**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, 2006**





File
      No.
      0-09482





**COLORADO
      WYOMING RESERVE COMPANY**


(Name
      of
      Small Business Issuer as Specified in its Charter)





**Wyoming**
            
            83-0246080(State
                or other jurisdiction
            
            (IRS
                Employerof
                incorporation)
            
            Identification
                No.)








751
                Horizon Court, Suite 205, Grand Junction, Colorado
            
            81506(Address
                of principal executive offices)
            
            (Zip
                Code)




Registrant’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 þ NO o





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. [ ]





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the
      price
      at which the common equity was sold, or the average bid and asked price of
      such
      common equity, as of a specified date within the past 60 days. (See definition
      of affiliate in Rule 12b-2 of the Exchange Act.) ____





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition
      of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
      Exchange Act. (Check one):




Large
      accelerated filer o Accelerated filer o Non-accelerated filer þ





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act) Yes o No þ


State
      Issuer's revenues for its most recent fiscal year: None





As
      of
      October 13, 2006, 16,365,982 shares
      of
      common stock $.01 par value were outstanding. The aggregate market value of
      voting stock held by non-affiliates of the Registrant was $12,806,083 based
      on
      the closing price of the Company's Common Stock of $0.90, as reported by the
      Pink Sheets on October 13, 2006.









**PART
      I**





**ITEM
      1. BUSINESS**





**GENERAL**





Colorado
      Wyoming Reserve Company ("CWYR" or the "Company"), with its principal office
      located 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.





The
      Company is an oil and natural gas exploration company with a geographical focus
      in the Rocky Mountain region of the western United States. The Company'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 three-dimensional (3D) 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. Although the
      Company's Southwest Lisbon property is currently in production, the Company
      shall own an interest in this property only after payout. The Company will
      begin
      to have operating income once payout is achieved. The Southwest Lisbon property
      is located in the upper 1/3 rd of the
      Paradox Basin on the Utah side and the Paradox Basin is located in the S.E.
      corner of Utah and the S.W. corner of Colorado.





**STRATEGY**





The
      Company is a 3D Seismic exploration and production company focused on the
      Paradox Basin which is located in the S.E. corner of Utah and the S.W. corner
      of
      Colorado. CWYR has defined seven structures, after four years of seismic science
      and the expenditure of approximately $6 million on science, acreage and
      drilling, by it and its partners. After payout, the Company shall own 10.6%
      of
      structures one and two with structure one under development. Structure one
      is
      producing into a sales pipeline. Structures three through five, where the
      Company owns 42.5% working interest, remain to be drilled. Structures six and
      seven are in the acquisition phase and the Company would own 42.5% of these
      to
      be acquired structures. The Company anticipates additional 3D Seismic work
      around the identified structures. The Company would like to expand its current
      16,640 acre 3D Seismic shoot generated in the years 2000 to 2002 by an
      additional 64,000 acres, in the future, in order to look for additional
      structures. Finally, it is worth noting that structures two through seven need
      to be drilled.





Payout
      will occur after the some $6 million dollars spent by the partners is recovered
      from the production of these wells. From an economic standpoint the income
      from
      these wells continues to be sporadic and insufficiently regular to enable an
      accurate and reliable assessment to be made as to whether the wells will ever
      reach payout. Since the Company’s interest in these wells is a 10.6% interest
      AFTER PAYOUT, as of June 30, 2006 the Company still has no ownership of any
      producing property.





In
      years
      2000 to 2002 the Company acquired 68,000 acre leases and then shot, processed
      and interpreted 16,640 acres, state of the art 3D Seismic shoot. In 2003 the
      interpretation of the shoot was perfected. In 2004, the Partners and the Company
      drilled two, 3D Science confirming wells, in May and December respectively,
      on
      structure one. In 2005 the Company and Partners caused the Pipeline Contract
      and
      hook-up of two wells on structure one. The Company anticipates an aggressive
      posture in pursuit of this area.





The
      Company is currently focusing its exploratory efforts on its mineral interests
      in approximately 22,640 gross leased acres (approximately 6,764 net leased
      acres) in the central Paradox Basin of southeastern Utah (the "Paradox Basin
      Project" or the "Project"). During fiscal 2001, the Company obtained a 3D
      seismic survey (the "Seismic Survey") covering a 26 square mile portion of
      its
      Paradox Basin leasehold position. The survey results indicate that further
      exploratory work is warranted on the Paradox Basin Project. Together with its
      joint venture partners, CWYR has undertaken drilling and intends to raise
      additional capital in order to be able to participate in the development of
      the
      Paradox Basin Project.





On
      March
      3, 2005, the Company confirmed its proprietary 3D Seismic Science with two
      exploratory successes at its Paradox Basin Exploration Project in Southeast
      Utah. The science, four years under development, has been confirmed by the
      completion of the Federal 1-31 and the Evelyn Chambers wells on the Southwest
      Lisbon structure, 3 1⁄2 miles southwest of the Lisbon Field in the same
      Mississippian formation. Both wells tested in the range of 2 MMCFD in the
      formation analogous to the productive formation at Lisbon. The ‘Evelyn Chambers’
well is hooked up to the plant, line laid and producing. The Federal 1-31 well,
      is about to be re-entered waiting on rig availability. It is also already hooked
      up to the plant, line laid but currently not producing. At June 30, 2006 CWYR
      owns only an after-payout interest in these two


-2-


productive
      oil and gas wells and the associated developed acreage. Variables affecting
      payout are: Price per mcf of gas and price per barrel of oil. These vary over
      time and have been very volatile of late. Payout will occur after the some
      $6
      million dollars spent by the partners is recovered from the production of these
      wells. From an economic standpoint the income from these wells continues to
      be
      sporadic and insufficiently regular to enable an accurate and reliable
      assessment to be made as to whether the wells will ever reach payout. Since
      the
      Company’s interest in these wells is a 10.6% interest AFTER PAYOUT, as of June
      30, 2006 the Company still has no ownership of any producing property.





The
      Company owns 10.6% APO of this 700-acre structure and 10.6% of the surrounding
      8,960 acres.  Further additional seismic work in light of this successful
      discovery is anticipated on the structure.





The
      Company owns 42 1⁄2 % of two other, 3D delineated, structures in the Paradox Basin
      Project.  Additionally, the Company will have 42 1⁄2 % of two other,
      tentatively identified, structures in the area.





The
      Company plans additional 3D Seismic science work in the whole of the Paradox
      Basin Project area as well as a development drilling program in the Southwest
      Lisbon structure.




On
      July
      21, 2005 the Company announced that it had received BLM approval to drill a
      third well on its previously 3D seismic identified Southwest Lisbon structure
      in
      the Paradox Basin Exploration Project in Southeast Utah. There is the
      possibility that up to a total of 12 to 16 wells from multiple zones on the
      Southwest Lisbon structure can be drilled. The Company already owns the acreage
      where this drilling is expected to occur.





The
      Company anticipates an extensive 3D seismic shooting program and drilling on
      its
      currently identified structures.





In
      May
      2006 the Company acquired a 42 1⁄2% interest in an additional 6,000 acres
      underneath and bordering its 3D Seismic Shoot in Southeast Utah. The acquisition
      of the 6,000 acres raises the Company’s acreage position in the area to 22,640
      acres (approximately 6,764 net leased acres). The acquired acreage borders
      the
      Company’s 16,640-acre 3D Seismic Shoot.





Additional
      3D Seismic Shooting is planned for and the Company anticipates 3 test wells
      in
      the area in 2007.





**FARMOUT
      AGREEMENT**





The
      Company entered into a farmout agreement (the "Farmout Agreement") with ST
      Oil
      Company ("ST Oil"), FM Energy, LLC (whose rights and interest were subsequently
      assigned to Moore Energy LLC ("Moore Energy")) and The Shoreline Companies,
      LLC,
      ("Shoreline") (collectively, "the Farmees"), effective September 22, 2000,
      to
      finance exploration of the Paradox Basin Project. Certain directors and
      stockholders of the Company are directors, officers and controlling stockholders
      of ST Oil, Moore Energy and Shoreline. Under the Farmout Agreement, the Company
      assigned 50 percent of its mineral working interests in the Paradox Basin
      Project to the Farmees in exchange for the Seismic Survey. Prior to the
      commencement of the Seismic Survey, the Company sold an additional 7.5 percent
      of its mineral working interests to the Farmees in February 2001 for $150,000.
      The purchase price was determined using the same valuation of the Paradox Basin
      Project as was used in the Farmout Agreement. The cost of completing, processing
      and interpreting the Seismic Survey of approximately $1.1 million was borne
      by
      the Farmees.





The
      Farmout Agreement requires the Company to bear 42.5 percent of the cost of
      maintaining the Paradox Basin Project leasehold, which cost is estimated at
      approximately $33,000 per year. The Company currently has no funds available
      to
      meet this obligation, and its interest in the Project consequently could be
      reduced or eliminated.





The
      Farmout Agreement establishes an area of mutual interest (the "AMI") until
      September 22, 2010. If during the ten-year term of the AMI, any party to the
      Farmout Agreement acquires an oil or gas leasehold interest in the AMI, that
      party must give all the other parties the opportunity to participate. The
      acquiring party must notify all other parties of the acquisition, and each
      recipient of this notice has thirty (30) days to notify the acquiring party
      of
      its election to participate or not participate. If a party elects to
      participate, the acquiring party must promptly assign to the party an interest
      in the leasehold interest proportionate to the party's interest under the
      Farmout Agreement. While there can be no assurance that the Company will have
      the funds to participate in future AMI acquisitions, it did participate during
      fiscal 2006, spending $36,000 on additional leases.





On
      September 25, 2002, Colorado Wyoming Reserve Company (the "Company") entered
      into a Farmout Agreement (the "2002 Farmout Agreement") with ST Oil Company,
      a
      Nevada corporation, and The Shoreline Companies, LLC, a Colorado limited
      liability company (collectively, the "Farmees"). The Company owns a 42.5%
      working interest and the Farmees collectively own a 34.5% working interest
      in
      certain oil and gas leases covering approximately 64,000 acres of land located
      in the Paradox Basin in San Juan County, Utah. J. Samuel Butler, a director
      of
      the Company till September 22, 2004, and a stockholder of the Company, is also
      President and Chief Executive Officer and a stockholder of ST Oil Company.
      F.
      Robert


-3-




Tiddens
      and John F. Greene, directors of the Company till September 22, 2004, and
      stockholders of the Company, are also directors and 50% stockholders of The
      Shoreline Companies, LLC.





**CREDIT
      AGREEMENT**





In
      September 2000, the Company also entered into a Credit Agreement with the
      Farmees. Amounts borrowed under the Credit Agreement bear interest at the rate
      of eight percent per annum. At June 30, 2006 the Company had a principal balance
      plus interest owing the Farmees of $192,169. The note was due and payable in
      full on September
      28, 2001, and remains unpaid as of October 13, 2006.





**EQUIPMENT**





The
      Company currently owns only leasehold interests in undeveloped acreage in the
      Paradox Basin. 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.





**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 explore, develop
      and operate such properties. Most 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, especially in the acquisition of attractive oil
      and gas properties.





**GOVERNMENTAL
      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 Paradox Basin Project is located, regulates the production 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 could impact operations on the
      Paradox Basin Project if an oil and gas prospect is discovered and developed;
      however, these impacts are not expected to be significant.





**ENVIRONMENTAL
      REGULATION**





The
      Company's exploration activities are, and any development or production
      activities could be, 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.


-4-




**EMPLOYEES**





As
      of
      October 13, 2006, the Company had one full-time employee. The Company employs
      consultants as needed.




