________________________________________________________________________________
                              UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
          
                             AMENDMENT NO. 1
                                   TO
                              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 September 30, 1998

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)

Yukon, Canada                                                   98-0164357
(State or other jurisdiction of                             (I.R.S. Employer 
incorporation or organization)                               Identification No.)

                                 6510 Abrams Road
                                    Suite 300
                               Dallas, Texas 75231
                     (Address of principal executive offices)

                          Telephone Number (214) 221-6500
              (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 September 30, 1998 there were 17,608,278 shares of the Registrant's 
Common Stock outstanding.
________________________________________________________________________________

                        COTTON VALLEY RESOURCES CORPORATION

                                        INDEX

                         

              PART I.  FINANCIAL INFORMATION                        Page No.

Item 1.     Condensed Consolidated Financial Statements:

            Condensed Consolidated Balance Sheets as of
            September 30, 1998                                              3

            Condensed Consolidated Statements of 
            Operations for the three months ended 
            September 30, 1998 and 1997                                     4

            Condensed Consolidated Statements of Cash Flow
            for the three months ended September 30, 1998 and 1997          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                                               8

Item 5.     Other Information                                               8

Item 6.     Exhibits and Reports on Form 8K                                 8

            Signatures                                                      9



                                        -2-




PART I.  FINANCIAL INFORMATION

        ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

                       COTTON VALLEY RESOURCES CORPORATION

                       CONDENSED CONSOLIDATED BALANCE SHEET
                                 September 30, 1998
                          (Expressed in U.S. Dollars)
                                  (Unaudited)

                                     ASSETS
<TABLE>
<S>                                                       <C>
CURRENT ASSETS:

     Cash                                                 $       226,879
     Accounts receivable                                          305,201
     Materials and supplies inventory                             604,400
     Prepaid expenses                                             146,516
                                                          ---------------
Total Current Assets                                            1,282,996

PROVED OIL and GAS PROPERTIES (full cost method)
     Net of accumulated depletion of $447,337                  25,171,738

OFFICE FURNITURE and EQUIPMENT
     Net of accumulated depreciation of $27,674                   108,301

FINANCING COSTS and OTHER ASSETS                                  626,637
                                                          ---------------

Total Assets                                              $    27,189,672
                                                          ===============
</TABLE>
                   LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S>                                                      <C>
CURRENT LIABILITIES:

Accounts payable                                          $    1,187,627
Accrued expenses                                                 102,788
Accrued interest                                                 252,190
Accrued well plugging costs                                      186,640
Notes payable                                                    350,000
                                                          --------------
Total Current Liabilities                                      2,079,245

LONG TERM DEBT                                                 4,983,100

ADVANCES FROM RELATED PARTIES                                    119,710

DEFERRED INCOME TAXES                                          1,669,337



STOCKHOLDERS' EQUITY:
Preferred Stock, no par value, authorized-unlimited, 
     none issued                                                   -
Common Stock, no par value, authorized-unlimited,   
     17,608,278 issued                                       21,426,630
Warrants and beneficial conversion                              823,695
Deficit accumulated in development stage                     (3,599,756)
Accumulated loss                                               (312,289)
                                                          -------------
Total Stockholders' Equity                                   18,338,280


Total Liabilities and Stockholders' Equity                $  27,189,672
                                                          =============
</TABLE>


See accompanying notes to these financial statements

                                        -3-

                        COTTON VALLEY RESOURCES CORPORATION 
                       CONDENSED CONSOLIDATED STATEMENTS OF 
                                   OPERATIONS 
                           (Expressed in U.S. Dollars)
                                   (Unaudited)

<TABLE>

                                            Period from           Period from
                                          July 1, 1998 to        July 1, 1997 to
                                        September 30, 1998    September 30, 1997
                                          ----------------       --------------
<S>                                       <C>                     <C>  
REVENUE:
   Oil and gas sales                       $      97,090          $    299,169
   Equipment sales                               456,933               330,000
   Other income                                   25,253                  -
                                         -----------------       --------------
            Total Revenue                        579,276               629,169
                                         -----------------       --------------

EXPENSES:
   Oil and gas production                         67,947               191,239
   Equipment purchase and rework                 237,660               183,190
   Equipment operations                          102,761                39,600
   General and administrative                    439,529               214,015
   Depreciation and depletion                     54,278                67,851
                                          -----------------       -------------
            Total Expenses                       902,175               695,895
                                          -----------------       -------------

LOSS FROM OPERATIONS                            (322,899)              (66,726)

OTHER INCOME (EXPENSES): 
    Interest and financing expense              (165,053)              (30,584)
    Interest income                                 -                      309
                                          -----------------       --------------
                Total Other                     (165,053)              (30,275)


LOSS BEFORE INCOME TAXES                        (487,952)              (97,001)

