--------------------------------------------------------------------------------
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------
                                   FORM 10-QSB
                                   -----------
(Mark One)

X   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange 
    Act of 1934
-

For the quarterly period ended March 31, 1997

OR

__   Transition report pursuant to Section 13 or 15(d) of the Securities 
     Exchange Act of 1934

                         Commission File Number: 0-28814

                       COTTON VALLEY RESOURCES CORPORATION

             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S>   <C>                                                                          <C>    
              Ontario, Canada                                                           98-0164357
      (State or other jurisdiction of                                                (I.R.S. Employer
       incorporation or organization)                                               Identification No.)
</TABLE>

                           8350 N. Central Expressway
                                   Suite M2030
                               Dallas, Texas 75206

                    (Address of principal executive offices)

                         Telephone Number (214) 363-1968

              (Registrant's telephone number, including area code)

        Indicate by check mark whether the  registrant (1) has 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  X                              No ___




        As of March 31, 1997,  there were 11,708,881  shares of the Registrant's
Common Stock outstanding.


<PAGE>


                       COTTON VALLEY RESOURCES CORPORATION

                                      INDEX

<TABLE>
<CAPTION>

                            PART I. FINANCIAL INFORMATION                                              Page No.
<S>           <C>                                                                                           <C>  
Item 1.        Condensed Consolidated Financial Statements:

               Condensed Consolidated Balance Sheet as at
               March 31, 1997                                                                                 3

               Condensed Consolidated Statements of Operations
               For the nine months ended March 31, 1997 and 1996                                              4

               Condensed Consolidated Statements of Cash Flow
               For the nine months ended March 31, 1997 and 1996                                              5

               Notes to Condensed Consolidated Financial Statements                                           6

Item 2.        Management's   Discussion  and  Analysis  of  Financial
               Condition and Results of Operations                                                            7

                             PART 11. OTHER INFORMATION

Item 1.        Legal Proceedings                                                                              9

Item 5.        Other Information                                                                              9

Item 6.        Exhibits and Reports on Form 8-K                                                              10

               Signatures                                                                                    11
</TABLE>

                                       2
<PAGE>


PART I.  FINANCIAL INFORMATION
-------  ---------------------

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       COTTON VALLEY RESOURCES CORPORATION
                          (a development stage company)

                      CONDENSED CONSOLIDATED BALANCE SHEET
                           (Expressed in U.S. Dollars)
                                 March 31, 1997
                                   (Unaudited)

                                     ASSETS

<TABLE>
<CAPTION>
<S>                                                                        <C> 
CURRENT ASSETS:
        Cash                                                                $       57,145
        Accounts receivable                                                         64,145
        Prepaid expenses                                                            32,651
                                                                               ------------
        Total Current Assets                                                       153,941

PROVED OIL AND GAS PROPERTIES (full cost method)                                12,033,974

OFFICE EQUIPMENT, net of accumulated depreciation of $10,900                        44,562

OTHER ASSETS                                                                       101,520
                                                                               ------------

      Total Assets                                                          $   12,333,997
                                                                               ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
      Accounts payable                                                     $       710,184
      Current portion of long-term debt                                            586,049
                                                                             --------------
      Total Current Liabilities                                                  1,296,233

ADVANCES FROM RELATED PARTIES                                                      149,710

DEFERRED INCOME TAXES                                                            1,088,000

STOCKHOLDERS' EQUITY:
      Preferred Stock, no par value, authorized-unlimited, none issued
      Common Stock, no par value, authorized-unlimited, 11,708,881              11,527,749
        issued
      Deficit accumulated in development stage                                  (1,727,695)
                                                                             --------------
      Total Stockholders' Equity                                                 9,800,054
                                                                             --------------

      Total Liabilities and Stockholders' Equity                           $    12,333,997
                                                                             ==============
</TABLE>


              See accompanying notes to these financial statements
                                       3
<PAGE>

                       COTTON VALLEY RESOURCES CORPORATION
                          (a development stage company)

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                           (Expressed in U.S. Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                  Period from
                                          Period from     Period from July       February 15,
                                      July 1, 1996 to     1, 1995 to March      1995 to March
                                       March 31, 1997             31, 1996           31, 1997
                                     -----------------  -------------------  -----------------
<S>                                    <C>                 <C>               <C>             
REVENUE - Oil and gas sales            $       131,986     $             -   $        131,986

EXPENSES:
  Direct costs                                  80,757                   -             80,757
  General and administrative                 1,462,532             741,467          2,497,839
  Interest                                      54,115              41,874            193,085
                                                             --------------
                                         --------------                        ---------------
        Total Expenses                       1,597,404             783,341          2,771,681
                                         --------------      --------------    ---------------

