U.S. Securities And Exchange Commission
                             Washington, D.C. 20549

                                 FORM 10-KSB/A1

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

          For the fiscal year ended August 31, 1997

 [ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [No Fee Required]

For the transition period from                 to
                                --------------    ------------------

                           Commission File No. 0-20879

                             PYR ENERGY CORPORATION
                  ---------------------------------------------
                 (Name of small business issuer in its charter)


             Delaware                                    95-4580642
             --------                                    ----------
      (State or jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                  Identification No.)


  1675 Broadway, Suite 1150, Denver, CO                      80202
  -------------------------------------                      -----
(Address of principal executive offices)                   (Zip Code)

          Issuer's telephone number, including area code (303) 825-3748
                                                         --------------

           Securities registered pursuant to Section 12(b) of the Act:

    Title of each class               Name of each exchange on which registered
            None                                            None
            ----                                            ----

           Securities registered pursuant to Section 12(g) of the Act:
                          $.001 Par Value Common Stock
                          ----------------------------
                                (Title of Class)

     Check  whether  the  issuer(1)  filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes     No   X
             ---     ---

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

     Issuer's revenues for the fiscal year ended August 31, 1997 were $85,596.

     The  aggregate  market  value of the voting  stock  held by  non-affiliates
computed  based on the average of the closing bid and asked prices of such stock
as of November 10, 1997, was $8,505,794.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     The number of shares  outstanding of each of the issuer's classes of common
equity as of November 7, 1997 is as follows:

      $.001 Par Value Common Stock                         9,154,804
                                                           ---------








<PAGE>


                                     PART I





ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES

Overview



     PYR  Energy  Corporation  (the  "Company")  is an  independent  exploration
company  that  applies  advanced  3-D seismic  and  computer  aided  exploration
("CAEX")  technology to systematically  explore for and exploit onshore domestic
natural gas and oil  accumulations in the western United States.  With a primary
technical focus, the Company has ongoing exploration and exploitation activities
in the San  Joaquin  basin of  California,  the  Denver  basin of  Colorado  and
Nebraska,  the Big Horn basin of  Wyoming,  and the  central  Montana  trough of
Montana.  The Company has not yet  drilled any wells,  and it owns no  producing
acreage. The Company plans to commence drilling on its San Joaquin basin acreage
in the second quarter of 1998.

     Since its  inception  in 1996,  the  Company has  developed a portfolio  of
exploration   and   exploitation   projects   possessing   a  critical   mix  of
high-potential,    high-risk   exploration   targets   and   moderate-potential,
moderate-risk  exploitation plays. The Company generates most of its exploration
projects internally,  and therefore has the ability to retain a sizeable working
interest in each project based on associated project risk and financial leverage
through  industry  joint  ventures.  The  Company  attempts  to limit  financial
exposure on a project by project basis by forming industry  partnerships through
which the Company's  technical  expertise can be complemented with the financial
resources and operating expertise of established companies. The Company does not
intend to operate the drilling of project wells.

     The Company has successfully  assembled a highly  motivated  geoscience and
management team with extensive technical  experience,  as well as a proven track
record of  resource  exploitation  and  business  development.  The  Company was
founded  by Scott  Singdahlsen,  a  geologist  who  previously  was a founder of
Interactive  Earth Sciences  Corporation,  a 3-D seismic  consulting firm in the
Rocky Mountain region, and by Robert Suydam, a geologist employed by a number of
oil and gas  exploration  companies  for an  aggregate  of  over 30  years.  The
Company's  technical/management  team of  goephysicists  and  geologists  brings
together   more  than  110  years  of  combined   experience   in   exploration,
exploitation,  and  the  application  of  advanced  geological  and  geophysical
technology.  Historically, the Company's technical team has had exposure to more
than 100 3-D seismic  surveys.  This  experience  has resulted in development of
expertise  in  the  application  of  seismic   technology  for  exploration  and
exploitation.

     The Company was  incorporated  in March 1996 in the state of Delaware under
the name Mar  Ventures  Inc.  Prior to  August 6,  1997 the  Company's  business
consisted  of the  marketing  of  traditional  television  programming  from the
Company's  limited film library to television  and cable  television  operators.
Effective  as of  August  6,  1997,  the  Company  purchased  all the  ownership
interests of PYR Energy,  LLC, an oil and gas exploration  company formed in May
1996, and, in a separate  transaction,  it sold its former business to the prior
president of the  Company.  Also on that date,  the Company  issued units of its
common stock and common stock purchase  warrants for an aggregate of $1,500,000.
As part of the acquisition of PYR Energy, LLC, the management of PYR Energy, LLC
and  one of the new  stockholders  of the  Company  replaced  all the  Company's
directors and officers.  Effective as of November 12, 1997, the Company  changed
its name to PYR Energy Corporation.

                                       1

<PAGE>


     The Company's  offices are located at 1675  Broadway,  Suite 1150,  Denver,
Colorado 80202, telephone number (303) 825-3748.

Disclosure Regarding Forward-Looking Statements And Cautionary Statements

Forward-Looking Statements
--------------------------

         This Annual Report on Form 10-K includes  "forward-looking"  statements
within the meaning of Section 21E of the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange Act"). All statements other than statements of historical
facts included in this Annual Report,  including without  limitation  statements
under  "ITEMS 1 AND 2.  DESCRIPTION  OF BUSINESS  AND  PROPERTIES"  and "ITEM 7.
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATION",  regarding the Company's financial position,  business strategy, and
plans and  objectives  of management  of the Company for future  operations  and
capital  expenditures,  are  forward-looking  statements.  Although  the Company
believes that the expectations  reflected in the forward-looking  statements and
the  assumptions  upon  which  the  forward-looking  statements  are  based  are
reasonable, it can give no assurance that such expectations and assumptions will
prove to have been correct.  Additional  statements concerning important factors
that  could  cause  actual  results  to  differ  materially  from the  Company's
expectation  ("Cautionary  Statements")  are disclosed below in the "-Cautionary
Statements"  section and elsewhere in this Annual  Report.  All written and oral
forward-looking  statements attributable to the Company or persons acting on its
behalf  subsequent to the date of this Annual Report are expressly  qualified in
their entirety by the Cautionary Statements.

Cautionary Statements
---------------------

     In addition to the other information  contained in this Annual Report,  the
following  Cautionary  Statements  should  be  considered  when  evaluating  the
forward-looking statements contained in this Annual Report.

Start-Up Nature Of The Company's Oil And Gas Business; Absence Of Profits

     The  Company was formed in 1996,  and does not have a history of  sustained
profit from operations.  The development of the Company's  business will require
substantial  expenditures.  The Company's future  financial  results will depend
primarily  on its  ability to locate  hydrocarbons  economically  in  commercial
quantities,  to provide drilling site and target depth recommendations resulting
in profitable productive wells and on the market prices for oil and natural gas.
There can be no assurance that the Company will achieve or sustain profitability
or positive cash flows from operating activities in the near future.

Oil And Gas Prices; Marketability Of Production

     Even if the Company is able to discover or acquire oil and gas  production,
of which  there is no  assurance,  the  Company's  revenues,  profitability  and
liquidity will be highly  dependent upon  prevailing  prices for oil and natural
gas. Oil and gas prices can be extremely  volatile and in recent years have been
depressed  by excess  total  domestic  and  imported  supplies.  There can be no
assurance  that current price levels can be sustained.  Prices also are affected
by  actions  of  state  and  local  agencies,  the  United  States  and  foreign
governments,  and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate  future prices of oil
and natural gas. Any substantial or extended  decline in the price of oil and/or



                                       2

<PAGE>

natural  gas would have a material  adverse  effect on the  Company's  financial
condition and results of operations,  including  reduced cash flow and borrowing
capacity.  All of these factors are beyond the control of the Company.  Sales of
oil and natural gas are seasonal in nature,  leading to substantial  differences
in cash flow at various times  throughout  the year.  The  marketability  of the
Company's gas  production,  if any,  will depend in part upon the  availability,
proximity  and  capacity of gas  gathering  systems,  pipelines  and  processing
facilities.  Federal  and  state  regulation  of  oil  and  gas  production  and
transportation,  general economic  conditions,  changes in supply and changes in
demand all could adversely affect the Compan s ability to produce and market oil
and natural gas. If market  factors were to change  dramatically,  the financial
impact on the Company could be substantial.  The availability of markets and the
volatility  of product  prices are beyond the  control of the  Company  and thus
represent a significant risk.

Reliance On Significant Partners

     The Company  attempts to limit  financial  exposure on a project by project
basis by forming industry  partnerships where the Company's  technical expertise
can be  complemented  with the financial  resources  and operating  expertise of
established  companies.  If the  Company  were not able to form  these  industry
partnerships,  this could limit the  Company's  ability to fully  implement  its
business  plan  and  could  have a  material  adverse  effect  on the  Company's
business, financial condition and results of operations.

Non-Operator Status

     The Company  focuses  primarily on  providing  3-D imaging and analysis and
relies upon other  project  partners to provide and complete  all other  project
operations and responsibilities including land acquisition, operating, drilling,
marketing  and  project  administration.  As a result,  the  Company  has only a
limited  ability to exercise  control over a  significant  number of a project's
operations or the associated costs of such operations.  The success of a project
is dependent upon a number of factors which are outside of the Company's area of
expertise  and  project   responsibilities.   Such  factors  include:   (i)  the
availability of favorable term leases and required permitting for projects, (ii)
the  availability  of future  capital  resources  by the  Company  and the other
participants  to the  purchasing of leases and the drilling of wells,  (iii) the
approval of other  participants  to the purchasing of leases and the drilling of
wells on the projects and (iv) the economic  conditions at the time of drilling,
including the prevailing and  anticipated  prices for oil and gas. The Company's
reliance on other project  partners and its limited ability to directly  control
certain project costs could have a material adverse effect on the realization of
expected rates of return on the Company's investment in certain projects.

Ability To Discover Additional Reserves

     The Company's  future success is dependent upon its ability to economically
locate additional oil and gas reserves in commercial  quantities.  Except to the
extent  that the  Company  acquires  properties  containing  proved  reserves or
conducts successful exploration and development activities,  or both, the proved
reserves of the Company,  if any,  will decline as reserves  are  produced.  The
Company's ability to do so is dependent upon a number of factors,  including its
participation in multiple exploration projects and its technological  capability
to locate oil and gas in  commercial  quantities.  Because  the Company may rely
upon other industry  participants to develop the Company's exploration projects,
no  assurances  can be given  that the  Company  will  have the  opportunity  to
participate  in projects which  economically  produce  commercial  quantities of
hydrocarbons in amounts necessary to meet its business plan or that the projects
in which it elects to participate will be successful.  There can be no assurance
that the Company's planned projects will result in significant  reserves or that
the Company will have future success in drilling productive wells at low reserve
replacement  costs.  The  Company  has  not  yet  established  any  oil  and gas
production, nor has it booked any proved reserves.

                                       3

<PAGE>

Substantial Capital Requirements And Liquidity

     In order to pursue its oil and gas  exploration  plans  fully,  the Company
will need  additional  capital  funding.  The Company  currently has outstanding
warrants (the  "Warrants")  to purchase an aggregate of 4,095,000  shares of the
Company's Common Stock.  One-half of the Warrants entitle the registered holders
thereof to purchase  an  aggregate  of  2,047,500  shares of Common  Stock on or
before  January 15,  1998 at an exercise  price of $1.25 per share (the "Class A
Warrants").  One-half of the Warrants entitle the registered  holders thereof to
purchase an aggregate of 2,047,500 shares of Common Stock on or before April 15,
1998 at an  exercise  price of $1.75 per share  (the  "Class B  Warrants").  The
Company  anticipates  having  adequate  short term capital  funding  through the
exercise of its outstanding Class A and Class B Common Stock Purchase  Warrants.
However,  there is no assurance  that these Warrants will be exercised at all or
to the extent  necessary to fund the Company's short term capital  requirements.
At the present time, there are no additional  commitments or alternative sources
for any such  funding.  The Company does not have a steady  source of revenue to
provide  funding to sustain  operations.  There is no assurance that the Company
will be able to obtain a reliable source of revenue to sustain its operations.

Risk Of Exploratory Drilling Activities

     Exploration for oil and natural gas is a speculative  business  involving a
high degree of risk, including the risk that no commercially  productive oil and
gas  reservoirs  will be  encountered.  The  cost of  drilling,  completing  and
operating  wells is often  uncertain and drilling  operations  may be curtailed,
delayed or  canceled  as a result of a variety of factors  including  unexpected
formation  and  drilling   conditions,   pressure  or  other  irregularities  in
formations,  equipment  failures or  accidents,  as well as weather  conditions,
compliance with governmental requirement and shortages or delays in the delivery
of equipment. There is no assurance that the expenditures made by the Company on
its oil and natural gas properties  will result in discoveries of oil or natural
gas in  commercial  quantities.  Some  test  wells,  as a  consequence,  may not
ultimately be developed into producing wells and may be abandoned.

Competition

     The  Company  competes in the areas of oil and gas  exploration  with other
companies,  many of which  may have  substantially  larger  financial  and other
resources.  From time to time,  there may be  competition  for, and shortage of,
exploration, drilling and production equipment and these shortages could lead to
an  increase  in costs and to delays in  operations  that  could have a material
adverse effect on the Company.  The Company may therefore not be able to acquire
desirable  properties or equipment required to develop its properties.  Problems
of this nature also could prevent the Company from producing any oil and natural
gas it discovers at the rate it desires to do so.

