<PAGE>


                   U.S. 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: March 31, 1999

                      Commission file number: 0-21313



                            PONTOTOC PRODUCTION, INC.
                ---------------------------------------------
                (Name of small business issuer in its Charter)



           Nevada                                          84-1349552
-------------------------------                        ------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

                       808 East Main, Ada, Oklahoma 74820
         -----------------------------------------------------------
         (Address of principal executive offices, including zip code)

                                (580) 436-6100
                          --------------------------
                          (Issuer's telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:  None.

Securities Registered Pursuant to Section 12(g) of the Act:

                        Common Stock, $.0001 Par Value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this form, 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. [ ]

The Issuer's revenues for its most recent fiscal year were $2,119,430.

As of June 23, 1999, 4,681,513 shares of the Registrant's common stock were
outstanding, and the aggregate market value of the shares held by non-
affiliates was approximately $14,790,000.

DOCUMENTS INCORPORATED BY REFERENCE: None.

Transitional Small Business Disclosure Format (check one): Yes __   No X

<PAGE>


                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

BACKGROUND

     Pontotoc Production, Inc. (the "Company") was incorporated under the laws
of the State of Nevada on July 1, 1996, under the name Mahogany Capital, Inc.
for the purpose of completing a merger or acquisition with a private entity.

     In September 1996, the Company filed a registration statement with the
Securities and Exchange Commission on Form 10-SB, wherein it registered its
common stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "34 Act").  As a result, the Company became a fully reporting
company under the 34 Act.

     On December 10, 1997, the Company completed a reverse acquisition of 100%
of the outstanding common stock of Pontotoc Production Company, Inc., a Texas
corporation ("PPCI") in exchange for 3,165,000 shares of the Company's Common
Stock which resulted in the shareholders of PPCI acquiring approximately 84.4%
of the shares outstanding in the Company.  In connection with the closing of
this transaction, several shareholders submitted for cancellation a total of
665,000 shares of common stock.  As a result, after the acquisition of PPCI
there were a total of 3,750,000 shares outstanding.

     On December 12, 1997, the Company's shareholders approved a proposal to
change the Company's name to Pontotoc Production, Inc.

     On July 1, 1998, the Company closed on the acquisition of certain oil and
gas properties from Bill G. Cantrell and his affiliated company.  The purchase
price was $2,750,000 in cash and 402,360 restricted shares of the Company's
Common Stock.  Included in the purchase were interests in approximately 82 oil
and gas leases located in the following counties in Oklahoma:  Pontotoc, Coal,
Garvin, and Seminole.  The purchase also included two workover rigs, one
drilling rig, and miscellaneous oil field equipment which relates to the
ongoing production of the oil and gas properties.  The purchase was funded
with $2,050,000 of bank borrowings and $700,000 from the proceeds of a private
offering of common stock and warrants which was partially closed on July 1,
1998.

     Unless the context otherwise requires, the term "Company" as used herein
refers to the Company and its wholly-owned subsidiary PPCI.

DESCRIPTION OF BUSINESS

     GENERAL

     The Company is engaged in the exploration for and the acquisition,
development and production of oil and natural gas.  The Company focuses on
lower risk, shallow oil and gas properties in the State of Oklahoma.  For the
last several years, the Company has been the most active operator in south-
central Oklahoma.  Since its inception in 1985, the Company's subsidiary has
drilled in excess of 87 wells.  Through drilling, acquisition and
recompletions, the Company's estimated proved reserves have reached 4,287,264
barrels of oil and 9,483,050 mcf of gas with a present value of approximately
$23,133,599 as of March 31, 1999.


                                       2
<PAGE>


OIL AND GAS OPERATIONS

     The Company's operations are conducted in the State of Oklahoma where the
Company owns producing and non-producing property interests in twenty
counties.  The Company's staff oversees the operations of existing properties,
evaluates property acquisition opportunities and drilling prospects, and
oversees drilling and completion of new wells.  Operations are concentrated on
shallow to medium depth properties generally ranging from 1,500 to 5,000 feet.
The funds necessary for acquisition, exploration and development of properties
are generated through cash flow and bank debt.

     The Company acts as "operator" of 233 wells pursuant to standard industry
Operating Agreements.

MARKETS AND CUSTOMERS

     Marketing of the Company's oil and gas production is influenced by many
factors which are beyond the Company's control and the exact effect of which
cannot be accurately predicted.  These factors include changes in supply and
demand, changes in market prices, regulatory changes, and actions of major
foreign producers.

     The Company sells its oil production to Sun Oil Co. (SUNOCO) at the
monthly New York Mercantile Exchange average less $.55.   Crude oil and
condensate production are readily marketable.  Crude oil is cost efficiently
transportable from production centers to demand centers and is, therefore,
subject to world-wide supply and demand.  Oil prices are primarily dependent
upon available oil supplies which can vary significantly depending on
production and pricing policies of OPEC and other major producing countries
and on significant events in major producing regions such as the Persian Gulf
War in 1991.

     Deregulation of natural gas pricing and transportation have resulted in
far-reaching and fundamental changes in the producing, transportation and
marketing segments of the natural gas industry.  Gas price decontrol and the
advent of an active spot market for natural gas have resulted in prices
received by the Company being subject to significant fluctuations.  Prices
tend to rise in peak demand periods such as fall and winter and to decline
during lower demand periods.  The Company presently sells most of its gas
through short-term contracts with terms of one year or less which are designed
to obtain the best available prices and deliverabilities.  Virtually all of
the Company's gas contracts provide for prices based on monthly spot prices
for the applicable market area.  These prices are reduced ("netted") by the
costs of gathering and transporting the gas.

     The Company periodically hedges the price of a portion of its crude oil
production by forward selling in the futures markets.

COMPETITION AND REGULATION

     The oil and gas industry is intensely competitive.  The Company competes
with larger more well established oil and gas companies including, on
occasion, major companies.  The significant areas of competition are in
acquiring oil and gas reserves, acquiring leases for drilling or development,
and selling natural gas.  The primary competitive factors for acquisitions are
the price the Company is willing to pay and the financial resources readily
available to the Company to fund acquisitions.  The primary factors which
affect the Company's ability to sell its natural gas include proximity to
markets, proximity to and capacity of natural gas pipelines and transportation



                                       3
<PAGE>



and processing facilities, and quantities of gas which can be aggregated for
sale.  Although both oil and gas are generally readily saleable at market
prices, they compete for market share with each other and with other energy
sources such as coal and nuclear power.

     Oil and gas drilling and production operations are regulated by various
Federal, state and local agencies.  These agencies issue binding rules and
regulations which increase the Company's cost of doing business and which
carry penalties, often substantial, for failure to comply.  It is anticipated
that the aggregate burden on the Company of Federal, state and local
regulation will continue to increase particularly in the area of rapidly
changing environmental laws and regulations.  The Company believes that its
present operations substantially comply with applicable regulations.  To date,
such regulations have not had a material effect on the Company's operations,
or the costs thereof.  There are no known environmental or other regulatory
matters related to the Company's operations which are reasonably expected to
result in material liability to the Company.  The Company does not believe
that capital expenditures related to environmental control facilities or other
regulatory matters will be material in fiscal 2000.

     No prediction can be made as to what legislation or regulations may be
enacted or what additional legislation or regulations may be proposed.

     EMPLOYEES

     The Company currently has 18 employees.  The Company is not subject to
any collective bargaining agreement and believes that its relationship with
its employees are good.

     RISK FACTORS

     Shareholders and investors in shares of the Company's Common Stock should
consider the following Risk Factors, in addition to other information in this
Report.

     1.  SUCCESS DEPENDENT ON MANAGEMENT. Success of the Company depends on
the active participation of James "Robby" Robson, Jr., the Company's
President.  The Company does not have an employment agreement with Mr. Robson
and the Company  has no "key man" life insurance on Mr. Robson.  The loss of
the services of Mr. Robson would adversely affect the Company's business.