LOSS BEFORE INCOME TAXES                   (1,465,418)           (783,341)        (2,639,695)

INCOME TAX BENEFIT                             500,000             275,000            912,000
                                         --------------      --------------    ---------------

NET LOSS                               $     (965,418)     $     (508,341)   $    (1,727,695)
                                         ==============      ==============    ===============

NET LOSS PER SHARE                     $        (0.07)     $        (0.04)
                                         ==============      ==============

WEIGHTED AVERAGE SHARES
                                            13,390,524           9,923,236
                                         ==============      ==============

</TABLE>














              See accompanying notes to these financial statements

                                       4
<PAGE>


                       COTTON VALLEY RESOURCES CORPORATION
                          (a development stage company)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                           (Expressed in U.S. Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                   Period from
                                                         Period from July         Period from       February 15,
                                                         1, 1996 to March     July 1, 1995 to      1995 to March
                                                                 31, 1997      March 31, 1996           31, 1997
                                                                 --------      --------------           --------
<S>                                                       <C>                <C>              <C> 
    CASH FLOWS FROM OPERATING ACTIVITIES:
         Net loss                                           $    (965,418)    $ (508,341)     $ (1,727,695)
                                                         
         Adjustments  to  reconcile  net  loss to net
           cash  used  by  operating activities:
             Deferred income tax benefit                         (500,000)      (275,000)         (912,000)
             Amortization of debt discount                              -              -            88,000
             Depreciation                                           9,216              -            10,900
             Common stock issued for services                     863,862        446,950         1,312,993
             Change in accounts payable                           193,495        107,759           480,184
             Other                                               (204,800)             -          (198,957)
                                                            --------------     ----------     -------------
         Net Cash Used by Operating Activities                   (603,645)      (228,632)         (946,575)

     CASH FLOWS FROM FINANCING ACTIVITIES:
         Advances from related parties                            (21,999)        171,709          149,710
         Sale of common stock                                      889,089             -         2,988,961
         Issuance of convertible debentures                             -         415,650          426,474
         Issuance of note payable subsequently converted
           into convertible debentures                                  -         146,300          146,300
         Costs related to sale of stock and debentures             (14,600)            -          (423,976)
         Issuance of note payable                                       -              -           250,000
         Repayment of note payable                                      -              -          (250,000)
                                                            --------------     ----------     -------------
         Net cash provided by financing activities                 852,490        733,659        3,287,469

     CASH FLOWS FROM INVESTING ACTIVITIES:
         Acquisition of oil and gas properties                    (893,250)      (506,027)      (2,182,229)
         Purchase of other assets                                 (101,520)              -        (101,520)
                                                             --------------     ----------     -------------
         Net cash used by investing activities                    (994,770)      (506,027)      (2,283,749)
                                                             --------------     ----------     -------------

     INCREASE (DECREASE) IN CASH                                  (745,925)        (1,000)          57,145

     CASH  - Beginning of period                                   803,070          1,000               -

     CASH - End of  period                                        $ 57,145     $      nil     $     57,145
                                                         
                                                            ==============     ==========     =============

     SUPPLEMENTAL INFORMATION
         Cash paid for interest                                 $   35,162     $   18,920     $      72,172
                                                         
         Debt incurred in acquisition of oil and                        -              -          1,086,049
         gas properties
         Conversion of debentures to common stock                       -              -            426,474
         Retirement of debenture upon merger with Arjon                 -              -            146,300
         Oil and gas property acquired with note payable          355,000              -            585,000
         Oil and gas properties acquired with common stock              -              -          7,072,914
         Issuance of common stock for stock offering costs              -              -            506,409
</TABLE>

              See accompanying notes to these financial statements
                                       5
<PAGE>


                       COTTON VALLEY RESOURCES CORPORATION
                          (a development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                           (Expressed in U.S. Dollars)
                                   (Unaudited)

(1)  Nature of Business and Basis of Preparation and Presentation

     Cotton  Valley  Resources   Corporation   primary  business  focus  is  the
     acquisition  of ownership  interests in, and the  production of oil and gas
     from,  existing oil and gas fields that  indicate a potential for increased
     production through rehabilitation.