**RISK
      FACTORS**





**THE
      COMPANY HAS NO CASH, NO OPERATIONS AND NO REVENUES AND COULD BE FORCED TO
      LIQUIDATE; AS A RESULT, STOCKHOLDERS MAY SUFFER A COMPLETE LOSS OF THEIR
      INVESTMENT.**





CWYR
      has
      a history of operating losses, and it is anticipated that those losses will
      continue for the foreseeable future. The Company continues to incur costs
      related to maintaining its interests in its properties as well as general and
      administrative costs. In addition, CWYR will require substantial additional
      capital to further explore and develop its properties and to acquire additional
      properties. The Company currently has no cash. The Company does not currently
      have any producing properties, and therefore has no prospects for a positive
      revenue stream in the near future. The Company is in default for nonpayment
      of
      its $192,169 loan (which includes $122,000 principal plus $70,169 interest)
      under the Credit Agreement. The Company will need to raise additional capital
      through a debt or equity financing in the immediate future in order to fund
      its
      share of maintaining and marketing the Paradox Basin Project, to acquire
      additional properties pursuant to the AMI provision of the Farmout Agreement
      or
      otherwise, to cover its general and administrative expenses and to repay
      outstanding indebtedness. If the Company is successful in raising additional
      equity capital, a substantial discount to prevailing market prices may be
      required, resulting in significant dilution to existing stockholders. There
      can
      be no assurance that the Company will be successful in obtaining additional
      financing on terms acceptable to it, if at all. The Company's failure to obtain
      additional financing would have a material adverse effect on the Company's
      business and financial position, and, as a result, CWYR may have to liquidate
      and stockholders may suffer a complete loss of their investment.





**THE
      COMPANY IS DEPENDENT ON A SINGLE PROJECT; IF THE PARADOX BASIN PROJECT IS NOT
      SUCCESSFUL, THE COMPANY WOULD BE MATERIALLY ADVERSELY AFFECTED.**





CWYR's
      only properties are its mineral interests in the Paradox Basin. The Paradox
      Basin is located in the S.E. corner of Utah and the S.W. corner of Colorado.
      The
      Company, together with the Farmees, have recently begun drilling in the Paradox
      Basin Project. The results of the Seismic Survey indicate that additional
      exploratory work is warranted. The Company may not be able to fund its share
      of
      developing the Project and its interest in the Project could consequently be
      reduced or forfeited. The Company may expend significant funds only to determine
      that the properties do not contain reserves. If the Company's exploration
      efforts on the Paradox Basin Project fail, the Company could be forced to
      liquidate and stockholders may suffer a complete loss of their investment.





**THE
      COMPANY'S EXPLORATION ACTIVITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
      OF
      RISK.**





CWYR
      currently is spending its entire capital budget on exploration of one project.
      Exploration activities are speculative and involve substantially more risk
      than
      development or exploitation activities. Even when fully utilized and properly
      interpreted, 3D seismic data and visualization techniques only assist
      geoscientists in identifying subsurface structures and hydrocarbon indicators
      and do not conclusively allow the interpreter to know if hydrocarbons will
      in
      fact be present in such structures. In addition, the use of 3D seismic data
      and
      such technologies requires greater predrilling expenditures than traditional
      drilling strategies. Additionally, market forces could increase the costs of
      further exploration to make it prohibitive. Because the Company has only one
      exploration project, any exploration failure could force the Company to
      liquidate.





**3D
      SEISMIC DATA ONLY ASSISTS AND IS NOT CONCLUSIVE.**





Even
      when
      fully utilized and properly interpreted, 3D seismic data only assists
      geoscientists in identifying subsurface structures and hydrocarbon indicators
      and does not conclusively allow the interpreter to know if hydrocarbons will
      in
      fact be present in such structures. In addition, the use of 3D seismic data
      and
      such technologies require greater pre-drilling expenditures than traditional
      exploration strategies. Failure to properly process or interpret the seismic
      survey or the receipt of disappointing results from a seismic survey in the
      target area would have a material adverse effect on the Company's future
      prospects and ability to remain in operation.





**ONE
      OF THE COMPANY'S MANY CREDITORS COULD FORCE IT INTO BANKRUPTCY.**





The
      Company has significant liabilities and numerous creditors, some of whom are
      parties to the Farmout Agreement. A creditor or group of creditors could force
      the Company into bankruptcy. The Company may be forced to liquidate
      and


-5-




stockholders
      may suffer a complete loss of their investment. Nevertheless, most liabilities
      are by way of compensation for services rendered by senior management and the
      Company has an understanding in place that these liabilities will only be
      retired once the Company is sufficiently well-funded.





**THE
      UNCERTAINTY OF OIL AND NATURAL GAS PRICES MAY ADVERSELY AFFECT CWYR'S ABILITY
      TO
      RAISE ADDITIONAL CAPITAL.**





For
      much
      of the past decade, the prices for oil and natural gas have been extremely
      volatile. It is anticipated that such prices will continue to be volatile in
      the
      foreseeable future. In general, prices of oil, gas and natural gas liquids
      are
      dependent upon numerous external factors such as weather, various economic,
      political and regulatory developments and competition from other sources of
      energy. The unsettled nature of the energy market and the unpredictability
      of
      worldwide political developments, including, for example, actions of OPEC
      members, make it particularly difficult to estimate future prices. Any
      substantial price erosion for an extended period of time would have a material
      adverse effect on CWYR's ability to raise additional capital in the future
      to
      fund the Company's exploration activities and could harm the Company's business
      and financial condition.




**THE
      COMPANY COMPETES AGAINST LARGER, BETTER FINANCED AND MORE EXPERIENCED COMPANIES.**





Competition
      in the oil and gas industry is intense. Major and independent oil and gas
      companies, as well as individuals and drilling programs, actively bid for
      desirable oil and gas properties, as well as for the equipment and labor
      required to operate and develop such properties. A number of CWYR's competitors
      have financial resources and exploration and development budgets that are
      substantially greater than those of CWYR, which may adversely affect CWYR's
      ability to compete successfully, especially in the acquisition of attractive
      oil
      and gas properties on terms the Company considers acceptable. The effects of
      this highly competitive environment could harm the Company's business, financial
      condition and results of operations.





**THE
      ABSENCE OF A LIQUID MARKET FOR CWYR COMMON STOCK COULD HARM THE ABILITY OF
      STOCKHOLDERS TO SELL SHARES OF CWYR COMMON STOCK.**





At
      present the Company is able to trade only on the OTC Bulletin Board System
      ("OTCBBS"). This market is thinly traded and lacks the liquidity of other public
      markets with which some investors have more experience. There is no assurance
      that a more liquid trading market will develop or, if developed, would be
      sustained. Stockholders may be unable to sell their shares of Common Stock.
      Furthermore, it is unlikely that a lending institution would accept Common
      Stock
      as pledged collateral for loans unless a regular trading market develops.





**THE
      COMPANY'S DELINQUENCY IN FILING EXCHANGE ACT REPORTS COULD LIMIT THE ABILITY
      OF
      STOCKHOLDERS TO SELL RESTRICTED SHARES OF CWYR COMMON STOCK.**





The
      Company was delinquent in filing its Annual Reports on Form 10-KSB for the
      fiscal years ended June 30, 2001, 2002, 2003 and 2004. The Company's delinquency
      in filing such reports could have an impact on the ability of its stockholders
      to sell restricted shares of Common Stock pursuant to the exemption from
      registration provided by Rule 144 of the Securities Act of 1933, as amended.





**LIMITED
      SHARE TRADING, STOCK PRICE VOLATILITY AND FUTURE ISSUANCES COULD ADVERSELY
      AFFECT THE PRICE OF CWYR COMMON STOCK.**





Historically,
      trading in the Company's stock has been sporadic and the stock price has been
      volatile. Sales of substantial amounts of Common Stock by CWYR's principal
      stockholders in the public market could adversely affect the prevailing market
      price of the Common Stock. In addition, CWYR has granted options and issued
      warrants to purchase 5,592,483 shares of Common Stock, all but 520,000 of which
      are presently exercisable. Future issuances upon exercise of options or warrants
      could cause substantial dilution to stockholders.





**THE
      COMPANY'S EXPLORATION ACTIVITIES ARE CONTROLLED BY THIRD PARTIES.**





The
      Company's current exploration activities are being conducted and controlled
      by
      third parties. The Company has a minority interest in the Paradox Basin Project,
      so its ability to control the future exploration activities under the Farmout
      Agreement is limited.


-6-




**CONFLICTS
      OF INTEREST MAY HARM THE INTERESTS OF STOCKHOLDERS.**





J.
      Samuel
      Butler, F. Robert Tiddens and John F. Greene, who were all directors and
      stockholders of the Company until September 22, 2004, are officers, directors
      and/or stockholders of the Farmees under the Farmout Agreement. The Company
      is
      in default for nonpayment of its $192,169 loan (which includes $122,000
      principal plus $70,169 interest) under the Credit Agreement In addition Mr.
      Butler is the President of Trinity Petroleum Management, LLC ("Trinity"), a
      privately-held company providing accounting and other administrative services
      to
      CWYR. See Item 12, "Certain Relationships and Related Transactions." The
      continuation of certain related party transactions and the interests that the
      Company's directors and stockholders have in other enterprises, including the
      Farmees, may result in conflicts of interest between
      the Company and such individuals. For example, the ownership interests of the
      Farmees in the Paradox Basin Project would increase if the Company fails to
      fund
      it share of maintaining the project. Conflicts of interest may not be resolved
      in a manner favorable to the Company.





**CONTROL
      BY INSIDERS MAY PREVENT A CHANGE IN CONTROL OR ASSET SALE THAT WOULD BE IN
      THE
      BEST INTERESTS OF STOCKHOLDERS.**





Of
      the
      Company's shares of Common Stock currently outstanding, approximately 13.1
      percent is held by the Company's directors, officer and affiliates. In addition,
      options or warrants for 2,650, 000
      shares of Common Stock have been granted to the Company's directors, officer
      and
      affiliates, all of which are currently outstanding and presently exercisable.
      If
      all such currently exercisable options were exercised, the Company's directors,
      officers and affiliates would beneficially own approximately 25.2 percent of
      the
      total outstanding shares of Common Stock of CWYR. Consequently, they are able
      to
      exercise significant control over all matters requiring stockholder approval.
      Such voting concentration may have the effect of discouraging, delaying or
      preventing a change in control of CWYR or a sale of CWYR's assets.





**TITLE
      TO CWYR'S PROPERTY MAY BE DEFECTIVE AND MAY BE CHALLENGED.**





Title
      matters relating to oil and gas properties can be subject to some doubt. In
      most
      states, it is not possible or customary in the oil and gas industry to purchase
      title insurance. The decision of whether or not to expend funds for additional
      title work is made by management on a case-by-case basis. In some cases, title
      may be found to be defective and the cost to cure title may be prohibitive.
      The
      validity of the Company's title to its property may be challenged, which could
      result in expensive and time consuming litigation.





**COST
      OF COMPLIANCE WITH GOVERNMENTAL REGULATIONS COULD BE MATERIAL.**





CWYR's
      business is subject to federal, state and local laws and regulations relating
      to
      the exploration for and the production, transportation and sale of natural
      gas
      and oil. Although CWYR believes it is in substantial compliance with all
      applicable laws and regulations, legal requirements are frequently changed
      and
      subject to interpretation, and the Company is unable to predict the ultimate
      cost of compliance with these requirements or their effect on its operations.





**LEGISLATIVE
      CHANGES TO ENVIRONMENTAL REGULATIONS COULD ADVERSELY AFFECT CWYR'S BUSINESS.**





CWYR's
      business is subject to complex environmental laws and regulations adopted by
      federal, state and local governmental authorities. Environmental laws and
      regulations are frequently changed. The implementation of new, or the
      modification of existing, laws or regulations could have a material adverse
      effect on the Company. The discharge of natural gas, oil or other pollutants
      into the air, soil or water may give rise to significant liabilities on the
      part
      of CWYR to the government and third parties and may require CWYR to incur
      substantial costs of remediation. No assurance can be given that existing
      environmental laws or regulations, as currently interpreted or reinterpreted
      in
      the future, or future laws or regulations will not substantially harm CWYR's
      financial condition and results of operations.





**THE
      ABILITY OF CWYR AND STOCKHOLDERS TO OBTAIN DAMAGES FROM DIRECTORS IS LIMITED.**





The
      liability of a director to CWYR or any stockholder for monetary damages for
      breach of his fiduciary duties as a director is limited by CWYR's Articles
      of
      Incorporation, with certain exceptions. In addition, CWYR will provide officers
      and directors the maximum indemnification allowable from time to time under
      Wyoming law. These provisions limit CWYR's and its stockholders' ability to
      obtain damages or other relief from its officers and directors in the event
      of a
      claimed wrongdoing.


