<PAGE>   1


                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                ---------------
                                   FORM 10-Q
                                ---------------

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                   FOR THE TRANSITION PERIOD FROM ___ TO ___

                          COMMISSION FILE NO. 0-21179

                           QUEEN SAND RESOURCES, INC.
                           QUEEN SAND RESOURCES, INC.
                            QUEEN SAND OPERATING CO.
                            CORRIDA RESOURCES, INC.
           (Exact name of registrants as specified in their charter)

 DELAWARE                               75-2615565
 NEVADA                                 75-2564071
 NEVADA                                 75-2593510
 NEVADA                                 75-2691594
 (State or Other Jurisdiction of        (I.R.S. Employer Identification Nos.)
 Incorporation or Organization)

                          13760 NOEL ROAD, SUITE 1030,
                            DALLAS, TEXAS 75240-7336
              (Address of principal executive offices) (Zip code)

      (REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE) (972) 233-9906

            Northland Operating Co. (n/k/a Queen Sand Operating Co.)
                    (Former name, former address and former
                   fiscal year, if changed since last report)

Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days. YES [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's (parent only) classes of common stock, as of May 14,
1999: 33,040,699


                                                                              1

<PAGE>   2
                          PART I FINANCIAL INFORMATION

                  QUEEN SAND RESOURCES, INC. AND SUBSIDIARIES

                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   March 31,           June 30,
                                                                     1999                1998
                                                                 --------------      --------------
<S>                                                              <C>                 <C>           
                       Assets

Current assets:
     Cash                                                        $    5,411,000      $    1,029,000
     Accounts receivable and other current assets                     4,646,000           5,382,000
                                                                 --------------      --------------
         Total current assets                                        10,057,000           6,411,000

Net property and equipment                                          108,011,000         142,467,000
Other assets                                                         11,705,000           4,797,000
                                                                 --------------      --------------

                                                                 $  129,773,000      $  153,675,000
                                                                 ==============      ==============


        Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable and other                                  $    6,680,000      $    6,751,000
     Current portion of long-term debt                                   85,000              85,000
                                                                 --------------      --------------
         Total current liabilities                                    6,765,000           6,836,000

Long-term obligations, net of current portion                       143,190,000         153,619,000

Commitments

Stockholders' deficit:
     Preferred stock, $.01 par value, authorized                         96,000              96,000
         50,000,000 shares:  issued and outstanding
         9,605,238 and 9,610,400 at March 31 and
         June 30, respectively 
     Common Stock, $.0015 par value, authorized                          62,000              51,000
         100,000,000 shares:  issued and
         Outstanding 32,553,940 and 24,323,767 at
         March 31 and June 30 respectively 
     Additional paid-in capital                                      65,007,000          34,012,000
     Accumulated deficit                                            (78,096,000)        (35,939,000)
     Treasury stock                                                  (7,251,000)         (5,000,000)
                                                                 --------------      --------------
             Total stockholders' equity                             (20,182,000)         (6,780,000)
                                                                 --------------      --------------

                                                                 $  129,773,000      $  153,675,000
                                                                 ==============      ==============
</TABLE>


                            See accompanying notes.



                                                                              2

<PAGE>   3


                  QUEEN SAND RESOURCES, INC. AND SUBSIDIARIES

                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                               March 31                           March 31
                                                               --------                           --------
                                                        1999              1998              1999              1998
                                                    ------------      ------------      ------------      ------------
<S>                                                 <C>               <C>               <C>               <C>         
Oil & gas revenues                                  $    785,000      $  1,507,000      $  3,533,000      $  4,849,000
Net profits and royalties interests                    5,818,000              --          17,333,000              --
Interest and other income                                131,000            65,000           197,000            80,000
                                                    ------------      ------------      ------------      ------------
                                                       6,734,000         1,572,000        21,063,000         4,929,000

Expenses:
   Oil and gas production expenses                       719,000         1,108,000         2,573,000         3,182,000
   General & administrative expenses                     863,000           428,000         2,242,000         1,646,000
   Interest and financing costs                        4,518,000           260,000        13,605,000           899,000
   Depreciation, depletion and amortization            2,700,000           469,000         9,628,000         1,340,000
   Write-down of oil and gas properties                     --                --          35,033,000              --
                                                    ------------      ------------      ------------      ------------
Net loss                                            $ (2,066,000)     $   (693,000)     $(42,018,000)     $ (2,138,000)
                                                    ============      ============      ============      ============

Net loss per common share                           $      (0.06)     $      (0.03)     $      (1.36)     $      (0.09)
                                                    ============      ============      ============      ============

Weighted average number of common shares
outstanding                                           32,170,000        22,400,000        30,829,000        23,611,000
                                                    ============      ============      ============      ============
</TABLE>



                            See accompanying notes.



                                                                              3

<PAGE>   4


                  QUEEN SAND RESOURCES, INC. AND SUBSIDIARIES

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended March 31
                                                                                ----------------------------------
                                                                                     1999                1998
                                                                                --------------      --------------
<S>                                                                             <C>                 <C>            
Operating activities:
   Net loss                                                                     $  (42,018,000)     $   (2,138,000)
   Depreciation, depletion, amortization and write-down of oil
     and gas properties                                                             45,593,000           1,340,000
   Issuance of common stock for services rendered                                         --               300,000
   Unrealized gains on foreign exchange obligations                                    (85,000)            (51,000)
   Net changes in operating assets and liabilities                                     664,000             (62,000)
                                                                                --------------      --------------
                     Net cash provided (used) in operating activities                4,154,000            (611,000)
                                                                                --------------      --------------

Investing activities
   Additions to property and equipment                                              (9,950,000)        (25,789,000)

Financing activities:
   Increase in deferred assets                                                      (7,933,000)               --
   Payments of term debt                                                          (142,385,000)         (2,008,000)
   Proceeds from long-term obligations                                             132,000,000          16,291,000
   Payments on capital lease obligations                                               (56,000)            (52,000)
   Proceeds from the sale of capital stock                                          30,803,000          12,996,000
   Redemption of treasury stock                                                     (2,251,000)               --
                                                                                --------------      --------------
              Net cash provided by financing activities                             10,178,000          27,227,000
                                                                                --------------      --------------

Net increase in cash                                                                 4,382,000             827,000

Cash at beginning of period                                                          1,029,000             310,000
                                                                                --------------      --------------

Cash at end of period                                                           $    5,411,000      $    1,137,000
                                                                                ==============      ==============
</TABLE>


                            See accompanying notes.


                                                                              4

<PAGE>   5

                  QUEEN SAND RESOURCES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                  (UNAUDITED)


(1)    Basis of Presentation

       The accompanying consolidated financial statements include the accounts
       of Queen Sand Resources, Inc. and its wholly owned subsidiaries
       (collectively, the "Company") after elimination of all significant
       intercompany balances and transactions. The financial statements have
       been prepared in conformity with generally accepted accounting
       principles which require management to make estimates and assumptions
       that affect the amounts reported in the financial statements and
       accompanying notes. While management has based its assumptions and
       estimates on the facts and circumstances currently known, final amounts
       may differ from such estimates.

       The interim financial statements contained herein are unaudited but, in
       the opinion of management, include all adjustments (consisting only of
       normal recurring entries) necessary for a fair presentation of the
       financial position and results of operations of the Company for the
       periods presented. The results of operations for the three and nine
       months ended March 31, 1999 are not necessarily indicative of the
       operating results for the full fiscal year ending June 30, 1999.
       Moreover, these financial statements do not purport to contain complete
       disclosure in conformity with generally accepted accounting principles
       and should be read in conjunction with the Company's Annual Report filed
       on Form 10KSB for the fiscal year ended June 30, 1998.