General Risks Of Oil And Gas Operations

     The  nature  of the oil and gas  business  involves  a  variety  of  risks,
including the risks of operating hazards such as fires,  explosions,  cratering,
blow-outs,  and encountering formations with abnormal pressures,  the occurrence
of any of which could result in losses to the Company. The Company will maintain
insurance  against some, but not all, of these risks in amounts that  management
believes to be reasonable in accordance with customary industry  practices.  The
occurrence of a significant event, however, that is not fully insured could have
a material adverse effect on the Company's financial position.

                                       4

<PAGE>

Technology Changes

     The oil  and  gas  industry  is  characterized  by  rapid  and  significant
technological  advancements  and  introductions  of new  products  and  services
utilizing new  technologies.  As new  technologies  develop,  the Company may be
placed at a competitive  disadvantage,  and competitive  pressures may force the
Company to implement such new  technologies  at  substantial  cost. In addition,
other oil and gas finding  companies may implement new  technologies  before the
Company,  and  consequently  such  companies  may be  able to  provide  enhanced
capabilities  and superior  quality compared with that which the Company is able
to provide.  There can be no assurance  that the Company will be able to respond
to such competitive  pressures and implement such technologies on a timely basis
or at an acceptable cost. One or more of the technologies  currently utilized by
the Company or implemented in the future may become obsolete.  In such case, the
Company's  business,  financial  condition  and results of  operations  could be
materially  adversely  affected.  If the  Company is unable to utilize  the most
advanced commercially  available technology,  the Company's business,  financial
condition and results of operations could be materially and adversely affected.

Government Regulations And Environmental Risks

     The production and sale of oil and gas are subject to a variety of federal,
state and local  government  regulations  including  regulation  concerning  the
prevention  of waste,  the  discharge of  materials  into the  environment,  the
conservation of oil and natural gas, pollution, permits for drilling operations,
drilling  bonds,  reports  concerning  operations,  the  spacing  of wells,  the
unitization  and pooling of  properties,  and various  other  matters  including
taxes.  Many  jurisdictions  have at various  times imposed  limitations  on the
production of oil and gas by restricting  the rate of flow for oil and gas wells
below their actual capacity to produce. During the past few years there has been
a  significant   amount  of  discussion  by  legislators  and  the  presidential
administration  concerning  a variety of energy tax  proposals.  There can be no
certainty that any such measure will be passed or what its effect will be on oil
and natural  gas prices if it is passed.  In  addition,  many states have raised
state taxes on energy sources and additional increases may occur, although there
can be no  certainty  of the effect that  increases  in state energy taxes would
have on oil and  natural  gas  prices.  Although  the  Company  intends to be in
substantial  compliance with applicable  environmental and other government laws
and regulations, there can be no assurance that significant costs for compliance
will not be incurred in the future.

Variability Of Operating Results

     The Company's  operating results,  as a start up company in the oil and gas
industry,  may vary significantly  during any financial period. These variations
may be caused by  significant  periods  of time  between  each of the  Company's
discoveries  and  developments,  if any,  of oil or natural  gas  properties  in
commercial  quantities.  These  variations  may also be caused by the volatility
associated with oil and gas prices.  See "Oil And Gas Prices;  Marketability  Of
Production".

                                       5

<PAGE>


Risks Associated With Management Of Growth

     Because of its small size, the Company desires to grow extremely rapidly in
order to achieve certain economies of scale. Although there is no assurance that
this rapid  growth will occur,  to the extent that it does occur it will place a
significant  strain  on the  Company's  financial,  technical,  operational  and
administrative resources. As the Company increases its services and enlarges the
number of projects it is evaluating or in which it is participating,  there will
be additional demands on the Company's  financial,  technical and administrative
resources.   The  failure  to  continue  to  upgrade  the  Company's  technical,
administrative,  operating and financial  control  systems or the  occurrence of
unexpected  expansion  difficulties,  including the recruitment and retention of
geoscientists  and  engineers,  could  have a  material  adverse  effect  on the
Company's business, financial condition and results of operations.

Dependence On Key Personnel

     The  Company  will  be  highly  dependent  on  the  services  of  D.  Scott
Singdahlsen and its other geological and geophysical staff members.  The loss of
the services of any of them could have a material adverse effect on the Company.
The Company does not have an  employment  contract with Mr.  Singdahlsen  or any
other employee.

Concentration Of Risks; Lack Of Diverse Business Operations

     The  Company  is  currently  pursuing  only  the oil  and  gas  exploration
business.  Although the Company is involved in other oil and gas projects, it is
concentrating  the  majority of its initial oil and gas  exploration  efforts on
approximately  22,000  exploratory  net acres in the  Maricopa  sub-basin at the
southern  end of the San  Joaquin.  Although  the  Company is  involved in three
separate  and  distinct  projects  in  the  San  Joaquin  basin,  the  Company's
exploration  efforts are concentrated in this same general area and this lack of
diverse  business  operations  subjects  the  Company  to a  certain  degree  of
concentration  of risks. The future success of the Company may be dependent upon
its success in discovering  and developing oil and gas in commercial  quantities
on its San Joaquin  properties and upon the general  economic success of the oil
and gas industry.

Certain Definitions

     Unless otherwise  indicated in this Annual Report,  natural gas volumes are
stated at the legal pressure base of the state or area in which the reserves are
located at 60(degree)Fahrenheit.  Oil equivalents are determined using the ratio
of 10 Mcf of natural gas to one barrel of crude oil,  condensate  or natural gas
liquids  so that 10 Mcf of  natural  gas are  referred  to as one  barrel of oil
equivalent or "BOE".

     As used in this  Annual  Report,  the  following  terms have the  following
specific  meanings:  "Mcf" means thousand cubic feet,  "Bcf" means billion cubic
feet, "Bbl" means barrel,  "MBbl" means thousand barrels,  "MMBoe" means million
barrels of oil  equivalent,  "MMBbl"  means  million  barrels,  and "MMBO" means
million barrels of oil.

     With respect to information  concerning the Company's  working interests in
wells or drilling  locations,  "gross" gas and oil wells or "gross" acres is the
number of wells or acres in which the Company has an interest, and "net" gas and
oil wells or "net" acres are determined by multiplying "gross" wells or acres by
the Company's working interest in those wells or acres. A "working  interest" in
an oil and gas  lease is an  interest  that  gives the owner the right to drill,
produce, and conduct operating activities on the property and to receive a share
of production of any hydrocarbons covered by the lease. A working interest in an
oil and gas lease also  entitles  its owner to a  proportionate  interest in any
well  located  on the lands  covered by the  lease,  subject  to all  royalties,
overriding   royalties  and  other  burdens,   to  all  costs  and  expenses  of
exploration,  development and operation of any well located on the lease, and to
all risks in connection therewith.


                                       6


<PAGE>

     A  "development  well" is a well drilled as an additional  well to the same
horizon or horizons as other producing wells on a prospect, or a well drilled on
a spacing  unit  adjacent  to a spacing  unit with an existing  well  capable of
commercial  production  and which is intended  to extend the proven  limits of a
prospect.  The latter type of  development  well  drilling is known as "step-out
drilling".  An  "exploratory  well"  is a  well  drilled  to  find  commercially
productive  hydrocarbons in an unproved area, or to extend significantly a known
prospect.

     "Reserves"  means  natural  gas and crude oil,  condensate  and natural gas
liquids on a net revenue interest basis,  found to be commercially  recoverable.
"Proved developed  reserves"  includes proved developed  producing  reserves and
proved developed  behind-pipe  reserves.  "Proved developed  producing reserves"
includes only those reserves  expected to be recovered from existing  completion
intervals  in casing of  existing  wells when the cost of making  such  reserves
available for production is relatively small compared to the cost of a new well.
"Proved  undeveloped  reserves" includes those reserves expected to be recovered
from new  wells on proved  undrilled  acreage  or from  existing  wells  where a
relatively major expenditure is required for recompletion.

     "Infill  drilling" means drilling of an additional well or additional wells
in order to more adequately drain a reservoir.

     "Stratigraphic  trap"  means  a  barrier  that  impedes  the  migration  of
hydrocarbons  caused by either a nonporous formation sealing off the top edge of
a reservoir bed or by a change of porosity and permeability within the reservoir
bed  itself.   "Strategraphic   play"  means  a  prospect  targeted  to  test  a
strategraphic trap.

     "API" means a measure of gravity  based on  standards  set by the  American
Petroleum Institute.

     "Cretaceous D-Sand and J-Sand  reservoirs" means sandstone  reservoirs that
contain  hydrocarbons  of  Cretaceous  age that are found in the Denver basin of
Colorado, Wyoming and Nebraska.

     "Cretaceous incised valley-filled reservoirs" means sandstone reservoirs of
Cretaceous  age that were  deposited in valleys  carved into  underlying  strata
during a period of falling sea level.

     "Cretaceous  reservoirs"  means rock reservoirs most commonly  comprised of
sandstone  that were  deposited  during the  Cretaceous  Period.  The Cretaceous
Period occurred between 66 and 144 million years before present.

     "Down-spaced  drilling" means a method of development drilling whereby well
density in a given area is increased by drilling between existing wells.

     "Palynology  analysis"  means  an  analysis  of  a  rock  sequence  through
examination of contained spores and/or pollen. A method of age dating strata.

                                       7

<PAGE>

     "Reserve  capture" means the  quantification  of hydrocarbon  reserves as a
result of drilling and testing a reservoir.

     "Steam  floods"  means a  secondary  recovery  technique  whereby  steam is
injected  into a  hydrocarbon  reservoir in an effort to mobilize  heavy (tarry)
oil.

     "Subthrust  structure"  means a fold of  strata  which is found  beneath  a
thrust fault.

     "Swept  reservoir  pods"  means  distinct  sandstone  units  that have been
depleted of hydrocarbons through the secondary recovery method of waterflooding.

     "Thrusted  anticlinal  feature"  means a fold of  geologic  strata  that is
bounded  by a trust  fault,  which  is a fault  that  results  in  older  strata
overlying younger strata.

     "Turbidite" means a stratigraphic sequence deposited by turbidity currents,
commonly associated with submarine canyons.

Strategy

     The Company's business strategy is to continue to enhance shareholder value
by leveraging its technical experience and expertise with 3-D seismic technology
to identify  exploration and exploitation  projects with  significant  potential
reserves and economic results based on the application of appropriate technology
and suitable project risk management.  The Company's ongoing goal is to increase
its reserve base through a focus on mature  hydrocarbon basins where it believes
that the historical under utilization of seismic  technology  creates tremendous
opportunities. It is the Company's view point that the systematic application of
advanced  seismic imaging and  visualization  to exploration  can  significantly
reduce drilling risk and enhance financial results. The Company's strategy is to
focus on applying 3-D seismic  technology to explore  properties that lie within
these mature basins and that offer oil and gas reserves that would be materially
significant to the Company.

     The Company has a three-pronged  corporate  approach for the application of
exploration  technology  in these mature  basins.  The three  components of this
strategy are set forth below:

     o    Internal  generation of exploration  and  exploitation  prospects with
          special  emphasis on 3-D seismic  application  to  stratigraphic  play
          concepts.

     o    Identification  and exploitation of non-performing  and under-utilized
          existing  3-D  seismic  surveys  and  acreage  positions  in which the
          application  of technical  expertise and advanced  interpretation  and
          visualization   methodologies  could  significantly   impact  drilling
          results.

     o    Development of partnerships with exploration and production  companies
          that lack advanced technical resources and expertise.

Exploration and Operating Approach

     The Company  focuses  its  technical  resources  on  obtaining  the highest
quality  subsurface image through advanced  geological and geophysical  methods,
which it believes are more likely to result in the cost effective identification
of oil  and gas  reserves  that  are  materially  significant.  The  Company  is
committed to providing its technical  team with access to the required tools and
support  necessary  to retain a  competitive  advantage  in today's  exploration
environment.  The  Company  strives to provide its  geoscientists  with the most
advanced  imaging and  analytical  technology  available  and provides  employee
incentives to utilize for the  recruitment  and  motivation  of these  technical
experts.

                                       8

<PAGE>


     The  Company  adheres  to  a  disciplined  approach  to  selective  project
participation.  The Company participates only in those projects that it believes
are likely to maximize the return on its capital  investment,  have  significant
reserve growth  potential,  and benefit from the application of advanced seismic
technology.  The Company believes that these factors result in a positive impact
to  the  finding-cost  and  production  economics.   The  Company  actively  and
continually manages its portfolio of exploration and exploitation  projects. The
aggressive  portfolio  management enables the Company to maximize the investment
of  available  capital in a limited  number of high  impact  geologic  plays and
projects.

     The Company  generates many of its  exploration and  exploitation  projects
internally,  and therefore is not dependent on outside parties for project flow.
The Company strives to control all the pre-drill  exploration phases,  including
the  acreage  position  and the  application  of  seismic  technology.  With the
resulting  project  control,  the Company is in the position to fully manage the
exploration  process  and  determine  subject to its  financial  resources,  the
appropriate  level of working  interest  that it retains in the  drilling of any
associated  wells.  The Company  aggressively  leverages its project control and
technical  expertise to potential industry partners thereby maximizing return on
investment while controlling  capital  exposure.  The Company does not intend to
operate the drilling of project wells,  but intends to retain the flexibility to
maintain a sufficient  working  interest in projects to enhance  leverage of its
technical resources and influence operator actions.