     2.  COMPETITION.  The Company is in an industry characterized by intense
competition. As a result of the Company's small size, the Company is not a
significant factor in the oil and gas exploration and drilling industry.  Many
of the Company's competitors are well established, have been in existence for
significantly longer periods of time than  the Company, have financial,
marketing, and other personnel as well as other resources substantially
greater than the Company.  (See "COMPETITION AND REGULATION.")

     3.  DECLINE IN PRICE OF OIL.  The price of crude oil fell more than 34%
between December 1997 and June 1998, with the average price per barrel of oil
falling to less than $12.00.  Although crude oil prices have improved
somewhat, there can be no assurance that such prices will return to past
levels or will not drop further.

     4.  TITLE TO FUTURE ACQUIRED PROPERTIES.   Any interests which the
Company may acquire in undeveloped and non-producing acreage may be in the
form of direct interests in leases, options, or permits with respect to such
acreage.  While the Company will attempt to acquire satisfactory title to such



                                       4
<PAGE>



oil and gas properties, title opinions may not be obtained prior to the time
of acquisition, with the attendant risk that some titles may be defective.
Under such circumstances, future expenditures may be incurred by the Company
for title work or some leasehold properties may be abandoned. In addition,
such leasehold interests may be subject to customary royalty interests, liens
incident to operating agreements, liens for current taxes and other burdens,
minor encumbrances, easements and restrictions, any of which may subject the
Company to future undetermined expenses.

     5.  SPECULATIVE NATURE OF OIL AND GAS EXPLORATION.  Oil and gas
exploration is highly speculative in nature, involves many risks, and
frequently results in unproductive properties.  These risks are significantly
higher for exploratory wells. Therefore, there can be no assurance that the
oil and gas exploration and/or development activities of the Company will be
successful, or that any future production will be profitable.

     6.  OPERATING HAZARDS AND UNINSURED RISKS.  Operations will be subject to
all of the risks normally incident to exploration for and production of oil
and gas, including blowouts, explosions and fires, seepage, and pollution,
each of which could result in damage to or destruction of oil and gas wells or
producing facilities, damage to life and property, environmental damage and
possible legal liability for any or all of such damages.

     7.  COMPETITION FOR SUITABLE PROPERTIES.  There exists substantial
competition in the market for properties suitable for oil and gas exploration.
Established companies may have an advantage over the Company because of
substantially greater resources in terms of number of personnel, finances and
access to technical data to devote to the acquisition of properties.  There
can be no assurance that properties can be obtained or that exploratory work
on any properties acquired in the future will result in commercially produc
ible reserves, or that any additional properties can be acquired economically.

     8.  GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONTROLS.  Activities of
the Company are subject to extensive federal, state and local laws and
regulations controlling not only the exploration for oil and gas, but also the
possible effects of such activities upon the environment.  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.

     9.  CONTROL BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS.  Management and
principal shareholders beneficially own over 50% of the outstanding Common
Stock.  (See Item 11.)

     10.  NO ASSURANCE OF TRADING MARKET FOR COMMON STOCK.  The Company's
Common Stock commenced trading in the over-the-counter market during February
1998.  There has been only limited trading in the Company's Common Stock, and
there can be no assurance that the trading volume will increase.  Any trading
is expected to be conducted in the over-the-counter market.  Only six market
makers are currently making quotations on the "OTC Bulletin Board" of the
National Association of Securities Dealers, Inc.  An investor may find it
difficult to dispose of, or to obtain accurate quotations as to the price of
the Common Stock.

     11.  GENERIC PREFERRED STOCK AUTHORIZED.  The Company's Articles of
Incorporation authorize the issuance of up to 5,000,000 shares of Preferred
Stock, the terms, preferences, rights and restrictions of which may be
established by its Board of Directors.  Other companies on occasion have
issued series of such preferred stock with terms, rights, preferences and



                                       5
<PAGE>



restrictions that could be considered to discourage other persons from
attempting to acquire control of such companies and thereby insulate incumbent
management.  It is possible the Company could issue shares of its Preferred
Stock for such a purpose.  In certain circumstances, the existence of
corporate devices which would inhibit or discourage takeover attempts could
have a depressant effect on the market value of the stock of  a company.  The
Board of Directors has no current plans to issue any shares of Preferred
Stock.

     12.  NO DIVIDENDS.  The Company has paid no dividends on its Common Stock
since  incorporation.  The Company does not anticipate paying dividends on its
Common Stock in the foreseeable future and intends to devote any earnings to
the development of the Company's business.

     13.  COMMON STOCK ELIGIBLE FOR RESALE.  Of the 4,681,513 shares of Common
Stock presently outstanding, approximately 4,012,877 shares are "restricted
securities" and under certain circumstances may be sold in compliance with
Rule 144 adopted under the Securities Act of 1933, as amended.   Approximately
3,520,877 shares of Common Stock are currently eligible for resale under Rule
144.  Future sales of such shares will in all likelihood depress the market
price of the Company's Common Stock.

ITEM 2.  DESCRIPTION OF PROPERTY.

     GENERAL

     During the year ended March 31, 1999, the Company drilled and/or
completed 12 wells owning an average of 92% interest in each. Eleven wells
have been successfully completed.  The Company also expanded its producing
properties by purchasing interests in an additional 129 leases located in
Blaine, Caddo, Carter, Custer, Dewey, Gradym, Coal, McClain, Logan, Oklahoma,
Latimer, LeFlore, Pittsburg and Pontotoc Counties, Oklahoma.  Capital
expenditures for oil and gas activities totaled $4,262,264 in the year ended
March 31, 1999.

     During the year ended March 31, 1998, the Company drilled seven wells
owning an average of 95% interest in each.  Seven wells have been successfully
completed.  In addition, the Company installed a waterflood in south central
Oklahoma.  The Company also expanded its  producing property by purchasing
100% interest in 20 wells located in Okmulgee and Creek County, Oklahoma.
Capital expenditures for oil and gas activities totaled $694,903 in the year
ended March 31, 1998.

     During the year ended March 31, 1997, the Company drilled and made new
zone completions on fourteen wells of which twelve were successful oil wells.
One was made into an injection well and one was a dry hole.  The Company also
purchased additional interests in twenty-five wells it operated and of which
it was a majority interest owner.  Capital expenditures for oil and gas
activities totaled $842,928 in the year ended March 31, 1997.

     ESTIMATED PROVED OIL AND GAS RESERVES AND FUTURE NET REVENUES

     In March 1999, Fletcher Lewis Engineering, an independent petroleum
engineering firm, estimated proved reserves for the Company's properties which
represented 94% of the estimated future value of estimated reserves.
Remaining reserves were estimated to represent 6%.  At March 31, 1999, oil
represented 73% and natural gas represented 27% of total reserves denominated
in equivalent barrels using a six Mcf of gas to one barrel of oil conversion
ratio.



                                       6
<PAGE>



     The following table sets forth, as of March 31, 1999, information
regarding the Company's proved reserves.  The average price used to calculate
estimated future net revenues was $15.50 per barrel held constant for oil and
$1.65 per Mcf of gas as of March 31, 1999.  Amounts do not include estimates
of future federal and state income taxes.

                                                             Estimated Future
                         Net Oil    Net Gas      Future      Net Revenues
                         (Bbls)       Mcf        Revenues    Discounted at 10%
                       ---------   ---------   -----------   -----------------

Proved Developed       1,546,518   2,675,544   $16,728,903     $11,053,774
Producing
Proved Developed          18,987      76,134   $   136,472     $   100,935
Non-Producing
Behind-Pipe            1,245,795   5,474,806   $22,216,774     $12,931,732
Proved Undeveloped     1,476,964   1,256,566   $19,492,079     $10,479,499
                       ---------   ---------   -----------     -----------
    Total              4,287,264   9,483,050   $58,574,228     $34,565,940

     PRODUCTION, AVERAGE SALES PRICES AND AVERAGE PRODUCTION COSTS

     The Company's net production quantities and average sales price per unit
for the indicated years are set forth below.