       In June 1997, the Financial Accounting Standards Board ("FASB") issued
       Statement of Financial Account Standards ("FAS") No. 130, "Reporting
       Comprehensive Income" ("FAS 130"), which established standards for
       reporting and display of comprehensive income and its components in a
       full set of general-purpose financial statements. Comprehensive income
       is defined as the change in equity of a business enterprise during a
       period from transactions and other events and circumstances from
       non-owner sources. For the three and nine months ended March 31, 1999
       and 1998, the Company's net income and comprehensive income were the
       same.

       In June 1998, the FASB issued FAS No. 133, "Accounting for Derivative
       Instruments and Hedging Activities" ("FAS 133") which established
       accounting and reporting standards for derivative instruments, including
       certain derivative instruments embedded in other contracts, and for
       hedging activities. FAS 133 requires that an entity recognize all
       derivatives as either assets or liabilities in the statement of
       financial position and measure those instruments at fair value. The
       Company will adopt the provisions of FAS 133 at the beginning of the
       fiscal year beginning July 1, 1999. The adoption of FAS 133 is not
       expected to have a material impact on the Company's financial
       statements.

(2)    Debt Issuance

       On July 8, 1998, the Company completed a private placement (the "Note
       Offering") of $125,000,000 principal amount of its 12.5% Senior Notes
       due 2008 (the "Notes"). In addition, on July 8, 1998 and July 20, 1998,
       the Company completed a private equity placement (the "Private
       Placement"). Pursuant to the Note Offering, the Company issued and sold
       the Notes to certain institutional buyers pursuant to Rule 144A and
       Regulation D promulgated under the Securities Act of 1933, as amended.
       The Notes mature on July 1, 2008, and interest on the Notes is payable
       semiannually on January 1 and July 1 of each year, commencing January 1,
       1999, at the rate of 12.5% per annum.

       The net proceeds received by the Company from the Note Offering and the
       Private Placement completed on July 8, 1998 of approximately $144.5
       million and on July 20, 1998 of approximately $6.9 million were used to
       repay indebtedness outstanding under the Company's Credit Agreement, to
       repay indebtedness outstanding under certain retired bridge facilities,
       and to unwind an interest rate hedge contract at a cost of $3.5 million.
       Substantially all of the retired indebtedness was incurred to fund the
       acquisition of oil and natural gas properties from trusts managed by 
       J.P. Morgan Investments.



                                                                              5

<PAGE>   6

       The Company maintains a revolving credit agreement, which requires,
       among other things, maintenance of a minimum interest coverage ratio of
       1.5x. At March 31, 1999, the Company was in violation of this
       requirement. The Company has received a waiver of this violation.

       The Company's payment obligations under the Notes are fully,
       unconditionally and jointly and severally guaranteed on a senior
       subordinated basis by all of the current domestic subsidiaries and
       future Restricted Subsidiaries. Such guarantees are subordinated to the
       guarantees of Senior Debt issued by the Guarantors (as defined in the
       Indenture) under the Credit Agreement and to other guarantees of Senior
       Debt issued in the future. All of the Company's current subsidiaries are
       wholly owned. There are currently no contractual restrictions on
       distributions from the Guarantors to the Company.

       Separate financial statements and other disclosures concerning the
       Guarantors are not presented because management has determined they are
       not material to investors. The combined condensed financial information
       of the Company's current subsidiaries, the Guarantors, is as follows:

<TABLE>
<CAPTION>
                                                            MARCH 31, 1999      JUNE 30, 1998
                                                            --------------      --------------
<S>                                                         <C>                 <C>           
Current assets                                              $    6,031,000      $    6,172,000
Net property and equipment                                     107,909,000         142,421,000
Other assets, net                                                1,713,000           2,244,000
                                                            --------------      --------------

  Total assets                                              $  115,653,000      $  150,837,000
                                                            ==============      ==============

Current liabilities                                         $    2,832,000      $    6,145,000
Intercompany payables                                          154,680,000          23,703,000
Long-term debt                                                  17,307,000         151,423,000
Stockholder's deficit                                          (59,166,000)        (30,434,000)
                                                            --------------      --------------

  Total liabilities and stockholder's deficit               $  115,653,000      $  150,837,000
                                                            ==============      ==============
</TABLE>

<TABLE>
<CAPTION>

                                                                FOR THE NINE MONTHS ENDED
                                                                        MARCH 31,
                                                                 1999                1998
                                                            --------------      --------------

<S>                                                         <C>                 <C> 
Oil and gas sales and net profits
  interests                                                 $   20,866,000      $    4,849,000

Costs and expenses:
  Production expenses                                            2,572,000           3,182,000
  General and administrative                                     1,192,000             713,000
  Depreciation, depletion and
    amortization                                                 9,614,000           1,312,000
  Write-down of oil and gas
    properties                                                  35,033,000                --
  Interest expense                                               1,342,000             684,000
  Other                                                           (157,000)            (13,000)
                                                            --------------      --------------
                                                                49,596,000           5,878,000
                                                            --------------      --------------

Net income (loss)                                           $  (28,730,000)     $   (1,029,000)
                                                            ==============      ==============
</TABLE>



                                                                              6

<PAGE>   7


(3) Capital Stock

    During the nine months ended March 31, 1999 the Company issued 6,319,476
    shares of its common stock for $30,803,000, net of costs (at per share
    prices ranging from $2.50 to $7.00). The Company also issued 1,073,046
    shares of common stock for no additional consideration to stockholders who
    exercised repricing rights included with the Private Placement of common
    stock. Additionally, the Company issued 8,742 shares of its common stock
    valued at $65,000 ($7.4375 per share) as partial consideration for the
    acquisition of a natural gas property in Utah.

    During the nine months ended March 31, 1999 the holders of 3,010 shares of
    the Company's Series C preferred stock converted their Series C preferred
    stock into 788,638 shares of common stock. In conjunction with these
    conversions, the Company issued 40,320 shares of common stock in payment of
    stock dividends. The value of these stock dividends was $139,000.
    Additionally, during the nine months ended March 31, 1999 the Company
    repurchased 2,152 shares of Series C preferred stock. The funds used to
    complete this transaction were raised from the issuance of shares of the
    Company's common stock pursuant to a private placement.

(4) Write-down of Oil and Gas Properties

    The Company limits the capitalized costs of oil and gas properties, net of
    accumulated depreciation, depletion and amortization, to the estimated
    future net revenues from proved oil and gas reserves less estimated future
    development costs and production expenditures, discounted at 10%, plus the
    lower of cost or estimated fair value of unproved properties, as adjusted
    for future income tax effects. If capitalized costs exceed this limit (the
    full cost ceiling), the excess is charged to depreciation, depletion and
    amortization expense. During the quarter ended December 31, 1998 the
    Company recorded a full cost ceiling write-down of $35,033,000.

(5) Hedging Activities

    During the three months ended March 31, 1999 the Company received $765,000
    in cash settlements and amortized $27,000 of deferred hedging costs as a
    result of its natural gas price hedging program. The Company paid $14,000
    on its oil hedging program.

    During the nine months ended March 31, 1999 the Company received $1,446,000
    in cash settlements and amortized $94,000 deferred hedging costs, as a
    result of its natural gas price hedging program. The Company received
    $133,000 on its oil price hedging program.