Significant Projects

     The Company's exploration  activities are currently focused on the southern
San Joaquin basin of California and in selective Rocky Mountain basins. Advanced
seismic  imaging of the structural  and  stratigraphic  complexities,  common to
these  regions,  provides the Company  with the ability to identify  significant
hydrocarbon  potential that could not be previously  detected with  conventional
2-D seismic  technology.  These projects offer multiple  drilling  opportunities
with individual wells having the potential  capability of encountering  multiple
reservoirs.

     The  following  provides a summary of the Company's  exploration  areas and
significant   projects.   While  aggressively   pursuing  specific   exploration
activities  in  each of the  following  areas,  the  Company  is  also  pursuing
additional  opportunities  in these  and other  core  areas  that  meet  certain
exploration  and  exploitation  criteria.  There is no assurance  that  drilling
opportunities  will be  identified in the current  project  portfolio or will be
successful if drilled.

Southern San Joaquin Basin, California

     The San  Joaquin  basin  of  California  has  proven  to be one of the most
productive  hydrocarbon  producing basins in the continental  United States.  To
date, the approximately  14,000 square mile basin has produced in excess of 12.7
billion barrels of oil equivalent,  and contains 25 fields  classified as giant,
with cumulative production of more than 100 MMBoe.

     The San Joaquin  contains  six of the 25 largest oil fields in the U.S. All
six of these fields were  discovered  between 1890 and 1911, a full decade prior
to the discovery of the first giant Texas oil field.  The basin  accounts for 34
percent of California's  actively  producing  fields,  yet produces more than 75
percent of the  state's  total oil and gas  production.  Most of the  production
within the basin is located  along the western and  southern end of Kern County.
Production figures for 1995 reported by the California Department of Oil and Gas
indicate aggregate total production of 230.9 MMBoe. Of this figure,  Kern County
accounts for over 95 percent of the oil production from the San Joaquin Basin.

                                       9

<PAGE>

     Exploration Opportunity. For the 100 plus years of its productive life, the
San  Joaquin  Basin  has been  dominated  by major oil  companies  and large fee
acreage holdings. As a result of these conditions,  the basin has generally been
under-explored by independent exploration and production companies,  groups that
usually bring advanced  technologies  to their  exploration  efforts.  The large
fields in the basin were all discovered on surface anticlines and produce mostly
heavy oil from depths of less than 5,000 feet. As a consequence, basin operators
have employed only those advanced  engineering  technologies related to enhanced
production  practices  including  steam  floods  and most  recently,  horizontal
drilling.

     The  basin  as a whole  has  suffered  from a lack of  applied  exploration
technology and deep drilling. Approximately one percent of the total basin wells
have been drilled to a depth greater than 12,000 feet, with only four out of the
1,500 wells  drilled  during  1995 being to a depth  greater  than 12,000  feet.
Additional 1995  statistics  indicate that the average well depth drilled during
the year was just slightly more than 2,000 feet.  Three-dimensional  seismic has
been employed only in limited quantity and in certain areas of the basin.

     Tenneco  and ARCO  shot a  limited  number  of 3-D  surveys  in the  mid-to
late-1980s on the  Bakersfield  Arch and to the south in the Yowlumne area. With
the ongoing  retrenchment  of majors in the basin,  independents  such as Torch,
Nuevo Energy,  Vintage  Petroleum,  HarCor Energy and Enron Oil & Gas have moved
into prominent  positions within the basin and are bringing  applied  geoscience
technologies  with them.  More 3-D  surveys  have been  acquired in the last two
years  than in all the  previous  years  combined.  This  trend is  expected  to
accelerate in the upcoming years as a renewed  emphasis is placed on 3-D seismic
exploitation and exploration.

     With limited  exploration in the San Joaquin basin since the "boom" days of
the early 1980s,  the Company believes that multiple  exploration  opportunities
available.  Deep basin targets,  both  structural and  stratigraphic  in nature,
remain  largely  untested with modern  seismic  technology and the drill bit. In
addition,  retrenchment  of the majors in the basin has  caused  many of them to
rethink their  policies  regarding  their large fee acreage  positions.  For the
first time in history,  many of these companies are opening up these fee acreage
positions  to outside  exploration  by  aggressive  independent  companies.  The
Company has identified and negotiated  exclusive access to three  high-potential
exploration plays in the southern San Joaquin basin.

     East Lost Hills.  The Company has identified  and is currently  undertaking
technical  analysis of a deep,  large untested  structure in the footwall of the
Lost Hills thrust.  This  structure  represents the largest  remaining  untested
structural  play in the  San  Joaquin  Valley,  and  may  contain  'world-class'
reserves  in  multiple  horizons.  This  prospect  lies  directly  east  of  and
structurally  below the existing Lost Hills field,  which has produced in excess
of 440 MMBoe from shallow pay zones in a large thrusted anticlinal feature.  The
Company  has entered  into a joint  venture  with  Armstrong  Oil and Gas,  Inc.
("Armstrong"),  a private  Denver-based  independent  exploration  company  that
specializes in  high-potential  structural plays, to develop and market the East
Lost Hills  prospect to the  industry.  The Company  holds a 30 percent  working
interest in the prospect, and jointly with Armstrong, owns or controls leases on
approximately 12,500 gross acres in the play.

                                       10

<PAGE>


     This unconventional deep prospect has significant  structural and reservoir
risk,  but the potential for large  reserves  makes it an attractive  play.  The
Company  and  Armstrong  have  analyzed  and  interpreted   over  350  miles  of
high-resolution  2-D seismic data to help refine the  structural  mapping of the
prospect.  Advanced pre-stack depth migration and interpretation clearly defines
the deep, sub-thrust  structure.  Two wells drilled to the east of the prospect,
in the mid-1970s,  proved the productivity potential of free oil (42 degree API)
and gas at depths below 17,000 feet. Ongoing source rock and maturation modeling
suggests  that the oil  generation  window exists at depths  between  15,000 and
17,000 feet, and that early migration of hydrocarbons  should preserve reservoir
quality at East Lost Hills. It is anticipated that the prospect will be marketed
to potential  industry partners during the fourth quarter of calendar 1997, with
a deep test well drilled in the first half of calendar of 1998.

     School Road/Southeast  Maricopa. The Company has signed a lease and seismic
option with Chevron  Production,  USA covering  exclusive  exploration rights on
approximately 22,000 acres of fee land in the Maricopa sub-basin at the southern
end of the San Joaquin  valley.  The  Maricopa  sub-basin  represents  a rapidly
subsiding  fore-arc  basin  containing  more than 30,000  feet of  post-Jurassic
sediments.  The  Maricopa  area is the  location  of the major  depo-center  for
deep-water turbidite deposition in the San Joaquin. The majority of oil produced
in the Maricopa sub-basin and on the Bakersfield arch to the north has come from
the Upper Miocene Stevens and older (Eocene) turbidite sands.

     Basin wide, the Stevens sands have produced in excess of 1,350 MMBbl,  with
mean field size being in excess of 70 MMBbl.  Stevens fields  produced more than
20 MMBbl in 1995. Stevens sand production is primarily from stratigraphic traps,
and ranges in depth from 7,500 feet to over 14,000  feet.  Reservoir  quality is
good with porosities ranging up to the mid 20 percent range. Oil gravities range
from 28 to 55 degree API with the lighter oil occurring in deeper  production to
the south.  With the  superior  reservoir  quality and light  hydrocarbons,  the
Stevens'  reservoirs  make an  attractive  exploration  target with  significant
potential reserves.

     Directly surrounding the Chevron acreage position, five fields produce from
Stevens  equivalent sands.  These fields include Landslide (14.9 MMBoe),  Paloma
(132.9 MMBoe),  Rio Viejo (7.9 MMBoe), San Emido Nose (21.1 MMBoe), and Yowlumne
(117.2 MMBoe). These fields all show stratigraphic trapping mechanisms including
updip sand pinch-outs,  lateral facies variation,  and differential  compaction.
These five fields produced over 2 MMBbls of light oil and associated natural gas
in 1995 (1995 Production Statistics,  California Department of Oil and Gas), and
have cumulative aggregate historical production in excess of 294 MMBoe. Per well
cumulative  production  ranges from a low of 690 MBbl to 2.1 MMBbl,  with a mean
value of 1.3 MMBbl.

     The objective of the School  Road/Southeast  Maricopa  exploration  program
will be to apply  advanced 3-D seismic  technology  and advanced  interpretation
methods,  within  a  detailed  sequence  stratigraphic  framework,  to  identify
stratigraphic   relationships  and  potential  traps.  Exploration  for  Stevens
stratigraphic traps with 2-D seismic data has proven to be largely  unsuccessful
due to the  lack  of  sufficient  line  density  to  resolve  the  stratigraphic
complexity  necessary to delineate  trapping  mechanisms.  The  discovery of the
Landslide   field  in  1985  resulted  from  the   application  of  3-D  seismic
exploration.  By  today's  standard,  that  data  suffered  from low  fold,  low
frequency,  short offset,  and generally poor imaging of detailed  stratigraphic
relationships. Advances in field acquisition, data processing, and visualization
methods since the mid-1980s  should allow much more detailed seismic analysis of
complex stratigraphic geometries and trapping mechanisms.

                                       11

<PAGE>

     The School  Road/Southeast  Maricopa  exploration  agreement  with  Chevron
involves a drill-to-earn option on more than 22,000 fee acres, a seismic license
to an existing (1992) 42-square-mile 3-D seismic survey (School Road), more than
200 miles of  proprietary  2-D seismic  data, a  proprietary  regional  sequence
stratigraphic  framework based on extensive,  detailed palynology analysis,  and
all available well file data.  This unique  database is anticipated to allow the
complete  integration  of  geology  and  modern  3-D  seismic  data to  identify
potential trapping opportunities within the stratigraphically  complex turbidite
systems present in the sub-basin. The drill-to-earn option entitles the Company,
for each well it drills, to earn a 100 percent working interest and a 75 percent
net revenue  interest in 1,280 acres in the  vicinity of the well  drilled.  The
wells are anticipated to range in depth from 9,000 to 16,000 feet.

     Preliminary regional mapping within this sequence  stratigraphic  framework
suggests the presence of multiple,  single- and  stacked-turbidite  leads within
the School  Road/Southeast  Maricopa area. The School Road 3-D seismic survey is
currently being re-processed to enhance the frequency content and seismic image.
It is anticipated that the first test well will be drilled at School Road in the
second quarter of calendar 1998. The Company holds 100 percent working  interest
(with net revenue  interests ranging from 75 to 87.5 percent) in the School Road
project.  At  Southeast  Maricopa,  the Company  anticipates  acquiring 40 to 60
square  miles of 3-D seismic data  beginning  in the fourth  quarter of calendar
1997,  with the first test well to be drilled  before the end of calendar  1998.
The  Company  holds 100 percent  working  interest  with net  revenue  interests
ranging  from 75 to 87.5  percent  at  Southeast  Maricopa,  but  will  look for
industry support in the shooting of the seismic data and drilling.

Denver Basin, Colorado and Nebraska

     The Denver  Basin  covers  approximately  60,000  square  miles in parts of
Colorado,  Nebraska  and  Wyoming.  The basin was the second  area in the United
States to produce oil from drilled wells, and has produced more than one billion
barrels of oil equivalent to date.  Published  statistical studies indicate that
an additional 150 MMBoe to 200 MMBoe of reserves remain to be discovered in this
mature basin from Cretaceous reservoirs in stratigraphic traps.

     During  the  past 10  years,  the  Denver  basin  has  been one of the most
actively  drilled  areas in the U.S. due to low  drilling  costs and low reserve
base risk.  Most of the  activity  has  centered  on  down-spaced  drilling  for
Codell/Niobrara  and  Sussex/Shannon/Parkman  targets in the Wattenburg  area, a
basin-center gas accumulation.

     As continued  drilling activity has resulted in decreasing  availability of
additional well locations, major Wattenburg operators (HS Resources,  Patina Oil
& Gas, Prima,  NARCO) are  experiencing  significant  retreat,  retrenchment and
consolidation of their operations.  Decreased  activity drilling for shallow gas
offers the Company an  opportunity  to acquire  land and/or  seismic  options to
explore  and  exploit  the  deeper oil prone 'D' and 'J'  sandstone  reservoirs.
Production from these Cretaceous reservoirs results from stratigraphic  trapping
in an incised  valley-fill  depositional  system.  Cretaceous  D-Sand and J-Sand
reservoirs  have been the  traditional  exploration  targets  within  the Denver
basin.  These  reservoirs  account for the majority of production to date in the
basin,  with  cumulative  production  from the D-Sand  totaling  386.6 MMBoe and
J-Sand production totaling 743.4 MMBoe. Modern sequence stratigraphic models and
strong  structural   control  on  deposition   indicate  that  these  traps  are
predictable both in geometry and orientation.