                YEAR ENDED           YEAR ENDED          YEAR ENDED
              MARCH 31, 1999       MARCH 31, 1998      MARCH 31, 1997
             ---------------      ----------------    ---------------
PRODUCT      VOLUME    PRICE      VOLUME    PRICE     VOLUME    PRICE
-------      ------    ------     ------    ------    ------    ------

Gas (Mcf)     87,942   $ 1.58     47,077    $ 1.74    45,660    $ 1.96
Oil (bbls)   137,436   $13.37     84,870    $19.45    47,007    $21.91

     Average production costs, including production taxes, per unit of
production (using a six to one conversion ratio of Mcfs to barrels) were
$6.97, $5.49 and $6.83 per barrel in the years ended March 31, 1999, 1998 and
1997, respectively.

     PRODUCTIVE WELLS AND DEVELOPED ACREAGE

     Developed acreage at March 31, 1999, totaled 7,997 net and 13,440 gross
acres.  At March 31, 1998, the Company owned working interests in 179 net (216
gross) oil wells and 14 net (17 gross) gas wells.  In addition, the Company
owned royalty and production payment interests in approximately 25 oil and gas
wells.

     UNDEVELOPED ACREAGE

     As of March 31, 1999, the Company had 2,796 undeveloped acres.

     DRILLING AND NEW ZONE RECOMPLETIONS

     The following tables set forth the number of gross and net oil and gas
wells in which the Company has participated in drilling or new zone
recompletions and the results thereof for the periods indicated.




                                       7
<PAGE>



                                GROSS WELLS

                                  EXPLORATORY           DEVELOPMENT
YEAR ENDED     TOTAL GROSS    -------------------    -----------------
 MARCH 31,       WELLS        OIL     GAS     DRY    OIL    GAS    DRY
-----------    -----------    ---     ---     ---    ---    ---    ---
  1999            12           0       1       0       6     4       1
  1998             7           0       0       0       7     0       0
  1997            14           0       0       0      12     0       2
  1996            18           0       0       0      16     2       0
1985-1995         50           3       1       6      30     5       5
                 ---           -       -       -      --    --       -
                 101           3       2       6      71    11       8

                                 NET WELLS

                                  EXPLORATORY            DEVELOPMENT
YEAR ENDED     TOTAL NET      -------------------     -----------------
 MARCH 31,       WELLS        OIL     GAS     DRY     OIL     GAS    DRY
-----------    ----------     ---     ---     ---     ---     ---    ---
  1999            8.70        0       0.65    0      4.20    3.1    0.75
  1998            5.80        0       0       0      5.80    0      0
  1997           11.60        0       0       0      9.96    0      1.66
  1996           14.94        0       0       0      13.28   1.66   0
1985-1995        41.50        2.49    0.83    3.32   26.56   4.15   4.15
                 -----        ----    ----    ----   -----   ----   ----
                 82.56        2.49    1.48    3.32   59.80   8.91   6.56

PRESENT ACTIVITIES

     In April 1999, the Company announced that it had commenced natural gas
pipeline sales through Pontotoc Gathering LLC pipeline system of which the
Company is a 45% owner.  This system is currently transporting 1.5  million
cubic feet per day from six Company wells.  The Company has approved a
$900,000 capital expenditure budget to develop this gas field.  The Company
plans to drill eight additional wells and re-complete 20 to 25 wells during
its current fiscal year.

     In June 1999, the Company sold its interests in certain oil and gas
properties in Oklahoma to FieldPoint Petroleum Corporation for $1,200,000 in
cash.  The proved reserves sold in this transaction represented  approximately
1,935,229 Mcf of gas and 756,524 barrels of oil, with a total present value
discounted at 10% of approximately $3,757,000.

OFFICE LEASE

     The Company currently leases approximately 4,500 square feet of office
space for its offices at 808 East Main, Ada, Oklahoma 74820.  The space is
based on a month-to-month basis at a cost of $1,000 per month from an entity
which is partially owned by the families of Todd Robson and James Robson, Sr.
The Company believes that these offices are suitable and adequate to meet its
present and anticipated needs.

ITEM 3.  LEGAL PROCEEDINGS.

     There are no pending legal proceedings in which the Company is a party,
and the Company is not aware of any threatened legal proceedings involving the
Company.




                                       8
<PAGE>



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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1999.




                                       9
<PAGE>



                                   PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     (a)  MARKET INFORMATION.  The Company's Common Stock trades in the over-
the-counter market, under the symbol "PNTU".  Trading commenced during
February 1998.  The following table sets forth the high and low bid prices for
the Company's Common Stock for the periods indicated as reported by the OTC
Bulletin Board. These prices are believed to be inter-dealer quotations and do
not include retail mark-ups, mark-downs, or other fees or commissions, and may
not necessarily represent actual transactions.

             QUARTER ENDED                 HIGH BID     LOW BID
             -------------                 --------     -------
     February 24, 1998 through
      March 31, 1998                        $2.25       $2.125
     June 30, 1998                          $4.50       $2.1875
     September 30, 1998                     $4.50       $3.625
     December 31, 1998                      $3.78125    $1.625
     March 31, 1999                         $5.375      $3.50

     (b)  HOLDERS.  As of May 31, 1999, the Company had 108 shareholders of
record.  This does not include shareholders who hold stock in their accounts
at broker/dealers.

     (c)  DIVIDENDS.  The Company has never paid a cash dividend on its common
stock and does not expect to pay a cash dividend in the foreseeable future.

     (d)  RECENT SALES OF UNREGISTERED SECURITIES.  During the three months
ended March 31, 1999, the Company sold one Unit consisting of 8,000 shares of
Common Stock and 8,000 Warrants to purchase Common Stock, to one accredited
investor at a purchase price of $26,000 per  Unit.  Each Warrant is
exercisable to purchase one share of Common Stock at $3.75 per share until
February 1, 2000.  In connection with such sale the Company paid a cash
commission to Capital West Investment Group in the amount of $1,800.

     With respect to this sale, the Company relied on Section 4(2) of the Act,
and Rule 506 of Regulation D promulgated thereunder.  The investor was given a
copy of a Private Placement Memorandum containing information concerning the
Company, a Form D was filed with the SEC and the Company complied with the
other applicable requirements of Rule 506.  The investor signed a subscription
agreement in which he represented that he was purchasing the Units for
investment only and not for the purpose of resale and distribution.  The
appropriate restrictive legends were placed on the certificates and stop
transfer orders were issued to the transfer agent.

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

     RESULTS OF OPERATIONS

     This Report contains forward-looking statements that involve a number of
risks and uncertainties.  While these statements represent the Company's
current judgment in the future direction of the business, such risks and
uncertainties could cause actual results to differ materially from any future
performance suggested herein.  The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking
statements which may be made to reflect events of circumstances after the date
hereof or to reflect the occurrence of unanticipated events.  Certain factors



                                       10
<PAGE>



that could cause results to differ materially from those projected in the
forward-looking statements are set forth under "RISK FACTORS" in Item 1.

     YEAR ENDED MARCH 31, 1999 COMPARED TO THE YEAR ENDED MARCH 31, 1998

     Operating revenues for the year ended March 31, 1999, increased $279,947
(15%) from the prior year due primarily to the acquisition of oil and gas
properties.

     Production costs for the year ended March 31, 1999, increased $276,736
(35%) due to the additional oil and gas properties.

     Depreciation, depletion and amortization costs for the year ended March
31, 1999, rose $66,372 (43%) as compared to the prior year due to the addition
of equipment and oil and gas properties.  General and administrative costs
decreased $42,857 (12%) due mainly to a reduction in executive salaries.

     CAPITAL RESOURCES AND LIQUIDITY

     The Company's working capital (deficit) was ($1,961,142) at March 31,
1999, compared to $210,221 at March 31, 1998.  The decrease in working capital
is primarily due to the Company's note payable to bank maturing in September
1999, although management believes this will be renewed at its maturity
in September 1999.