-7-




**THE
      ADDED DISCLOSURE REQUIREMENTS UNDER THE PENNY STOCK RULES COULD ADVERSELY AFFECT
      THE ABILITY OF STOCKHOLDERS TO SELL CWYR COMMON STOCK.**





Shares
      of
      CWYR Common Stock are subject to rules adopted by the Securities and Exchange
      Commission regulating broker-dealer practices in connection with transactions
      in
      "penny stocks." Such rules require that prior to effecting any transaction
      in a
      penny stock, a broker or dealer must give the customer a risk disclosure
      document that describes various risks associated with an investment in penny
      stocks, as well as various costs and fees associated with such an investment.
      It
      is possible that some brokers may be unwilling to engage in transactions of
      shares of CWYR Common Stock because of these added disclosure requirements,
      which would make it more difficult for a stockholder to sell his shares.




**ITEM
      2. PROPERTIES**





The
      Company's Paradox Basin Project consists of mineral interests in approximately
      22,640 gross leased acres (approximately 6,764 net leased acres) in San Juan
      County in southeastern Utah. During fiscal 2001, the Company obtained the
      Seismic Survey covering a 26 square mile portion of its Paradox Basin leasehold
      position. Analysis of the data confirmed the existence of drillable prospects
      previously identified by two dimensional ("2D") seismic as well as the
      identification of prospects not previously defined. Additionally, the Seismic
      Survey confirmed that 3D Vibroseis, a technique that is considerably less
      expensive than the traditional dynamite energy source, can be used effectively
      in many areas of the Paradox Basin Project.





The
      Seismic Survey was located and conducted in an area where Pennsylvanian aged
      prospects were previously identified by 2D seismic. Many analog Pennsylvanian
      fields produce in the Paradox Basin south of the Company's project area. Due
      to
      the lack of sub-surface well control and complex geology, drilling these
      prospects based on 2D seismic entails significant risk. The Company obtained
      the
      Seismic Survey to delineate prospects and to identify other potential
      hydrocarbon formations. As a result of the Seismic Survey, several Pennsylvanian
      prospects were delineated and two separate Pennsylvanian zones were identified
      as being potentially productive. Additionally, two deeper Mississippian zone
      locations were found to be prospective. Analysis of the seismic led to the
      inference of closed carbonate structures and faulting in the Mississippian.
      The
      Lisbon Field, a Mississippian carbonate unit is located less than 10 miles
      from
      the Company's project area. There can be no assurance that reserves will be
      found at the Paradox Basin Project.





The
      Company is still evaluating its options with respect to the next phase of
      Project development. See Management's Discussion and Analysis or Plan of
      Operation.





**ACREAGE**





The
      following table sets forth the Company's approximate working interest in
      undeveloped acreage, all of which is located in the central Paradox Basin,
      San
      Juan County, Utah, at June 30, 2006:




Undeveloped
              
              AcreageGross
              
              NetUtah
              
              
              22,640
              
              
              6,764




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 its leases.





**PRODUCING
      WELLS**





CWYR
      owns
      only an after-payout interest in two productive oil and gas wells and the
      associated developed acreage at June 30, 2006. Variables affecting payout are:
      Price per mcf of gas and price per barrel of oil. These vary over time and
      have
      been very volatile of late. Payout will occur after the some $6 million dollars
      spent by the partners is recovered from the production of these wells. From
      an
      economic standpoint the income from these wells continues to be sporadic and
      insufficiently regular to enable an accurate and reliable assessment to be
      made
      as to whether the wells will ever reach payout. Since the Company’s interest in
      these wells is a 10.6% interest AFTER PAYOUT, as of June 30, 2006 the Company
      still has no ownership of any producing property.


-8-




**OTHER**





During
      fiscal 2006 and 2005:





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
            In
                the fall of 2004 the Company participated (with an after payout interest)
                in the re-entry into an existing well and an exploratory well. Both
                wells
                proved productive. The Company drilled no other productive or dry,
                exploratory or development wells during fiscal 2006 and 2005.





o
            On
                July 21, 2005 the Company announced that it had received BLM approval
                to
                drill a third well on its previously 3D seismic identified Southwest
                Lisbon structure in the Paradox Basin Exploration Project in Southeast
                Utah. There is the possibility that up to a total of 12 to 16 wells
                from
                multiple zones on the Southwest Lisbon structure can be drilled.
                The
                Company already owns the acreage where this drilling is expected
                to
                occur.





o
            In
                May 2006 the Company acquired a 42 1⁄2% interest in an additional 6,000
                acres underneath and bordering its 3D Seismic Shoot in Southeast
                Utah. The
                acquisition of the 6,000 acres raises the Company’s acreage position in
                the area to 22,640 acres (approximately 6,764 net leased acres).
                The
                acquired acreage borders the Company’s 16,640-acre 3D Seismic Shoot.





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.





o
            The
                Company sold no oil or gas.





**ITEM
      3. LEGAL PROCEEDINGS**





None.





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





During
      the fiscal year covered by this Annual Report on Form 10-KSB, 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 is traded on the NASD's Over-the-Counter Bulletin Board System
      (the
      "OTCBBS") with the symbol CWYR.





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 and Pink Sheets 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 has been
      minimal.




For
                the Quarter Ended
            
            High
            
            LowSeptember
                30, 2004
            
            $
            .50
            
            $
            .02December
                31, 2004
            
            $
            1.10
            
            $
            .05March
                31, 2005
            
            $
            2.15
            
            $
            .60June
                30, 2005
            
            $
            2.15
            
            $
            1.00September
                30, 2005
            
            $
            1.90
            
            $
            1.40December
                31, 2005
            
            $
            1.75
            
            $
            .90March
                31, 2006
            
            $
            1.10
            
            $
            .70June
                30, 2006
            
            $
            1.39
            
            $
            .70




-9-




The
      number of record holders of Common Stock of CWYR as of October 13, 2006 is
      estimated to be 2,800. The closing price as of that date, as quoted on the
      OTCBB
      under the symbol CWYR was $0.90.





No
      dividends have been declared to date by CWYR, nor does CWYR anticipate declaring
      and paying cash dividends in the foreseeable future.




**RECENT
      SALES OF UNREGISTERED SECURITIES**





The
      following sales of unregistered securities took place during fiscal
      2006:





A
      total
      of 100,000 shares were issued at $0.50 per share for a total of $50,000 to
      an
      accredited private investor. The investor was also granted 50,000 warrants
      valid
      for a period of three years to purchase stock at $1.00 per share. The Board
      authorized the issuance of 1,000,000 shares in lieu of amounts owed for services
      rendered resulting in a cancellation of $250,000 of liabilities. An additional
      30,000 shares were issued for $15,000 short term loan. The Board also extended
      for another period of five years the 500,000 options previously granted to
      Mr.
      Kim Fuerst at $0.25 which are set to expire on October 18, 2006. The new expiry
      date for these 500,000 options shall be October 18, 2011. The Board authorized
      the issuance of 150,000 shares consequent to the exercise by a consultant of
      150,000 options granted her previously at $0.25 for services rendered.





Whereas
      the Company is now ready to embark on its fund-raising efforts, the Board felt
      the need to provide the President and CEO additional help and it was decided
      that Mr. Rafiq Sayed be appointed the Chief Operating Officer and be made
      responsible for coordinating and executing the day to day
      operations.





The
      Board
      also approved the granting to Janfra Partners a total of 400,000 options to
      acquire stock at $1.00 per share valid for three years.





In
      recognition of the work performed to date the Board authorized the issuance
      of
      three million shares to Messrs. Kim Fuerst, Rafiq Sayed and Waseem Sayed to
      be
      vested over three years.





The
      Board
      also authorized the issuance of 4,000,000 shares for the facilitation of hiring
      of the Company’s new President and CEO.





**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





**UNCERTAINTY
      OF FORWARD-LOOKING INFORMATION**





This
      annual report on Form 10-KSB includes statements that are not purely historical
      and are "forward-looking statements" within the meaning of Section 27A of the
      Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
      Act of 1934, as amended. Forward-looking statements involve risks and
      uncertainties that could cause actual results to differ from projected results.
      Such statements address activities, events or developments that the Company
      expects, believes, projects, intends or anticipates will or may occur,
      particularly its ability to raise capital sufficient enough to repay outstanding
      indebtedness, to fund its share of maintaining and marketing the Project and
      to
      participate in future Paradox Basin activities, the Company's use of proceeds
      from any financing or sale of its interest, the Company's beliefs regarding
      the
      results of the Seismic Survey and the next phase of development, volatility
      of
      Common Stock prices, anticipated lack of revenues, anticipated losses, plans
      to
      market the Project to third parties and the effect of the application of certain
      accounting rules. Factors that could cause actual results to differ materially
      ("Cautionary Disclosures") include, among others: general economic conditions,
      the market price of oil and natural gas, concentration of the Company's
      properties in a small area in the Paradox Basin, the strength and financial
      resources of the Company's competitors, climatic conditions, environmental
      risks, the results of financing efforts, regulatory developments and the factors
      identified in ITEM 1 - BUSINESS - RISK FACTORS. Many of such factors are beyond
      the Company's ability to control or predict. All forward-looking statements
      included or incorporated by reference in this Form 10-KSB are based on
      information available to the Company on the date hereof. Although the Company
      believes that the assumptions and expectations reflected in such forward-looking
      statements are reasonable, it can give no assurance that such expectations
      will
      prove to have been correct or that the Company will take any actions that may
      presently be planned. All forward-looking statements attributable to the Company
      or persons acting on its behalf are expressly qualified in their entirety by
      the
      Cautionary Disclosures.




**PLAN
      OF OPERATIONS**





At
      October 13, 2006, the Company had no cash, no operations and no revenues. These
      factors raise substantial doubts about the Company's ability to continue as
      a
      going concern without raising significant additional capital.


-10-




At
      October 13, 2006, the following major events have taken place since June
      2005:





The
      Company and the Farmees may elect to sell the Paradox Basin Project for cash
      and
      to retain an overriding royalty interest in the Project. This option would
      require the Company to raise capital sufficient to fund its share of the costs
      of maintaining and marketing the Project, to pay its existing creditors and
      to
      run day-to-day operations until the Project is sold. Alternatively, the Company
      and the Farmees could enter into a farmout agreement with an industry partner
      whereby the industry partner pays all the cost of one or more exploratory wells
      and possibly a second seismic shoot. The Company would need to raise additional
      capital sufficient to fund its share of the drilling of future exploratory
      and
      development wells. Finally, the Company and the Farmees could decide to
      participate in the drilling of the initial exploratory well and all future
      drilling and seismic shoots. This third option would require extensive capital.





The
      Company plans to raise funds to meet its obligation to fund its 42.5 percent
      share of the costs of maintaining the Paradox Basin Project leasehold (estimated
      at $33,000 per year) and the costs of marketing the Project, to repay the
      $192,169 loan (which includes $122,000 principal plus $70,169 interest) borrowed
      under the Credit Agreement and due and payable in full on September 28, 2001,
      and to pay existing accounts payable. If the Company is not successful in
      raising additional capital to fund its short term needs, the Company may have
      to
      liquidate and stockholders may suffer a complete loss of their investment.





If
      the
      Company and the Farmees elect to sell the property, the Company intends to
      use
      its share of the proceeds to pay outstanding obligations, including the $192,169
      loan (which includes $122,000 principal plus $70,169 interest) under the Credit
      Agreement and existing accounts payable. Remaining proceeds, if any, may be
      used
      to purchase new oil and gas leases. If the joint venture elects to enter into
      a
      farmout agreement with an industry partner or to drill an exploratory well
      or
      wells, the Company would need significant additional financing. If an industry
      partner is brought in to drill or if the Company is not successful in raising
      additional capital, its interests in the Project would be further reduced.
      The
      failure to raise additional capital could also lead to forfeiture of the
      Company's interest in the Project.