     While seismic data has been employed in the basin since the mid-1950s,  the
success of 2-D seismic  exploration has been limited by  stratigraphic  trapping
and the complex  nature of the reservoir  systems.  The emergence of 3-D seismic

                                       12

<PAGE>


technology  has created  exciting new  exploration  opportunities  in the basin.
While the handful of 3-D surveys acquired to date in the basin have proven to be
economic  successes,  the  downturn  in  basin-wide  activity  has  resulted  in
significant  underutilization  of  this  exploration  application.  The  Company
proposes  to  capitalize  on 3-D  seismic  exploration  opportunities  generated
internally,   and  through  opportunities  arising  from  the  recent,   ongoing
consolidation and retrenchment of major basin operators.

     Exploration Opportunity.  Historically, exploration in the Denver basin has
been  dominated  by  small,   low-cost   operators   employing   subsurface  and
"trend-ology" geological mapping methods. The lack of applied technology and the
stratigraphic  reservoir  complexity  in the basin has  resulted in low drilling
success  rates and overall poor  economic  results.  Expanded use of 3-D seismic
technology  to image  D-Sand and J-Sand  reservoir  should  enhance the economic
results and expedite the discovery  process.  To date,  less than 20 3-D seismic
surveys have been acquired  within the Denver basin.  Geoscientists  employed by
the  Company  have been  directly  involved  in eight of these  projects.  These
projects  have proven the economic  viability of 3-D seismic in  unraveling  the
stratigraphic  complexity and  productivity  of Cretaceous  incised  valley-fill
reservoirs and have resulted in the identification and production of significant
incremental reserves.

     Geological  and  geophysical  methodologies  developed  internally  by  the
Company allow for the identification and differentiation of significant economic
reserves from the background of marginal  producers  common in the Denver basin.
The application of these methodologies  result in the potential for discovery of
significant  reserves with high success rates and low finding costs. The Company
proposes to undertake a systematic exploration/exploitation effort in the Denver
basin. A regional  stratigraphic  framework for  Cretaceous  reservoirs has been
constructed  leading to the  identification  of numerous D-Sand and J-Sand leads
and  prospects.  Detailed  geologic  work is underway to refine  these leads and
prospects with regard to  prospectivity,  reserve potential and applicability of
3-D seismic  imaging.  The centerpiece of the proposed  exploration/exploitation
effort  will  be the  application  of  3-D  seismic  to  delineate  and  resolve
stratigraphic  traps.  Previous  experience  with 3-D seismic  technology in the
Denver  basin  has  provided  a  competitive  advantage  in risk  reduction  and
identification  of  prospective   drilling   locations.   The  Company  has  one
exploitation project underway in the basin, and is continuing efforts to develop
and define additional opportunities.

     Peoria Unit. The Company,  in partnership  with  Tyler-Rockies  Exploration
Ltd., has developed an opportunity to redevelop the 7,000-acre  Peoria  (J-Sand)
Unit   employing   applied   technology,   including   3-D   seismic   reservoir
characterization, geostatistical analysis and modeling and possible short-radius
lateral drilling.  Peoria, discovered in mid-1970, has produced 15.4 MMBoe (12.8
MMBbl and 15.86 Bcf) from a series of laterally  discontinuous  fluvial deposits
within an incised valley-fill sequence. The field has been developed on standard
80-acre spacing,  and exhibits strong  indications of significant  stratigraphic
and structural compartmentalization as evidenced by reservoir correlation across
the field, multiple fluid contacts,  reservoir performance,  lack of response to
waterflooding and production history.

     Previous  experience  with  reservoir  characterization  in the basin  with
valley-fill sequences suggests that stratigraphic compartmentalization occurs on
a scale of less  than 40  acres.  The  result  of this  stratigraphic  reservoir
compartmentalization  is the potential  identification of isolated,  untapped or
incompletely swept reservoir pods that are inadequately  sampled and produced at
standard 80-acre spacing. The Company has developed a plan to apply advanced 3-D
seismic  reservoir  characterization  to identify and map prospective  reservoir
compartments to be produced by selective infill and step-out drilling.  Compared
to the  production  performance  of  surrounding  fields with similar  reservoir

                                       13

<PAGE>

properties, Peoria has significantly underperformed. Cumulative field production
has  accounted  for a 22 percent  recovery of  calculated  original oil in place
(OOIP) of 57 MMBbl,  leaving an  estimated  10 percent of OOIP  remaining  to be
produced from selective infill and stepout drilling.

     The  Company  and   Tyler-Rockies   Exploration  have  completed   detailed
geological  and  engineering  reservoir  characterization,  and have  leased  or
optioned approximately 2000 additional prospective acres in addition to the 7000
acres held by  production  within  the Peoria  Unit.  The  Company is  currently
marketing  the Peoria  re-development  project to the  industry,  and expects to
acquire 24.5 square miles of 3D seismic data in early 1998. After acquisition of
seismic data,  the Company  retains a 10 percent  working  interest in all wells
drilled within the project area.

Big Horn Basin, Wyoming and Montana

     The Big Horn basin of Wyoming  and Montana is an  asymmetric  intermountain
basin of the Rocky Mountain foreland.  Initial production was established in the
basin in 1906 with the discovery of Garland field.  Cumulative  production  from
the basin is in excess of 2.4 BBO and 1.8 TCF of gas. The vast  majority of this
production has come from Paleozoic reservoirs trapped in basin-margin anticlinal
structures.  The majority of major field discoveries (greater than 90 percent of
field total and cumulative production) were made prior to 1950.

     Exploration  Opportunity.  While most of the early exploration in the basin
was the result of mapping of surface structures, recent exploration efforts have
focused  on  the  application  of  detailed   subsurface  mapping  to  delineate
structural  complexities not previously observed.  Because most of the producing
anticlines are structurally  uncomplicated at their surface  expression,  little
exploration  effort  has  historically  been  applied  to  defining   structural
compartmentalization  and secondary  culminations at depth. The advent of modern
geophysical technology,  including the application of 3-D seismic, has increased
the ability to resolve the structural complexity of producing intervals.  Recent
exploration and  exploitation  success at fields such as Gooseberry,  Manderson,
Golden Eagle,  and Enigma have resulted from this increased effort to understand
and delineate smaller-scaled secondary structural features.

     The Company sees multiple exploration and exploitation opportunities in the
basin to  identify  unrecognized  and  untested  structural  culminations  along
producing  trends.  Multiple  potentially  productive  horizons exist on many of
these structural  features creating attractive project economics and exploration
finding costs.  The Company has identified a number of individual  project focus
areas, and has secured a lease position,  covering approximately 2,080 gross and
2,080 net acres,  on its first  exploration  project in the basin.  There are no
immediate plans to commence drilling on this prospect.

     North Zimmerman Butte. The Company has developed an exploration lead, based
on subsurface geological analysis,  north and west of the Zimmerman Butte field.
Zimmerman Butte field was discovered in 1945 and has produced over 1.3 MMBO from
several reservoirs.  The productive area of the field covers less than 350 acres
on a surface  structural feature that extends along trend for approximately five
miles.  Subsurface  analysis has  indicated  the  possible  presence of multiple
subsidiary  structural  features  along  this  structural  trend.  Based  on the
production  potential of these  structural  leads,  the Company acquired a lease
covering 2080 acres in the August 1997 BLM lease sale.  The  leasehold  position
covers some but not all of the prospective  acreage along trend.  The Company is
currently  negotiating an exploration joint venture with another independent oil
and gas company that controls the remaining prospective acreage, and there is no
assurance that this will occur. The Company will undertake additional geological
and geophysical analysis before drilling a test well.

                                       14

<PAGE>


Geological and Geophysical Expertise

     The  Company's  oil and gas finding  capabilities  are  dependent  upon the
effective  application  of 3-D  seismic  imaging  technologies.  The Company has
assembled  a  technically   experienced   staff  of  in-house   geologists   and
geophysicists  with extensive  experience  involving the utilization of advanced
seismic data imaging and analysis,  and have  collectively  participated in more
than 100 3-D seismic projects in diverse geological trends.

     The Company  also has access,  both  in-house and through  consultants,  to
state-of-the-art  exploration  hardware and software  applications.  The Company
owns one  computer  aided  exploration  workstation  running  the full  suite of
GeoGraphix  geologic mapping and analysis  software.  Additionally,  the Company
owns  one   geophysical   workstation   employing  SeisX  2-D  and  3-D  seismic
interpretation  and  analysis  software.  Through a  strategic  alliance  with a
Denver-based   3-D  seismic   consulting   firm   (Interactive   Earth  Sciences
Corporation),  the  Company  has full  access  to  multiple  UNIX-based  seismic
interpretation workstations running the complete  Schlumberger/GeoQuest  seismic
analysis software package. Through this relationship,  the Company also has full
access  to GMA  seismic  modeling  software  as well as  Paradigm  Geophysical's
GeoDepth pre-stack depth migration software package.

Drilling Activities

     The Company  drilled no gross or net wells in 1996.  The  Company  does not
anticipate the drilling of any gross or net wells during the 1997 calendar year.
The Company does anticipate the drilling of an undetermined  number of gross and
net wells during 1998,  based on ongoing  exploration  efforts in California and
Colorado.

Production

     The Company  currently does not own any oil or gas production.  The Company
has no immediate plans to acquire or purchase any  production.  The Company also
has no booked reserves at the current time and any near-term  reserve  additions
would result from successful exploration efforts.

Acreage

     The Company currently  controls,  through lease,  farmout,  and option, the
following acreage position as detailed below:


        State                      Gross Acres               Net Acres
        -----                      -----------               ---------
        California                 34,123                      25,314
        Colorado                    9,000                         900
        Wyoming                     2,080                       2,080
        -------                  --------                    --------
        TOTAL                      45,203                      28,294

Competitive Advantage

     The Company  believes that the  cumulative  experience of its technical and
management  team,  with  past  exposure  to more than 100 3-D  seismic  projects
covering  approximately 1,500 square miles in diverse geologic trends throughout
the  world  results  in a  strong  competitive  advantage  relative  to  current
competition  in these focus  areas.  The Company  currently  has four  full-time
geoscientists  and a  landman  who are  specialists  in a variety  of  technical
aspects  and have  extensive  experience  and  expertise  in  numerous  geologic
regions.

                                       15
<PAGE>

     The   Company's   expertise  in  the   application   of  advanced   seismic
interpretation   methods  includes  many  of  the  "cutting-edge"   technologies
necessary  in  today's  competitive  exploration  environment.   These  advanced
techniques include 3-D seismic visualization, attribute analysis, geostatistical
modeling,  pre-stack  depth  migration,  and the  integration  of geological and
engineering  data in  support  of  reservoir  characterization.  These  advanced
seismic  interpretation  methods  allow the Company to leverage  its 3-D seismic
experience  and  expertise  with   significant   exploration  and   exploitation
opportunities.

     The Company  generates  the majority of its  exploration  and  exploitation
projects internally, and therefore is not dependent on third parties for project
flow. This results in full control of all pre-drill exploration phases including
the acreage position and application of seismic technology.

ITEM 3.  LEGAL PROCEEDINGS

     The  Company is not a party to any  pending  legal  proceeding  (nor is the
Company's  property  subject of a pending  legal  proceeding)  that the  Company
believes would have a material adverse effect on the Company.

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

     Not applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is traded in the over-the-counter market and has
been quoted on the OTC  Bulletin  Board since  November  1996.  Effective  as of
November  12,  1997,  the  Company's  trading  symbol was changed from "MRVI" to
"PYRX".

     The  table  below  presents  the range of high and low bid  prices  for the
Company's Common Stock during each of the quarters  indicated.  These quotations
were obtained  from brokers who make a market in the Company's  Common Stock and
reflect interdealer prices, without retail mark up, mark down or commission, and
may not represent actual transactions.

                                                   Bid Prices
                                                   ----------
       Quarter Ended                          High             Low
       -------------                          ----             ---

     November 30, 1996                        .125            .12
     February 28, 1997                        .0625           .0625
     May 30, 1997                             .1875           .125
     August 31, 1997                         1.6875           .25

     On November 10, 1997, the closing bid price for the Company's  Common Stock
was $1.50 per share.
                                       16

<PAGE>

Number Of Stockholders Of Record

     On October 6, 1997, the number of stockholders of record of the Company was
approximately 710.

Dividend Policy

     The Company has not declared or paid any cash dividends on its Common Stock
since its formation and does not presently  anticipate paying any cash dividends
on its Common Stock in the foreseeable  future. The Company currently intends to
retain any future earnings to finance the expansion and continued development of
its business.

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

     The  following is a discussion  of the  financial  condition and results of
operations of the Company as of and for the seven months (from  inception) ended
December 31, 1996 ("1996"),  and as of and for the eight months ended August 31,
1997 ("1997").  This discussion should be read in conjunction with the Company's
Financial  Statements,  the notes related  thereto and the other  financial data
included elsewhere in this Annual Report on Form 10-KSB.

Overview

     The  Company  is an  independent  oil and  gas  exploration  company  whose
strategic  focus is the  application  of advanced  seismic  imaging and computer
aided   exploration   technologies  in  the  systematic  search  for  commercial
hydrocarbon  reserves,  primarily  in the onshore  western  United  States.  The
Company  attempts to leverage its technical  experience  and expertise  with 3-D
seismic to identify  exploration  and  exploitation  projects  with  significant
potential  economic  return.  The  Company  intends to  participate  in selected
exploration  projects as a non-operating,  working interest owner,  sharing both
risk and rewards with its partners.  The Company has and will continue to pursue
exploration  opportunities  in regions  where the Company  believes  significant
opportunity  for  discovery  of oil and gas exists.  By reducing  drilling  risk
through 3-D seismic technology, the Company seeks to improve the expected return
on investment in its oil and gas exploration projects.