     During the year ended March 31, 1999, cash generated by operating
activities was $528,774 compared to cash generated of $671,487 for the year
ended March 31, 1998.  The decrease in the amount of cash generated was
primarily due to the $83,360 decrease in net earnings and an increase in
accounts receivable of $45,308.

     Cash used in investing activities during the year ended March 31, 1999,
was $3,679,481 compared to $687,073 for the prior year.  The Company paid
$3,760,319 toward the purchase of oil and gas properties during the year ended
March 31, 1999 which accounts for the increase.

     Cash provided by financing activities during the year ended March 31,
1999, was $3,302,545 compared to $47,419 during the prior year.  The Company
borrowed $2,715,250 during the year and repaid $820,754.  Also the Company had
net proceeds of $1,408,049 from the sale of common stock through a private
placement.

     The Company does not have any material commitments for capital
expenditures as of the filing of this Report except that the Company has
approved a budget of approximately $900,000 to drill approximately eight new
gas wells and re-complete 20 to 25 existing gas wells in a program to develop
its gas properties.  This program will be funded through existing cash and
future cash flow.  The Company has a $3,000,000 line of credit with an in-
state bank, and as of March 31, 1999, the available credit was approximately
$635,282.  Interest on the line of credit is New York prime and the loan is
secured by certain of the Company's oil and gas properties.

Year 2000

     The Company has reviewed its computer operations and has identified all
computers and systems that are not year 2000 compliant.  As a result of this
review the Company has purchased a new oil and gas accounting software system
which is year 2000 compliant.  The cost of this software including training
is approximately $18,000.  This new software will be installed in early July
1999 and should be fully operational by the end of August 1999.

     The Company has reviewed its vendors and suppliers and determined that it
does not have any material vendors or suppliers.  The Company's bank has
advised the Company that it is year 2000 compliant.  The Company has two
material customers, Sun Oil which buys the Company's oil and Pontotoc
Gathering LLC which buys the Company's gas.  Both of these customers have
advised the Company that they are year 2000 compliant.

     Based on the above analysis the Company does not believe that it has any
material risks related to the year 2000 problem.  Therefore, the Company has
not developed any contingency plans.

                                     11
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS.

     The financial statements are set forth on pages F-1 through F-16 hereto.


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

     No response required.



                                       12
<PAGE>



                                   PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     The directors and executive officers of the Company and its wholly-owned
subsidiary, their ages and positions held in the Company are as follows:

          NAME               AGE    POSITIONS HELD AND TENURE
          ----               ---    -------------------------

James "Robby" Robson, Jr.    40     President, Chief Executive Officer and
                                    Director

Todd Robson                  36     Vice President, Secretary, Treasurer
                                    and Director

James Robson, Sr.            60     Vice President and Director

Brian K. Gourley             37     Director

     There is no family relationship between any Director or Executive Officer
of the Company except that James Robby Robson, Jr. and Todd Robson are
brothers and their father is James Robson, Sr.

     The Company presently has no committees.

     Set forth below are the names of all Directors and Executive Officers of
the Company, all positions and offices with the Company held by each such
person, the period during which he has served as such, and the principal
occupations and employment of such persons during at least the last five
years:

     JAMES "ROBBY" ROBSON, JR. - President, Chief Executive Officer and
Director.  Mr. Robson has served as the President, Chief Executive Officer and
a Director of the Company since December 1997, and has held these same
positions with Pontotoc  Production Company, Inc., the Company's wholly-owned
subsidiary, since January 1987.  From January 1985 through January 1987, he
worked as a consultant for Pontotoc Production Company, Inc.  From April 1982
until January 1985, he served as the President of Robco Oil Co.  From August
1981 until March 1982 he served as Vice President of Marketing for Daner Oil
Co., Inc.  From March 1981 until August 1981, he was a free agent running back
with the Pittsburgh Steelers.  Mr. Robson attended Youngstown State University
from 1977 until 1981.

     TODD ROBSON - Vice President, Secretary, Treasurer and Director.  Mr.
Robson has served as Vice President, Secretary and a Director of the Company
since December 1997, and has held these same positions with Pontotoc
Production Company, Inc., the Company's wholly-owned subsidiary, since January
1987.  From January 1985 until January 1987, he served as President and a
Director of Pontotoc Production Company, Inc.  From January 1983 until January
1985, he was Vice President of Marketing for Robco Oil Co., Inc.

     JAMES ROBSON, SR. - Vice President and Director.  Mr Robson has served as
Vice President and Director of the Company since December 1997, and has held
these same positions with Pontotoc Production Company, Inc., the Company's
wholly-owned subsidiary, since January 1985.   From April 1982 until January
1985, he served as Vice President of Operations for Robco Oil Co., Inc.



                                       13
<PAGE>



     BRIAN K. GOURLEY - Director.  Mr. Gourley has served as a Director of the
Company since January 1998.  He has served as Chief Operating Officer and a
Partner of  BetterBody Company, Ada, Oklahoma, a company engaged in orthopedic
manufacturing, since January 1998.  From April 1989 until January 1997, he
served as Vice President of Operations and a Partner of Look, Inc., a company
engaged in manufacturing medical eye implant devices.  From April 1986 until
April 1989, he was the Production Engineering Manager and Chief Engineer of
Electrovert USA Corp.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
Director, Officer or beneficial owner of more than 10% of the Company's Common
Stock, failed to file on a timely basis reports required by Section  16(a) of
the Exchange Act during the most recent fiscal year, except that James Robson,
Sr., Vice President and a Director of the Company, filed one Form 4 late
reporting three transactions.

ITEM 10.  EXECUTIVE COMPENSATION.

     The following table sets forth information regarding the executive
compensation for the Company's President and each other executive officer
whose total annual salary and bonus exceeded $100,000 for the year ended March
31, 1999, 1998 and 1997:

                                  SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                           LONG-TERM COMPENSATION
                                                   -----------------------------------
                           ANNUAL COMPENSATION         AWARDS        PAYOUTS
                          -----------------------  ----------------- --------
                                                            SECURI-
                                                             TIES
                                                            UNDERLY-
                                           OTHER     RE-      ING               ALL
                                           ANNUAL  STRICTED OPTIONS/           OTHER
NAME AND PRINCIPAL                         COMPEN-  STOCK     SARs     LTIP    COMPEN-
     POSITION       YEAR  SALARY   BONUS   SATION  AWARD(S) (NUMBER)  PAYOUTS  SATION
------------------  ----  -------  -----   ------  -------- --------  -------  ------
<S>                 <C>   <C>      <C>     <C>     <C>      <C>       <C>      <C>
James "Robby"       1999  $36,500    --    $3,504     --       --        --      --
 Robson, Jr.,                              <FN1>
 President          1998  $84,000    --    $4,806     --       --        --      --
                                           <FN1>
                    1997  $48,600    --    $4,118     --       --        --      --
                                           <FN1>
________________
<FN>
<FN1>  Represents dues paid to Oak Hill Country Club.
</FN>
</TABLE>
STOCK OPTION PLAN

     During November 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan"), and on November 12, 1997, the Corporation's shareholders



                                       14
<PAGE>



approved the Plan.  The Plan authorizes the issuance of options to purchase up
to 2,000,000 shares of the Company's Common Stock.

     The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company.  The Board has
the power to determine at the time that the option is granted whether the
option will  be an Incentive Stock Option (an option which qualifies under
Section 422 of the Internal Revenue Code of 1986) or an option which is not an
Incentive Stock Option.  Vesting provisions are determined by the Board at the
time options are granted.  The option price for any option will be no less
than the fair market value of the Common Stock on the date the option is
granted.

     Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options for stock options granted to employees.  In
accordance with a proposed Interpretation of APB25, Accounting for Stock
Issued to Employees, stock options granted to non-employee directors
subsequent to December 15, 1998 would be measured at the fair value of the
options.  The Interpretation would require accounting recognition attributable
to the service period remaining at the date of issuance of the Interpretation,
which is expected to be September 1999.  Generally, there will be no federal
income tax consequences to the Company in connection with Incentive Stock
Options granted under the Plan.  With regard to options that are not Incentive
Stock Options, the Company will ordinarily be entitled to deductions for income
tax purposes of the amount that option holders report as ordinary income upon
the exercise of such options, in the year such income is reported.