                                                                              7

<PAGE>   8

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

FORWARD-LOOKING STATEMENTS

All statements in this document concerning the Company other than purely
historical information (collectively "Forward-Looking Statements") reflect the
current expectation of management and are based on the Company's historical
operating trends, estimates of proved reserves and other information currently
available to management. These statements assume, among other things, (i) that
no significant changes will occur in the operating environment for the
Company's oil and gas properties, gas plants and gathering systems, and (ii)
that there will be no material acquisitions or divestitures. The Company
cautions that the Forward-Looking Statements are subject to all the risks and
uncertainties incident to the acquisition, development and marketing of, and
exploration for, oil and gas reserves. These risks include, but are not limited
to, commodity price risk, environmental risk, drilling risk, reserve,
operations, and production risks, regulatory risks and counterparty risk. Many
of these risks are described in the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1998 filed with the Securities and Exchange
Commission in September 1998. The Company may make material acquisitions or
dispositions, enter into new or terminate existing oil and gas sales or hedging
contracts, or enter into financing transactions. None of these can be predicted
with any certainty and, accordingly, are not taken into consideration in the
Forward-Looking Statements made herein. For all of the foregoing reasons,
actual results may vary materially from the Forward-Looking Statements and
there is no assurance that the assumptions used are necessarily the most
likely.

SELECTED FINANCIAL DATA

The following tables set forth selected financial data for the Company. The
financial data were derived from the consolidated financial statements of the
Company and should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto included herein. The consolidated
financial statements for the three and nine month periods ended March 31, 1999
and 1998 reflect all adjustments which, in the opinion of the Company, are
necessary for a fair presentation of the results of operations and the
financial position of the Company. The results of operations for the three and
nine months ended March 31, 1999 will not necessarily be indicative of the
operating results for the full fiscal year ending June 30, 1999.



<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                               MARCH 31                             MARCH 31
                                                      1999                  1998             1999              1998
                                                  ------------          ------------     ------------      ------------
<S>                                               <C>                   <C>              <C>               <C>         
OPERATIONS DATA:
Oil and gas sales (1)                             $  7,659,000          $  1,507,000     $ 26,168,000      $  4,849,000
Oil and gas production expenses (1)                  1,935,000             1,108,000        7,968,000         3,182,000
                                                  ------------          ------------     ------------      ------------
Net oil and gas revenues                             5,724,000               399,000       18,200,000         1,667,000

General and administrative expenses                    863,000               428,000        2,242,000         1,646,000
Interest and financing expense (2)                   4,164,000               260,000       12,580,000           899,000
Depreciation, depletion and amortization (3)         2,894,000               469,000       10,560,000         1,340,000
Write-down of oil and gas properties                      --                    --         35,033,000              --
Interest and other income                             (131,000)              (65,000)        (197,000)          (80,000)
                                                  ------------          ------------     ------------      ------------
Net Loss                                          $ (2,066,000)         $   (693,000)    $(42,018,000)     $ (2,138,000)
                                                  ============          ============     ============      ============


1. Oil and gas sales and production expenses related to net profits interests
     have been presented as if such net profits interests were working
     interests.
2. Interest charges payable on outstanding debt obligations.
3. Depreciation, depletion and amortization includes $355,000 and $1,026,000
     of amortized deferred charges related to debt obligations for the three
     and nine months ended March 31, 1999, respectively, and $27,000 and
     $93,000 of amortized deferred charges related to the Company's gas price
     hedging program for the three and nine months ended march 31, 1999,
     respectively.
</TABLE>


                                                                              8

<PAGE>   9



<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                    MARCH 31                       MARCH 31
                                                               1999           1998           1999           1998
                                                            ----------     ----------     ----------     ----------

<S>                                                         <C>            <C>            <C>            <C>       
SALES DATA
  Oil (Mbbls)                                                    123.0           60.5          398.0          184.6
  Gas (Mmcf)                                                   3,105.0          244.4       10,154.5          736.1
  Mmcfe                                                        3,843.0          607.6       12,542.6        1,843.4
  MBOE                                                           640.5          101.3        2,090.4          307.2

AVERAGE SALES PRICE
  Oil (per Bbl)                                             $     8.78     $    16.60     $    11.52     $    17.19
  Gas (per Mcf)                                             $     2.12     $     2.06     $     2.13     $     2.28
  Per Mcfe                                                  $     1.99     $     2.48     $     2.09     $     2.63
  Per BOE                                                   $    11.96     $    14.88     $    12.52     $    15.78

AVERAGE COST DATA ($/MCFE):
  Production and operating costs                            $     0.50     $     1.82     $     0.64     $     1.73
  Depreciation, depletion and amortization of oil
     and gas properties                                     $     0.64     $     0.77     $     0.75     $     0.73
  General and administrative expenses                       $     0.22     $     0.70     $     0.18     $     0.89
  Interest and financing expense                            $     1.08     $     0.43     $     1.00     $     0.49
</TABLE>


The following discussion of the results of operations and financial condition
should be read in conjunction with the Consolidated Financial Statements and
related Notes thereto included herein.


THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED 
MARCH 31, 1998

RESULTS OF OPERATIONS

The following discussion and analysis reflects the operating results as if the
net profits interest were working interests. The Company believes that this
will provide the readers of the report a more meaningful understanding of the
underlying operating results and conditions for the period.

REVENUES: The Company's total revenues rose by $6.2 million (408%) to $7.7
million for the three months ended March 31, 1999, from $1.5 million during the
comparable period in 1998.

The Company produced 123,000 barrels of crude oil during the three months ended
March 31, 1999, an increase of 63,000 barrels (103%) over the 60,000 barrels
produced during the comparable period in 1998. This increase was comprised of
an overall decrease of 8,000 barrels (14%) from the properties that the Company
owned during both periods and an increase of 71,000 barrels from the properties
acquired during the period April 1, 1998 to December 31, 1998. The decrease in
production of crude oil from the properties owned during the comparative
quarters is a reflection of the natural depletion of the crude oil reservoirs,
offset by the successful development and exploitation efforts of the Company.

The Company produced 3,105,000 Mcf of natural gas during the three months ended
March 31, 1999, an increase of 2,861,000 Mcf (1,171%) over the 244,000 Mcf
produced during the comparable period in 1998. This increase consists of a
decrease of 14,000 Mcf (6%) from the properties that the Company owned during
both periods and an increase of 2,875,000 Mcf from the properties acquired
during the period April 1, 1998 to December 31, 1998. The decrease in
production of natural gas from the properties owned during the comparative
quarters is a reflection of the natural depletion of the natural gas reservoirs,
offset by the successful development and exploitation efforts of the Company.

                                                                              9

<PAGE>   10

On a thousand cubic feet of gas equivalent (Mcfe) basis, production for the
three months ended March 31, 1999 was 3,843,000 Mcfe, up 3,235,000 Mcfe (532%)
over the 608,000 Mcfe produced during the comparable period in 1998.

The increase in revenues arising from the increased production has been
buffered by the significant industry-wide decline in oil and natural gas
prices, which has been mitigated by the Company's natural gas price management
program. The average price per barrel of crude oil sold by the Company during
the three months ended March 31, 1999 was $8.78, a decrease of $7.82 per barrel
(47%) from the $16.60 per barrel during the three months ended March 31, 1998.
The average price per Mcf of natural gas sold by the Company was $2.12 during
the three months ended March 31, 1999, an increase of $0.06 per Mcf (3%) from
the $2.06 per Mcf during the comparable period in 1998. Crude oil and natural
gas prices have increased subsequent to March 31, 1999. On an Mcfe basis, the
average price received by the Company during the three months ended March 31,
1999 was $1.99, a $0.49 decrease (20%) from the $2.48 the Company received
during the comparable period in 1998.

During the three months ended March 31, 1999 the Company received $765,000 in
cash settlements and amortized $27,000 of deferred hedging costs, as a result
of its natural gas price hedging program. The net positive effect on the
average natural gas prices received by the Company during the period was $0.24
per Mcf (13%). The Company paid $14,000 on its oil price hedging program. The
net negative effect on average oil prices received by the Company during the
period was $0.11 per barrel (1%). During the comparable period in 1998 the
Company neither received nor paid any cash on its natural gas price-hedging
program. The Company received $74,000 ($1.22 per barrel) on its oil
price-hedging program during the three months ended March 31, 1998.