INCOME TAX BENEFIT                               175,663                34,920
                                          -----------------       --------------
 
NET LOSS                                   $    (312,289)          $   (62,081)
                                          =================       ==============

NET LOSS PER SHARE                          $      (0.02)          $     (0.00)
                                          =================       ==============

WEIGHTED AVERAGE SHARES                       17,377,278            14,567,455
                                          =================       ==============
</TABLE>

See accompanying notes to these financial statements

                                         -4-   


 
                        COTTON VALLEY RESOURCES CORPORATION

                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                          (Expressed in U.S. Dollars)
                                   (Unaudited)

<TABLE>
                                            Period from          Period from 
                                           July 1, 1998         July 1, 1997 
                                   to September 30, 1998   to September 30, 1997
                                        -----------------     -----------------
<S>                                     <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:         
     Net loss                            $    (312,289)        $      (62,081)
     Adjustments to reconcile net 
      cash used by operating activities:
     Deferred income tax benefit              (175,663)               (34,920)
     Depreciation and depletion                 54,278                 67,851
     Amortization                               35,468                 10,000
     Common stock issued for services           21,000                   -
     Change in accounts payable and accrued 
       liabilities                             157,438                (38,314)
     Change materials and supplies 
       inventory                               286,959                (74,303)
     Change in accounts receivable             163,792                   -
     Other                                      (9,553)              (399,199)
                                         -----------------      ----------------
     Net Cash Provided Used by Operating 
       Activities                              221,430               (530,966)


CASH FLOWS FROM FINANCING ACTIVITIES:
     Advances from related 
        parties                                  3,279                (20,000)
     Sale of common stock and exercise of  
        warrants                               142,500              2,133,310
     Issuance of notes payable                 350,000                425,000
     Conversion of trade payables to 
        long term debt                         278,291                   -
     Conversion of debenture to common stock   100,000                   -
     Conversion of accounts payables to
        common stock                            44,000                   -
     Costs related to sale of stock and 
        notes                                  (86,666)               (60,000)
     Repayment of notes payable                   -                  (349,750)
                                       ----------------        ---------------
     Net cash provided by financing  
        activities                             831,404              2,128,560

CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to oil and gas properties      (891,878)              (748,404)
     Additions to office furniture and 
        equipment                              (19,839)                (8,162)
                                        ----------------      ----------------
     Net cash used by investing activities    (911,717)              (756,566)


INCREASE (DECREASE) IN CASH                    141,117                841,028 

CASH - Beginning of period                      85,762                642,612

CASH - End of period                    $      226,879         $    1,483,640
                                        ===============        ===============


SUPPLEMENTAL INFORMATION

Cash paid for interest                  $       4,472                 20,584
Debt incurred in acquisition of oil 
   and gas properties                            -                   300,000
Oil and gas properties acquired with 
   common stock                                  -                 4,700,000

</TABLE>

See accompanying notes to these financial statements

                                       -5-

                     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 (the "Company") has its primary business 
focus in 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 Company purchases, repairs, 
rehabilitates and sells used oilfield production equipment.  Also, beginning 
in February, 1998, the Company provides well servicing and horizontal 
drilling services on its own properties.
 
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 for the fiscal year ended 
June 30, 1998.
 
(2) Common Stock

During the three months ended September 30, 1998, the Company issued 285,000 
shares of common stock to three entities in a private placement for $142,500, 
issued 12,000 shares of common stock for services valued at $6,000, and 
issued 74,000 shares of  common stock in payment of $59,000 of trade 
payables. In August, 1998, a debenture of $100,000 was converted to 222,222 
shares of common stock.
                       
(3)  Yukon Continuance Contingent Liability

Potential Securities Act Violation
On March 16, 1998, the Company filed with the Commission a Registration 
Statement on Form SB-2 (the "March 1998 Registration Statement") for the 
purpose of registering up to 10,891,184 shares of the Company's Common Stock 
for sale by certain shareholders of the Company, including approximately 5.7 
million shares to be issued upon exercise of outstanding warrants and 
conversion of the Convertible Debentures.  On May 1, 1998, the Company 
received a letter of comments from the Staff of the Commission (the "May 1998 
Staff Comment Letter") relating to the March 1998 Registration Statement.  In 
the May 1998 Staff Comment Letter, the Staff advised the Company that it 
should have registered the Yukon Continuance under the Securities Act. The 
Yukon Continuance was not registered under the Securities Act.

The Company in its supplemental response on May 26, 1998 to the Staff's May 
1998 Comment Letter contended, with the concurrence of  the Company's U.S. 
securities counsel, that the Yukon Continuance was a transaction not subject 
to the registration requirements of Section 5 of the Securities Act.  The 
Staff has advised the Company that is does not agree with the Company and its 
U.S. securities counsel's conclusion regarding the Yukon Continuance.

