exv10w1



 






Exhibit 10.1




December 29, 2005




Mr. Tim Burroughs

TBX Resources, Inc.

3030 LBJ Freeway

Suite 1320

Dallas, Texas 75234




Dear Tim:



We are pleased to confirm our understanding of the services we are to provide for TBX Resources,
Inc. (the “Company”) for the year ended November 30, 2005.



We will audit the balance sheet of TBX Resources, Inc. as of November 30, 2005, and the related
statements of operations, stockholders’ equity, and cash flows for the year then ended. The
objective of an audit of the financial statements is to express an opinion on the financial
statements in accordance with generally accepted accounting principles accepted in the United
States (“GAAP”). Our audit of the financial statements will be conducted in accordance with the
standards established by the Public Company Accounting Oversight
Board (“PCAOB”) and will include
tests of the Company’s accounting records and other procedures we consider necessary to enable us
to express our opinion. If our opinion is other than unqualified, we will discuss the reasons with
Company management in advance. If, for any reason, we are unable to complete our audit or are
unable to form or have not formed our opinion, we may decline to issue a report as a result of this
engagement.



We will plan and perform the audit of the financial statements to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether from errors, fraudulent
financial reporting, misappropriation of assets, or violations of laws or regulations that are
attributable to the entity or to acts by management or employees acting on behalf of the entity.
The audit will include examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements; therefore, our audit will involve judgment about the number of
transactions to be examined and the areas to be tested. Our procedures will include tests of
documentary evidence supporting the transactions recorded in the accounts, tests of physical
existence of inventories, and direct confirmation of certain assets and liabilities by
correspondence with selected customers, creditors, and financial institutions. In connection with
our audit of the financial statements, we will obtain an understanding of internal control
sufficient to plan the audit and to determine the nature, timing and extent of audit procedures to
be performed. At the conclusion of our audit, you agree to provide certain representations from
management about the Company’s financial statements and related matters.



Because our audit is designed to provide reasonable, but not absolute, assurance and because we
will not perform a detailed examination of all transactions, there is a risk that material
misstatements or material weaknesses in internal control may exist and not be detected by us. In
addition, our financial statement audit is not designed to detect immaterial misstatements or
violations of laws or governmental regulations that do not have a direct and material effect on the
financial statements. We will, however, communicate to the audit committee and management of the
Company, as appropriate, any errors, fraud, or other illegal acts that come to our attention during
our audit, unless clearly inconsequential.





 









 








Mr. Tim Burroughs

December 29, 2005

Page 2



Our audit will include obtaining an understanding of internal control sufficient to plan the audit
and to determine the nature, timing, and extent of audit procedures to be performed. An audit is
not designed to provide assurance on internal control or to identify significant deficiencies or
material weaknesses in the design or operation of internal control. However, we will communicate
in writing to the audit committee and management any significant deficiencies and material
weaknesses relating to internal control over financial reporting identified while performing our
audit. Any significant deficiency or material weakness identified because the audit committee’s
oversight of the Company’s external financial reporting and internal control over financial
reporting is ineffective will be communicated in writing to the Company board of directors.



We are also responsible for communicating with the audit committee about certain other matters
related to our audit, including (a) our audit responsibility under PCAOB standards; (b) information
relating to our independence with respect to the Company; (c) the Company’s critical accounting
policies; (d) the quality of the Company’s accounting principles; (e) management’s judgments and
sensitive accounting estimates; (f) significant audit adjustments; (g) any disagreements with
management about matters that could be significant to the Company’s financial statements or our
report; (h) any consultations management made with other accountants; (i) any issues discussed with
management prior to retention; (j) any significant difficulties encountered in performing the
audit; (k) other information in documents containing audited financial statements, such as the
Company’s annual report; and (I) other matters as considered necessary. Further, we are
responsible for ensuring that the audit committee receives copies of certain written communications
between us and management, including management representation letters and written communications
on accounting, auditing, internal control, or other matters.



Management is responsible for the financial statements, for making all financial records and
related information available to us on a timely basis, and for the accuracy and completeness of
that information. Management is also responsible for the establishment and maintenance of adequate
records; the selection and application of accounting principles; the safeguarding of assets;
adjusting the financial statements to correct material misstatements; and confirming to us in the
management representation letter that the effects of any uncorrected misstatements aggregated by us
during the current engagement and pertaining to the latest period presented are immaterial, both
individually and in the aggregate, to the financial statements taken as a whole. In addition,
management is responsible for identifying and ensuring that the Company complies with applicable
laws and regulations.



We will also perform reviews of the Company’s unaudited quarterly financial information for each of
the four quarters in the year ending November 30, 2006. For the first three quarters, we will
perform reviews of that information before the Form 10-QSB is filed. The objective of a review is
to provide a basis for communicating whether there are any material modifications that should be
made to the interim financial information for it to conform with GAAP.