     The condensed  consolidated financial statements of Cotton Valley Resources
     Corporation and subsidiaries (collectively "Cotton Valley") included herein
     have been prepared by Cotton Valley without audit.  Certain information and
     footnote  disclosures normally included in financial statements prepared in
     accordance  with  generally  accepted   accounting   principles  have  been
     condensed or omitted,  since Cotton Valley  believes  that the  disclosures
     included are adequate to make the information presented not misleading.  In
     the opinion of management,  the condensed consolidated financial statements
     include  all  adjustments   consisting  of  normal  recurring   adjustments
     necessary to present fairly the financial position,  results of operations,
     and  cash  flows  as of the  dates  and for the  periods  presented.  These
     condensed  consolidated  financial statements should be read in conjunction
     with the consolidated  financial  statements and the notes thereto included
     herein for the fiscal year ended June 30, 1996.

(2)  Common Stock

     During the nine months ended March 31, 1997,  Cotton  Valley  issued 36,888
     shares of common stock to  individuals  for services  which was recorded at
     $30,932,  issued  73,750  shares of common  stock to settle debts which was
     recorded at $53,838,  issued  1,141,000  shares of common stock to Liviakis
     Financial  Communications,  Inc.  which was  recorded at  $832,930,  issued
     416,667 shares of common stock to former Arjon  stockholders on exercise of
     warrants for $200,449,  issued  300,000  shares of common stock in Canadian
     private  placements  for proceeds of $235,425  (before  deducting  costs of
     $14,600),  issued  500,000  shares of common  stock to  Liviakis  Financial
     Communications,  Inc. for cash of  $375,000,  and issued  48,980  shares of
     common stock to the agent  involved in Canadian  financings  on exercise of
     agent's options for $78,215.


(3)      Liviakis Financial Communications, Inc.

        During the period, Cotton Valley entered into an agreement with Liviakis
Financial Communications,  Inc. of Sacramento, California ("Liviakis") to assist
and consult with Cotton Valley in matters concerning corporate finance,  mergers
and acquisitions,  and to provide investor  communications  and public relations
services.  In consideration of Liviakis' services,  Cotton Valley issued a total
of 500,000  shares of common  stock to Liviakis  and an officer of Liviakis  for
$.75 per share and will issue  1,490,000  shares of its common stock to Liviakis
for services of which  1,141,000  shares were issued during this period.  Cotton
Valley also  granted  Liviakis  and an officer of Liviakis  warrants to purchase
500,000 shares of its common stock from January 2, 1998,  until November 8, 2001
at $.80 per share.



                                       6
<PAGE>


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


Results of Operations

First Nine Months Fiscal 1997 and First Nine Months Fiscal 1996

        During the nine months ended March 31, 1997,  Cotton  Valley  incurred a
net loss of $965,418.  From  February 15, 1995  (inception),  to March 31, 1997,
Cotton Valley accumulated a deficit of $1,727,695.

        The loss of  $1,465,418  for the first nine months of 1997 compares to a
loss of  $783,341  during  the  first  nine  months of 1996.  There was  greater
business  activity  during the first nine  months of fiscal 1997 and during this
period Cotton Valley issued 400,000 shares of common stock to Liviakis Financial
Communications, Inc. for services. The stock was valued at $.73 per share, based
on trading  on the  Canadian  over-the-counter  market,  for a total  expense of
$292,000.

        During  the first  nine  months of fiscal  1996,  Cotton  Valley  issued
300,000  shares for  services  which was recorded at  $446,950.  Other  expenses
during this period were $209,253. The loss before income tax benefit of $230,000
was $656,203.

        Rehabilitation  work on two wells in the Cheneyboro  Field in the fourth
quarter of fiscal 1996 resulted in oil and gas sales of $74,473 during the first
nine months of 1997.

        Cotton Valley  acquired its interest in the Alden Field in December 1996
for  $416,328 of which  $35,000 was paid in December  1996 and $381,328 was paid
upon closing on March 3, 1997.

        During the nine months ended March 31, 1997, Cotton Valley issued 36,888
shares of common  stock to  individuals  for  services  which  was  recorded  at
$30,932, issued 73,750 shares of common stock to settle debts which was recorded
at  $53,838,  issued  1,141,000  shares of common  stock to  Liviakis  Financial
Communications,  Inc.  which was recorded at $832,930,  issued 416,667 shares of
common stock to former Arjon  shareholders on exercise of warrants for $200,449,
issued  300,000  shares of  common  stock in  Canadian  private  placements  for
proceeds of $235,425 (before deducting costs of $14,600),  issued 500,000 shares
of common stock to Liviakis Financial Services,  Inc. for cash of $375,000,  and
issued  48,980  shares  of  common  stock  to the  agent  involved  in  Canadian
Financings on exercise of agent's options for $78,215.