     As of the filing of this Report, no options have been granted under this
Plan.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth, as of May 31, 1999, the stock ownership
of each person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each director individually, and all
officers and directors as a group.  Each person has sole voting and investment
power over the shares except as noted.




                                       15
<PAGE>



                                     AMOUNT AND
  NAME AND ADDRESS                 NATURE OF BENE-          PERCENT
OF BENEFICIAL OWNERS               FICIAL OWNERSHIP         OF CLASS
-------------------------          ----------------         --------

James "Robby" Robson, Jr.                754,797              16.1%
1500 East 17th Street
Ada, Oklahoma 74820

Todd Robson                              763,951              16.3%
701 South Shumard
Ada, Oklahoma 74820

James Robson, Sr.                        771,451              16.5%
Route 4, Box 437
Ada, Oklahoma 74820

Brian K. Gourley                          59,471               1.3%
305 North Lake Drive
Ada, Oklahoma 74820

Bill G. Cantrell                         382,360               8.2%
4204 Arlington
Ada, Oklahoma  74820

All Directors and Executive            2,349,670              50.2%
Officers as a Group (4
Persons)

     The Company knows of no arrangement or understanding, the operation of
which may at a subsequent date result in a change of control of the Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ACQUISITION OF PONTOTOC PRODUCTION COMPANY, INC.

     On December 10, 1997, the Company completed the acquisition of 100% of
the outstanding common stock of Pontotoc Production Company, Inc., a Texas
corporation ("Pontotoc"), in exchange for 3,165,000 shares of the Company's
Common Stock (approximately 84.4% of the shares then outstanding).

     The stock issuances were made pursuant to an Agreement between the
Company and Pontotoc.  The terms of the Agreement were the result of
negotiations between the managements of the Company and Pontotoc.  However,
the Board of Directors did not obtained any independent "fairness" opinion or
other evaluation regarding the terms of the Agreement, due to the cost of
obtaining such opinion or evaluation.

     The 3,165,000 shares issued to acquire Pontotoc were issued to the
following shareholders of Pontotoc in the amounts set forth:




                                       16
<PAGE>



                    NAME                NUMBER OF SHARES
                    ----                ----------------

           James "Robby" Robson, Jr.          831,297
           Todd Robson                        845,951
           James Robson, Sr.                  845,951
           Brian K. Gourley                    77,071
           19 other shareholders              564,730
                                            ---------
               Total                        3,165,000




                                       17
<PAGE>



                                   PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  3.  EXHIBITS.

EXHIBIT
NUMBER      DESCRIPTION                   LOCATION

 3.1        Articles of Incorporation,    Incorporated by reference to
            as Amended                    Exhibit 2.1 to the Registrant's
                                          Form 10-SB Registration State-
                                          filed on September 5, 1996

 3.2        Bylaws                        Incorporated by reference to
                                          Exhibit 2 to the Registrant's
                                          Form 10-SB Registration State-
                                          ment filed on September 5, 1996

10.1        Share Exchange Agreement      Incorporated by reference to
            with Pontotoc Production      the Registrant's Form 8-K dated
            Company, Inc. dated           December 10, 1997, and filed
            December 10, 1997             December 23, 1997

21          Subsidiaries of the           Filed herewith electronically
            Registrant

27          Financial Data Schedule       Filed herewith electronically


     (b) REPORTS ON FORM 8-K.  No Reports on Form 8-K were filed for the last
quarter of the fiscal year covered by this Report.




                                       18
<PAGE>



                         INDEX TO FINANCIAL STATEMENTS


                                                              PAGE(S)

Report of Independent Certified Public Accountants . . . . .   F-2

Financial Statements:

     Balance Sheets, March 31, 1999 and 1998 . . . . . . . .   F-3

     Statements of Earnings for the years
     ended March 31, 1999 and 1998. . . . . . . . . . . . . .  F-4

     Statement of Stockholders' Equity
     for the years ended March 31, 1999 and 1998. . . . . . .  F-5

     Statements of Cash Flows for the years
     ended March 31, 1999 and 1998. . . . . . . . . . . . . .  F-6

     Notes to Financial Statements. . . . . . . . . . . . . .  F-7-F-16


































                                     F-1
<PAGE>



Report of Independent Certified Public Accountants


Board of Directors
Pontotoc Production, Inc.

We have audited the accompanying balance sheets of Pontotoc Production, Inc.,
as of March 31, 1999 and 1998, and the related statements of earnings,
stockholders' equity, and cash flows for the years then ended.  These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  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 financial statements referred to above present fairly, in
all material respects, the financial position of Pontotoc Production, Inc., as
of March 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.





/s/ Grant Thornton LLP

GRANT THORNTON LLP

Oklahoma City, Oklahoma
May 27, 1999




















                                     F-2
<PAGE>



                             PONTOTOC PRODUCTION, INC.
                                 BALANCE SHEETS
                                    March 31,

     ASSETS                                           1999          1998

CURRENT ASSETS
  Cash and cash equivalents (note A1)              $  271,170    $  119,332
  Trading securities (note A2)                          2,188         5,250
  Accounts receivable, net of allowance
   for doubtful accounts of $1,361 in
   1999 and $2,974 in 1998 (note A8)                  295,542       250,234
  Other current assets (note A3)                       29,567             -
                                                   ----------    ----------
          Total current assets                        598,467       374,816

PROPERTY AND EQUIPMENT - AT COST, net
  (notes A4 and B)                                    175,248       133,774

OIL AND GAS PROPERTIES - AT COST, net, using
  the full cost method (notes A5, C, D, and E)      5,587,199     1,743,205

NOTE RECEIVABLE - AFFILIATE (note J)                   70,000             -

OTHER (note J)                                          9,400         4,900
                                                   ----------    ----------
                                                   $6,440,314    $2,256,695
                                                   ==========    ==========
     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                 $   59,181    $   73,907
  Accrued and other current liabilities                51,408        24,404
  Income taxes payable (note F)                         9,809        16,423
  Deferred income taxes (notes A7 and F)               74,493        40,802
  Current portion of long-term debt (note E)        2,364,718         1,599
  Other (note A3)                                           -         7,460
                                                   ----------    ----------
          Total current liabilities                 2,559,609       164,595

LONG-TERM DEBT, less current maturities (note E)            -       468,623

DEFERRED INCOME TAXES (notes A7 and F)                443,914       380,241

COMMITMENTS AND CONTINGENCIES (note G)                      -             -

STOCKHOLDERS' EQUITY (note K)
  Common stock - $.0001 par value; authorized,
   100,000,000 shares; issued and outstanding,
   4,654,513 shares in 1999 and 3,750,000 shares
   in 1998                                                465           375
  Preferred stock - $.0001 par value; authorized,
   5,000,000 shares; issued and outstanding, none           -             -
  Additional paid-in capital                        2,018,828       108,924
  Retained earnings                                 1,417,498     1,133,937
                                                   ----------    ----------
                                                    3,436,791     1,243,236
                                                   ----------    ----------
                                                   $6,440,314    $2,256,695
                                                   ==========    ==========
The accompanying notes are an integral part of these statements.
                                     F-3
<PAGE>


                           PONTOTOC PRODUCTION, INC.
                            STATEMENTS OF EARNINGS
                              Year ended March 31,

                                                      1999          1998
Operating revenues
  Oil and gas sales (notes A6 and A8)              $2,034,087    $1,754,390
  Well supervision fees and overhead
   reimbursements                                      85,343        85,093
                                                   ----------    ----------
                                                    2,119,430     1,839,483

Operating costs and expenses
  Production                                        1,060,811       784,075
  Depreciation, depletion, and amortization           221,458       155,086
  General, administrative, and other                  319,881       362,738
                                                   ----------    ----------
                                                    1,602,150     1,301,899
                                                   ----------    ----------
          Earnings from operations                    517,280       537,584

Other income                                           14,453        11,655
Interest expense                                     (148,449)      (44,630)
                                                   ----------    ----------
          Earnings before income taxes                383,284       504,609

Provision for income taxes (notes A7 and F)            99,723       137,688
                                                   ----------    ----------

          NET EARNINGS                             $  283,561    $  366,921
                                                   ==========    ==========

Basic and diluted earnings per share (note A9)     $      .06    $      .10
                                                   ==========    ==========






















The accompanying notes are an integral part of these statements.