SEVERANCE AND PRODUCTION TAXES: Severance and production taxes were $275,000
($0.07 per Mcfe) during the three months ended March 31, 1999, as compared to
$93,000 ($0.15 per Mcfe) during the comparable period in 1998. The increase of
$182,000 (195%) is a result of the 408% increase in revenues for the three
month period ended March 31, 1999, as compared to the same period for 1998.
This increase was buffered by the shift in revenues from 39% gas during the
three months ended March 31, 1998 to 85% gas during the three months ended
March 31, 1999. The reduction in severance and production taxes on a per Mcfe
basis relates to severance and production tax abatements on certain net profits
interests.

PRODUCTION EXPENSES: The Company's lease operating expenses rose to $1.7
million for the three months ended March 31, 1999, an increase of $645,000
(64%) over the $1.0 million incurred during the comparable period in 1998. This
increase is a result of the increased production of crude oil and natural gas
by the Company. Lease operating expenses were $0.43 per Mcfe during the three
months ended March 31, 1999; a decrease of $1.24 (74%) from the $1.67 per Mcfe
incurred during the comparable period in 1998. This improvement is a result of
the acquisition of properties with lower average operating costs per Mcfe than
those the Company has owned during the preceding years and improved
efficiencies at an operating level.

DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE: Depreciation, depletion and
amortization of oil and gas properties and related oil field equipment were
$2.5 million ($0.64 per Mcfe) during the three months ended March 31, 1999, an
increase of $2.2 million (932%) over the $240,000 ($0.77 per Mcfe) charged to
income during the comparable period in 1998. The increase in the provision is
primarily a result of the 532% Mcfe increase in production for the three month
period ended March 31, 1999, as compared to the same period for 1998. On a cost
per Mcfe basis, the decrease of $0.13 per Mcfe (16%) is primarily the result of
the write-down of oil and gas properties the Company recorded at December 31,
1998, offset by the increased average cost of reserves the Company acquired
during the period April 1,1998 to March 31, 1999.

GENERAL AND ADMINISTRATIVE EXPENSES: The Company incurred $863,000 ($0.22 per
Mcfe) in general and administrative costs during the three months ended March
31, 1999, an increase of $435,000 (102%) over the $428,000 ($0.70 per Mcfe)
incurred during the comparable period in 1998. This is a reflection of the
increased management support requirements of the Company as it continues to
acquire new properties, redevelop existing properties and raise the funds
necessary to accomplish these activities. Since inception the Company has been
growth oriented and has directed its efforts at acquiring and developing oil
and natural gas producing properties. 



                                                                             10

<PAGE>   11

This activity requires additional personnel and outside consultants, thereby
increasing general and administrative costs.

INTEREST EXPENSE: The interest expense of $4.5 million for the three months
ended March 31, 1999 is comprised of $4.2 million in cash interest charges and
$354,000 of amortized deferred costs. Interest expense increased by $4.2
million, to $4.5 million for the three months ended March 31, 1999, compared to
$260,000 for the three months ended March 31, 1998. This increase is a function
of the increased debt the Company incurred, primarily related to the acquisition
of the net profits and royalty interests in April 1998.

NET LOSS: The Company has incurred losses since its inception, including $2.1
million ($0.06 per common share) for the three months ended March 31, 1999
compared to $693,000 ($0.03/share) for the three months ended March 31, 1998.
The decline in oil and natural gas prices since December 31, 1997 caused the
Company to record non-cash write-downs of oil and gas properties of $28,166,000
and $35,033,000 for the year ended June 30, 1998 and during the nine months
ended March 31, 1999, respectively. Further declines in oil and natural gas
prices could lead to additional non-cash write-downs of the Company's oil and
gas properties. The Company currently believes, but cannot assure, that as a
result of the April 1998 acquisition of net profits and royalty interests from
J.P. Morgan that the Company's future revenues from crude oil and natural gas
will be sufficient to cover its production costs and operating expenses,
provided that the prevailing prices for crude oil and natural gas do not
decline further and production volume is maintained. The Company's revenues,
profitability and future rate of growth are substantially dependent upon
prevailing prices for crude oil and natural gas and the volumes of crude oil
and natural gas produced by the Company (see "-Changes in Prices and Hedging
Activities"). In addition, the Company's proved reserves will decline as crude
oil and natural gas are produced unless the Company is successful in acquiring
additional properties containing proved reserves or conducts successful
exploration and development activities.

THE NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE NINE MONTHS ENDED
MARCH 31, 1998

RESULTS OF OPERATIONS

The following discussion and analysis reflects the operating results as if the
net profits interests were working interests. The Company believes that this
will provide the readers of the report with a more meaningful understanding of
the underlying operating results and conditions for the period.

REVENUES: The Company's total revenues rose by $21.3 million (440%) to $26.2
million for the nine months ended March 31, 1999, from $4.8 million during the
comparable period in 1998.

The Company produced 398,000 barrels of crude oil during the nine months ended
March 31, 1999, an increase of 213,000 barrels (116%) over the 185,000 barrels
produced during the comparable period in 1998. This increase was comprised of a
decrease of 11,000 barrels (6%) from the properties that the Company owned
during both periods and an increase of 224,000 barrels from the properties
acquired during the period April 1, 1998 to December 31, 1998. The decrease in
production of crude oil from the properties owned during the comparative
quarters is a reflection of the natural depletion of the crude oil reservoirs,
offset by the development and exploitation efforts of the Company.

The Company produced 10,154,000 Mcf of natural gas during the nine months ended
March 31, 1999, an increase of 9,418,000 Mcf (1,280%) over the 736,000 Mcf
produced during the comparable period in 1998. This increase consists of an
increase of 25,000 Mcf (3%) from the properties that the Company owned during
both periods and an increase of 9,393,000 Mcf from the properties acquired
during the period April 1, 1998 to December 31, 1998. The increase in
production from the properties owned during the comparative quarters is a
result of the successful development and exploitation efforts of the Company,
offset by the natural depletion of the natural gas reservoirs.

On a thousand cubic feet of gas equivalent ("Mcfe") basis, production for the
nine months ended March 31, 1999 was 12,542,000 Mcfe, up 10,699,000 (580%) over
the 1,843,000 Mcfe produced during the comparable period in 1998.


                                                                             11

<PAGE>   12

The increase in revenues arising from the increased production has been
buffered by the significant industry-wide decline in oil and natural gas
prices. The average price per barrel of crude oil sold by the Company during
the nine months ended March 31, 1999 was $11.52, a decrease of $5.67 per barrel
(33%) from the $17.19 per barrel during the nine months ended March 31, 1998.
The average price per Mcf of natural gas sold by the Company was $2.13 during
the nine months ended March 31, 1999, a decrease of $0.15 per Mcf (7%) from the
$2.28 per Mcf during the comparable period in 1998. Crude oil and natural gas
prices have increased subsequent to March 31, 1999. On an Mcfe basis, the
average price received by the Company during the nine months ended March 31,
1999 was $2.09, a $0.54 decrease (21%) from the $2.63 the Company received
during the comparable period in 1998.

During the nine months March 31, 1999 the Company received $1,446,000 in cash
settlements and amortized $94,000 of deferred hedging costs, as a result of its
natural gas price hedging program. The net positive effect on the average
natural gas prices received by the Company during the period was $0.13 per Mcf
(6%). An additional $133,000 was received on its oil price hedging program. The
net positive effect on average oil prices received by the Company during the
period was $0.33 per barrel (3%). During the comparable period in 1998 the
Company paid $36,000 ($0.05 per Mcf) on its natural gas price-hedging program.
The Company received $68,000 ($0.37 per barrel) on its oil price-hedging
program during the nine months ended March 31, 1998.