These reviews will be conducted in accordance with the standards of the PCAOB. A review of interim
financial information consists principally of performing analytical procedures and making inquiries
of persons responsible for financial and accounting matters. It includes obtaining sufficient
knowledge of the Company’s business and its internal control as it relates to the preparation of
both annual end interim financial information to identify the types of potential material
misstatements in the interim financial information and consider the likelihood of their occurrence,
and to select the inquiries and analytical procedures that will provide a basis for communicating
whether there are material modifications that
should be made to the interim financial information for it to conform with GAAP. A review is
substantially less in scope than an audit conducted in accordance PCAOB standards, the objective of
which is the expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we will not express opinions on the interim financial information.





 









 








Mr. Tim Burroughs

December 29, 2005

Page 3



Management is responsible for the Company’s interim financial information and for establishing and
maintaining effective internal control over financial reporting. It is also responsible for
identifying and ensuring that the Company complies with the laws and regulations applicable to its
activities; making all financial records and related information available to us; adjusting the
interim financial information to correct material misstatements; and affirming that the effects of
any uncorrected misstatements pertaining to the periods under review are immaterial, both
individually and in the aggregate, to the interim financial information taken as a whole.



We will communicate to the audit committee and management any matters that come to our attention as
a result of the reviews that we believe may require material modifications to the quarterly
financial information to make it conform with GAAP. We will also communicate any significant
deficiencies or material weaknesses that come to our attention. If, for any reason, we are unable
to complete our reviews or are unable to form or have not formed our opinions, we will notify the
audit committee and management. At the conclusion of our reviews, you agree to provide certain
representations from management about the financial statements and related matters.



We are required to read any annual report that contains our audit report. We will read the annual
report for the purpose of determining whether other information in the annual report (including the
manner of its presentation) is materially inconsistent with information in the financial statements
or management’s assessment of the effectiveness of the Company’s internal control over financial
reporting. We assume no obligation to perform procedures to corroborate such other information as
part of our audit.



Regarding electronic filings such as the SEC’s Electronic Data Gathering, Analysis, and Retrieval
(“EDGAR”) system, management agrees that, before filing any document in electronic format with the
SEC with which we are associated, we will be advised of the proposed filing on a timely basis. We
will provide the Company a signed copy of our report and consent. These manually signed documents
will serve to authorize the use of our name prior to the Company’s electronic transmission.
Management will provide us with a complete copy of the document accepted by EDGAR.



We estimate that our fee for the audit of TBX Resources, Inc. will be $35,000. Our fees for each
of the first three quarters ended August 31, 2006 are estimated to be $7,000. You will also be
billed an administrative charge assessed at $1,500 to cover all out-of-pocket expenses. We will
require a retainer of $12,000 prior to starting the audit. The fee estimate is based on
anticipated cooperation from your personnel and the assumption that unexpected circumstances will
not be encountered during the audit. If significant additional time is necessary, we will discuss
it with you and arrive at a new fee estimate before we incur the additional costs. Our invoices
for these fees will be rendered each month as work progresses and are payable on presentation. In
accordance with our firm policies, work may be suspended if your account becomes thirty (30) days
or more overdue and will not be resumed until your account is paid in full. If we elect to
terminate our services for nonpayment, our engagement will be deemed to have been completed even if
we have not completed our report. You will be obligated to compensate us for all time expended and
to reimburse us for all out-of-pocket expenditures through the date of termination.



The Company may wish to include or incorporate by reference our audit report on these financial
statements in a registration statement proposed to be filed under the Securities Act of 1933 or in
some other securities offering. If so, you agree not to include our audit report or make reference
to our Firm without our prior permission or consent. Any agreement to perform work in connection
with an offering, including an agreement to provide permission or consent, will be a separate
engagement.



Any additional services that may be requested, and we agree to provide, will be the subject of
separate arrangements.





 









 








Mr. Tim Burroughs

December 29, 2005

Page 4



The audit documentation for this engagement is the property of our firm and constitutes
confidential information. However, we may be requested to make certain audit documentation
available to the PCAOB, SEC, or other regulators pursuant to the authority given to them by law or
regulation. If requested, access to such audit documentation will be provided under the
supervision of firm personnel. Further, upon request, we may provide copies of selected audit
documentation to the regulator. The regulator may intend, or decide, to distribute the copies or
information contained therein to others, including other government agencies.



We appreciate the opportunity to be of service and believe this letter accurately summarizes the
significant terms of our engagement. If you have any questions, please let us know. If you agree
with the terms of our engagement as described in this letter, please sign the enclosed copy and
return it to us.




Very truly yours,




KBA GROUP LLP




/s/ KBA Group LLP




RESPONSE:




This letter correctly sets forth the understanding of TBX Resources, Inc.




	 	 	 
	/s/ Tim Burroughs

	 	1/12/06
	 

	 	 
	Mr. Tim Burroughs

	 	Date