                                     F-4
<PAGE>


                           PONTOTOC PRODUCTION, INC.
                       STATEMENT OF STOCKHOLDERS' EQUITY
                      Years ended March 31, 1999 and 1998


                                         Additional
                     Common Stock         Paid-in       Retained
                    Shares    Amount      Capital       Earnings      Total
                   ---------  ------     ----------    ----------   ----------
Balance at
 April 1, 1997     3,750,000   $375      $  108,924    $  767,016   $  876,315

Net earnings               -      -               -       366,921      366,921
                   ---------   ----      ----------    ----------   ----------

Balance at
 March 31, 1998    3,750,000    375         108,924     1,133,937    1,243,236


Issuance of
 common stock        904,513     90       1,909,904             -    1,909,994

Net earnings               -      -               -       283,561      283,561
                   ---------   ----      ----------    ----------   ----------

Balance at
 March 31, 1999    4,654,513   $465      $2,018,828    $1,417,498   $3,436,791
                   =========   ====      ==========    ==========   ==========





























The accompanying notes are an integral part of these statements.

                                     F-5
<PAGE>


                            PONTOTOC PRODUCTION, INC.
                            STATEMENTS OF CASH FLOWS
                              Year ended March 31,

                                                     1999           1998
Increase (Decrease) in Cash and Cash Equivalents

Cash flows from operating activities
  Net earnings                                     $  283,561    $  366,921
  Adjustments to reconcile net earnings to
   net cash provided by operating activities
    Depreciation, depletion, and amortization         221,458       155,086
    Deferred income taxes                              97,364       110,807
    Gain on sale of property and equipment                  -          (487)
    Change in assets and liabilities
     (Increase) decrease in
       Trading securities                               3,062          (750)
       Accounts receivable, net                       (45,308)       62,729
       Other current assets                           (29,567)        6,306
       Other assets                                         -        (1,650)
     Increase (decrease) in
       Accounts payable                               (14,726)      (34,074)
       Accrued and other current liabilities           19,544         7,864
       Income taxes payable                            (6,614)       (1,265)
                                                   ----------    ----------
          Net cash provided by operating
           activities                                 528,774       671,487

Cash flows from investing activities
  Issuance of note receivable - affiliate             (70,000)            -
  Purchase of property and equipment                  (40,095)      (33,135)
  Proceeds on sales of property and equipment         195,433        24,668
  Oil and gas property additions                   (3,760,319)     (678,606)
  Other                                                (4,500)            -
                                                   ----------    ----------
          Net cash used in investing activities    (3,679,481)     (687,073)

Cash flows from financing activities
  Borrowings                                        2,715,250       938,033
  Repayment of borrowings                            (820,754)     (890,614)
  Sale of common stock, net of offering costs       1,408,049             -
                                                   ----------    ----------
          Net cash provided by financing
           activities                               3,302,545        47,419
                                                   ----------    ----------
          NET INCREASE IN CASH AND CASH
           EQUIVALENTS                                151,838        31,833

Cash and cash equivalents at beginning of year        119,332        87,499
                                                   ----------    ----------
Cash and cash equivalents at end of year           $  271,170    $  119,332
                                                   ==========    ==========
Supplemental Cash Flow Information

Cash paid during the year for:
  Interest                                         $  148,449    $   44,631
  Income taxes                                          8,973        28,146

Noncash investing and financing activities:

During 1999, property and equipment and oil and gas property additions of
$501,945 were financed through the issuance of 439,513 shares of common stock.
During 1999 and 1998, depreciation expense on oil field service equipment of
$23,686 and $16,997, respectively, was capitalized to oil and gas properties
and oil and gas property additions of $0 and $57, respectively, were financed
through accounts payable.

The accompanying notes are an integral part of these statements.

                                     F-6
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                        NOTES TO FINANCIAL STATEMENTS
                           March 31, 1999 and 1998

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

On December 10, 1997, Pontotoc Production Company, Inc. ("Pontotoc") was
acquired by Mahogany Capital, Inc. ("Mahogany"), a nonoperating public shell
corporation, through exchange of 100% of the issued and outstanding shares of
Pontotoc's common stock for approximately 84% of the outstanding shares of
Mahogany's common stock.  Mahogany's legal name was changed to Pontotoc
Production, Inc. (the "Company").  The acquisition was considered to be a
capital transaction, in substance equivalent to the issuance of stock by
Pontotoc for the net monetary assets of Mahogany, accompanied by a
recapitalization of Pontotoc.  Common stock and additional paid-in capital at
April 1, 1996 have been restated to reflect the recapitalization for all
periods presented.

The major operations of the Company consist of exploration, production, and
sale of crude oil and natural gas in the United States with an area of
concentration in shallow reserves in the vicinity of Pontotoc County,
Oklahoma.  Other business segments are not a significant factor in the
Company's operation.

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.

1.  Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less and money market funds to be cash
equivalents.

The Company maintains its cash in bank deposit accounts and money market funds
which may not be federally insured.  The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk on such accounts.

2.  Investments

Trading securities are carried at fair value with unrealized gains and losses
included in earnings.

Investments in affiliated companies and joint ventures owned 20% to 50% or
which the Company is able to exercise significant influence over operations
are accounted for on the equity method. Accordingly, the consolidated
statements of earnings include the Company's share of the affiliated entities'
net earnings.

3.  Futures Contracts

The Company contracts to sell crude oil at future dates at prices based on
then-current market prices. Due to wide fluctuations in the market prices for
crude oil, the Company frequently enters into futures contracts to hedge the
price risk associated with anticipated sales.  Gains and losses on these
contracts are deferred and recognized concurrently with the revenues from the
associated exposures.  At March 31, 1999, the Company has entered into futures
contracts settling at various dates through June 1999.

                                     F-7
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

3.  Futures Contracts - Continued

The gains (losses) on these futures contracts at March 31, 1999 and 1998 of
approximately $(29,600) and $7,500, respectively, have been deferred.  These
deferred amounts are reflected in other current assets at March 31, 1999 and
other current liabilities at March 31, 1998.

4.  Property and Equipment

Depreciation and amortization are provided in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated service lives
using an accelerated method.  Estimated useful lives are as follows:

          Furniture, fixtures, and office equipment     5-7 years
          Automobiles and trucks                          5 years
          Leasehold improvements                          7 years
          Oil field service equipment                   5-7 years

Impairment losses are recorded on property and equipment when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.

5.  Oil and Gas Properties

The full cost method of accounting is used to account for oil and gas
properties.  Under this method of accounting, all costs incident to the
acquisition, exploration, and development of properties (both developed and
undeveloped), including costs of abandoned leaseholds, lease rentals,
unproductive wells, and well drilling and equipment costs, are capitalized.
These costs as well as estimated future development costs on proved
undeveloped properties are amortized using the units-of-production method.
The units-of-production method is based primarily on estimates of reserve
quantities.  Due to uncertainties inherent in this estimation process, it is
at least reasonably possible that reserve quantities will be revised
significantly in the near term.  If the Company's unamortized costs exceed the
cost center ceiling (defined as the sum of the present value, discounted at
10%, of estimated future net revenues from proved reserves, less related
income tax effects), the excess is charged to expense in the year in which the
excess occurs.  Generally, no gains or losses are recognized on the sale or
disposition of oil and gas properties.  Income in connection with contractual
services performed on wells in which the Company has an economic interest is
credited to oil and gas properties as a component of the full cost pool.