SEVERANCE AND PRODUCTION TAXES: Severance and production taxes were $1.1
million ($0.09 per Mcfe) during the nine months ended March 31, 1999, as
compared to $314,000 ($0.17 per Mcfe) during the comparable period in 1998. The
increase of $805,000 (256%) is a result of the 440% increase revenues for the
nine month period ended March 31, 1999, as compared to the same period for
1998. This increase was buffered by the shift in revenues from 35% gas during
the nine months ended March 31, 1998 to 82% gas during the nine months ended
March 31, 1999. The reduction in severance and production taxes on a per Mcfe
basis relates to severance and production tax abatements on certain net profits
interests.

PRODUCTION EXPENSES: The Company's lease operating expenses rose to $6.8
million for the nine months ended March 31, 1999, an increase of $4.0 million
(139%) over the $2.9 million incurred during the comparable period in 1998.
This increase is a result of the increased production of crude oil and natural
gas by the Company. Lease operating expenses were $0.55 per Mcfe during the
nine months ended March 31, 1999, a decrease of $1.01 (65%) from the $1.56 per
Mcfe incurred during the comparable period in 1998. This improvement is a
result of improved efficiencies at an operating level and the acquisition of
properties with lower average operating costs per Mcfe than those the Company
has owned during the preceding years.

DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE: Depreciation, depletion and
amortization of oil and gas properties and related oil field equipment were
$9.3 million ($0.75 per Mcfe) during the nine months ended March 31, 1999, an
increase of $8.3 million (777%) over the $1.1 million ($0.73 per Mcfe) charged
to income during the comparable period in 1998. The increase in the provision
is primarily a result of the 580% Mcfe increase in production for the nine
month period ended March 31, 1999, as compared to the same period for 1998. On
a cost per Mcfe basis, the increase of $0.02 per Mcfe (2%) is primarily the
result of the increased average cost of reserves the Company acquired during
the period April 1, 1998 to December 31, 1998 offset by the $35.0 million
writedown of oil and gas properties recorded at December 31,1998. The Company
was not required to record a similar write-down at March 31, 1998.

GENERAL AND ADMINISTRATIVE EXPENSES: The Company incurred $2.2 million ($0.18
per Mcfe) in general and administrative costs during the nine months ended
March 31, 1999, an increase of $596,000 (36%) over the $1.6 million ($0.89 per
Mcfe) incurred during the comparable period in 1998. This is a reflection of
the increased management support requirements of the Company as it continues to
acquire new properties, redevelop existing properties and raise the funds
necessary to accomplish these activities. Since inception the Company has been
growth oriented and has directed its efforts at acquiring and developing oil
and natural gas producing properties. This activity requires additional
personnel and outside consultants thereby increasing general and administrative
expenses.


                                                                             12

<PAGE>   13



INTEREST EXPENSE: The interest expense of $13.6 million for the nine months
ended March 31, 1999 is comprised of $12.6 million in cash interest charges and
$1.0 million of amortized deferred costs. Interest expense increased by $12.7
million, to $13.6 million for the nine months ended March 31, 1999, compared to
$899,000 for the nine months ended March 31, 1998. This increase is a function
of the increased debt the Company incurred, primarily related to the
acquisition of the net profits and royalty interests in April 1998.

NET LOSS: The Company has incurred losses since its inception, including $42.0
million ($1.36 per common share) for the nine months ended March 31, 1999
compared to $2.1 million ($0.09/share) for the nine months ended March 31,
1998. The decline in oil and natural gas prices since December 31, 1997 caused
the Company to record non-cash write-downs of oil and gas properties of
$28,166,000 and $35,033,000 for the year ended June 30, 1998 and during the
nine months ended March 31, 1999, respectively. Further declines in oil and
natural gas prices could lead to additional non-cash write-downs of the
Company's oil and gas properties. The Company currently believes, but cannot
assure, that as a result of the April 1998 acquisition of net profits and
royalty interests from J.P. Morgan that the Company's future revenues from
crude oil and natural gas will be sufficient to cover its production costs and
operating expenses, provided that the prevailing prices for crude oil and
natural gas do not decline and production volume is maintained. The Company's
revenues, profitability and future rate of growth are substantially dependent
upon prevailing prices for crude oil and natural gas and the volumes of crude
oil and natural gas produced by the Company (see "Changes in Prices and Hedging
Activities"). In addition, the Company's proved reserves will decline as crude
oil and natural gas are produced unless the Company is successful in acquiring
additional properties containing proved reserves or conducts successful
exploration and development activities.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

Consistent with the Company's strategy of acquiring and developing reserves,
the Company has an objective of maintaining as much financing flexibility as is
practicable. Since the Company commenced its oil and natural gas operations,
the Company has utilized a variety of sources of capital to fund its
acquisitions and development and exploitation programs, and to fund its
operations.

The Company's objective is to use the cash generated from operations to pay
operating costs and interest charges and to contribute to the costs of
developing and exploiting its oil and natural gas properties. There can be no
assurance that the cash from operations will be sufficient in the future to
cover such purposes.

The Company's objective is to use incremental debt, the proceeds from the
issuance of equity securities and the proceeds from the sale of non-core oil
and gas properties to fund a portion of its development and exploitation
program and to fund the acquisition of additional oil and natural gas
properties. The availability of funds under the Credit Agreement (as defined
below) is subject to periodic redeterminations by the bank and there can be no
assurance that such funds will be available to the Company to meet its budgeted
capital spending. Furthermore, the Company's ability to borrow other than under
the Amended and Restated Credit Agreement dated as of April 17, 1998 as amended
with Bank of Montreal, as agent for the Lenders thereunder (the "Credit
Agreement") is subject to restrictions imposed by such Credit Agreement. If the
Company cannot secure additional funds for its planned development and
exploitation activities, then the Company will be required to delay or reduce
substantially both of such activities.

SOURCES OF CAPITAL

The Company's principal sources of capital for funding its business activities
have been cash flow from operations, debt financings and the issuance of equity
securities. The Company's sources of funds from debt financings include funds
available under the Credit Agreement and the Company's Subordinated Revolving
Credit Agreement (the "ECT Revolving Credit Agreement") with Enron Capital and
Trade Resources Corporation.

On April 17, 1998, the Company amended and restated its Credit Agreement with
Bank of Montreal as agent for the lender parties thereto. The Credit Agreement
provides for borrowings up to $125.0 million (subject to borrowing 



                                                                             13

<PAGE>   14

base limitations) from such lenders to, among other things, fund development
and exploitation expenditures, acquisitions and general working capital. The
loan under the Credit Agreement is secured by a first lien on substantially all
of the Company's oil and natural gas properties. Pursuant to the Credit
Agreement the Company is subject to certain affirmative and negative financial
and operating covenants that are usual and customary for transactions of this
nature.

On March 31, 1999 the Company was not in compliance with a fixed charge
coverage ratio covenant of 1.5x, as required by the Credit Agreement. The
Company received a waiver under the Credit Agreement from the Bank regarding
this covenant breach.

On May 14, 1999 the Credit Agreement was amended to provide for a credit line
of $17.15 million, all of which is outstanding at May 14, 1999, interest is to
be charged at Bank Prime plus two percent (currently 9.75%) and payable monthly
and loans under the Credit Agreement are to mature on October 1, 2000 with no
scheduled amortization or repayment of principal. The fixed charge ratio
covenant has been reset to 1.15x. In the event of the sale of oil and natural
gas properties, the May 14, 1999 Amendment to the Credit Agreement provides
that a portion of the net proceeds received by the Company pursuant to the sale
of those properties will be applied to reduce the credit amount.