     During 1996, the Company  commenced its business  operations and identified
specific initial  projects for focus. The Company  undertook no drilling and had
no revenues from oil and gas production during 1996.

     During 1997, the Company incurred approximately $311,000 for acquisition of
acreage and exclusive rights to undertake exploration activities with respect to
its projects. The Company undertook no drilling and had no revenues from oil and
gas  production  during  1997.  To finance its  operations  and obtain funds for
additional  capital  expenditures  relating  to its  exploration  projects,  the
Company sold equity  securities  through  private  placement  offerings  raising
approximately $1,743,000 net to the Company.

     The Company currently  anticipates that it will participate in the drilling
of one to three gross exploratory wells during its fiscal year ending August 31,
1998 ("1998"),  although the number of wells may increase as additional projects
are added to the Company's  portfolio.  However,  there can be no assurance that
any such wells will be drilled  and if drilled  that any of these  wells will be
successful.  See "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES-Start-Up
Nature Of The Company's Oil And Gas Business; Absence Of Profits."

                                       17

<PAGE>

     The Company's  future  financial  results will depend  primarily on (i) the
Company's ability to discover  commercial  quantities of hydrocarbons;  (ii) the
market price for oil and gas; (iii) the Company's  ability to continue to source
and screen potential projects; and (iv) the Company's ability to fully implement
its  exploration  and  development  program.  There can be no assurance that the
Company will be  successful  in any of these  respects or that the prices of oil
and gas  prevailing  at the time of production  will be at a level  allowing for
profitable  production.  See  "ITEMS  1  AND  2.  DESCRIPTION  OF  BUSINESS  AND
PROPERTIES-Start-Up  Nature of The Company's  Oil And Gas  Business;  Absence Of
Profits," "-  Substantial  Capital  Requirements  And Liquidity" and "- Risks Of
Exploratory Drilling Activities."

     In connection  with the  implementation  of its exploration and development
program,  the Company intends to use a portion of its existing cash resources to
expand its technical and support  staff.  As a result,  the Company  anticipates
that its general and administrative expenses will increase in 1998. Further, the
Company anticipates  incurring  additional legal,  administrative and accounting
costs in future periods as a result of being a public company.

Results of Operations

     Inception (May 31, 1996) through  December 31, 1996 ("1996")  compared with
the eight months ended August 31, 1997 ("1997")

     Oil and Gas Revenues and Expenses.  At August 31, 1997 (and at November 10,
1997),  the Company did not own any producing or proved oil and gas  properties.
No oil and gas revenues or expenses have been recorded by the Company.

     Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas  properties in 1996 or 1997. At August 31, 1997 (and at
November 10, 1997),  the Company did not own any proved  reserves and has no oil
or gas production.  The Company recorded nominal depreciation expense associated
with  capitalized  office  furniture  and  equipment  during 1996 and 1997.  The
Company also recorded nominal  amortization expense associated with organization
costs during 1996 and 1997.

     General  and  Administrative  Expense.  The  Company  incurred  $7,000  and
$101,000  in  general  and   administrative   expenses  during  1996  and  1997,
respectively.  The increase  results from incurring  costs  associated  with the
hiring of technical personnel, leasing of office space, and legal and accounting
and other costs  associated with  administering  and pursuing the development of
the Company's exploration and exploitation plan.

     Consulting  Fee  Revenue.  The Company  generated  $37,000 and $80,000 from
consulting fees in 1996 and 1997, respectively. These revenues are considered to
be ancillary to the  Company's  focus of  generating  revenues  from oil and gas
production.  These revenues may decrease or cease  completely at any time in the
future.

Liquidity and Capital Resources

     At August  31,  1997,  the  Company  had  working  capital in the amount of
$1,376,000.  To  date,  the  Company  has  funded  its oil  and gas  exploration
activities  principally  through  cash  provided  by  the  sale  of  its  equity
securities.

                                       18

<PAGE>


     Cash used in investing  activities  during 1997 totaled  $327,000.  Of this
amount,  $298,000  was  used  in  conjunction  with  the  Company's  oil and gas
exploration and exploitation plan, and $29,000 was used for office furniture and
equipment.

     The Company has no outstanding  long-term debt and has not entered into any
commodity swap arrangements or hedging transactions.  Although it has no current
plan to do so,  it may  incur  long  term  debt in the  future  in order to fund
development  of oil and gas  producing  properties,  and it may also  enter into
commodity swap and/or hedging transactions in the future in conjunction with oil
and gas  production.  Nevertheless,  there can be no assurance  that the Company
will  ever  have oil and gas  production.  See  "ITEMS 1 AND 2.  DESCRIPTION  OF
BUSINESS AND PROPERTIES- Risks Of Exploratory Drilling Activities".

     The future development of the Company's  business will require  substantial
capital  expenditures.  If all the outstanding Warrants are exercised,  of which
there is no assurance, the Company would receive approximately  $5,651,100,  net
of sales  commissions,  from the  exercise of  outstanding  warrants  during the
fiscal year ending  August 31, 1998.  To the extent that these  warrants  expire
without being  exercised,  the Company will be limited or  completely  unable to
fund its exploration and exploitation  activities until additional  financing is
available.  There can be no assurance  such  financing  would be available.  See
"ITEMS 1 AND 2.  DESCRIPTION  OF  BUSINESS  AND  PROPERTIES-Substantial  Capital
Requirements  And  Liquidity".  To the extent  sufficient  funding is available,
capital expenditures for the 12 month period ending August 31, 1998 are expected
to be up to $4,500,000.

ITEM 7.  FINANCIAL STATEMENTS

     The Financial  Statements that constitute Item 7 are attached at the end of
this Annual Report on Form 10-KSB. An index to these Financial Statements is set
forth below:

                                                                      Page
                                                                      ----

         Independent Auditor's Report                                  F-2

         Balance Sheets
             December 31, 1996 and August 31, 1997                     F-3

         Statements of Operations
             Period from Inception (May 31, 1996) to
             December 31, 1996 and Eight Months Ended
             August 31, 1997                                           F-4

         Statements of Members'/Stockholders' Equity
             Period from Inception (May 31, 1996) to
             December 31, 1996 and Eight Months Ended
             August 31, 1997                                            F-5

         Statements of Cash Flows
             Period from Inception (May 31, 1996) to
             December 31, 1996 and Eight Months Ended
             August 31, 1997                                        F-6 - F-7

         Notes To Financial Statements                             F-8 - F-14

                                       19

<PAGE>


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

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

     Not applicable.

                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     The  directors  and  executive  officers of the Company,  their  respective
positions and ages, and the year in which each director was first  elected,  are
set forth in the following table.  Each director has been elected to hold office
until the next annual meeting of stockholders and thereafter until his successor
is elected and has qualified.  Additional  information  concerning each of these
individuals follows the table.

       Name              Age      Position with the Company     Director Since
       ----              ---      -------------------------     --------------

D. Scott Singdahlsen      39      Chief Executive Officer,            1997
                                  President, and Chairman
                                  of the Board

Robert B. Suydam          59      Secretary                            ---

Andrew P. Calerich        33      Chief Financial Officer              ---

Gregory B. Barnett        36      Director                            1997

Keith F. Carney           41      Director                            1997


     D. Scott Singdahlsen has served as President,  Chief Executive Officer, and
Chairman  of the  Board  of the  Company  since  August  1997.  Mr.  Singdahlsen
co-founded  PYR  Energy,  LLC  in  1996,  and  served  as  General  Manager  and
Exploration  Coordinator.  In 1992, Mr. Singdahlsen co-founded Interactive Earth
Sciences  Corporation,  a 3-D seismic management and  interpretation  consulting
firm in  Denver,  where he served as  officer  and lead  seismic  interpretation
specialist  from  1992 to 1996.  Prior to  forming  Interactive  Earth  Sciences
Corporation, Mr. Singdahlsen was employed as a Development Geologist for Chevron
USA in the Rocky Mountain region.  At Chevron,  Mr.  Singdahlsen was involved in
3-D seismic reservoir characterization projects and geostatistical analysis. Mr.
Singdahlsen started his career at UNOCAL as an Exploration Geologist in Midland,
Texas. Mr. Singdahlsen earned a B.A. in Geology from Hamilton College and a M.S.
in Structural Geology from Montana State University.

     Robert B. Suydam has served as Secretary of the Company  since August 1997.
Mr. Suydam  co-founded  PYR Energy,  LLC in 1996 and served as Chief  Geologist.
Since 1985, Mr. Suydam served as exploration coordinator for Snyder Oil, Gerrity
Oil, and Energy Minerals in Denver. Prior to this employment,  Mr. Suydam served
as Vice  President of Exploration  for National Oil Company,  and as Exploration
Manager for  Hamilton  Brothers Oil Company in Denver and  Calgary.  Mr.  Suydam
started his career as an exploration Geologist at Texaco in Denver, Calgary, and
New Orleans. Mr. Suydam earned a B.S. and M.S. in Geology from the University of
Wyoming.

                                       20

<PAGE>


     Andrew P.  Calerich  has served as Chief  Financial  Officer of the Company
since August 1997.  From 1993 to 1997,  Mr.  Calerich was a business  consultant
specializing  in accounting  for private oil and gas  producers in Denver.  From
1990 to 1993,  Mr.  Calerich was employed as corporate  Controller  at Tipperary
Corporation,  a public oil and gas  company in Denver.  Mr.  Calerich  began his
professional  career  in  public  accounting  in the tax  department  at  Arthur
Andersen & Company.  Mr.  Calerich is a Certified  Public  Accountant and earned
B.S. degrees in both Accounting and Business Administration at Regis College.

     Gregory B.  Barnett has served as a Director of the  Company  since  August
1997. Mr. Barnett is President of EnerCOM, Inc., a Denver-based  consulting firm
specializing in financial  public  relations for a variety of private and public
petroleum  companies.  From 1993 to 1994,  Mr.  Barnett  served as  Director  of
Investor Relations at Gerrity Oil Corporation in Denver.  From 1988 to 1993, Mr.
Barnett  was  employed  as  Director  of  Investor  Relations  at  Maxus  Energy
Corporation  in Dallas.  Mr.  Barnett is past  President  of the Rocky  Mountain
chapter  of the  Petroleum  Investor  Relations  Association,  a  member  of the
National  Association  of Petroleum  Investment  Analysts and National  Investor
Relations Institute. Mr. Barnett received a B.B.A. degree from the University of
Texas-Arlington.

     Keith F. Carney has served as a Director of the Company  since August 1997.
Mr. Carney is Chief Financial Officer of Cheniere Energy,  Inc., a Houston based
public  oil and gas  exploration  company.  From 1992 to 1996,  Mr.  Carney  was
employed  as a  Securities  Analyst  in the oil  and gas  exploration/production
sector with Smith  Barney,  Inc. Mr.  Carney began his career as an  exploration
Geologist  at Shell Oil after  earning  B.S.  and M.S.  degrees in Geology  from
Lehigh  University.  Mr.  Carney also received a M.B.A.  from the  University of
Denver in 1992.

Other Key Employees - Other key employees of the Company include the following:

     Kenneth R. Berry,  Jr. has served as land  manager  for the  Company  since
October 1997.  Mr. Berry is  responsible  for the  management of all land issues
including  leasing and  permitting.  Mr. Berry has 23 years of  experience as an
independent  landman.  Prior to joining the  Company,  Mr.  Berry  served as the
managing land consultant for Swift Energy Company in the Rocky Mountain  region.
Mr. Berry began his career in the land department with Tenneco Oil Company after
earning a B.A.  degree in Petroleum Land Management at the University of Texas -
Austin.

     Richard A. Castle has served as Senior Explorationist for the Company since
August  1997,  and is  currently  exploration  coordinator  for the San  Joaquin
project. Mr. Castle has 26 years of technical and management  experience.  Prior
to  joining  the  Company,   Mr.  Castle  was  Project  Geologist  for  WaveTech
Geophysical, a Denver based 3-D seismic service provider. From 1994 to 1996, Mr.
Castle was employed as a Senior  Geologist  for Ampolex,  USA in Denver where he
served  as new  ventures  coordinator.  From  1989 to  1994,  Mr.  Castle  was a
geological  consultant in Denver.  From 1974 to 1989, Mr. Castle was employed by
Union Pacific  Resources  Corporation  where he served in various  technical and
management roles including  Regional  Geologist and Exploration  Manager for the
Pacific  Division.  Mr.  Castle began his career at Shell Oil in Houston and Los
Angeles after earning a B.S. degree in Geology at the University of Illinois and
a M.S. degree in Geology from the Louisiana State University.

                                       21

<PAGE>

     Lisa A. Mallin has served as  Geologist-CAEX  for the Company  since August
1997.  Ms. Mallin is responsible  for all aspects of computer aided  exploration
including mapping and geophysical  workstation system  administration.  Prior to
joining the Company,  Ms. Mallin served in various  exploration  and  production
capacities with Amoco,  Snyder Oil, Intera Information  Technologies,  Nicor Oil
and Gas,  Louisiana Land and Exploration,  and Amerada Hess. Ms. Mallin earned a
B.A. degree in Geology from the University of Northern Colorado.