6.  Revenue Recognition

Oil and gas sales are recognized when the product is transported from the well
site.  Well supervision fees and overhead reimbursements from producing
properties are recognized when the services are performed.

                                     F-8
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

7.  Income Taxes

Deferred income taxes are provided for significant carryforwards and temporary
differences between the tax basis of an asset or liability and its reported
amount in the financial statements that will result in taxable or deductible
amounts in future years.  Deferred income tax assets or liabilities are
determined by applying the presently enacted tax rates and laws.

A valuation allowance for deferred tax assets is required when it is more
likely than not that some portion or all of the deferred tax assets will not
be realized.  Management believes a valuation allowance is not required for
deferred tax assets at March 31, 1999 or 1998.

8.  Concentrations of Credit Risk and Major Customers

The Company extends credit to purchasers of oil and natural gas which are
primarily large energy companies.  The Company had one purchaser whose
purchases were 87% and 90%, respectively, of total revenues for the years
ended March 31, 1999 and 1998 and were 65% and 91%, respectively, of accounts
receivable at March 31, 1999 and 1998.

9.  Earnings Per Share

Basic earnings per common share are based upon the weighted average number of
common shares outstanding.   Diluted earnings per common share are based on
the assumption that all of the common stock purchase warrants are converted
into common shares using the treasury stock method.  There are no differences
in net earnings for purposes of computing basic and diluted earnings per share
as conversion of the common stock purchase warrants would have no effect on
net earnings.

The following table sets forth the computation of weighted average shares
outstanding, basic and diluted, for the years ended March 31:

                                                     1999          1998

     Weighted average shares outstanding          4,420,761     3,750,000
     Effect of dilutive securities -
      common stock purchase warrants                 50,585             -
                                                  ---------     ---------
     Weighted average shares outstanding -
      assuming dilution                           4,471,346     3,750,000
                                                  =========     =========

10.  Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates based on management's
knowledge and experience.  Actual results could differ from those estimates.

                                     F-9
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE B - PROPERTY AND EQUIPMENT

Major classes of property and equipment consisted of the following at March
31:

                                                     1999          1998

     Furniture, fixtures, and office equipment    $  45,789     $  41,605
     Automobiles and trucks                         155,114       154,340
     Leasehold improvements                           7,261         7,261
     Oil field service equipment                    300,935       219,898
                                                  ---------     ---------
                                                    509,099       423,104
     Less accumulated depreciation and
      amortization                                  373,351       328,830
                                                  ---------     ---------
                                                    135,748        94,274
     Land                                            39,500        39,500
                                                  ---------     ---------
                                                  $ 175,248     $ 133,774
                                                  =========     =========

NOTE C - OIL AND GAS INFORMATION

Costs related to the oil and gas activities of the Company were incurred as
follows:

                                                    Year ended March 31,
                                                    1999            1998

     Property acquisition costs                  $3,761,791       $487,960
     Development costs                              282,828        206,943

The Company had the following aggregate capitalized costs relating to the
Company's oil and gas activities at March 31:

                                                    1999            1998

     Proved oil and gas properties               $6,008,933      $1,964,316
     Less accumulated depreciation,
      depletion, and amortization                  (421,734)       (221,111)
                                                 ----------      ----------
                                                 $5,587,199      $1,743,205
                                                 ==========      ==========

Depreciation, depletion, and amortization expense of oil and gas properties
amounted to $1.32 and $1.37 per equivalent barrel of production for the years
ended March 31, 1999 and 1998, respectively.







                                     F-10
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE D - OIL AND GAS RESERVE DATA (UNAUDITED)

The following estimates of proved reserve quantities and related standardized
measure of discounted net cash flows are estimates only, and do not purport to
reflect realizable values or fair market values of the Company's reserves.
The Company emphasizes that reserve estimates are inherently imprecise and
that estimates of new discoveries are more imprecise than those of producing
oil and gas properties. Accordingly, these estimates are expected to change as
future information becomes available.  All of the Company's reserves are
located in the United States.

Proved reserves are estimated reserves of crude oil (including condensate and
natural gas liquids) and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions.  Proved
developed reserves are those expected to be recovered through existing wells,
equipment, and operating methods.

The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated
future production of proved oil and gas reserves, less estimated future
expenditures (based on year-end costs) to be incurred in developing and
producing the proved reserves, less estimated future income tax expenses
(based on year-end statutory tax rates, with consideration of future tax rates
already legislated) to be incurred on pretax net cash flows less tax basis of
the properties and available credits, and assuming continuation of existing
economic conditions.  The estimated future net cash flows are then discounted
using a rate of 10% a year to reflect the estimated timing of the future cash
flows.

The following summaries of changes in reserves and standardized measure of
discounted future net cash flows were prepared from estimates of proved
reserves developed by an independent petroleum engineer.

                     Summary of Changes in Proved Reserves

                                                Year ended March 31,
                                           1999                    1998
                                   --------------------  --------------------
                                     Bbls        Mcf       Bbls        Mcf
                                   ---------  ---------  ---------  ---------
Proved developed and undeveloped
 reserves
  Beginning of year                1,526,072    478,371  1,339,175    411,168
  Extensions and discoveries         375,108  1,570,848    143,365     17,159
  Purchase of minerals in place    2,554,298  7,628,178     38,944     45,854
  Sale of minerals in place          (28,335)  (136,632)         -          -
  Production                        (137,436)   (87,942)   (89,827)   (43,572)
  Revisions of estimates              (2,443)    30,227     94,415     47,762
                                   ---------  ---------  ---------  ---------
  End of year                      4,287,264  9,483,050  1,526,072    478,371
                                   =========  =========  =========  =========

Proved developed reserves
  Beginning of year                  966,134    478,371    753,284    411,168
  End of year                      2,811,300  8,226,484    966,134    478,371

                                     F-11
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE D - OIL AND GAS RESERVE DATA (UNAUDITED) - CONTINUED

           Standardized Measure of Discounted Future Net Cash Flows
                  Relating to Proved Oil and Gas Reserves

                                                        March 31,
                                                  1999            1998
                                              ------------     -----------

Future oil and gas revenues                   $ 82,804,402     $26,024,555
Future production and development costs        (24,230,176)     (7,317,999)
                                              ------------     -----------
Future net cash flows before income taxes       58,574,226      18,706,556
Future income taxes                            (18,341,880)     (6,202,125)
                                              ------------     -----------
Future net cash flows after income taxes        40,232,346      12,504,431
Discounted at 10% for estimated timing of
  cash flows                                   (17,098,747)     (5,314,383)
                                              ------------     -----------
Standardized measure of discounted future
 net cash flows                               $ 23,133,599     $ 7,190,048
                                              ============     ===========

                  Changes in Standardized Measure of Discounted
                               Future Net Cash Flows
                      Related to Proved Oil and Gas Reserves

                                                   Year ended March 31,
                                                  1999            1998
                                              ------------     -----------

Sales and transfers of oil and gas
  produced, net of production costs           $   (973,276)    $  (937,167)
Development costs incurred during year
  which were previously estimated                   18,303          73,315
Extensions and discoveries, net of related
 development costs                               2,348,716       1,718,519
Net change in income taxes                      (6,980,359)        523,620
Accretion of discount                            1,075,627       1,203,934
Purchase of minerals in place                   16,974,683         328,437
Sale of minerals in place                         (196,437)              -
Net changes in production rates and other        4,110,318      (2,040,128)
Revisions in quantity estimates                      8,121         872,743
Net change in sales and transfer prices,
 net of related production costs                  (442,145)     (2,477,416)
                                              ------------     -----------
Net increase (decrease)                         15,943,551        (734,143)

Balance at beginning of year                     7,190,048       7,924,191
                                              ------------     -----------

Balance at end of year                        $ 23,133,599     $ 7,190,048
                                              ============     ===========

                                     F-12
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998


NOTE E - LONG-TERM DEBT

Long-term debt consisted of the following at March 31:

                                                  1999            1998
                                              ------------     -----------
Note payable to BancOne, Oklahoma, N.A.
("BancOne") bearing interest at bank prime
(7.75% at March 31, 1999); due in September
1999; collateralized by oil and gas
properties                                     $2,364,718        $468,623

Other notes payable                                     -           1,599
                                               ----------        --------
                                                2,364,718         470,222
Less current maturities                         2,364,718           1,599
                                               ----------        --------
                                               $        -        $468,623
                                               ==========        ========

The note payable to BancOne is subject to the provisions of a credit
agreement, covenants of which provide for, among other things, current ratio,
debt service ratios, and tangible net worth requirements, as defined.