The Company periodically reviews its portfolio of oil and natural gas
properties with a view to identifying and divesting properties that no longer
fit the Company's strategic focus, including fitting within the Company's core
geographic areas of interest. The Company is actively pursuing the sale of
certain non-core properties. The Company intends to sell non-core oil and gas
properties and in the event such sales occur, has agreed that a portion of the
net proceeds received by the Company will be used to reduce the availability of
credit under the Credit Agreement. However, there can be no assurance the
Company will complete any divestment of non-core properties. Therefore, the
Company must rely primarily on the cash generated from operations to fund
operating expenses, general and administrative expenses and interest expense
and to contribute to its capital expenditure program, in conjunction with the
ECT Revolving Credit Agreement, until such time as the Credit Agreement is
either amended or replaced.

Effective December 29, 1997, the Company established the ECT Revolving Credit
Agreement with ECT, as a lender and as agent for the lenders thereto, to fund
on a revolving basis, capital costs incurred with future development projects
and to fund further acquisitions. The ECT Revolving Credit Agreement is
subordinate to the Credit Agreement. The ECT Revolving Credit Agreement
provides for borrowings up to $10.0 million, on a revolving basis and subject
to borrowing base limitations, which has been initially set at an amount equal
to 40% of the borrowing base established from time to time under the Credit
Agreement. This facility is designed to provide bridge financing for
development projects and acquisitions to be completed on relatively short
notice or until the affected assets are eligible to be included in the
borrowing base for the Credit Agreement or financed with longer-term
indebtedness or equity capital; provided, that the availability for
acquisitions under the facility is limited to the lesser of $5.0 million or 50%
of the borrowing base as in effect from time to time. Borrowings in excess of
certain amounts under the ECT Revolving Credit Agreement will reduce the
available borrowing base under the Credit Agreement. The loan is secured by a
second priority lien and security interest (behind the first lien position of
the Credit Agreement) in approximately 95% of the oil and natural gas
properties of the Company. There was no indebtedness outstanding under this 
facility on May 14, 1999.

The ECT Revolving Credit Agreement is subject to payment of interest at a
fluctuating rate per annum equal to (i) the rate of 1% above the then highest
rate of interest being paid on any portion of the indebtedness owed under the
Credit Agreement or (ii) the rate of 15%, depending upon whether there is any
indebtedness owed under the Credit Agreement outstanding or whether there has
been a certain amount of indebtedness owed under the ECT Revolving Credit
Agreement for certain time periods.

On July 8, 1998, the Company completed a private placement (the "Note
Offering") of $125,000,000 principal amount of its 12.5% Senior Notes due 2008
(the "Notes"). In addition, on July 8, 1998 and July 20, 1998, the Company
completed a private equity placement (the "Private Placement"). Pursuant to the
Note Offering, the 


                                                                             14

<PAGE>   15

Company issued and sold the Notes to certain institutional buyers pursuant to
Rule 144A and Regulation D promulgated under the Securities Act of 1933, as
amended. The Notes mature on July 1, 2008, and interest on the Notes is payable
semiannually on January 1 and July 1 of each year, commencing January 1, 1999
at the rate of 12.5% per annum. The payment of the Notes is guaranteed by the
Company's three operating subsidiaries. The net proceeds received by the
Company from the Note Offering and the Private Placement completed on July 8,
1998 of approximately $144.5 million and on July 20, 1998 of approximately $6.9
million were used to repay indebtedness outstanding under the Company's Credit
Agreement, to repay indebtedness outstanding under the Company's bridge
facilities, and to unwind an interest rate hedge contract at a cost of $3.5
million. Substantially all of this indebtedness was incurred to fund the
acquisition of oil and natural gas properties from trusts managed by J. P.
Morgan Investments.

During the nine months ended March 31, 1999, the Company issued an aggregate of
1,073,046 shares of Common Stock to stockholders who exercised repricing rights
under the Amended and Restated Securities Purchase Agreement dated as of July
8, 1998 among the Company and the buyers signatory thereto. The repricing
rights were issued in connection with the July 1998 private placement and
permit the holders to acquire shares of Common Stock without the payment of
additional consideration if the Company's Common Stock does not achieve certain
price thresholds in excess of the original issuance of the shares purchased by
the holders in the July 1998 private placement. The resale of these shares of
Common Stock has been registered pursuant to a Registration Statement on Form 
S-3 filed by the Company and declared effective by the Securities and Exchange
Commission.

During the nine months ended March 31, 1999, the Company issued an aggregate of
788,638 shares of Common Stock upon conversion of 3,010 shares of the Company's
Series C Convertible Preferred Stock by the holders thereof and 40,320 shares
of Common Stock as payment of dividends at the time of the conversion. The
resale of these shares of Common Stock has been registered pursuant to a
Registration Statement on Form S-3 filed by the Company and declared effective
by the Securities and Exchange Commission.

Due to the current market price of the Company's Common Stock, it is likely
that additional shares of Common Stock will be issued upon exercise of
Repricing Rights and upon conversion of the Series C Convertible Preferred
Stock.

Pursuant to a Securities Purchase Agreement dated November 10, 1998 among the
Company and the buyers signatory thereto, the Company issued on November 24,
1998, to the buyers, an aggregate of (i) 416,667 shares of Common Stock, (ii)
certain repricing rights to acquire additional shares of Common Stock and (iii)
warrants to purchase an aggregate of 50,000 shares of Common Stock at $6.00 per
common share in exchange for aggregate cash consideration of $2.5 million. The
Company used the net proceeds from this equity placement to repurchase an
aggregate of 2,152 shares of Series C Convertible Preferred Stock from two
holders thereof.

The November Share Purchase Agreement provides that the reset rights became
exercisable in stages beginning on March 11, 1999. To date none of the buyers
have exercised any reset rights under the Agreement.

Pursuant to the Securities Purchase Agreement dated March 27, 1997 (the
"Agreement") between the Company and Joint Energy Development Investments
Limited Partnership ("JEDI"), the Company granted certain maintenance rights to
JEDI to allow it to maintain its relative voting position in the event that the
Company issued additional shares of voting stock subsequent to the date of the
Agreement and up to December 31, 1999. For the period up to and including
December 31, 1998, the JEDI maintenance rights were to be manifested in share
purchase warrants exercisable within one year of the date of issuance of and at
the same effective price as the voting stock giving rise to the maintenance
right. Following that date no warrants are to be issued and JEDI must exercise
the maintenance rights within 30 days of being notified by the Company of
additional issuances of voting stock. Since January 1, 1999 JEDI has accrued
the right to purchase an aggregate of 334,135 shares of common stock pursuant
to the maintenance rights provisions at prices ranging from $1.00 to $3.50 but
has not exercised any of those maintenance rights.

On April 9 the Company issued 2,650,000 warrants to Northern Tier Asset
Management, Inc. in consideration for investment banking services to be
provided to the Company by Northern Tier. The warrants have an exercise price



                                      15

<PAGE>   16

of $1.50 per share and expire at various times from July 31, 1999 to June 30,
2000. The warrants carry a cashless exercise feature that allows them to be
exercised for shares in proportion to the difference between the exercise price
and the market price at the time of exercise. The market price applicable to
the cashless exercise is capped at various levels between $2.00 and $3.00.

The Company believes that it can generate sufficient cash flow from operations
to pay the interest charges on all of its interest-bearing debt. The gas
price-hedging program currently in place provides a degree of protection
against significant decreases in gas prices. Furthermore, 87% of the Company's
interest-bearing debt is at fixed rates for extended periods, providing an
effective hedge against increases in prevailing interest rates.