On
      January 5, 2004, pursuant to the terms of a farmout agreement, the Company
      elected to participate in the acquisition of an oil and gas lease with respect
      to two wells located in San Juan County, Utah. The lessor is the Bureau of
      Land
      Management, and the Company and the other participants intend to recomplete
      the
      two wells upon resolution of certain contractual obligations and other issues.





The
      Company is currently focusing its exploratory efforts on its mineral interests
      in approximately 22,640 gross leased acres (approximately 6,764 net leased
      acres) in the central Paradox Basin of southeastern Utah (the "Paradox Basin
      Project" or the "Project"). During fiscal 2001, the Company obtained a 3D
      seismic survey (the "Seismic Survey") covering a 26 square mile portion of
      its
      Paradox Basin leasehold position. The survey results indicate that further
      exploratory work is warranted on the Paradox Basin Project. Together with its
      joint venture partners, CWYR has recently undertaken drilling and intends to
      raise additional capital in order to be able to participate in the next phase
      of
      development of the Paradox Basin Project.





On
      March
      3, 2005, the Company confirmed its proprietary 3D Seismic Science with two
      exploratory successes at its Paradox Basin Exploration Project in Southeast
      Utah. The science, four years under development, has been confirmed by the
      completion of the Federal 1-31 and the Evelyn Chambers wells on the Southwest
      Lisbon structure, 3 1⁄2 miles southwest of the Lisbon Field in the same
      Mississippian formation. Both wells tested in the range of 2 MMCFD in the
      formation analogous to the productive formation at Lisbon. The ‘Evelyn Chambers’
well is hooked up to the plant, line laid and producing. The Federal 1-31 well,
      is about to be re-entered waiting on rig availability. It is also already hooked
      up to the plant, line laid but currently not producing. CWYR owns only an
      after-payout interest in two productive oil and gas wells and the associated
      developed acreage at June 30, 2006. Variables affecting payout are: Price per
      mcf of gas and price per barrel of oil. These vary over time and have been
      very
      volatile of late. Payout will occur after the some $6 million dollars spent
      by
      the partners is recovered from the production of these wells. From an economic
      standpoint the income from these wells continues to be sporadic and
      insufficiently regular to enable an accurate and reliable assessment to be
      made
      as to whether the wells will ever reach payout. Since the Company’s interest in
      these wells is a 10.6% interest AFTER PAYOUT, as of June 30, 2006 the Company
      still has no ownership of any producing property.





The
      Company owns 10.6% APO of this 700-acre structure and 10.6% of the surrounding
      8,960 acres.  Further additional seismic work in light of this successful
      discovery is anticipated on the structure.





The
      Company owns 42 1⁄2 % of two other, 3D delineated, structures in the Paradox Basin
      Project.  Additionally, the Company will have 42 1⁄2 % of two other,
      tentatively identified, structures in the area.





The
      Company plans additional 3D Seismic science work in the whole of the Paradox
      Basin Project area as well as a development drilling program in the Southwest
      Lisbon structure.


-11-




On
      July
      21, 2005 the Company announced that it had received BLM approval to drill a
      third well on its previously 3D seismic identified Southwest Lisbon structure
      in
      the Paradox Basin Exploration Project in Southeast Utah.




The
      Company also stated that there is the possibility that up to a total of 12
      to 16
      wells from multiple  zones
      on
      the Southwest Lisbon structure can be drilled. The Company already owns the
      acreage where this drilling is expected to occur.





The
      Company anticipates an extensive 3D seismic shooting program and drilling on
      its
      currently identified structures.





On
      May
      25, 2006 the Company announced that it has acquired a 42 1⁄2% interest in an
      additional 6,000 acres underneath and bordering its 3D Seismic Shoot in
      Southeast Utah. The acquisition of the 6,000 acres raises the Company’s acreage
      position in the area to 22,640 acres (approximately 6,764 net leased acres).
      The
      acquired acreage borders the Company’s 16,640-acre 3D Seismic Shoot.




Additional
      3D Seismic Shooting is planned for later this year and the Company anticipates
      3
      test wells in the area in 2007.




**ASSET
      RETIREMENT OBLIGATIONS.**




Statement
      of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset
      Retirement Obligations” requires we estimate the future cost of asset retirement
      obligations, discount that cost to its present value, and record a corresponding
      asset and liability in our Balance Sheet. The values ultimately derived are
      based on many significant estimates, including future abandonment costs,
      inflation, market risk premiums, useful life, and cost of capital. The nature
      of
      these estimates requires us to make judgments based on historical experience
      and
      future expectations. Revisions to the estimates may be required based on such
      things as changes to cost estimates or the timing of future cash outlays. Any
      such changes that result in upward or downward revisions in the estimated
      obligation will result in an adjustment to the related capitalized asset and
      corresponding liability on a prospective basis.




**EFFECTS
      OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**





In
      March
      2004, the FASB issued consensus on EITF 03-6, "Participating Securities and
      the
      Two-Class Method Under FASB Statement No. 128, Earnings Per Share," related
      to
      calculating earnings per share with respect to using the two-class method for
      participating securities. This pronouncement is effective for all periods after
      March 31, 2004, and requires prior periods to be restated. As, the Company
      has
      incurred net losses in the current and prior periods, the adoption of EITF
      03-6
      had no impact on the Company's financial condition, or its results of
      operations.




In
      December 2004, the FASB issued SFAS 123(R), "Share-Based Payment," which is
      a
      revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS 123(R)
      is effective for public companies for interim or annual periods beginning after
      June 15, 2005, supersedes APB Opinion 25, Accounting for Stock Issued to
      Employees, and amends SFAS 95, Statement of Cash Flows. SFAS 123(R) requires
      all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the income statement based on their fair values. We
      have
      adopted SFAS 123 (R) as of January 1, 2006.




In
      December 2004, the FASB issued SFAS 153, Exchanges of Non-monetary Assets,
      which
      changes the guidance in APB 29, Accounting for Non-monetary Transactions. This
      Statement amends APB 29 to eliminate the exception for non-monetary exchanges
      of
      similar productive assets and replaces it with general exception for exchanges
      of non-monetary assets that do not have commercial substance. A non-monetary
      exchange has commercial substance if the future cash flows of the entity are
      expected to change significantly as a result of the exchange. SFAS 153 is
      effective during fiscal years beginning after June 15, 2005. We do not believe
      the adoption of SFAS 153 will have a material impact on our financial
      statements.





The
      Securities and Exchange Commission has issued Staff Accounting Bulletin (SAB)
      No. 106 regarding the application of SFAS 143, "Accounting for Asset Retirement
      Obligations," on oil and gas producing entities that use the full cost
      accounting method. It states that after adoption of SFAS 143, the future cash
      outflows associated with settling asset retirement obligations that have been
      accrued on the balance sheet should be excluded from the present value of
      estimated future net cash flows used for the full cost ceiling test calculation.





In
      March 2005, the FASB issued Interpretation (FIN) No. 47,
“Accounting for Conditional Asset Retirement Obligations — An Interpretation of
      SFAS No. 143”, which clarifies the term “conditional asset retirement
      obligation” used in SFAS No. 143, “Accounting for Asset Retirement
      Obligations”, and specifically when an entity would have sufficient information
      to reasonably estimate the fair value of an asset retirement obligation. The
      adoption did not have an impact on our financial statements.


-12-


In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections”, which replaces Accounting Principles Board Opinion No. 20,
      Accounting Changes and SFAS No. 3. SFAS 154 provides guidance on the
      accounting for and reporting of accounting changes and error corrections. It
      establishes retrospective application, or the latest practicable date, as the
      required method for reporting a change in accounting principle and the reporting
      of a correction of an error. SFAS 154 is effective for accounting changes and
      corrections of errors made in fiscal years beginning after December 15,
      2005. We do not expect that the adoption of SFAS No. 154 will have an
      impact on our financial statements.


-13-




**ITEM
      7. FINANCIAL STATEMENTS**  **PAGE**




Independent
                Auditor's Report
            15Consolidated
                Balance Sheet as of June 30,2006
            16Consolidated
                Statements of Operations for the Years Ended June 30, 2006 and June
                30,
                2005 and the Period from January 1, 1999 through June 30,
                2006
            17Consolidated
                Statements of Stockholders' Equity for the Years Ended June 30, 2006
                and
                June 30, 2005
            18Consolidated
                Cash Flow Statements for the Years Ended June 30, 2006 and June 30,
                2005
                and the Period from January 1, 1999 through June 30, 2006
            19Notes
                to the Consolidated Financial Statements
            20




-14-




**INDEPENDENT
      AUDITOR'S REPORT**







Board
      of
      Directors


Colorado
      Wyoming Reserve Company


Grand
      Junction, Colorado





We
      have
      audited the accompanying consolidated balance sheet of Colorado Wyoming Reserve
      Company and subsidiary as of June 30, 2006, the related consolidated statements
      of stockholders' equity for each of the years in the two-year period ended
      June
      30, 2006 and the consolidated statements of operations, and cash flows for
      each
      of the years in the two-year period ended June 30, 2006 and the period from
      January 1, 1999 to June 30, 2006. These consolidated financial statements are
      the responsibility of the Company's management. Our responsibility is to express
      an opinion on these consolidated financial statements based on our audits.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Colorado Wyoming Reserve
      Company and subsidiary as of June 30, 2006, and the results of their operations
      and their cash flows for each of the years in the two-year period ended June
      30,
      2006 and the period from January 1, 1999 to June 30, 2006 in conformity with
      U.S. generally accepted accounting principles.





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 limited 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.





/s/
      Arshad Farooq


**ARSHAD
      FAROOQ CPA**





Ontario,
      California


October
      16, 2006


-15-




**COLORADO
      WYOMING RESERVE COMPANY**


(A
      DEVELOPMENT STAGE ENTERPRISE)


**CONSOLIDATED
      BALANCE SHEET**


JUNE
      30,
      2006





**CURRENT
                ASSETS:**Cash
                and cash equivalents
            
            $
            1,463Accounts
                receivable
            
            
            --Total
                current assets
            
            
            1,463PROPERTY
                AND EQUIPMENT:Unproved
                oil and gas properties
            
            
            62,570Other
                property and equipment
            
            
            14,914Less
                accumulated depreciation, other property and equipment
            
            
            (14,841
            )Net
                property and equipment
            
            
            62,643Other
            
            
            1,960Total
                assets
            
            $
            66,066**CURRENT
                LIABILITIES:**Trade
                accounts payable
            
            $
            75,722Other
                accrued liabilities
            
            
            190,426Related
                party payables:On
                account
            
            
            874,218Convertible
                Notes
            
            
            280,000Note
                payable
            
            
            25,000Total
                current liabilities
            
            
            1,445,366EQUITYCommon
                Stock, $.01 par value: authorized--75,000,000 shares; issued and
                outstanding—16,137,694
            
            
            161,377Additional
                paid-in capital
            
            
            9,398,676Warrants
            
            
            148,100Accumulated
                deficit:Before
                entering the development stage
            
            
            (4,441,242
            )After
                entering the development stage
            
            
            (6,646,212
            )Total
                Equity
            
            
            (1,379,301
            )Total
                liabilities and equity
            
            $
            66,065


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


-16-




**COLORADO
      WYOMING RESERVE COMPANY**


(A
      DEVELOPMENT STAGE ENTERPRISE)


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




Period
                  FromYears
                  Ended
              
              January
                  1,June
                  30,
              
              1999
                  to2006
              
              2005
              
              June
                  30, 2006REVENUES:
              
              $
              —
              
              $
              —
              
              $
              —EXPENSES:Exploration
                  cost
              
              
              12,493
              
              
              53,679
              
              
              723,829Depreciation,
                  depletion and amortization
              
              
              
              
              
              —
              
              
              6,320General
                  and administrative
              
              
              4,143,094
              
              
              381,130
              
              
              5,812,525Total
                  expenses
              
              
              4,155,587
              
              
              434,809
              
              
              6,542,674Operating
                  loss
              
              
              ($4,155,587
              )
              
              ($434,809
              )
              
              ($6,542,674
              )OTHER
                  INCOME (EXPENSE)Interest
                  income (expense)
              
              
              (19,111
              )
              
              (19,599
              )
              