Committees Of The Board Of Directors

     The  Board  of  Directors  currently  has  a  Compensation  Committee.  The
Compensation  Committee  has the  authority  to  establish  policies  concerning
compensation   and  employee   benefits  for  employees  of  the  Company.   The
Compensation   Committee  reviews  and  makes  recommendations   concerning  the
Company's  compensation  policies and the  implementation  of those policies and
determines  compensation and benefits for executive  officers.  The Compensation
Committee currently consists of Messrs. Barnett and Carney.

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

     The following table sets forth in summary form the compensation paid to the
Company's  current and former  President  during the period  from the  Company's
inception  on May 31,  1996 until its fiscal  year ended  August 31,  1996,  and
during the fiscal  year  ended  August 31,  1997.  No  employee  of the  Company
received total salary and bonus  exceeding  $100,000 during either of the fiscal
years ended August 31, 1996 and 1997.
<TABLE>
<CAPTION>

                                           Annual Compensation
------------------------------------------------------------------------------------------------------------------
Name and               Fiscal                                           Long-Term                 Other Annual
Principal Position     Year Ended     Salary ($)(1)(2)  Bonus ($)       Compensation Options      Compensation ($)
------------------     ----------     ----------------  ---------       --------------------      ----------------

<S>                    <C>            <C>                 <C>             <C>                       <C>
D. Scott Singdahlsen,  1997           $10,250            -0-             -0-                       -0-
President              1996           $ -0-              -0-             -0-                       -0-

Buddy Young,           1997           $ -0-              -0-             -0-                      15,800 (3)
Former President       1996           $ -0-              -0-             -0-                      14,000 (3)
</TABLE>

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

(1)  The dollar value of base salary (cash and non-cash) received.
(2)  Includes $4,000 paid as consulting  fees to Mr.  Singdahlsen by PYR Energy,
     LLC during the period from January 1, 1997 through August 6, 1997.
(3)  The amount shown represents a consulting fee paid to Mr. Young.

The 1997 Stock Option Plan

     In  August  1997,  the  Board of  Directors  of the  Company  approved  the
Company's  1997 Stock  Option  Plan (the "1997  Plan")  which  subsequently  was
approved  by the  Company's  stockholders  effective  as of November  12,  1997.
Pursuant  to the 1997  Plan,  the  Company  may grant  options  to  purchase  an
aggregate of 1,000,000  shares of the Company's  Common Stock to key  employees,
directors,  and other persons who have or are contributing to the success of the
Company.  The options granted  pursuant to the 1997 Plan may be either incentive
options   qualifying   for   beneficial  tax  treatment  for  the  recipient  or
nonqualified  options.  The  1997  Plan  may be  administered  by the  Board  of
Directors or by an option  committee  that  determines  the terms of the options
subject to the  requirements of the 1997 Plan. At November 10, 1997,  options to
purchase 246,000 shares were outstanding under the 1997 Plan.

                                       22

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of November 10, 1997, there were 9,154,804 shares of the Company's $.001
par value common stock (the "Common  Stock")  outstanding.  The following  table
sets forth  certain  information  as of November 10,  1997,  with respect to the
beneficial  ownership of the  Company's  Common Stock by each  director,  by all
executive  officers and directors as a group,  and by each other person known by
the  Company  to be the  beneficial  owner  of more  than  five  percent  of the
Company's Common Stock:


Name and Address of               Number of Shares            Percentage of
Beneficial Owner                  Beneficially Owned (1)      Shares Outstanding
----------------                  ----------------------      ------------------

D. Scott Singdahlsen              2,000,000                        21.8%
1675 Broadway, Suite 1150
Denver, Colorado 80202

Robert B. Suydam                  1,300,000(2)                     14.2%
1675 Broadway, Suite 1150
Denver, Colorado 80202

Gregory B. Barnett                200,000                          2.2%
1675 Broadway, Suite 1150
Denver, Colorado 80202

Keith F. Carney                   200,000 (3)                      2.2%
915 Bay Oaks Road
Houston, Texas 77008

All Officers and Directors
 as a group                       3,700,000                       40.0%
 (five persons)

PinOak Inc.                       1,300,000 (2)                   14.2%
5037 South Oak Court
Littleton, Colorado 80127

Greyledge LLC                     889,066 (3)                      9.3%
237 Park Avenue , 21st Floor
New York, New York 10017

BSR Investments                   880,000 (3)                      9.2%
97 Avenue Henri Martin
Paris, France 75016

Bernard Young and Rebecca Young   558,138 (4)                      6.1%
as trustees for the Young
Family Trustdated October 1992
5269 Amestoy Avenue
Encino, California 91316

Gail D. Forster                   501,600 (3)                      5.3%
237 Park Avenue
New York, New York 10017


                                       23

<PAGE>

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

(1)  "Beneficial  ownership" is defined in the  regulations  promulgated  by the
     U.S. Securities and Exchange  Commission as having or sharing,  directly or
     indirectly (i) voting power,  which includes the power to vote or to direct
     the voting, or (ii) investment  power,  which includes the power to dispose
     or to direct the  disposition,  of shares of the common stock of an issuer.
     Unless  otherwise  indicated,  the  beneficial  owner has sole  voting  and
     investment power.
(2)  The  shares  shown for Mr.  Suydam  are  owned of  record  by  PinOak  Inc.
     ("PinOak").  These shares are included twice in the table.  They are listed
     as being held  beneficially  by both  PinOak and by Mr.  Suydam.  PinOak is
     owned by Mr. Suydam's wife and Mr. Suydam is the President of PinOak.
(3)  The number of shares  indicated  includes  the  following  number of shares
     underlying  warrants that currently are exercisable and held by each of the
     following persons:  Keith F. Carney,  100,000;  Greyledge LLC, 444,533; BSR
     Investments, 440,000; and Gail D. Forster, 250,800.
(4)  The number of shares  indicated does not include 30,000 shares owned by Mr.
     and Mrs. Young and an aggregate of 16,917 additional shares held by the son
     and daughter of Mr. and Mrs.  Young and their spouses for themselves and as
     custodians for their children.  Pursuant to Rule 16a-1(a)(4),  Mr. and Mrs.
     Young  disclaim  beneficial  ownership of shares held by their children and
     the spouses of their children.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Acquisition Of PYR Energy, LLC
------------------------------

     The Company  acquired  all the  ownership  interest  in PYR Energy,  LLC on
August 6, 1997 in exchange for 4,000,000  shares of the Company's  Common Stock.
Mr. Singdahlsen  received 2,000,000 shares of the Company's Common Stock in that
transaction  in  exchange  for the 50 percent of PYR  Energy,  LLC that he owned
immediately  prior to the transaction.  PinOak, a company of which Mr. Suydam is
the  President  and  whose  sole  shareholder  is Mr.  Suydam's  wife,  received
1,300,000  shares of the Company's  Common Stock in that transaction in exchange
for PinOak's ownership of 32.5 percent of the ownership interests in PYR Energy,
LLC immediately  prior to the transaction.  In connection with that transaction,
the Company agreed to appoint each of Messrs. Singdahlsen, Carney and Barnett to
constitute all the members of the Company's Board Of Directors.

Loan To PYR Energy, LLC
-----------------------

     In June 1997, PYR Energy,  LLC borrowed  $275,000 from the Company in order
to fund certain of PYR Energy,  LLC's obligations  pursuant to PYR Energy, LLC's
lease  and  seismic  option  in the  San  Joaquin  basin.  See  "ITEMS  1 AND 2.
DESCRIPTION OF BUSINESS AND PROPERTIES".  PYR Energy, LLC secured that loan with
a pledge of PYR Energy, LLC's interest in the lease and seismic option. The loan
accrues  interest at a rate of eight  percent per annum.  Interest is payable at
the end of each  calendar  quarter.  The loan was  effectively  eliminated  upon
consummation of the Company's acquisition of PYR Energy, LLC.

                                       24

<PAGE>

Sale Of Assets To former Director And Officer
---------------------------------------------

     Effective as of August 6, 1997, the Company sold all the assets not related
to  the  Company's  business  of  oil  and  gas  exploration,   development  and
consulting,  and not  related  to the  Company's  principal  office  in  Denver,
Colorado to Buddy  Young,  a principal  stockholder  and a former  director  and
officer of the Company. The purchase price for the assets was $32,000, which was
paid in the form of a release  from Mr.  Young to the  Company of the  Company's
obligation to repay the $32,000 it owed to Mr. Young. The Company's  approximate
$32,000  obligation  to Mr. Young had been  incurred  through  advances from Mr.
Young to the Company for working capital purposes.  At August 6, 1997 there were
outstanding  $17,852 of accounts receivable related to the assets that Mr. Young
obtained the right to receive. Mr. Young also assumed all liabilities related to
the assets.  The Company also  assigned to Mr. Young the lease for the Company's
office in Encino,  California,  and Mr. Young assumed the Company's  obligations
under the lease. The Company obtained a release from the landlord for additional
obligations under the lease.

     In addition to the accounts receivable  described above, the assets sold to
Mr. Young  consisted  primarily of the Company's  interests in three  television
programs,  "Heartstoppers . . . At The Movies",  a two-hour  television  program
hosted by George  Hamilton,  "Christmas  At The Movies",  a one-hour  television
program  hosted  by  Gene  Kelly,  and  "It's  A  Wonderful  Life  - A  Personal
Remembrance",  an  approximately  15-minute  television  program hosted by Frank
Capra, Jr., and the office furniture and supplies in the Company's former office
in Encino,  California.  The television programs previously had been held by the
Company for  licensing to various  television  and cable  television  operators.
During the year ended August 31, 1997,  the Company  received  licensing fees of
$15,216 for the television programming assets sold to Mr. Young. The low revenue
amount was mainly due to the programs'  previously  having been licensed in most
major  territories.  Because,  as a result of the Company's  acquisition  of PYR
Energy,  LLC,  the Company  determined  to focus its  activities  on oil and gas
exploration,  development  and consulting and to locate its principal  office in
Denver,  Colorado,  the Company  determined that it was in its best interests to
sell the assets of the  Company  that were not related to this  business  and to
assign its office lease in Encino, California.

Placement Agent of Warrants And Significant Stockholder Under Common Control
----------------------------------------------------------------------------

     In connection with the exercise of the Warrants,  the Company has agreed to
pay  Stonington  Partners  Group  ("Stonington"),  which served as the placement
agent for the Warrants,  an amount equal to eight percent of the exercise  price
paid in connection with the exercise of any of the Warrants.  Stonington will be
entitled  to  receive  an  aggregate  of  $491,400  if all of the  Warrants  are
exercised.  Greyledge  LLC, is 100 percent  owned by an  individual  who owns 50
percent of, and is a managing  director of,  Stonington.  See "ITEM 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT".

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1) and (a)(2)  Financial Statements And Financial Statement Schedules

         See "ITEM 7. FINANCIAL STATEMENTS" on page 19.

                                       25

<PAGE>

(a)(3) Exhibits.
       ---------

                                  Exhibit Index

Number            Description

3.1               Certificate Of Incorporation filed with the Delaware Secretary
                  Of State on March 27, 1996 (1)

3.2               Certificate Of Amendment to the Certificate Of Incorporation 
                  effective as of November 12, 1997 filed with the Delaware 
                  Secretary Of State.

3.3               Bylaws (1)

4.1               Specimen Common Stock Certificate (4)

4.2               Specimen Class A Warrant (4)

4.3               Specimen Class B Warrant (4)

10.1              Asset Transfer, Assignment and Assumption Agreement dated
                  April 16, 1996 between the Registrant and Bexy Communications,
                  Inc. (2)

10.2              Form of Purchase And Sale Agreement dated as of July 31, 1997
                  between the Registrant and a member of PYR Energy, LLC (4)

10.3              Purchase And Sale Agreement effective as of August 6, 1997 
                  between the Registrant and Buddy Young (4)

10.4              1997 Stock Option Plan (3)

27.1              Financial Data Schedule (4)

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

(1)  Incorporated by reference from the Registrant's  Registration  Statement on
     Form 10-SB filed with the  Securities  And Exchange  Commission  ("SEC") on
     June 18, 1996, File No. 0-20879.

(2)  Incorporated  by  reference  from  the  Registrant's  Amendment  No.  1  to
     Registration  Statement  and Form 10-SB filed with the SEC on July 3, 1996,
     File No. 0-20879.

(3)  Incorporated  by reference from the  Registrant's  Preliminary  Information
     Statement filed with the SEC on October 8, 1997.

(4)  Incorporated by reference from the Registrant's  Registration  Statement on
     Form SB-2 filed with the SEC on October 24, 1997, File No. 333-38665.

(b) Reports On Form 8-K.
    --------------------

     During the fourth quarter of the fiscal year ended August 31, 1997, the
Registrant  filed (i) three Current  Reports on Form 8-K  reporting  events that
occurred on June 3, 1997, August 6, 1997, and August 7, 1997, respectively;  and
(ii) one amended  Current Report on Form 8-K/A  reporting an event that occurred
August 6, 1997.


                                       26


<PAGE>




                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)






                                     F - 1


<PAGE>


                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)




                          INDEPENDENT AUDITOR'S REPORT


To The Board of Directors and Stockholders
PYR ENERGY CORPORATION
(Formerly Mar Ventures Inc.)