USES OF CAPITAL

Since commencing its oil and natural gas operations in August 1994 the Company
has completed 20 acquisitions of oil and natural gas producing properties.
Through March 31, 1999, the Company had expended a total of $187 million in
acquiring, developing and exploiting oil and natural gas producing properties.
Initially, the operations of the Company represented a net use of funds. The
Company generated positive cash flow from operations during the nine months
ended March 31, 1999. The Company initially expected to spend $17 million on
the development and exploitation of its oil and natural gas properties during
the fiscal year ended June 30, 1999. During the nine months ended March 31,
1999 the Company spent $10 million on the development and exploitation of its
oil and natural gas properties. Due to low oil and natural gas prices the
Company has deferred some development and exploitation projects and has
extended others over a longer period of time. The Company exercises a fair
degree of control over the timing of the individual projects that comprise the
development and exploitation program. The Company now expects to spend between
$1 million and $3 million between April 1 and June 30, 1999. With the recent
improvements in oil and natural gas prices the Company is currently
re-evaluating its development and exploitation projects with a view of
increasing it capital expenditure budget.



                                                                             16

<PAGE>   17



The Company does not have sufficient liquidity or capital to undertake
significant potential acquisition prospects. Therefore, the Company will
continue to be dependent on raising substantial amounts of additional capital
through any one or a combination of institutional or bank debt financing,
equity offerings, debt offerings and internally generated cash flow, or by
forming sharing arrangements with industry participants. Although the Company
has been able to obtain such financings and to enter into such sharing
arrangements in certain of its projects to date, there can be no assurance that
it will continue to be able to do so. Alternatively, the Company may consider
issuing additional securities in exchange for producing properties. There can
be no assurance that any such financings or sharing arrangement can be
obtained. Therefore, notwithstanding the Company's need for substantial amounts
of additional capital, there can be no assurance that it can be obtained.

Further acquisitions and development activities in addition to those for which
the Company is contractually obligated are discretionary and depend to a
significant degree on cash availability from outside sources such as bank debt
and the sale of securities or properties.

INFLATION

During the past several years, the Company has experienced moderate increases
in property acquisition and development costs. During the fiscal year ended
June 30, 1998, the Company received somewhat lower commodity prices for the
natural resources produced from its properties. Oil and gas prices have
decreased during the nine months ended March 31, 1999. However, late in March,
1999 prices started to rise. The results of operations and cash flow of the
Company have been, and will continue to be, affected to a certain extent by the
volatility in oil and natural gas prices. Should the Company experience a
significant increase in oil and natural gas prices that is sustained over a
prolonged period, it would expect that there would also be a corresponding
increase in oil and natural gas finding costs, lease acquisition costs, and
operating expenses.

CHANGES IN PRICES AND HEDGING ACTIVITIES

Annual average oil and natural gas prices have fluctuated significantly over
the past two years. The table below sets out the Company's weighted average
price per barrel and the weighted average price per Mcf, the impact of its
hedging programs and the NYMEX indices.

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                   MARCH 31                   MARCH 31
                                                             1999          1998          1999          1998
                                                           --------      --------      --------      --------
<S>                                                        <C>           <C>           <C>           <C>     
Gas (per mcf)
  Price received at wellhead                               $   1.88      $   2.06      $   2.00      $   2.33
  Effect of hedge contracts                                    0.24          0.00          0.13         (0.05)
                                                           --------      --------      --------      --------
  Effective price received, including hedge contracts      $   2.12      $   2.06      $   2.13      $   2.28
                                                           ========      ========      ========      ========

  Average NYMEX Henry Hub                                  $   1.75      $   2.18      $   1.97      $   2.54
  Average basis differential including hedge contracts     $   0.37      ($  0.12)     $   0.16      ($  0.26)
  Average basis differential excluding hedge contracts     $   0.13      ($  0.12)     $   0.03      ($  0.21)

Oil (per barrel)
  Average price received at wellhead per barrel            $   8.89      $  15.38      $  11.19      $  16.82
  Average effect of hedge contract                            (0.11)         1.22          0.33          0.37
                                                           --------      --------      --------      --------
  Average price received, including hedge contracts        $   8.78      $  16.60      $  11.52      $  17.19
                                                           ========      ========      ========      ========

  Average NYMEX Sweet Light Oil                            $  13.06      $  16.06      $  13.38      $  18.60
  Average basis differential including hedge contracts     $  (4.28)     $   0.54      $  (1.86)     $  (1.41)
  Average basis differential excluding hedge contracts     $  (4.17)     $  (0.68)     $  (2.19)     $  (1.78)
</TABLE>


                                                                             17
<PAGE>   18


The table below sets out volume of natural gas hedged with a floor price of
$1.90 per MMBtu with Enron. The volumes presented in this table are divided
equally over the months during the period:

<TABLE>
<CAPTION>
                                                     Volume
  Period Beginning        Period Ending              (MMBtu)
  ----------------        -------------              -------
<S>                      <C>                       <C> 
  January 1, 1999         December 31, 1999         1,080,000
  January 1, 2000         December 31, 2000           880,000
  January 1, 2001         December 31, 2001           740,000
  January 1, 2002         December 31, 2002           640,000
  January 1, 2003         December 31, 2003           560,000
</TABLE>


The table below sets out volume of natural gas hedged with a swap at $2.40 per
MMBtu with Enron. The volumes presented in this table are divided equally over
the months during the period:

<TABLE>
<CAPTION>
                                                                 Volume
  Period Beginning            Period Ending                      (MMBtu)
  ----------------            -------------                      -------
<S>                          <C>                                <C>
  January 1, 1999             December 31, 1999                   2,710,000
  January 1, 2000             December 31, 2000                   2,200,000
  January 1, 2001             December 31, 2001                   1,850,000
  January 1, 2002             December 31, 2002                   1,600,000
  January 1, 2003             December 31, 2003                   1,400,000
</TABLE>


Effective May 1, 1998 through December 31, 2003 the Company has a contract
involving the hedging of a portion of its future natural gas production
involving floor and ceiling prices as set out in the table below. The volumes
presented in this table are divided equally over the months during the period.

<TABLE>
<CAPTION>
                                                                        Volume          Floor       Ceiling
               Period Ending               Period Ending               (MMBtu)          Price        Price
               -------------               -------------               -------          -----        -----
<S>                                       <C>                       <C>                 <C>          <C>  
               January 1, 9999             December 31, 1999          4,330,000          $2.00        $2.70
               January 1, 2000             December 31, 2000          3,520,000          $2.00        $2.70
               January 1, 2001             April 30, 2001               990,000          $2.00        $2.70
               May 1, 2001                 December 31, 2001          1,980,000          $2.00        $2.80
               January 1, 2002             April 30, 2002               850,000          $2.00        $2.80
               May 1, 2002                 December 31, 2002          1,700,000          $2.00        $2.90
               January 1, 2003             December 31, 2003          2,250,000          $2.00        $2.90
</TABLE>

Effective April 1, 1999 the Company entered into a swap agreement on 5,000
barrels of crude oil per month with Enron at $14.35 per barrel. This agreement
is for the 3 months ending June 1999 and is extendable for the three months of
July, August and September 1999 at the option of Enron.

Effective April 1, 1999 the Company entered into a swap agreement on 5,000
barrels of crude oil per month with Enron at $14.82 per barrel. This agreement
is for the 3 months ending June 1999 and is extendable for the three months of
July, August and September 1999 at the option of Enron.

Effective March 1, 1999 the Company entered into a swap agreement on 10,000
barrels of crude oil per month with Enron at $13.50 per barrel. This agreement
is for the 3 months ending May 1999 and is extendable for the three months of
June, July and August 1999 at the option of Enron.

Effective October 1, 1998 the Company entered into a swap agreement on 12,000
barrels of crude oil per month with Enron at $17.00 per barrel. This agreement
expired on December 31, 1998.