              (102,309
              )Loss
                  on sale of assets
              
              
              —
              
              
              —
              
              
              (1,231
              )Income
                  (Loss) before income taxes
              
              
              ($4,174,698
              )
              
              ($454,408
              )
              
              ($6,646,214
              )Provision
                  for income taxes
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              $
              (4,174,698
              )
              $
              (454,408
              )
              $
              (6,646,214
              )Basic
                  and diluted loss per share
              
              $
              (0.37
              )
              $
              (0.04
              )Weighted
                  average common shares outstanding
              
              
              11,313,886
              
              
              10,674,361


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


-17-




**COLORADO
      WYOMING RESERVE COMPANY**


(A
      DEVELOPMENT STAGE ENTERPRISE)


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**


JUNE
      30,
      2006




AdditionalCommon
                  Stock
              
              
              
              Subscription
              
              Paid-In
              
              AccumulatedShares
              
              Par
                  Value
              
              Warrants
              
              Receivable
              
              Capital
              
              Deficit
              
              TotalBALANCE,
                  JUNE 30, 2005
              
              
              10,807,694
              
              $
              108,077
              
              $
              148,100
              
              $
              —
              
              $
              5,384,976
              
              $
              (6,912,758
              )
              $
              (1,271,605
              )Stock
                  option exercise
              
              
              1,200,000
              
              
              12,000
              
              
              —
              
              
              —
              
              
              978,000
              
              
              —
              
              
              990,000Sale
                  of common stock
              
              
              100,000
              
              
              1,000
              
              
              —
              
              
              —
              
              
              49,000
              
              
              —
              
              
              50,000Stock
                  grant for services
              
              
              4,030,000
              
              
              40,300
              
              
              —
              
              
              —
              
              
              2,986,700
              
              
              —
              
              
              3,027,000Net
                  (loss) for the year ended June 30, 2006
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (4,174,698
              )
              
              (4,174,698
              )Rounding
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2
              
              
              2BALANCE,
                  JUNE 30, 2006
              
              
              16,137,694
              
              $
              161,377
              
              $
              148,100
              
              $
              —
              
              $
              9,398,676
              
              $
              (11,087,454
              )
              $
              (1,379,301
              )


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


-18-




**COLORADO
      WYOMING RESERVE COMPANY**


(A
      DEVELOPMENT STAGE ENTERPRISE)


**CONSOLIDATED
      CASH FLOW STATEMENTS**




Period
                  FromYears
                  Ended
              
              January
                  1,June
                  30,
              
              1999
                  to2006
              
              2005
              
              June
                  30, 2006Cash
                  flows from operating activities:Net
                  loss
              
              $
              (4,174,698
              )
              $
              (454,408
              )
              $
              (6,646,214
              )Stock
                  based compensation
              
              
              —
              
              
              
              
              
              95,600Stock
                  issued for services
              
              $
              3,690,000
              
              $
              —
              
              $
              3,690,000Stock
                  based deferred compensation
              
              $
              —
              
              $
              —
              
              $
              —Stock
                  issued for oil and gas properties
              
              $
              —
              
              $
              —Warrants
                  issued for oil and gas properties
              
              $
              —
              
              $
              —Stock
                  issued for financing costs
              
              $
              27,000
              
              
              
              
              $
              27,000Warrants
                  issued for financing costs
              
              $
              —
              
              
              
              
              $
              —Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depletion,
                  depreciation and amortization
              
              
              —
              
              
              —
              
              
              6,320Loss
                  on asset sale
              
              
              —
              
              
              —
              
              
              1,231Amortization
                  of note payable discount
              
              
              —
              
              
              —
              
              
              35,000Loss
                  from joint venture investment
              
              
              —
              
              
              —
              
              
              361,767Changes
                  in current assets and liabilities:Receivables
              
              
              —
              
              
              —
              
              
              3,126Payables
              
              
              127,577
              
              
              391,644
              
              
              1,098,610Other
              
              
              —
              
              
              —
              
              
              (436
              )Net
                  cash (used in) operating activities
              
              
              (330,121
              )
              
              (62,764
              )
              
              (1,327,996
              )Cash
                  flows from investing activities:Additions
                  to unproved properties
              
              
              (35,972
              )
              
              —
              
              
              (46,544
              )Unproved
                  property cost recovery
              
              
              
              
              
              191,467Asset
                  purchases
              
              
              —
              
              
              —
              
              
              (1,269
              )Proceeds
                  from asset sale
              
              
              —
              
              
              —
              
              
              (2,354
              )Net
                  cash provided by investing activities
              
              
              (35,972
              )
              
              —
              
              
              141,300Cash
                  flows from financing activities:Sale
                  of common stock
              
              
              350,000
              
              
              50,000
              
              
              1,184,456Borrowings
                  under credit agreement
              
              
              —
              
              
              —
              
              
              130,509Repayment
                  of note payable
              
              
              —
              
              
              —
              
              
              (130,000
              )Net
                  cash provided by financing activities
              
              
              350,000
              
              
              50,000
              
              
              1,184,965Net
                  increase (decrease) in cash and equivalents
              
              
              (16,092
              )
              
              (12,764
              )
              
              (1,730
              )Cash
                  and equivalents at beginning of period
              
              
              17,553
              
              
              30,317
              
              
              3,191Rounding
              
              
              2
              
              
              
              
              
              2Cash
                  and equivalents at end of period
              
              $
              1,463
              
              $
              17,553
              
              $
              1,463**SUPPLEMENTAL
                  SCHEDULE OF CASH FLOW INFORMATION**Cash
                  paid for interest expense
              
              $
              19,111
              
              $
              19,599**SUPPLEMENTAL
                  DISCLOSURES OF NON-CASH INVESTING AND FINANCING
                  ACTIVITIES**Stock
                  based compensation
              
              $
              —
              
              $
              —Stock
                  issued for services
              
              $
              3,690,000
              
              $
              —Stock
                  based deferred compensation
              
              $
              —
              
              $
              —Stock
                  issued for oil and gas properties
              
              $
              —
              
              $
              —Warrants
                  issued for oil and gas property consulting
              
              $
              —
              
              $
              —Stock
                  issued for financing costs
              
              $
              27,000
              
              $
              —Warrants
                  issued for financing costs
              
              $
              —
              
              $
              —


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


-19-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**






**1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**ORGANIZATION
      AND NATURE OF OPERATIONS:**





Colorado
      Wyoming Reserve Company (the "Company" or "CWYR") is an oil and natural gas
      exploration company with a geographical focus in the Rocky Mountain region
      of
      the western United States. The Company'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 3D 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 areas of southeastern Utah (the "Paradox Basin Project"). The Company
      has
      no revenues and continues to incur certain general and administrative expenses
      and obligations related to the Paradox Basin Project.





As
      more
      fully discussed in Note 3, on September 28, 2000, the Company entered into
      a
      Farmout Agreement with ST Oil Company ("ST Oil"), FM Energy, LLC, (whose rights
      and interests were subsequently assigned to Moore Energy LLC ("Moore Energy")
      and The Shoreline Companies ("Shoreline") (collectively, "the Farmees"). The
      Farmout Agreement was entered into for the purpose of having a 3D seismic survey
      (the "Seismic Survey") conducted on the Paradox Basin Project. The Seismic
      Survey was completed in August 2001.





A
      second
      farmout was created where the Company would own a 25% back-in after payout
      on
      the 8,960 acre farmout with two wells to be drilled by the farmees.





**GOING
      CONCERN:**





The
      Company currently has no revenue source and continues to incur obligations
      with
      respect to certain general and administrative items and maintenance cost of
      its
      Paradox Basin Project acreage. Accordingly, there is substantial doubt about
      the
      Company's ability to continue as a going concern. There is no assurance that
      the
      Company will be successful in raising additional capital and failure to do
      so
      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:**





The
      Company currently has no material trade receivables. Historically, however,
      substantially all of the Company's trade receivables were within the oil and
      gas
      industry, primarily from purchasers of oil and gas and joint venture
      participants, and collectibility has been dependent upon the general economic
      conditions of the industry. The receivables were not collateralized.





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


-20-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**






**1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued**





**OIL
      AND GAS 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 of unproved properties, on
      a
      property-by-property basis, are considered to be not realizable.





Should
      the Company own producing properties in the future, it will test for impairment
      of those 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 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.
      Depletion, depreciation and amortization ("DD&A") of capitalized costs of
      proved oil and gas properties will be 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.





For
      financial reporting purposes, during fiscal 2001 the Company recognized its
      pro
      rata share of the expenses (primarily exploration costs) incurred by the Farmees
      pursuant to the Farmout Agreement. Undeveloped acreage cost was reduced by
      the
      amount of such expenses.





Exploration
      costs are comprised of delay lease rentals and the Seismic Survey costs. Delay
      rentals were paid at 100 percent by the Company during fiscal 2000 and the
      first
      quarter of fiscal 2001. From the date of the Farmout Agreement (September 2000)
      through June 30, 2001, CWYR recognized its pro rata share (50 percent until
      February 2000 and thereafter 42.5 percent) of delay rentals. Additionally,
      during fiscal 2001, the Company recognized as exploration costs its pro rata
      share of Seismic Survey costs incurred by the Farmees.





**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, Shoreline Resources Company, Inc. 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.


-21-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**






**1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued**





**STOCK
      OPTIONS:**





As
      permitted under the Statement of Financial Accounting Standards ("SFAS") No.
      123, Accounting for Stock-Based Compensation, the Company accounts for its
      stock-based compensation for options issued to employees and directors in
      accordance with the provisions of Accounting Principles Board (APB) Opinion
      No.
      25, Accounting for Stock Issued to Employees. As such, compensation expense
      is
      recorded on the date of grant only if the current market price of the underlying
      stock exceeded the exercise price. Certain pro forma net income and EPS
      disclosures for employee stock option grants are also included in the notes
      to
      the financial statements as if the fair value methods as defined in SFAS No.
      123
      had been applied. Transactions in equity instruments with non-employees for
      goods or services are accounted for by the fair value method.





In
      March
      2000 the Financial Accounting Standards Board ("FASB") adopted FASB
      Interpretation No. 44, Accounting for Certain Transactions including Stock
      Compensation. Accordingly, beginning with the first quarter of fiscal 2001,
      the
      Company has been required to value any options repriced subsequent to December
      15, 1998 as if the options were granted pursuant to a variable stock plan.





**COMPREHENSIVE
      INCOME:**





The
      Company has adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No.
      130
      establishes new rules for the reporting and display of comprehensive income
      and
      its components; however, it has no impact on the Company's net loss or
      stockholders' equity.





**NET
      LOSS ATTRIBUTABLE TO COMMON SHARES:**





The
      Company has adopted SFAS 128, Earnings per Share. 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. A 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 and warrants because they would be anti-dilutive.





**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.





Significant
      estimates made by CWYR include the ultimate realization of the cost of the
      Company's unproved oil and gas properties. Depending on the results of its
      Paradox Basin Project, the Company's estimate as to the realization of the
      unproved property cost could materially change.





**RECENTLY
      ISSUED FINANCIAL ACCOUNTING STANDARDS:**




In
      December 2004, the FASB issued SFAS 123(R), "Share-Based Payment," which is
      a
      revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS 123(R)
      is effective for public companies for interim or annual periods beginning after
      June 15, 2005, supersedes APB Opinion 25, Accounting for Stock Issued to
      Employees, and amends SFAS 95, Statement of Cash Flows.




SFAS
      123(R) requires all share-based payments to employees, including grants of
      employee stock options, to be recognized in the income statement based on their
      fair values. Pro-forma disclosure is no longer an alternative. We have adopted
      SFAS 123 (R) as of January 1, 2006.


-22-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**






**1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued**





**RECENTLY
      ISSUED FINANCIAL ACCOUNTING STANDARDS, continued**





In
      December 2004, the FASB issued SFAS 153, Exchanges of Non-monetary Assets,
      which
      changes the guidance in APB 29, Accounting for Non-monetary Transactions. This
      Statement amends APB 29 to eliminate the exception for non-monetary exchanges
      of
      similar productive assets and replaces it with general exception for exchanges
      of non-monetary assets that do not have commercial substance. A non-monetary
      exchange has commercial substance if the future cash flows of the entity are
      expected to change significantly as a result of the exchange. SFAS 153 is
      effective during fiscal years beginning after June 15, 2005. We do not believe
      the adoption of SFAS 153 will have a material impact on our financial
      statements.