We have  audited  the  accompanying  balance  sheets of PYR  Energy  Corporation
(formerly Mar Ventures  Inc.) (a  development  stage company) as of December 31,
1996  and  August  31,  1997  and  the   related   statements   of   operations,
members'/stockholders'  equity and cash flows for the period from inception (May
31,  1996) to December  31, 1996 and for the eight months ended August 31, 1997.
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  PYR  Energy  Corporation
(formerly  Mar Ventures  Inc.) as of December 31, 1996 and August 31, 1997,  and
the results of its  operations  and its cash flows for the period from inception
(May 31,  1996) to December  31, 1996 and for the eight  months ended August 31,
1997 in conformity with generally accepted accounting principles.


                                            WHEELER WASOFF, P.C.


Denver, Colorado
September 23, 1997
(except for Note 8, as to which
the date is November 12, 1997)

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

                                      F - 2
                                                     

<PAGE>

                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                                 BALANCE SHEETS

                                     ASSETS
                                                     December 31,    August 31,
                                                        1996           1997

CURRENT ASSETS
  Cash                                               $    11,536    $ 1,432,281
  Accounts Receivable                                        527         10,000
  Prepaid expenses                                          --            4,196
                                                     -----------    -----------

    Total Current Assets                                  12,063      1,446,477
                                                     -----------    -----------

PROPERTY AND EQUIPMENT, at cost
  Furniture and equipment, net                              --           28,540
  Undeveloped oil and gas prospects                         --          311,007
                                                     -----------    -----------

                                                            --          339,547
                                                     -----------    -----------

OTHER ASSETS, net                                            427          3,642
                                                     -----------    -----------

                                                     $    12,490    $ 1,789,666
                                                     ===========    ===========

                 LIABILITIES AND MEMBERS'/STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                   $       527    $    60,064
  Accrued payroll taxes                                     --           10,184
                                                     -----------    -----------

    Total Current Liabilities                                527         70,248
                                                     -----------    -----------

COMMITMENTS AND CONTINGENCIES (Note 5)

MEMBERS'/STOCKHOLDERS' EQUITY
  Members equity                                          11,963           --
  Common stock, $.001 par value
        Authorized 30,000,000 shares
        Issued and outstanding
         9,154,804 shares                                   --            9,155
  Capital in excess of par value                            --        1,768,088
  Deficit accumulated during the
    development stage                                       --          (57,825)
                                                     -----------    -----------

                                                          11,963      1,719,418
                                                     -----------    -----------

                                                     $    12,490    $ 1,789,666
                                                     ===========    ===========

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

                                      F - 3

<PAGE>
<TABLE>
<CAPTION>

                                                 PYR ENERGY CORPORATION
                                               (Formerly Mar Ventures Inc.)
                                              (A Development Stage Company)
                                                 STATEMENTS OF OPERATIONS


                                                Inception             Eight Months           Cumulative
                                              (May 31, 1996)            Ended                   from
                                              to December 31,          August 31,            Inception to
                                                  1996                    1997              August 31, 1997

REVENUES
<S>                                           <C>                     <C>                     <C>        
  Consulting fees                             $    37,528             $    80,000             $   117,528
  Interest                                           --                     5,596                   5,596
                                              -----------             -----------             -----------

                                                   37,528                  85,596                 123,124
                                              -----------             -----------             -----------

OPERATING EXPENSES
  General and administrative                       18,518                 125,161                 143,679
  Interest                                           --                       351                     351
  Depreciation and amortization                        47                   1,004                   1,051
                                              -----------             -----------             -----------

                                                   18,565                 126,516                 145,081
                                              -----------             -----------             -----------

                                                   18,963                 (40,920)                (21,957)

INCOME APPLICABLE TO PREDECESSOR LLC
        (Note 1)                                  (18,963)                (16,905)                (35,868)
                                              -----------             -----------             -----------

NET (LOSS)                                    $      --               $   (57,825)            $   (57,825)
                                              ===========             ===========             ===========

PRO FORMA NET INCOME (LOSS) PER
   COMMON SHARE (NOTE 2)                      $      .005             $     (.009)            $     (.005)
                                              ===========             ===========             ===========

WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING (NOTE 2)                  4,000,000               4,644,351               4,343,654
                                              ===========             ===========             ===========



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

                                                     F - 4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                      PYR ENERGY CORPORATION
                                                   (Formerly Mar Ventures Inc.)
                                                  (A Development Stage Company)
                                           STATEMENTS OF MEMBERS'/STOCKHOLDERS' EQUITY
                                    PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996
                                              AND EIGHT MONTHS ENDED AUGUST 31, 1997
                                                                                                                          Deficit
                                                                                                                        Accumulated
                                                                 Members'           Common Stock         Capital in      During the
                                                                 Equity         ----------------------    Excess of     Development
                                                                                Shares       Amount       Par Value       Stage


<S>                                                           <C>            <C>           <C>            <C>           <C>    
Inception, May 31, 1996                                       $      --             --     $      --     $      --      $      --

Initial member contributions - cash                                 5,000           --            --            --             --
Member contribution - services                                     12,000           --            --            --             --
Distributions to members                                          (24,000)          --            --            --             --
Net income                                                         18,963           --            --            --             --
                                                              -----------    -----------   -----------   -----------    -----------

Balance, December 31, 1996                                         11,963           --            --            --             --

Member contributions - cash                                        23,000           --            --            --             --
Member contribution - services                                     24,000           --            --            --             --
Distributions to members                                          (42,000)          --            --            --             --
Net income - January 1, 1997 to August 5, 1997                     16,905
           --            --            --             --
Issuance of common stock to members of PYR
    Energy, LLC upon merger ($.008 per share)                     (33,868)     4,000,000         4,000        29,868           --
Recapitalization of shares issued by Mar prior
    to merger                                                        --        1,059,804         1,060          (724)          --
Sale of common stock pursuant to private placement
    at $.25 per share                                                --        2,095,000         2,095       521,655           --
Sale of common stock pursuant to private placement
    at $.75 per share                                                --        2,000,000         2,000     1,498,000           --
Costs of private placement offerings                                 --             --            --        (280,711)
Net (loss) August 6, 1997 to August 31, 1997                         --             --            --            --          (57,825)
                                                              -----------    -----------   -----------   -----------    -----------

Balance, August 31, 1997                                      $      --        9,154,804   $     9,155   $ 1,768,088    $   (57,825)
                                                              ===========    ===========   ===========   ===========    ===========



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

                                                             F - 5

</TABLE>



<PAGE>
<TABLE>
<CAPTION>

                                                     PYR ENERGY CORPORATION
                                                  (Formerly Mar Ventures Inc.)
                                                 (A Development Stage Company)
                                                    STATEMENTS OF CASH FLOWS


                                                            Inception            Eight Months
                                                          (May 31, 1996)            Ended            Cumulative
                                                          to December 31,         August 31,         Amounts from
                                                              1996                   1997              Inception

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                        <C>                  <C>                  <C>        
  Net income (loss)                                        $    18,963          $   (40,920)         $   (21,957)
  Adjustments to reconcile net income (loss) to net
      cash provided by operating activities
    Depreciation and amortization                                   47                1,004                1,051
    Contributed services                                        12,000               24,000               36,000
    Changes in assets and liabilities
      (Increase) in accounts receivable                           (527)              (9,473)             (10,000)
      (Increase) in prepaids                                      --                 (2,591)              (2,591)
      Increase in accounts payable                                 527               45,103               45,630
      Increase in accrued expenses                                --                 10,183               10,183
      Other                                                       (474)              (3,277)              (3,751)
                                                           -----------          -----------          -----------

  Net cash provided by operating activities                     30,536               24,029               54,565
                                                           -----------          -----------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Cash paid for furniture and equipment                           --                (29,481)             (29,481)
  Cash paid for undeveloped oil and gas properties                --               (298,178)            (298,178)
                                                           -----------          -----------          -----------

  Net cash (used) in investing activities                         --               (327,659)            (327,659)
                                                           -----------          -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Members capital contributions                                  5,000               23,000               28,000
  Distributions to members                                     (24,000)             (42,000)             (66,000)
  Cash from short-term borrowings                                 --                285,000              285,000
  Repayments of short-term borrowings                             --               (285,000)            (285,000)
  Proceeds from sale of common stock                              --              2,023,750            2,023,750
  Cash paid for offering costs                                    --               (280,711)            (280,711)
  Cash received upon recapitalization and merger                  --                    336                  336
                                                           -----------          -----------          -----------

  Net cash (used) provided by financing activities             (19,000)           1,724,375            1,705,375
                                                           -----------          -----------          -----------

NET INCREASE IN CASH                                            11,536            1,420,745            1,432,281

CASH, BEGINNING OF PERIODS                                        --                 11,536                 --
                                                           -----------          -----------          -----------

CASH, END OF PERIODS                                       $    11,536          $ 1,432,281          $ 1,432,281
                                                           ===========          ===========          ===========


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

                                                             F - 6
</TABLE>


<PAGE>



                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                      STATEMENTS OF CASH FLOWS (CONTINUED)
            PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996
                     AND EIGHT MONTHS ENDED AUGUST 31, 1997



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

During the eight months ended August 31, 1997 the Company paid cash for interest
on short-term borrowings of $351.

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

In August 1997,  4,000,000  shares of common stock were issued to the members of
PYR  Energy,  LLC ("PYR  LLC") in  exchange  for 100  percent  of the  ownership
interests in PYR LLC,  for which the net members  equity in PYR LLC was $33,868.
These  shares  were  issued  pursuant  to a plan of  reorganization  and  merger
effective August 6, 1997 (Notes 1 and 3).

During 1996 and 1997,  the President of the Company  performed  services for PYR
LLC valued at $12,000 and $24,000, respectively. The value of these services was
charged to members' equity as a non-cash contribution.


                                      F - 7

<PAGE>

                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 1 - ORGANIZATION AND BUSINESS COMBINATION

          Mar Ventures Inc. ("Mar") was incorporated under the laws of the State
          of  Delaware  on March  27,  1996 for the  purpose  of  producing  and
          marketing  traditional  television  programming and marketing its film
          library.  Mar is a public company which had no significant  operations
          as of July 31, 1997.  On August 6, 1997 Mar acquired all the interests
          in PYR Energy LLC ("PYR LLC") (a Colorado  Limited  Liability  Company
          organized on May 31, 1996), a development  stage company as defined by
          Statement of Financial  Accounting Standards (SFAS) No. 7. PYR LLC, an
          independent  exploration company, is engaged in the acquisition of oil
          and gas  properties  for  exploration  and  exploitation  in the Rocky
          Mountain region and California. As of August 31, 1997 PYR LLC had only
          acquired  non-producing leases and acreage and no exploration had been
          commenced on the properties. Effective August 6, 1997, Mar transferred
          to its former president  substantially  all its assets and liabilities
          that were  related to its film library  operations.  The net assets of
          Mar exchanged pursuant to the transaction with PYR LLC are as follows:


                      Cash                                $   336
                      Assets                                1,605
                      Liabilities                          (1,605)
                                                          -------

                                                          $   336
                                                          =======


          Upon  completion of the  acquisition of PYR LLC by Mar, PYR LLC ceased
          to exist as a separate  entity.  Mar  remained as the legal  surviving
          entity and,  effective  November 12, 1997, Mar changed its name to PYR
          Energy  Corporation (the "Company") (Note 8). For financial  reporting
          purposes,  the business combination was accounted for as an additional
          capitalization  of Mar (a  reverse  acquisition  with  PYR  LLC as the
          acquirer).  The accompanying  financial  statements as of December 31,
          1996 and August 31, 1997 and for the  periods  then ended are those of
          PYR  LLC.  The  operations  of PYR  LLC  will be the  only  continuing
          operations of the Company.

          Prior to the business combination,  Mar loaned $275,000 to PYR LLC for
          amounts  owed by PYR LLC with  respect to its oil and gas  operations.
          The loan was eliminated in conjunction with the successful  completion
          of the combination of PYR LLC and Mar.

          The Company's fiscal year end is August 31.


                                      F - 8

<PAGE>
                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          PROPERTY AND EQUIPMENT

          Furniture and equipment is recorded at cost.  Depreciation is provided
          by use of the straight-line  method over the estimated useful lives of
          the related assets of three to five years.

          Expenditures   for   replacements,   renewals,   and  betterments  are
          capitalized.  Maintenance  and repairs are  charged to  operations  as
          incurred. Depreciation expense for 1997 was $941.

          OIL AND GAS PROPERTIES

          The  Company  follows  the full cost method to account for its oil and
          gas  exploration  and  development  activities.  Under  the full  cost
          method,  all costs incurred which are directly  related to oil and gas
          exploration   and   development   are  capitalized  and  subjected  to
          depreciation and depletion. Depletable costs also include estimates of
          future  development  costs  of  proved  reserves.   Costs  related  to
          undeveloped  oil and gas  properties  may be excluded from  depletable
          costs  until  such  properties  are  evaluated  as  either  proved  or
          unproved.   The  net  capitalized  costs  are  subject  to  a  ceiling
          limitation. Gains or losses upon disposition of oil and gas properties
          are  treated  as  adjustments  to   capitalized   costs,   unless  the
          disposition  represents a significant  portion of the Company's proved
          reserves.  A  separate  cost  center is  maintained  for  expenditures
          applicable to each country in which the Company  conducts  exploration
          and/or production activities.