Liquidity and Capital Resources

        As of March 31, 1997, Cotton Valley had a working capital  deficiency of
$1,142,292  calculated  by  subtracting  accounts  payable of  $710,184  and the
current  portion of long-term  debt of $586,049 from current assets of $153,941.
Included in  accounts  payable is  $230,000  representing  an unpaid part of the
purchase  price of the Movico  Filed  which is not due until  others who hold an
interest  in the  property  decide to  commence  drilling.  Management  believes
$115,000 of this  amount  will be  converted  to equity in the  intended  public
offering.  The current  portion of long-term  debt is described in the following
paragraph.

                                       7
<PAGE>



        Cotton Valley has  promissory  notes payable  totaling  $586,049 for the
unpaid  purchase price of the Cheneyboro oil and gas  properties.  The notes are
collateralized  by the properties and are due July 17,1997.  Interest is payable
quarterly  at 12%.  Management  believes  the notes will be  extended  if Cotton
Valley is  unsuccessful in its initial public  offering,  and the extended notes
would be converted to equity in the intended public offering.

        During the first nine months of fiscal 1997, Cotton Valley purchased oil
and gas  interests  in the  Alden  Field,  Caddo  County,  Oklahoma  for cash of
$416,328.  Cotton Valley spent $62,000 in remedial work in the Alden Field.  Net
monthly production was worth approximately $55,000 in March 1997.

        Management is currently taking the following action to obtain short-term
financing:

             - it  has   encouraged   warrant  holders  to   exercise  warrants,
             - it is actively seeking  participation  from  other  oil  and  gas
                 companies to fund part of the Cheneyboro Field development, and
             - it  is   in   negotiation   with   three   parties   for   debt
                 financing,  in  the  nature  of  a  "bridge  loan" to be repaid
                 with  net  proceeds  of  its  intended  offering of  securities
                 in the U.S.

        Management  believes  a  combination  of the above  steps  will  provide
liquidity  until an intended  offering of securities  is completed.  There is no
assurance management will be successful.

        The net  proceeds of an intended  U.S.  offering of  securities  and the
anticipated sale of an interest in the offshore  California property will not be
sufficient to develop fully the properties.  If the cash flow generated from the
first  five wells is less than  expected,  the  development  of  properties  may
require  capital  resources  greater than the net  proceeds of this  offering or
resources otherwise  currently available to Cotton Valley.  Cotton Valley has no
current  arrangements with respect to, or sources of, additional  financing.  No
assurance can be given that any additional financing will be available to Cotton
Valley  on  acceptable  terms or at all.  The  inability  to  obtain  additional
financing  would  have a material  adverse  effect on Cotton  Valley,  including
requiring  Cotton  Valley  to  curtail   significantly  its  deployment  of  the
properties.  Any additional  financing may involve  substantial  dilution to the
interests of Cotton Valley's then existing shareholders.



                                       8
<PAGE>


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

As of the date of this filing,  there are no legal  proceedings  pending against
Cotton Valley.

Item 5.  Other Information

Safe Harbor Statement under the Private  Securities  Litigation  Reform  Act  of
     1995:

Certain  statements in this filing,  and elsewhere  (such as in other filings by
Cotton  Valley with the  Commission,  press  releases,  presentations  by Cotton
Valley  or its  management  and  oral  statements)  constitute  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Such  forward-looking  statements  involve  known and  unknown  risks,
uncertainties and other factors which may cause the actual results,  performance
or  achievements  of Cotton  Valley to be materially  different  from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking  statements.  Such  factors  include,  among other  things,  (i)
significant  variability in Cotton  Valley's  quarterly  revenues and results of
operations  as a result of  variations  in the Cotton  Valley's  production in a
particular quarter while a significant  percentage of its operating expenses are
fixed in  advance,  (ii)  changes  in the  prices of oil and gas,  (iii)  Cotton
Valley's  ability to obtain capital,  (iv) other risk factors  commonly faced by
development stage oil and gas companies.

                                       9
<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

9a)     Exhibits

        The following documents are filed with this report as exhibits:

Exhibit
Number              Description
27.01               Financial Data Schedule







(b)      Reports filed on Form 8-K.

        On February  20,  1997,  Cotton  Valley filed a report on Form 8-K which
announced  management's  decision  to delay  an  intended  reincorporation  into
Canada's Yukon Territory until after Cotton Valley completes its intended public
offering  of  securities  in the United  States  and then only  after  obtaining
approval of Cotton Valley's stockholders.


                                       10
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirement  of the  Securities  Exchange  Act  of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Dated:  May 14, 1997



                       COTTON VALLEY RESOURCES CORPORATION
                                  (Registrant)





                     /s/Eugene A. Soltero
                     Eugene A. Soltero
                     Chief Executive Officer and Acting Chief Financial Officer