The
      Securities and Exchange Commission has issued Staff Accounting Bulletin (SAB)
      No. 106 regarding the application of SFAS 143, "Accounting for Asset Retirement
      Obligations," on oil and gas producing entities that use the full cost
      accounting method. It states that after adoption of SFAS 143, the future cash
      outflows associated with settling asset retirement obligations that have been
      accrued on the balance sheet should be excluded from the present value of
      estimated future net cash flows used for the full cost ceiling test calculation.





In
      July
      2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142,
      Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase
      method of accounting be used for all business combinations initiated after
      June
      30, 2001. SFAS No. 141 also specifies criteria intangible assets acquired in
      a
      purchase method business combination must meet to be recognized and reported
      apart from goodwill, and establishes that any purchase price allocable to an
      assembled workforce may not be accounted for separately. SFAS No. 142 requires
      that goodwill and intangible assets with indefinite useful lives no longer
      be
      amortized, but instead tested for impairment at least annually in accordance
      with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
      assets with definite useful lives be amortized over their respective estimated
      useful lives to their estimated residual values, and reviewed for impairment
      in
      accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
      and for Long-Lived Assets to Be Disposed Of. At present, The Company does not
      have any mergers or acquisitions under consideration so it is anticipated that
      neither SFAS Nos. 141 or 142 will affect the Company.





In
      June
      2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations,
      which addresses financial accounting and reporting for obligations associated
      with the retirement of tangible long-lived assets and the associated asset
      retirement costs. The standard applies to legal obligations associated with
      the
      retirement of long-lived assets that result from the acquisition, construction,
      development and/or normal use of the asset.





SFAS
      No.
      143 requires that the fair value of a liability for an asset retirement
      obligation be recognized in the period in which it is incurred if a reasonable
      estimate of fair value can be made. The fair value of the liability is added
      to
      the carrying amount of the associated asset and this additional carrying amount
      is depreciated over the life of the asset. The liability is accreted at the
      end
      of each period through charges to operating expense. If the obligation is
      settled for other than the carrying amount of the liability, the Company will
      recognize a gain or loss on settlement.





While
      the
      Company presently has no assets that would be affected by SFAS No. 143, should
      producing wells be drilled on the Paradox Basin Project acreage, the estimated
      abandonment cost of such wells could be subject to SFAS No. 143. However, the
      financial statement impact cannot be estimated at present.





In
      August
      2001, the FASB also approved SFAS 144, Accounting for the Impairment or Disposal
      of Long-Lived Assets SFAS 144 replaces SFAS 121, Accounting for the Impairment
      of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The new
      accounting model for long-lived assets to be disposed of by sale applies to
      all
      long-lived assets, including discontinued operations, and replaces the
      provisions of APB Opinion No. 30, "Reporting Results of Operations Reporting
      the
      Effects of Disposal of a Segment of a Business," for the disposal of segments
      of
      a business. SFAS 144 requires that those long-lived assets be measure at the
      lower of carrying amount or fair value less cost to sell, whether reported
      in
      continuing operations or in discontinued operations. Therefore, discontinued
      operations will no longer be measured at net realizable value or include amounts
      for operating losses that have not yet occurred. SFAS 144 also broadens the
      reporting of discontinued operations to include all components of an entity
      with
      operations that can be distinguished from the rest of the entity and that will
      be eliminated from the ongoing operations of the entity in a disposal
      transaction. The provisions of SFAS 144 are effective for financial statements
      issued for fiscal years beginning after December 15, 2001 and, generally, are
      to
      be applied prospectively. At this time, the Company cannot estimate the effect
      of this statement on its financial position, results of operations, or cash
      flows.


-23-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**






**2.
      INCOME TAXES**





No
      tax
      benefits from the losses incurred during fiscal 2001 and 2000 were recognized
      due to the substantial uncertainty as to their eventual utilization.





At
      June
      30, 2001, the Company had tax basis net operating loss carry forwards available
      to offset future taxable income of $2.8 million, which expire from 2001 to
      2015.
      Of that amount, approximately $1.8 million can never be used by the Company
      and
      the usage of approximately $200,000 is limited to certain maximum yearly amounts
      over a 14-year period, as a result of the changes in control occurring during
      fiscal 1999 and 1998.





**3.
      COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS**





The
      principal owed amounts are to management $625,000 (no interest accrues on these
      owed amounts), Convertible bondholders $330,000 ($280,000 principal and $50,000
      interest) the Operator $212,000 ($172,000 principal and $40,000 interest),
      other
      working interest partners $152,000 ($98,000 principal and $54,000 interest),
      for
      a total of $1,319,000. The amounts owed to management are accrued but not paid
      and an understanding is in place that these will not be payable till the Company
      is reasonably well-funded.





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. Trinity bills for its services on an hourly basis, receives a flat
      fee
      of $1,100 per month (formerly $3,000 per month) and is reimbursed for third
      party expenses. The Trinity Agreement continues 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 until September 22, 2004,
      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 as part of the
      merger with Shoreline Resource Company, Inc. on January 22, 1998 the Company
      issued to Trinity 25,000 restricted shares of Common Stock as well as a warrant
      to purchase up to 100,000 shares of the Company's Common Stock at an exercise
      price of $1.50 per share, subsequently repriced to $.10 per share in May 1999.





The
      Company entered into an employment contract with its president, Mr. Kim M.
      Fuerst on October 1, 1996 pursuant to which Mr. Fuerst received 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 (repriced to $.25 per share in May 1999). The contract is renewed
      automatically for succeeding periods of one year unless terminated. The contract
      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 (of which Mr. Fuerst owns 50
      percent) 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. Mr. Fuerst determined to forego his salary
      during the months of November and December 1998, and January through April
      1999.
      In May 1999, Mr. Fuerst's salary was reduced to $5,000 per month pursuant to
      an
      amendment to his employment agreement. During July 1999, the Company granted
      Mr.
      Fuerst an incentive stock option pursuant to the Equity Incentive Plan, to
      purchase 500,000 shares of Common Stock at an exercise price of $.75 per share
      (determined to be at least 110 percent of the fair market value at the date
      of
      grant). The option has a five year life and is exercisable as of the date of
      grant.





On
      September 28, 2000, the Company entered into a Farmout Agreement, effective
      September 22, 2000, with the Farmees. Certain directors and stockholders of
      the
      Company are directors, officers and controlling stockholders of the
      Farmees.


-24-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**






**3.
      COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS, Continued**





Pursuant
      to the terms of the Farmout Agreement, the Company assigned 50 percent of its
      mineral working interests in and to certain oil and gas leases and seismic
      options covering approximately 64,000 gross leased acres (approximately 25,500
      net leased acres) of land located in the Paradox Basin Project in San Juan
      County, Utah, to the Farmees. Prior to commencement of the Seismic Survey,
      the
      Company sold an additional 7.5 percent of its mineral working interests to
      the
      Farmees in February 2001 for $150,000. The purchase price was determined using
      the same valuation of the Paradox Basin Project as was used in the Farmout
      Agreement. The cost of completing, processing and interpreting the Seismic
      Survey of approximately $1.1 million was borne by the Farmees. The Farmout
      Agreement requires the Company to bear its 42.5 percent share of the costs
      of
      maintaining the Paradox Basin Project leasehold.





The
      Farmout Agreement also establishes an area of mutual interest (the "AMI") for
      a
      term of ten years from the effective date of the Farmout Agreement. If during
      the ten-year term, any party to the Farmout Agreement acquires an oil or gas
      leasehold interest in the AMI, that party must give all other parties the
      opportunity to participate.





In
      September 2000, the Company entered into a Credit Agreement with the Farmees.
      Amounts borrowed under the Credit Agreement bear interest at the rate of 8
      percent per annum. At June 30, 2005, the Company had a balance owing the Farmees
      of $192,169 (which includes $122,000 principal plus $70,169 interest). The
      note
      was due and payable in full on September 28, 2001, and remains unpaid as of
      September 13, 2005.





Prior
      to
      the Farmout Agreement described above, in April 2000 the Company had entered
      into an Option Agreement with ST Oil and Edwards Energy Corporation, a Letter
      of
      Intent with FM Energy and a Letter of Intent with Shoreline, which agreements
      contemplated a joint venture arrangement to be established by all the parties
      similar to the arrangement set forth in the Farmout Agreement and the Credit
      Agreement described herein. Pursuant to the terms of the Option Agreement,
      the
      Company was paid $24,000 during the last quarter of fiscal 2000 for the option.
      The option and the letters of intent expired according to their terms on August
      30, 2000.





The
      Farmout Agreement and the Credit Agreement reflect the final agreement of the
      parties regarding the acquisition by ST Oil, FM Energy, and Shoreline of an
      aggregate 50.0 percent of the Company's working interests in certain leases
      and
      seismic options in exchange for providing the Company with a seismic survey
      of
      certain acreage covered by such leases and options.





**4.
      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 five years or 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
      options and warrants outstanding at June 30, 2005 and 2006 are as
      follows:


-25-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**









**4.
      OPTIONS, WARRANTS AND RESERVED SHARES, Continued**





Information
      on options and warrants outstanding at June 30, 2005:




Options
                  and
              
              
              
              Options
                  and
              
              WeightedWeighted
              
              Warrants
              
              Average
              
              WarrantsExercise
              
              Outstanding
              
              Contractual
              
              ExercisablePrice
              
              June
                  30, 2005
              
              Life
              
              June
                  30, 2005$0.24
              
              
              5,395,000
              
              
              6.63
              
              
              5,395,000


Information
      on options and warrants outstanding at June 30, 2006:




Options
                  and
              
              Weighted
              
              Options
                  andWeighted
              
              Warrants
              
              Average
              
              WarrantsExercise
              
              Outstanding
              
              Contractual
              
              ExercisablePrice
              
              June
                  30, 2006
              
              Life
              
              June
                  30, 2006$0.32
              
              
              5,592,483
              
              
              3.82
              
              
              5,072,483




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 and for shares issued to nonemployees. 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
      all options issued during fiscal 2006 (options issued in fiscal 2006 are not
      in
      the money) was estimated at the date of grant using the Black-Scholes option
      pricing model with the following weighted average assumptions.




Risk
                  free interest rate
              
              
              5.0
              %Volatility
                  factor
              
              
              34
              %Dividend
                  yield
              
              
              0
              %Expected
                  term of options
              
              
              five
                  years


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.


-26-




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006 AND 2005**





**4.
      OPTIONS, WARRANTS AND RESERVED SHARES, Continued**





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:




For
                the Years Ended June 30,2006
            
            2005Net
                loss as reported
            
            $
            (4,174,698
            )
            $
            (454,408
            )Pro
                forma
            
            $
            (7,841,340
            )
            $
            (1,193,740
            )Basic
                loss per share as reported
            
            $
            (0.37
            )
            $
            (0.04
            )Pro
                forma
            
            $
            (0.46
            )
            $
            (0.11
            )




**5.
      SUPPLEMENTAL OIL AND GAS INFORMATION**




Capitalized
      costs relating to oil and gas activities at June 30, 2006 and 2005 are as
      follows:




2006
              
              2005Unproved
                  oil and gas properties
              
              $
              35,972
              
              $
              58,177


Costs
      incurred in oil and gas property acquisition, exploration, and development
      activities for the years ended June 30, 2006 and 2005 are as
      follows:




2006
              
              2005Acquisition
                  of unproved properties
              
              $
              12,493
              
              $
              22,100


The
      Company had no oil and gas sales during the years ended June 30, 2006 and 2005.
      As such, it had no results of operations for oil and gas producing activities
      during each of those periods.




**RESERVES
      (UNAUDITED)**





The
      Company had no proved oil and gas reserves at June 30, 2006 and
      2005.