The Company, therefore, may have a contingent liability to certain of its 
shareholders, who may sue the Company to recover the consideration paid, if 
any, for shares of the Company's Common Stock, with interest thereon, from 
the date of the Yukon Continuance to the date of repayment by the Company 
less the amount of any income received thereon, upon tender of such 
securities, or for damages if the shareholder no longer owns such securities.  
The Company intends to vigorously defend any such shareholder lawsuit and 
believes that it may have valid defenses, including the running of applicable 
statutes of limitations, against claims by some or all of its shareholders.  
However, to the extent that any of the Company's shareholders obtain a 
judgment for damages against the Company, the Company's net assets and net 
worth will be reduced, which in turn could reduce the Company's ability to 
obtain financing for its exploration and drilling operations and cause the 
Company to curtail operations.  The Company is unable to quantify the amount 
of such contingent liability.
                                   -6-

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

Results of Operations

First Three Months Fiscal 1999 and First Three Months Fiscal 1998

     During the three months ended September 30, 1998, Cotton Valley incurred a 
net loss of $312,289 which compares to a loss of $62,081 during the first three 
months of fiscal 1998. The decline is a result of lower oil and gas revenue, 
higher general and administrative costs and higher interest and finance expense.
 
     Oil and gas sales decreased 68% from $299,169 for the three months ended 
September 30, 1997 to $97,090 for the three months ended September 30, 1998, 
reflecting lower oil prices, the shutting in of several wells which became 
uneconomic to produce as a result of low oil prices, and shut-down of the gas 
compressor at Alden for most of the month of September, 1998.  Oil and gas 
production costs decreased 64% from $191,239 for the three months ended 
September 30, 1997 to $67,947 for the three months ended September 30, 1998, 
reflecting lower production taxes and maintenance deferred on shut-in uneconomic
wells.

     Used equipment sales for the first quarter of fiscal 1999 were $456,933 as 
compared to $330,000 for the comparable quarter of fiscal 1998.  Cost of goods 
sold for the first quarter of fiscal 1999 was $237,660, and general and 
operations expense for used equipment sales was $102,761 as compared with 
$183,190 and $39,600, respectively, in the first quarter of fiscal 1998.

     General and administrative costs were $439,529 in the first quarter of 
fiscal 1999, an increase of 105% over the $214,015 incurred in the first quarter
of fiscal 1998.  Most of the increase is attributable to higher audit fees, 
legal fees associated with a registration statement and related issues, and 
increased costs of investor relations consultants. 

     The Company recognized an income tax benefit of $175,663 for the first 
quarter of fiscal 1999 as compared to recognition of an income tax benefit of 
$34,920 for the first quarter of fiscal 1998.  This is directly related to the 
size of the  loss before income taxes.

Liquidity and Capital Resources

     As of September 30, 1998, Cotton Valley has a working capital deficit of 
$796,249 calculated by subtracting current liabilities of $2,079,245 from 
current assets of $1,282,996.  Approximately $500,000 of accrued liabilities are
expected to be paid with common stock.  Management estimates that aggregate 
capital expenditures of approximately $4 million will be spent during the 
remainder of fiscal 1999 to acquire and develop oil and gas reserves.  Cotton 
Valley intends to finance its development activities with the proceeds from 
private placements, exercise of warrants, traditional bank debt and 
institutional mezzanine reserves based financing.  No assurance can be given 
that the Company will be successful in these efforts.  

Year 2000 Issues

     The "Year 2000 Problem" arose because many existing computer programs use 
only the last two digits to refer to a year.  Cotton Valley has purchased all 
its computer programs and computers since January 1, 1995, all of which have 
been certified as "Year 2000 Compliant."  Most of Cotton Valley's principal 
suppliers and customers have also certified to Cotton Valley that their computer
systems are "Year 2000 Compliant."  Therefore, the Company has determined that 
the "Year 2000 Problem" is not likely to have any material effect on the
Company.

                                  -7-

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

     As of the date of this filing, there are no legal proceedings 
pending against Cotton Valley, which would have a material adverse 
effect.

 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 small oil and gas 
companies.

Item 6.  Exhibits and Reports on Form 8K

     In a Form 8-K filed on August 5, 1998, "Effective August 3, 1998, the Board
of Directors of the Company, as well as the Audit Committee of the Board of 
Directors of the Company, approved the engagement of Lane Gorman Trubitt L.L.P. 
("LGT") as the Company's independent auditors for the fiscal year ending June 
30, 1998 to replace the firm of Hein + Associates LLP ("Hein") who declined to 
stand for re-election, effective the same date."

        

                                     -8-

                               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:  November 16, 1998


                       COTTON VALLEY RESOURCES CORPORATION
                       (Registrant)


                         /s/ Eugene A. Soltero
                         Eugene A. Soltero
                         Chief Executive Officer 




                                    -9-





EX-27
Financial Data Schedule