          Undeveloped  oil and gas  properties  consists  of leases and  acreage
          acquired  by  the  Company  for  its   exploration   and   development
          activities.  As of August 31, 1997, no exploration  had been commenced
          on the properties.  The cost of these nonproducing  leases is recorded
          at the lower of cost or fair market value.

          The Company has adopted SFAS No. 121 "Accounting for the Impairment of
          Long-Lived  Assets and for Long-Lived  Assets to Be Disposed of" which
          requires  that  long-lived  assets to be held and used be reviewed for
          impairment  whenever events or changes in circumstances  indicate that
          the carrying amount of an asset may not be  recoverable.  The adoption
          of  SFAS  121  has  not  had  an  impact  on the  Company's  financial
          statements,  as the Company has determined that no impairment loss for
          1997  need  to be  recognized  for  applicable  assets  of  continuing
          operations.

          ORGANIZATION COSTS

          Costs related to the organization of the Company have been capitalized
          and are being amortized over a period of five years.

          INCOME TAXES

          The Company has adopted the  provisions  of SFAS No. 109,  "Accounting
          for Income  Taxes".  SFAS 109  requires  recognition  of deferred  tax
          liabilities  and assets for the expected  future tax  consequences  of
          events that have been  included  in the  financial  statements  or tax
          returns.  Under this method,  deferred tax  liabilities and assets are
          determined based on the difference between the financial statement and
          tax basis of assets and liabilities  using enacted tax rates in effect
          for the year in which the differences are expected to reverse.

          PYR LLC was taxed as a Limited Liability Company until August 6, 1997,
          and as such was not subject to federal and state income tax.  Earnings
          and losses through that date were included in the personal tax returns
          of its members, and PYR LLC did not record an income tax provision.



                                      F - 9

<PAGE>
                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          At August 31, 1997, the Company had a net operating loss  carryforward
          of  approximately  $33,000 that may be offset  against  future taxable
          income through 2012.

          The Company has fully  reserved  the tax  benefits of these  operating
          losses  because the  likelihood  of  realization  of the tax  benefits
          cannot be determined.

          The $6,300 tax benefit of the loss  carryforward  has been offset by a
          valuation  allowance  of the same  amount.  The total tax  benefit  is
          attributable to 1997.

          Temporary  differences between the time of reporting certain items for
          financial and tax reporting purposes are not considered significant by
          management of the Company.

          USE OF ESTIMATES

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

          INCOME (LOSS) PER SHARE

          Income (loss) per common share at August 31, 1997 is computed based on
          the weighted  average number of common shares  outstanding  during the
          period then ended. Common shares issued to the members of PYR LLC upon
          completion  of  Mar's  merger  with PYR LLC  (Note  1) are  considered
          outstanding  for all periods  presented.  Common stock  equivalents at
          August  31,  1997,   consisting  of  warrants  and  options,  are  not
          considered in the calculation of net loss per share as their inclusion
          would be antidilutive.

          Pro forma  income  (loss)  per share  has been  computed  based on the
          income (loss) of PYR LLC for the period from inception to December 31,
          1996 and the eight  months  ended  August 31, 1997 as if PYR LLC was a
          corporation and not a limited liability company, which distributes its
          earnings and losses to its members.

          SHARE BASED COMPENSATION

          In  October   1995,   SFAS  No.  123   "Accounting   for   Stock-Based
          Compensation" was issued. This new standard defines a fair value based
          method of accounting  for an employee  stock option or similar  equity
          

                                     F - 10

<PAGE>
                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          instrument.  This  statement  gives  entities a choice of  recognizing
          related  compensation expense by adopting the new fair value method or
          to continue to measure compensation using the intrinsic value approach
          under  Accounting  Principles  Board (APB) Opinion No. 25. The Company
          has elected to utilize APB No. 25 for measurement;  and will, pursuant
          to SFAS No. 123, disclose  supplementally the pro forma effects on net
          income and earnings per share of using the new  measurement  criteria.
          During the eight  months ended  August 31,  1997,  the Company  issued
          options to purchase shares of its common stock (Note 4). The effect of
          this  issuance on pro forma net income and  earnings  per share it not
          material.

          CASH EQUIVALENTS

          For purposes of reporting  cash flows,  the Company  considers as cash
          equivalents  all highly  liquid  investments  with a maturity of three
          months or less at the time of purchase. At August 31, 1997, there were
          no cash equivalents.


NOTE 3 - COMMON STOCK

          Effective August 6, 1997 Mar completed a merger with PYR LLC (Note 1).
          In  conjunction  with the  merger,  the  members  of PYR LLC  received
          4,000,000 shares of common stock of Mar. These shares were recorded at
          the net  member  equity  of PYR LLC as of that  date of  $33,868.  The
          1,059,804  Mar  shares  outstanding  as of the  date  of  merger  were
          recapitalized  to  the  net  assets  of  Mar of  $336.  For  financial
          statement   reporting   purposes,   this  was  treated  as  a  reverse
          acquisition whereby PYR LLC was considered the surviving and reporting
          entity.  For legal  purposes,  however,  Mar remained as the surviving
          entity, therefore the capital structure of the Company was accordingly
          restated.

          In July  1997,  the  Company  completed  the sale of common  stock and
          warrants pursuant to a private placement as follows:

          o    2,095,000  units,  at a price of $.25  per  unit,  consisting  of
               2,095,000 shares of common stock,  warrants to purchase 1,047,500
               shares of common  stock at an  exercise  price of $1.25 per share
               before  October 31,  1997,  and  warrants  to purchase  1,047,500
               shares of common  stock at an  exercise  price of $1.75 per share
               before January 31, 1998. Subsequent to the offering,  the warrant
               expiration  date of October 31, 1997 was  extended to January 15,
               1998,  and the  warrant  expiration  date of January 31, 1998 was
               extended to April 15, 1998.


                                     F - 11

<PAGE>
                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 3 - COMMON STOCK (CONTINUED)

          In August  1997,  the Company  completed  the sale of common stock and
          warrants pursuant to a private placement as follows:

          o    2,000,000  units,  at a price of $.75  per  unit,  consisting  of
               2,000,000 shares of common stock,  warrants to purchase 1,000,000
               shares of common  stock at an  exercise  price of $1.25 per share
               before  October 31,  1997,  and  warrants  to purchase  1,000,000
               shares of common  stock at an  exercise  price of $1.75 per share
               before January 31, 1998. Subsequent to the offering,  the warrant
               expiration  date of October 31, 1997 was  extended to January 15,
               1998,  and the  warrant  expiration  date of January 31, 1998 was
               extended to April 15, 1998.

          Proceeds  from  these   offerings   were   $523,750  and   $1,500,000,
          respectively, before costs of the offerings of $280,711.


NOTE 4 - STOCK OPTION PLAN

          In August 1997, the Board of Directors  approved the 1997 Stock Option
          Plan (the "1997  Plan").  Pursuant  to the 1997 Plan,  the Company may
          grant options to purchase  1,000,000  shares of the  Company's  common
          stock to key employees and other persons who have or are  contributing
          to the success of the  Company.  The options  granted  pursuant to the
          1997 Plan may be either  incentive  options  qualifying for beneficial
          tax  treatment for the recipient or  non-qualified  options.  The 1997
          Plan will be administered by the Option  Committee,  which may consist
          of either (i) the Company's  Board of Directors,  or (ii) a Committee,
          appointed  by the  Board  of  Directors,  of two or more  non-employee
          directors.  No option may be exercisable more than ten years after the
          granting of the option,  and no options may be granted  under the 1997
          Plan after August 13, 2007.  The exercise  price of incentive  options
          granted can not be less than the fair market  value of the  underlying
          common stock on the date the options are granted.  No options  granted
          under the 1997 Plan may be exercised  until  approval of the 1997 Plan
          by the Company's  stockholders has become effective,  which will be on
          or about November 12, 1997.

          At August 31, 1997 the status of outstanding  options granted pursuant
          to the 1997 Plan was as follows:
<TABLE>
<CAPTION>

                                                                    Unvested
                           Grant         Options      Options        Options        Exercise
                           Date          Granted      Vested       Outstanding       Price


<S>                   <C>                 <C>          <C>          <C>              <C>
Executive Officer      Aug. 13, 1997      75,000         -           75,000          $1.50

Employees              Aug. 13, 1997      96,000         -           96,000          $1.50

</TABLE>


                                     F - 12

<PAGE>

                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES

          The Company has entered into a non-cancelable  lease, as amended,  for
          office  facilities.  Minimum  payments  due  under  this  lease are as
          follows:

              Years ending August 31,

                         1998                           $ 35,515
                         1999                             38,685
                         2000                             38,685
                         2001                             38,685

          Rent  expense  was $0 and  $8,694  for the period  from  inception  to
          December  31, 1996 and for the eight  months  ended  August 31,  1997,
          respectively.

          The Company has acquired  leases  covering 2,080 acres in Wyoming from
          the Bureau of Land Management ("BLM"). In order to maintain its rights
          to explore these properties, the Company is obligated to pay the BLM a
          maximum  aggregate  $3,120  annually for the  undeveloped  acres under
          lease.  The amount due has been paid for the lease  period  October 1,
          1997 to September 30, 1998.

          The Company  entered into an agreement with Chevron U.S.A.  Production
          Company  ("Chevron")  for the Company to farm-in oil and gas prospects
          located in the San  Joaquin  basin of  California.  The  Company  paid
          $275,000 upon execution of the agreement for certain rights  including
          access to certain  proprietary  2D and 3D seismic data.  The agreement
          provides for  exclusive  rights to undertake  oil and gas drilling and
          development  operations  on lands owned in fee by Chevron.  As part of
          the agreement,  the Company has an option to undertake the acquisition
          of additional 3D seismic data and has agreed to drill a test well on a
          portion of the prospect areas. In addition,  as part of the agreement,
          the  Company  has agreed to drill an  additional  test well on another
          portion of the prospect areas. The Company has notified Chevron of its
          intent to undertake the  acquisition of additional 3D seismic data and
          in  September  1997 the Company  paid $10,000 to Chevron as an earnest
          money deposit in conjunction with the agreement.

          The Company may be subject to various possible contingencies which are
          primarily  from   interpretations   of  federal  and  state  laws  and
          regulations  affecting the oil and gas industry.  Although  management
          believes it has complied  with the various laws and  regulations,  new
          rulings   and   interpretations   may  require  the  Company  to  make
          adjustments.


                                     F - 13

<PAGE>

                             PYR ENERGY CORPORATION
                          (Formerly Mar Ventures Inc.)
                          (A Development Stage Company)
                          Notes to Financial Statements
                      December 31, 1996 and August 31, 1997


NOTE 6 - RELATED PARTY TRANSACTIONS

          In 1996 and 1997 the President of the Company  performed  services for
          PYR LLC  valued  at  $12,000  and  $24,000,  respectively.  The  value
          ascribed to these services was charged to members'  equity during each
          of the periods ended December 31, 1996 and August 6, 1997 as a capital
          contribution.

          In 1997 the Company paid an aggregate  $14,000 in  consulting  fees to
          its  President  and an entity owned by an officer of the Company;  and
          borrowed an aggregate  $8,000 from two  officers of the  Company.  The
          amount borrowed was repaid with interest, at 8%, of $280 by August 31,
          1997.


NOTE 7 - FINANCIAL INSTRUMENTS

          FAIR VALUE

          The carrying  amount  reported in the balance sheet for cash,  prepaid
          expenses,  accounts payable and accrued liabilities  approximates fair
          value  because  of the  immediate  or  short-term  maturity  of  these
          financial instruments.

          CONCENTRATION OF CREDIT RISK

          Financial   instruments  which  potentially  subject  the  Company  to
          concentrations  of credit risk consist of cash. The Company  maintains
          cash accounts at one financial  institution.  At August 31, 1997, cash
          on deposit at this financial  institution  exceeded  federally insured
          amounts  by  approximately   $1,332,000.   The  Company   periodically
          evaluates  the  credit  worthiness  of  financial  institutions,   and
          maintains   cash  accounts  only  in  large  high  quality   financial
          institutions,  thereby  minimizing  exposure for deposits in excess of
          federally insured amounts.


NOTE 8 - SUBSEQUENT EVENT

          Effective November 12, 1997 the Company changed its name to PYR Energy
          Corporation from Mar Ventures Inc.



                                     F - 14

<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned,  thereunto
duly authorized.





                                   PYR ENERGY CORPORATION



Date:  April 9, 1998               By:  /s/ D. Scott Singdahlsen
                                       -----------------------------------------
                                   D. Scott Singdahlsen, Chief Executive Officer


     In accordance  with the  requirements  of the Exchange Act, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.


       Signatures                       Title                     Date
       ----------                       -----                     ----


 /s/ D. Scott Singdahlsen         Chief Executive Officer;
------------------------------    President and Chairman      April 9, 1998
D. Scott Singdahlsen              Of The Board


                                  Director                    
------------------------------                                -------------
Keith F. Carney


 /s/ Gregory B. Barnett           Director                    April 9, 1998
-----------------------------
Gregory B. Barnett


 /s/ Andrew P. Calerich           Chief Financial Officer     April 9, 1998
-----------------------------     and Secretary
Andrew P. Calerich



                                      II-1