-27-




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





On
      December 21, 2004 Hein & Associates LLP (“Hein & Associates”) resigned
      as independent auditor of Colorado Wyoming Reserve Company (the "Company").
      Hein
& Associates' reports in the Company's 10-KSB for each of the years ended
      June 30, 2001 and 2000, respectively, did not contain an adverse opinion or
      disclaimer of opinion, and were not qualified or modified as to uncertainty,
      audit scope or accounting principles, other than reflecting an uncertainty
      as to
      the Company's ability to continue as a going concern.





During
      each of the two (2) years ended June 30, 2001 and 2000, and all subsequent
      interim periods through June 29, 2005, there were no disagreements on any matter
      of accounting principles or practices, financial statement disclosure, or
      auditing scope or procedures, which disagreements, if not resolved to Hein
&
Associates’ satisfaction would have caused them to make reference in connection
      with their opinion to the subject matter of the disagreement.





On
      December 22, 2004, the Company engaged Arshad Farooq, CPA (“Farooq”) as its
      independent registered public accounting firm to audit the Company's financial
      statements for the fiscal years 2002, 2003 and 2004. During each of the two
      (2)
      years ended June 30, 2001 and 2000, and all subsequent interim periods through
      December 22, 2004, the Company did not consult Farooq on any matters described
      in Item 304(a)(2)(i) of Regulation S-B. During each of the two (2) years ended
      June 30, 2001 and 2000, and all subsequent interim periods through December
      22,
      2004, the Company did not consult Farooq on any matters described in Item
      304(a)(2)(ii) of Regulation S-B.





The
      decision to change accountants was approved by the Board of Directors of the
      Company on December 22, 2004.




**ITEM
      8A CONTROLS AND PROCEDURES**




As
      of the
      end of the period covered by this report, the Company conducted an evaluation
      of
      the Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
      under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this
      evaluation, the Company concluded that the Company's disclosure controls and
      procedures are effective to ensure that information required to be disclosed
      by
      the Company in annual reports that it files under the Exchange Act is recorded,
      processed, summarized, and reported within the time periods specified in
      Securities and Exchange Commission rules and forms. There was no change in
      the
      Company's internal controls over financial reporting during the Company's most
      recently completed fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, the Company's internal control over financial
      reporting period.


-28-




**PART
      III**





**ITEM
      9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE**


**WITH
      SECTION 16(A) OF THE EXCHANGE ACT**





**DIRECTORS
      AND EXECUTIVE OFFICERS**





The
      following table sets forth the names, ages and titles of the Company's executive
      officers and the members of the Board of Directors of the Company as of June
      30,
      2006.




Name
              
              Age
              
              PositionKim
                  M. Fuerst
              
              55
              
              Chairman
                  of the Board of Directors, DirectorWaseem
                  A. Sayed, PhD
              
              51
              
              President,
                  Chief Executive Officer, DirectorRafiq
                  A. Sayed
              
              52
              
              Chief
                  Financial Officer, Treasurer, Secretary, DirectorDr.
                  Syed A. Daud
              
              42
              
              Director




WASEEM
      A.
      SAYED PhD took over as President and CEO from Mr. Kim Fuerst as of July 1,
      2006.
      He was also appointed a Director effective the same date. He has been providing
      consulting services to publicly traded companies especially those operating
      assets in North and/or Central and South America. He participated in a $12.65mm,
      9% Convertible Senior Subordinated Debenture for Saba Petroleum Company. He
      provided financial public relations to Saba Petroleum Co., and during 1 1/2
      years of service was instrumental in increasing market cap from $15mm to over
      $300mm while liquidity increased 1,000 fold. He worked with Raptor Networks
      Technology Inc. Management to attract $7.35 mm of equity funding during the
      first six months of 2004.





KIM
      M.
      FUERST, currently Chairman of the Board of Directors, served as President,
      Chief
      Executive Officer and Director till June 30, 2006. He was President, CEO and
      Director since September 1996, and Chief Financial and Accounting Officer from
      October 17, 1997 to September 22, 2004. 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.





RAFIQ
      A.
      SAYED has been a Director of the Company since September 1998. On September
      22,
      2004 Mr. Sayed was appointed Chief Financial Officer. Since May 2000, Mr. Sayed
      has worked for EMC Corporation as a Vice President. From October 1999 through
      April 2000, Mr. Sayed was a consultant for the utility industry. From 1997
      to
      October 1999, Mr. Sayed served as Vice President of Engineering for ADC Telecom.
      From 1981 to 1997, Mr. Sayed was with Nortel Technology in various positions,
      most recently as Senior Director. He served on the Board of Directors of Meteor
      Industries, Inc., a position he held from April 1996 until September 1998.
      Mr.
      Sayed graduated from Southbank College in London, England in 1975 with an H.N.D.
      in Electrical/Electronic Engineering. He also attended Essex University in
      London, England where he was enrolled in an advanced computer science program.





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


-29-




Surgery
      from Dow Medical College, University of Karachi, Pakistan.





All
      directors of the Company serve one year terms and hold office until the next
      annual meeting of stockholders and 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. Officers of the Company serve at the discretion
      of the Board of Directors and until the next annual meeting of directors of
      the
      Company.





**COMMITTEES
      AND MEETINGS**





During
      the fiscal year ended June 30, 2006, the Board of Directors held 10 meeting.
      The
      Board of Directors of the Company has no established committees to which it
      has
      delegated any authority.





**SECTION
      16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**





The
      Company's directors, executive officers and persons who are beneficial owners
      of
      more than ten percent of the Company's Common Stock are required to file reports
      of their holdings and transactions in Common Stock with the Commission and
      to
      furnish the Company with such reports. Based solely upon written representations
      it has obtained from certain of these persons, the Company believes that in
      the
      fiscal year ended June 30, 2001, Dr. Daud and Mr. Rafiq Sayed had each failed
      to
      file a Form 5 to report the grant of an option.





**ITEM
      10. EXECUTIVE COMPENSATION**





**EXECUTIVE
      COMPENSATION**





The
      following table sets forth the aggregate compensation paid for each of the
      Company's last three fiscal years by the Company to its chief executive and
      chief financial officers.




**SUMMARY
      COMPENSATION TABLE**




Annual
                  Compensation
              
              Long
                  Term
                Compensation
                  AwardsAwardsName
                  and Position
              
              Year
              
              Salary
                  ($)
              
              Securities
                Underlying
                  Options(#)Kim
                  M. Fuerst
              
              
              2006
              
              
              60,000
                  (1
              )
              
              1,000,000
                  (2
              )Chief
                  Executive Officer,
              
              
              2005
              
              
              60,000
                  (1
              )
              
              —President,
                  Treasurer and Secretary
              
              
              2004
              
              
              60,000
              
              
              —Rafiq
                  Sayed
              
              
              2006
              
              
              120,000
                  (1
              )
              
              1,000,000
                  (2
              )Chief
                  Financial Officer
              
              
              2005
              
              
              100,000
                  (1
              )
              
              800,000
 
 (1)
              All
                  executive salaries were accrued but not paid during fiscal 2005,
                  2006.
 (2)
              Will
                  vest after three years.




The
      Company does not grant stock appreciation rights.





**STOCK
      OPTION AND INCENTIVE PLAN**





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.


-30-




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 five years
      or ten years; the actual term and any vesting requirements are set at the
      discretion of the Board of Directors or a Committee thereof.





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.
      To date, options to purchase 2,310,000 shares have been granted under the Equity
      Plan. A total of 500,000 shares have been reserved for issuance under the ISO
      Plan. Both plans are currently administered by the Board of Directors, but
      may
      be administered by a committee appointed by the Board.





The
      following table shows the number of shares covered by all exercisable and
      unexercisable stock options held by the named executive officer as of June
      30,
      2006, as well as the value of unexercised "in the money" options at such date.
      No stock options were exercised by the named executive officer during the last
      fiscal year.




**AGGREGATED
      OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR**


**AND
      FISCAL YEAR-END OPTION/SAR VALUES**




Number
                of SecuritiesUnderlying
                Unexercised
            
            Value
                of Unexercised In theOptions/SARs
                At FY-End
            
            Money
                Options/SARs at(#)
            
            FY-EndName
            
            Exercisable/Unexercisable
            
            Exercisable/UnexercisableKim
                M. Fuerst
            
            
            1,000,000/0
            
            $
            650,000/0
                (1
            )Waseem
                A. Sayed
            
            
            250,000/0
            
            $
            162,500/0
                (1
            )Rafiq
                Sayed
            
            
            1,200,000/0
            
            $
            780,000/0
                (1
            )





(1)
            The
                closing price on June 30, 2006, was $0.90 per share.




**EMPLOYMENT
      CONTRACTS**





The
      Company has no employment contracts in place currently.





**COMPENSATION
      OF DIRECTORS**





On
      February 2, 2001, Rafiq Sayed and Dr. Daud, directors of the Company, were
      granted options to purchase 150,000 shares and 50,000 shares, respectively,
      at
      $.343 per share, exercisable immediately and expiring on February 2, 2006.





On
      September 22, 2004, Rafiq Sayed and Dr. Daud, directors of the Company, were
      granted options to purchase 800,000 shares and 50,000 shares, respectively,
      at
      $.25 per share, exercisable immediately and expiring on September 22, 2014.
      A
      consultant was also granted options to purchase up to 1,250,000 shares at a
      price of $.25 per share, exercisable immediately and expiring on September
      22,
      2014.





Effective
      September 22, 2004 Rafiq Sayed was also appointed CFO of the Company at a salary
      of $10,000 per month.





Effective
      July 1, 2006 Waseem Sayed was appointed President and CEO of the Company at
      a
      salary of $15,000 per month.





The
      Directors of CWYR do not receive annual salaries or retainers from CWYR but
      do
      receive reimbursement for travel expenses.





**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 September 15, 2005, by
      (i)
      each person who is known to the Company to be the beneficial owner


-31-




of
      more
      than five percent of the Common Stock of the Company; (ii) each of the Company's
      directors; (iii) the Company's sole 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.




Number
                  of
              
              PercentageName
                  and Address
              
              Shares(a)
              
              Beneficially
                  Owned (b)Kim
                  M. Fuerst
              
              
              3,137,000(c
              )
              
              18.1
              %751
                  Horizon Court, Ste. 205Grand
                  Junction, Colorado 81506Waseem
                  A. Sayed PhD
              
              
              250,000(d)(i
              )
              
              1.5
              %2400
                  Ridgeview Drive, Ste. 409Chino
                  Hills, California 91709Syed
                  A. Daud
              
              
              200,000(e
              )
              
              1.2
              %64
                  Hainsworth Ct.Markham,
                  Ontario L3S1T5CanadaRafiq
                  A. Sayed
              
              
              1,200,000(f)(i
              )
              
              6.8
              %102
                  Avenue of the EstatesCary,
                  North Carolina 27511The
                  James E. Moore Revocable Trust,
              
              
              3,050,000(g
              )
              
              18.4
              %u/d/t
                  dated July 28, 199421484
                  Paseo Portola St.Malibu,
                  California 90265Kaleem
                  A. Sayed,
              
              
              5,237,840
                  (i
              )
              
              32.0
              %95
                  Coulsdon Road,Old
                  Coulsdon, Surrey UK CR5 2LDAll
                  executive officers and directors as a group (four persons)
              
              
              4,787,000(h
              )
              
              25.2
              %


(a)
            All
                shares are owned both of record and beneficially unless otherwise
                specified by footnote to this table.


(b)
            Based
                on 16,365,982 shares of Common Stock outstanding at October 13, 2006.


(c)
            Includes
                500,000 shares issuable upon exercise of currently exercisable stock
                options granted under the Incentive Stock Option Plan in 1996, and
                500,000
                shares issuable upon exercise of currently exercisable stock options
                granted under the Equity Plan.


(d)
            Includes
                250,000 options granted for consulting.


(e)
            Includes
                150,000 shares issuable upon exercise of currently exercisable director
                stock options granted under the Equity Incentive Plan, and 50,000
                shares
                issuable upon exercise of currently exercisable stock options granted
                September 22, 2004.


(f)
            Includes
                400,000 shares issuable upon exercise of currently exercisable director
                stock options granted under the Equity Incentive Plan and 800,000
                shares
                issuable upon exercise of currently exercisable stock options granted
                September 22, 2004.