                                                                             18

<PAGE>   19

The Company was under contract with an affiliate of Enron for 10,000 Bbls of
oil per month with a floor of $18.00 per Bbl and a ceiling of $20.40 per Bbl
with the Company participating on 50% of the price of WTI Nymex over $20.40 for
the period from September 1, 1997 through August 31, 1998. The Company also had
a contract for 50,000 MMBtu of natural gas per month with an affiliate of
Enron, with a floor price of $1.90 per MMBtu and a ceiling price of $2.66 per
MMBtu, with the Company participating on 50% of the price of Henry Hub Nymex
Index over $2.66 per MMBtu for the period from September 1, 1997 through August
31, 1998.

INTEREST RATE HEDGING

The Company entered into a forward LIBOR interest rate swap effective for the
period June 30, 1998 through June 29, 2009 at a rate of 6.30% on $125.0
million. On July 9, 1998, the Company unwound this swap at a cost to the
Company of approximately $3.5 million with borrowings drawn under the Credit
Agreement.

YEAR 2000 COMPUTER ISSUE

GENERAL: The Company is addressing the potential impact of the Year 2000
("Y2K") issue on its operations. A review of internal systems has been
initiated and a review of the state of readiness of significant suppliers and
customers will be undertaken over the next few months. It is believed that
appropriate remedial action can be completed in advance of the year 2000 and
the costs of such action will not have a material affect on the financial
condition or results of operations of the Company.

STATE OF READINESS: The Company currently uses commercially available software
for its management information ("IT") systems including accounting, engineering
evaluation, acquisition analysis and word processing. This software is
warranted by the suppliers/manufacturers to be Y2K compliant. The Company has
not taken any steps to independently verify the truth of such warranties but
has no reason to believe that the software is not as warranted. The Company has
begun a review of non-IT systems, which it expects to complete in the next few
months.

COSTS OF COMPLIANCE: Management believes that the cost of compliance will be
minimal. As its IT systems were warranted to be compliant when purchased, the
Company has not incurred, nor does it expect to incur any significant
incremental costs to modify or replace such systems to make them compliant.
Non-IT systems are currently being evaluated to determine whether and to what
extent they may be non-compliant. Management does not currently believe that
the amount of non-compliant equipment will be found to be significant nor will
the cost to modify or replace such equipment be material.

The Company is seeking written verification from its major operators, suppliers
and customers that they will be Y2K compliant. The costs of seeking
verification are minimal. Management believes that it will not be practical to
independently verify the responses because it does not believe that the Company
would be given access to carry out such verification or that the costs of doing
so would be affordable. The cost of replacing non-compliant or non-responsive
suppliers and customers will not be possible to determine until the review
process has progressed.

RISK: Any Y2K problems that do occur will likely manifest themselves in reduced
production through equipment shut down or impaired liquidity through inability
of customers to take delivery or process payment.

CONTINGENCY: The Company plans to establish contingency plans once its
verification program is complete and the risks have been more fully quantified.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Changes in Prices and Hedging Activities".




                                                                             19

<PAGE>   20

                          PART II - OTHER INFORMATION


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

         ISSUANCE OF WARRANTS. Pursuant to a Consulting Agreement (the
"Consulting Agreement") dated April 9, 1999 between the Company and Northern
Tier Asset Management, Inc. ("Northern Tier"), the Company issued to Northern
Tier warrants to purchase an aggregate of 2,625,000 shares of the Company's
common stock (the "Northern Tier Warrants") in exchange for Northern Tier's
agreement to provide us certain consulting services. The consulting services to
be provided include advice and counsel regarding the Company's strategic
business and financial plans, strategy and negotiations with potential lenders
and investors and other involving financial and financially related
transactions. The term of the Consulting Agreement is from April 1, 1999 until
the earlier to occur of July 31, 2000 and the termination of the Consulting
Agreement.

         The Northern Tier Warrants were issued in eleven series with
expiration dates ranging from July 31, 1999 to June 30, 2000 at an exercise
price of $1.50. The warrants provide for customary adjustments to the exercise
price and number of shares to be issued in the event of certain dividends and
distributions to holders of common stock, stock splits, combinations and
mergers. The warrants also include customary provisions with respect to, among
other things, transfer of the Northern Tier Warrants, mutilated or lost warrant
certificates, and notices to holder(s) of the warrants.

         The issuance of the Northern Tier Warrants was made in reliance on
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").
The Company has filed a Registration Statement on Form S-3 with the Securities
and Exchange Commission to register the resale of the shares of Common Stock
issuable pursuant to the Northern Tier Warrants.

         OTHER ISSUANCES OF COMMON STOCK. During the quarter ended March 31,
1999, pursuant to Section 3(a)(9) of the Securities Act, the Company issued an
aggregate of 258,427 shares of Common Stock to stockholders who exercised
repricing rights under the Amended and Restated Securities Purchase Agreement
dated as of July 8, 1998 among the Company and the buyers signatory thereto.
The repricing rights were issued in connection with the July 1998 private
placement and permit the holders to acquire shares of Common Stock without the
payment of additional consideration if the Company's Common Stock does not
achieve certain price thresholds in excess of the original issuance of the
shares purchased by the holders in the July 1998 private placement. The resale
of these shares of Common Stock is registered pursuant to a Registration
Statement on Form S-3 filed by the Company and declared effective by the
Securities and Exchange Commission.

         During the quarter ended March 31, 1999, pursuant to Section 3(a)(9)
of the Securities Act, the Company issued an aggregate of 416,325 shares upon
conversion of 720 shares of the Company's Series C Convertible Preferred Stock
by the holders thereof. The resale of these shares of Common Stock is
registered pursuant to a Registration Statement on Form S-3 filed by the
Company and declared effective by the Securities and Exchange Commission.

         Due to the current market price of the Company's Common Stock, it is
likely that additional shares of Common Stock will be issued upon exercise of
Repricing Rights and upon conversion of the Series C Convertible Preferred
Stock.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

    (a)  EXHIBITS.

         4.1      Fourth Amendment to Amended Restated Credit Agreement among
                  the Company, Queen Sand Resources, Inc., a Nevada
                  corporation, Bank of Montreal, as Agent and the lenders
                  signatory thereto, effective as of May 14, 1999.



                                                                             20

<PAGE>   21

         4.37     Form of Common Stock Purchase Warrant issued to Northern Tier
                  Asset Management, Inc., filed as Exhibit 4.37 to the
                  Company's Registration Statement on form S-3 (No. 333-78001),
                  filed on May 7, 1999 (the "Form S-3") and incorporated by
                  reference herein.

         4.38     Registration Rights Agreement, dated as of April 9, 1999,
                  between the Company and Northern Tier Asset Management, Inc.,
                  filed as Exhibit 4.38 to the Form S-3 and incorporated by
                  reference herein.

         4.39     Consulting Agreement, dated as of April 9, 1999, between the
                  Company and Northern Tier Asset Management Asset Inc., filed
                  as Exhibit 4.39 to the Form S-3 and incorporated by reference
                  herein.

         27       Financial Data Schedule

    (b)  REPORTS ON FORM 8-K.
         NONE




                                                                             21

<PAGE>   22


SIGNATURES



Pursuant to the requirements 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.


                                      QUEEN SAND RESOURCES, INC.



                                      By:  /s/ Edward J. Munden
                                      -----------------------------------------
                                      Edward. J. Munden
                                      President and Chief Executive Officer



                                      By:  /s/ Ronald Benn
                                      -----------------------------------------
                                      Ronald Benn
                                      Chief Financial Officer



Date:  May 17, 1999


                                                                              22
<PAGE>   23


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
        Exhibit 
        Number                      Description
        ------                      -----------
<S>      <C>                                                                 
         4.1      Fourth Amendment to Amended Restated Credit Agreement among
                  the Company, Queen Sand Resources, Inc., a Nevada
                  corporation, Bank of Montreal, as Agent and the lenders
                  signatory thereto, effective as of May 14, 1999.

         27       Financial Data Schedule
</TABLE>