to November 30, 1998 in
connection with the North Dakota Agreement (as defined and described herein
below).

      Effective as of November 1, 1998, the Company accepted an Offer to
Purchase certain of its properties located in North Dakota (the "North Dakota
Agreement") submitted by FM Energy, LLC ("FM"), a California limited liability
company collectively owned by the Company's President, Kim M. Fuerst, and the
Trust. Pursuant to the North Dakota Agreement, the Company sold its interest in
certain properties located in North Dakota in return for (a) a cash payment to
the Company of $50,000; (b) extinguishment of the Company's $50,000 obligation
to Kim M. Fuerst as compensation for his services as President of the Company
for the months of June through October 1998; and (c) an extension of the
repayment date for the Bridge Loan from October 31, 1998 to November 30, 1998.
The Company acquired the North Dakota properties during fiscal 1998 for
$113,392. See Item 6 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

      On December 4, 1998, the Board of Directors of the Company approved an
agreement with the Trust to extend the repayment date for the Bridge Loan from
November 30, 1998 to January 15, 1999 (the "Bridge Loan Extension"). As partial
consideration therefore, the Trust received an additional warrant for the
purchase of up to 100,000 shares of Common Stock at a price per share of the
lower of (i) $1.00 or (ii) the lowest price per share of Common Stock or Common
Stock equivalent issued by the Company in any offering of its securities
occurring prior to April 1, 1999, thereby increasing the beneficial ownership by
the Trust to approximately 7.6 percent. As additional consideration, the Bridge
Loan Extension agreement provided that the Company (a) reprice the warrants to
purchase 180,000 shares of Common Stock previously granted to the Trust at $1.00
in accordance with the price described above for the newly-granted warrants; (b)
reprice the options held by SCI from $1.75 to $1.00 per share; and appoint Dr.
Daud as a member of the Board of Directors.


ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

      A list of the Exhibits required by Item 601 of Regulation S-B to be filed
      as part of this report is set forth in the Index to Exhibits and is
      incorporated herein by reference.

(b)   Reports on Form 8-K

      No reports were filed on Form 8-K during the quarter ended June 30, 1998.


                                      -31-

<PAGE>

(c)   The following Financial Statements are filed as part of this Report:

                                                                            PAGE

      Report of Independent Accountants.......................................9

      Consolidated Balance Sheets as of June 30, 1998 and 1997...............10

      Consolidated Statements of Operations for the years
      ended June 30, 1998 and 1997...........................................11

      Consolidated Statements of Stockholders' Equity
      for the years ended June 30, 1998 and 1997.............................12

      Consolidated Statements of Cash Flows for the years
      ended June 30, 1998 and 1997...........................................13

      Notes to Consolidated Financial Statements.............................14

All Financial Statement Schedules are omitted because they are not required, are
inapplicable or the information is included in the financial statements or notes
thereto.


                                      -32-

<PAGE>

                                 SIGNATURE PAGE

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


Dated: December 23, 1998               COLORADO WYOMING RESERVE COMPANY


                                       By /s/ Kim Fuerst
                                         ---------------------------------------
                                          Kim Fuerst, President and Principal 
                                          Executive Officer

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




Dated:  December 23, 1998              By /s/ Kim Fuerst
                                         ---------------------------------------
                                          Kim Fuerst, President and Principal 
                                          Executive Officer, Treasurer and Chief
                                          Financial and Accounting Officer


Dated:  December 23, 1998              By /s/ Faisal Chaudhary
                                         ---------------------------------------
                                          Faisal Chaudhary, Director and 
                                          Secretary


Dated:  December 23, 1998              By /s/ J. Samuel Butler
                                         ---------------------------------------
                                          J. Samuel Butler, Director


Dated:  December 23, 1998              By /s/ John F. Greene
                                         ---------------------------------------
                                          John F. Greene, Director


Dated:  December 23, 1998              By /s/ F. Robert Tiddens
                                         ---------------------------------------
                                          F. Robert Tiddens, Director


Dated:  December 23, 1998              By /s/ Rafiq A. Sayed
                                         ---------------------------------------
                                          Rafiq A. Sayed, Director


Dated:  December 23, 1998              By /s/ Syed A. Daud                     
                                         ---------------------------------------
                                          Syed A. Daud, Director


                                      -33-

<PAGE>

                                INDEX TO EXHIBITS


3.1   Articles of Incorporation.  (a)

3.2   Bylaws.  (a)

10.1  Employment Agreement between the Company and Kim M. Fuerst, dated
      October 1, 1976. (b)

10.2  Incentive Stock Option Plan, dated October 18, 1996.  (b)

10.3  Incentive Stock Option Agreement between the Company and Kim M. Fuerst,
      dated October 18, 1996. (b)

10.4  The Company's Equity Incentive Plan.  (b)

10.5  Administrative Services Agreement between the Company and Trinity
      Petroleum Management LLC, dated March 15, 1997. (c)

10.6  Warrant, dated March 31, 1997, from the Company to Trinity Petroleum
      Management LLC. (c)

10.7  Consulting Agreement between the Company and Sayed Consulting, Inc.,
      effective October 1, 1996. (b)

10.8  Option Agreement between the Company and Sayed Consulting, Inc., dated
      November 15, 1996. (b)

10.9  Agreement for Administrative Services between the Company and Trinity
      Petroleum Management, LLC, dated as of January 1, 1998.

10.10 Agreement for Consulting Services between the Company and Sayed
      Consulting, Inc., dated as of January 1, 1998. (d)

10.11 Agreement and Plan of Merger, dated as of February 6, 1998, between the
      Company, CW Sub, Inc., Shoreline Resource Company, Inc., F. Robert 
      Tiddens, John F. Greene and Cindy L. Stewart. (d)

10.12 Loan Agreement, dated as of August 25, 1998, between the Company and the
      James E. Moore Revocable Trust, u/d/t dated July 28, 1994 (the "Trust").

10.13 Mortgage, Deed of Trust, Security Agreement and Financing Statement, dated
      as of August 25, 1998, from the Company to James A. Holtkamp, Trustee and
      the Trust.

10.14 Promissory Note, dated August 25, 1998, in the principal amount of
      $120,000.00, from the Company to the Trust.

10.15 Warrant Agreement, dated as of August 25, 1998, between the Company and
      the Trust.

10.16 Registration Rights Agreement, dated as of August 25, 1998, between the
      Company and the Trust.

10.17 Extension, dated as of December 4, 1998, to the Bridge Loan between the
      Company and the Trust.

10.18 Amendment No. 1 to Registration Rights Agreement and Promissory Note,
      dated as of December 4, 1998, between the Company and the Trust.

10.19 Warrant Agreement, dated as of December 4, 1998, between the Company and
      the Trust.

10.20 Offer to Purchase, dated November 2, 1998, from FM Energy, LLC to the
      Company.


                                      -34-

<PAGE>

23    Consent of PricewaterhouseCoopers LLP.

27    Financial Data Schedule.

------------------------------

(a)   Incorporated by reference to the Company's Form 10-K for the fiscal year
      ended May 31, 1983.
(c)   Incorporated by reference to the Company's Form 10-QSB for the quarter
      ended March 31, 1997.
(b)   Incorporated by reference to the Company's Form 10-KSB for the fiscal year
      ended June 30, 1997.
(d)   Incorporated by reference to the Company's Form 10-QSB for the quarter
      ended March 31, 1998.


                                     -35-