(g)
            Includes
                180,000 shares issuable upon exercise of currently exercisable warrants
                granted in connection with Bridge Loan and extensions thereof.


(h)
            Includes
                2,650,000 shares issuable upon exercise of options and warrants.


(i)
            Messrs
                Waseem A. Sayed, Rafiq A. Sayed and Kaleem A. Sayed are
                brothers.




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**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





Messrs
      Waseem A. Sayed, Rafiq A. Sayed and Kaleem A. Sayed are brothers.





Set
      forth
      below is a description of transactions entered into between the Company and
      its
      executive officer and certain directors during the last two fiscal years.





**CONSULTING
      AGREEMENTS**





Effective
      March 10, 2006 the Company entered into an Agreement for Investor Relations
      Services (the "Janfra Agreement") with Janfra Partners LLC of 1590 Horseshoe
      Drive, Manasquan, NJ 08736. Pursuant to the terms of the Janfra Agreement,
      Janfra performs certain investor related functions for the Company. The Janfra
      Agreement calls for no cash compensation. Janfra Partners LLC were offered
      a
      total of 400,000 warrants to purchase the 0.01 par value common stock of the
      Company at $1.00 per share. The warrants are valid for a period of three years.





**FINANCINGS**





On
      September 28, 2000, the Company entered into a Farmout Agreement, effective
      September 22, 2000, with the Farmees: ST Oil, FM Energy (whose rights and
      interest were subsequently assigned to Moore Energy) and Shoreline. Sam Butler,
      a director and stockholder of the Company, is the Chairman, Chief Executive
      Officer and principal stockholder of ST Oil. FM Energy is jointly owned by
      Kim
      Fuerst, the Company's Chief Executive Officer and President, and The James
      E.
      Moore Revocable Trust, a principal stockholder of the Company, and Mr. Moore,
      the trustee and sole beneficiary under the Trust, and Mr. Fuerst serve as
      Co-Chairman of FM Energy. The Trust is the sole member of Moore Energy, and
      Mr.
      Moore serves as the manager of Moore Energy. F. Robert Tiddens, a director
      and
      stockholder of the Company, is the President and Chief Executive Officer and
      holder of a 49 percent interest in Shoreline. John Greene, who is also a
      director and stockholder of the Company, is a director and holder of a 51
      percent interest in Shoreline.





Pursuant
      to the terms of the Farmout Agreement, the Company assigned 50 percent of its
      mineral working interests in and to certain oil and gas leases and seismic
      options covering approximately 61,000 acres of land located in the Paradox
      Basin
      Project in San Juan County, Utah, to the Farmees. Prior to commencement of
      the
      Seismic Survey, the Company sold an additional 7.5 percent to the Farmees in
      February 2001 for $150,000. The purchase price was determined using the same
      valuation of the Paradox Basin Project as was used in the Farmout Agreement.
      The
      cost of completing, processing and interpreting the Seismic Survey of
      approximately $1.1 million was borne by the Farmees. The Farmout Agreement
      requires the Company to bear 42.5 percent of the cost of maintaining the Paradox
      Basin Project leasehold.





The
      Farmout Agreement also establishes an area of mutual interest (the "AMI") for
      a
      term of ten years from the effective date of the Farmout Agreement. If during
      the ten-year term, any party to the Farmout Agreement acquires an oil or gas
      leasehold interest in the AMI, that party must give all other parties the
      opportunity to participate.


In
      September 2000, the Company entered into a Credit Agreement with the Farmees.
      The Credit Agreement established a revolving line of credit for the Company
      in
      an aggregate principal amount not to exceed $100,000, subsequently increased
      to
      $122,000. Amounts borrowed under the Credit Agreement bear interest at the
      rate
      of 8 percent per annum. At June 30, 2005 the Company had a balance owing the
      Creditors of $192,169 loan (which includes $122,000 principal plus $70,169
      interest). The note was due and payable in full on September 28, 2001, and
      remains unpaid as of September 13, 2005.





In
      April
      2000, the Company had entered into an Option Agreement with ST Oil and Edwards
      Energy Corporation, a Letter of Intent with FM Energy and a Letter of Intent
      with The Shoreline Companies, which agreements contemplated a joint venture
      arrangement to be established by all the parties similar to the arrangement
      set
      forth in the Farmout Agreement and the Credit Agreement described above.
      Pursuant to the terms of the Option Agreement, the Company was paid $24,000
      during the last quarter of fiscal 2000 for the option. The option and the
      letters of intent expired according to their terms on August 30, 2000. The
      Farmout Agreement and the Credit Agreement reflect the final agreement of the
      parties regarding the acquisition by ST Oil, FM Energy and The Shoreline
      Companies of an aggregate 50 percent of the Company's working interests in
      certain leases and seismic options in exchange for providing the Company with
      a
      seismic survey of certain acreage covered by such leases and options.




**ITEM
      13. EXHIBITS**





(a)
      Exhibits





A
      list of
      the Exhibits filed as part of this report or incorporated by reference is set
      forth in the Index to Exhibits.


-33-




**ITEM
      14. AUDIT FEES**





The
      aggregate fees billed in each of the last two fiscal years by Arshad Farooq,
      CPA
      for its audit of the Company’s annual financial statements and review of interim
      financial statements, including the Company’s Form 10-QSB reports, were $15,000
      and $15,000 in the years 2006 and 2005, respectively.





Audit-Related
      Fees





$15,000
      and $15,000 in 2006 and 2005 respectively.





Tax
      Fees





None
      in
      2006 and 2005.





All
      Other Fees





There
      were no other aggregate fees billed in either of the last two fiscal years
      for
      products and services provided by Hein + Associates, other than the services
      reported above.


-34-




**SIGNATURES**





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.





**COLORADO
      WYOMING RESERVE COMPANY**


Dated:
      October 13, 2006




By: 
      /S/ WASEEM A. SAYED


Waseem
      A.
      Sayed, President and


Chief 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:
        October 13, 2006
 By: 
        /s/ WASEEM A. SAYED
 Waseem
        A.
        Sayed, President, Chief *Executive
        Officer,*
 (Principal
        Executive Officer,
        Director)
  Dated:
        October 13, 2006
 By: 
        /s/ KIM M. FUERST
 Kim
        M.
        Fuerst, Chairman of the Board of
        Directors
  Dated:
        October 13, 2006
 By: 
        /s/ RAFIQ A. SAYED
 Rafiq
        A.
        Sayed, Director and Chief
        Financial Officer
 (Chief Financial
        and Accounting Officer, Secretary,
        Treasurer)
   By: 
        /s/ SYED A. DAUD
 Syed
          A.
          Daud, Director
 Dated:
        October 13, 2006


-35-




**INDEX
      TO EXHIBITS**





**EXHIBIT
              NO.**
            **DESCRIPTION**  3.1
            Articles
                of Incorporation, incorporated by reference to theCompany's
                Annual Report on Form 10-K for the fiscal year ended May31,
                1983.





3.2
            Bylaws,
                incorporated by reference to the Company's Annual Report onForm
                10-K for the fiscal year ended May 31,
                1983.





10.1
            Employment
                Agreement between the Company and Kim M. Fuerst, datedOctober
                1, 1996, incorporated by reference to the Company'sQuarterly
                Report on Form 10-QSB for the quarter ended March 31,1997,
                and as amended by Amendment, dated May 17, 1999, incorporatedby
                reference to the Company's Annual Report on Form 10-KSB for theyear
                ended June 30, 1999.





10.2
            Incentive
                Stock Option Plan, dated October 18, 1996, incorporated byreference
                to the Company's Quarterly Report on Form 10-QSB for thequarter
                ended March 31, 1997.





10.3
            Incentive
                Stock Option Agreement between the Company and Kim M.Fuerst,
                dated October 18, 1996, incorporated by reference to theCompany's
                Quarterly Report on Form 10-QSB for the quarter endedMarch
                31, 1997.





10.4
            The
                Company's Equity Incentive Plan, incorporated by reference tothe
                Company's Quarterly Report on Form 10-QSB for the quarter endedMarch
                31, 1997.





10.5
            Warrant,
                dated March 31, 1997, from the Company to Trinity PetroleumManagement,
                LLC, incorporated by reference from the Company'sQuarterly
                Report on Form 10-QSB for the quarter ended March 31,1997.





10.6
            Agreement
                for Administrative Services between the Company andTrinity
                Petroleum Management, LLC, dated as of January 1, 1998,incorporated
                by reference to the Company's Annual Report on Form10-KSB
                for the fiscal year ended June 30,
                1998.





10.12
            Warrant
                Agreement, dated as of August 25, 1998, between the Companyand
                the Trust, incorporated by reference to the Company's AnnualReport
                on Form 10-KSB for the fiscal year ended June 30,
                1998.





10.13
            Registration
                Rights Agreement, dated as of August 25, 1998, betweenthe
                Company and the Trust, incorporated by reference to theCompany's
                Annual Report on Form 10-KSB for the fiscal year endedJune
                30, 1998.





10.15
            Amendment
                No. 1 to Registration Rights Agreement and PromissoryNote,
                dated as of December 4, 1998, between the Company and theTrust,
                incorporated by reference to the Company's Annual Reporton
                Form 10-KSB for the fiscal year ended June 30,
                1998.





10.16
            Warrant
                Agreement, dated as of December 4, 1998, between the Companyand
                the Trust, incorporated by reference to the Company's AnnualReport
                on Form 10-KSB for the fiscal year ended June 30,
                1998.





10.18
            Warrant
                Agreement, dated December 30, 1998, between the Company andthe
                Trust, incorporated by reference to the Company's QuarterlyReport
                on Form 10-QSB for the quarter ended December 31,
                1998.




-36-




10.19
            Amendment
                No. 2 to Registration Rights Agreement and PromissoryNote,
                dated as of December 30, 1998, between the Company and theTrust,
                incorporated by reference to the Company's QuarterlyReport
                on Form 10-QSB for the quarter ended December 31,
                1998.





10.26
            Letter
                Agreement, dated April 29, 1999, by and between theCompany
                and F. Robert Tiddens.





10.27
            Option
                Agreement, dated May 10, 2000, by and between the Company andST
                Oil Company, incorporated by reference to the Company's QuarterlyReport
                on Form 10-QSB for the quarter ended March 31,
                2000.





10.28
            Letter
                of Intent, dated May 15, 2000, by and between the Company andFM
                Energy, LLC, incorporated by reference to the Company's QuarterlyReport
                on Form 10-QSB for the quarter ended March 31,
                2000.





10.29
            Letter
                of Intent, dated May 10, 2000, by and between the Company andThe
                Shoreline Companies, LLC, incorporated by reference to theCompany's
                Quarterly Report on Form 10-QSB for the quarter endedMarch
                31, 2000.





10.30
            Farmout
                Agreement, dated September 22, 2000, by and among theCompany,
                ST Oil Company, FM Energy, LLC and The Shoreline Companies,LLC,
                incorporated by reference to the Company's Current Report onForm
                8-K dated September 22, 2000.





10.31
            Credit
                Agreement, dated September 22, 2000, by and among theCompany,
                ST Oil Company, FM Energy LLC and The Shoreline Companies,LLC,
                incorporated by reference to the Company's Current Report onForm
                8-K dated September 22, 2000.





10.32
            Farmout
                Agreement, dated September 25, 2002, by and among theCompany,
                ST Oil Company, and The Shoreline Companies,LLC,
                incorporated by reference to the Company's Current Report onForm
                8-K dated September 25, 2002





14
            Code
                of Business Conduct and Ethics of Colorado Wyoming Reserve Company(Incorporated
                by reference to Exhibit 14 in the Company’s Annual Report on Form 10-KSB
                for the year ended June 30, 2002.)




21
            Subsidiaries
                of the Company:Shoreline
                Resource Company, Inc., a Colorado
                corporation





23
            Consent
                of Arshad Farooq CPA





31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 ofthe
                Sarbanes-Oxley Act of 2002





31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 ofthe
                Sarbanes-Oxley Act of 2002





32.1
            Certification
                of Chief Executive Officer pursuant to U.S.C. 18,Section
                1350





32.2
            Certification
                of Chief Financial Officer pursuant to U.S.C. 18,Section
                1350




-37-