NOTE F - INCOME TAX EXPENSE

The components of income tax expense were as follows:

                                                   Year ended March 31,
                                                  1999            1998
                                              ------------     -----------
Current
  Federal                                       $ 2,359        $ 26,881
  State                                               -               -
                                                -------        --------
                                                  2,359          26,881
Deferred                                         97,364         110,807
                                                -------        --------
                                                $99,723        $137,688
                                                =======        ========

Deferred tax assets and liabilities consisted of the following at March 31:

                                                  1999            1998
                                              ------------     -----------
Assets
  Investments                                   $21,397         $ 9,448
  Other                                           1,366           2,084
                                                -------         -------
                                                $22,763         $11,532
                                                =======         =======

                                     F-13
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE F - INCOME TAX EXPENSE - CONTINUED

                                                       1999       1998
                                                  ------------ -----------

Liabilities
  Conversion from accrual to cash basis             $ 73,217     $ 50,250
  Property and equipment                               6,254        6,254
  Oil and gas properties                             461,699      376,071
                                                    --------     --------
                                                    $541,170     $432,575
                                                    ========     ========

The effective tax rate on earnings before income taxes differs from the
federal statutory tax rate.  The following summary reconciles taxes at the
federal statutory tax rate with actual taxes for the years ended March 31:

                                                       1999       1998
                                                  ------------ -----------


Computed federal tax provision                      $130,317     $171,567
Increase (decrease) in tax from
  Allowable percentage depletion in excess
   of depletion for financial statements             (29,597)     (23,120)
  Nondeductible expenses                               3,672        3,568
  State taxes, net of federal income tax benefit           -        4,390
  Effect of graduated rates, tax credits, and other   (4,669)     (18,717)
                                                    --------     --------
      Provision for income taxes                    $ 99,723     $137,688
                                                    ========     ========
NOTE G - COMMITMENTS AND CONTINGENCIES

1.  Leases

The Company conducts its operations from facilities which are leased from an
affiliate under an operating lease.  The lease calls for monthly rentals of
$1,000 and is on a month-to-month basis.

Rent expense for the years ended March 31, 1999 and 1998 was $12,918 and
$14,154, respectively.

2.  Other

The Company is involved in various legal actions relating to its operations.
Management believes that losses, if any, arising from such actions will not be
material to the Company's financial position or results of operations.












                                     F-14
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE H - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments as of March 31, 1999 and 1998 as required
by Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosure
About Fair Value of Financial Instruments.  Such information, which pertains
to the Company's financial instruments, is based upon the requirements of SFAS
No. 107 and does not purport to represent the aggregate net fair value of the
Company.  The carrying amounts in the table are the amounts at which the
financial instruments are reported in the financial statements.

All of the Company's financial instruments are held for purposes other than
trading except for trading securities.  The carrying amounts of cash and cash
equivalents approximate fair values of such assets. The carrying amounts of
trading securities approximate fair values of such assets as carrying values
are adjusted to quoted market prices.  The fair value of note receivable -
affiliate is estimated by using the current rates at which similar loans would
be made to borrowers with similar credit ratings and for the same remaining
maturities.  Estimated fair value of fixed rate long-term debt is the
discounted amount of future cash flows using the Company's current incremental
rate of borrowing for similar liabilities.  The carrying amount of variable
rate debt approximates fair value because interest rates adjust to market
rates.
                                     1999                     1998
                             Carrying     Estimated    Carrying    Estimated
                              amount      fair value    amount     fair value
                            ------------  -----------  ---------   ----------
Financial assets
 Cash and cash equivalents  $    271,170  $   271,170  $ 119,332   $ 119,332
 Trading securities                2,188        2,188      5,250       5,250
 Note receivable -
  affiliate                       70,000       70,000          -           -
Financial liabilities
 Fixed rate long-term debt             -            -     (1,599)     (1,599)
 Variable rate long-term
  debt                        (2,364,718)  (2,364,718)  (468,623)   (468,623)

NOTE I - PROPERTY ACQUISITIONS

Effective July 1, 1998, the Company acquired oil and gas properties and
equipment from an Oklahoma oil and gas operator for approximately $2,750,000
and 402,000 shares of common stock.  The acquisition has been accounted for
using the purchase method, and the operations of the acquired properties are
included subsequent to July 1, 1998.  The purchase price of approximately
$3,168,500 was allocated to the assets, primarily oil and gas properties,
acquired on the basis of their estimated fair value.

The following summarized pro forma, unaudited, information assumes the
acquisition had occurred on April 1, 1997:

                                                  Year ended March 31,
                                                 1999              1998
                                              ------------     -----------
Revenues                                       $2,395,787       $3,353,095
Net earnings                                      360,122          674,693
Basic and Diluted earnings per share                  .08              .15

                                     F-15
<PAGE>



                          PONTOTOC PRODUCTION, INC.
                 NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           March 31, 1999 and 1998

NOTE J - RELATED PARTY TRANSACTION

During 1999, the Company acquired a 45% ownership interest in a natural gas
gathering company for $4,500 which is reflected in other assets.  In addition,
the Company loaned $70,000 to this entity under a note agreement which
requires monthly payments of interest at 10% and matures on April 30, 2001.

NOTE K - STOCKHOLDERS' EQUITY

During May 1998, the Company issued 37,153 shares of common stock in exchange
for oil and gas properties.  The common stock was valued at $2.25 per share
based on the estimated fair value of the oil and gas properties acquired.

In July 1998, the Company issued 402,360 shares of common stock having an
estimated fair value of $1.04 per share in conjunction with the acquisition of
certain oil and gas properties (see Note I).  The fair value was estimated
based on the fair value of common stock and common stock purchase warrants
being sold through a private placement occurring at approximately the same
time.

The Company completed a private placement in October 1998 of 465,000 shares of
common stock and 465,000 common stock purchase warrants, for a total price of
$1,511,250.  The warrants are exercisable at $3.75 per share at any time
through February 1, 2000.

The Board of Directors is authorized to issue the Company's preferred stock in
series and is further authorized to establish the relative rights and
preferences for each series, including voting rights and common stock
conversion rights.

NOTE L - YEAR-END ADJUSTMENT

During the fourth quarter of 1999, proceeds from the sale of certain oil and
gas properties recorded as other income in the Company's third quarter were
credited to the full cost pool.  The effect of the adjustment was to reduce
net earnings by approximately $148,000 or $.03 per basic and diluted share for
the year ended March 31, 1999.



















                                     F-16
<PAGE>



                              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.

Date: June 28, 1999                  PONTOTOC PRODUCTION, INC.


                                     By:/s/ James Robson, Jr.
                                         James "Robby" Robson, Jr., President


     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 dates indicated.

        SIGNATURE                       TITLE                     DATE



/s/ James Robson, Jr.           President (Chief Executive     June 28, 1999
James "Robby" Robson, Jr.       Officer) and Director



/s/ Todd Robson                 Vice President, Secretary,     June 28, 1999
Todd Robson                     Treasurer (Chief Finan-
                                ancial and Accounting
                                Officer) and Director


/s/ James Robson, Sr.           Vice President and Director    June 28, 1999
James Robson, Sr.



/s/ Brian K. Gourley            Director                       June 28, 1999
Brian K. Gourley