UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

|X|  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITITES
     EXCHANGE ACT OF 1934. For the quarter ended October 31, 2005

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934




                                VTEX ENERGY, INC.
                 (Name of small business issuer in its charter)

                                     Nevada
                         (State or other jurisdiction of
                         incorporation or organization)

                                   76-0582614
                                (I.R.S. Employer
                               Identification No.)

                        8303 Southwest Freeway, Suite 950
                              Houston, Texas 77074
                     (Address of principal executive office)

                                 (713) 773-3284
                           (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

        Yes  |X|  No  |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

        Yes  |_|  No  |X|

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

        As of November 30, 2005, there were 12,708,579 shares of common stock,
$0.001 par value, outstanding.

Transitional Small Business Disclosure Format (Check one).

        Yes  |_|  No  |X|

<PAGE>


                                VTEX ENERGY, INC.
                                   FORM 10-QSB
                     FOR THE QUARTER ENDED OCTOBER 31, 2005

                                     INDEX
                                                                        PAGE
 PAGE PART I.  FINANCIAL INFORMATION
     Item 1. Financial Statements
          Consolidated Balance Sheets
               as of October 31, 2005 and April 30, 2005                  3
          Consolidated Statements of Operations
               for the Three Months Ended October 31, 2005 and 2004       5
          Consolidated Statements of Operations
               for the Six Months Ended October 31, 2005 and 2004         6
          Consolidatd Statement of Changes in Stockholders' Equity
               for the Six Months Ended October 31, 2005                  7
          Consolidated Statements of Cash Flow
               for the Six Months Ended October 31, 2005 and 2004         8
          Notes to Consolidated Financial Statements                      9

     Item 2. Management's Discussion and Analysis of Financial           18
          Condition and Results of Operations

     Item 3. Procedures and Controls                                     25

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings                                           26

     Item 2. Changes in Securities and Use of Proceeds                   26

     Item 3. Defaults Upon Senior Securities                             27

     Item 4. Submission of Matters to a Vote of Security Holders         27

     Item 5. Other Information                                           27

     Item 6. Exhibits                                                    27

SIGNATURES                                                               28


                                      -2-

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                                VTEX ENERGY, INC.
                           CONSOLIDATED BALANCE SHEETS


                                                October 31, 2005  April 30, 2005
                                                ----------------  --------------
                                                   Unaudited

    ASSETS

 CURRENT ASSETS
    Cash                                         $      43,592    $      37,582
    Certificates of deposit                            101,807           98,917
    Accounts receivable, oil and natural gas           175,239           78,702
    Joint interest billings receivable                 158,496          106,118
    Other current assets                               239,382             -
                                                 --------------   --------------
         Total current assets                          718,516          321,319
                                                 --------------   --------------

 OIL AND NATURAL GAS PROPERTIES - Full
    cost method of accounting                       18,206,900       18,325,280

    Less accumulated depreciation,
       depletion and amortization                 (  1,677,843)    (  1,581,145)
                                                 --------------   --------------
          Oil and natural gas
             properties, net                        16,529,057       16,744,135
                                                 --------------   --------------

 OTHER ASSETS
    Other property and equipment, less
       accumulated depreciation of $128,329
       and $111,229 at October 31, 2005 and
       April 30, 2005, respectively                     72,511           47,030
    Deferred loan costs, net of accumulated
       amortization of $505,716 and $362,558
       at October 31, 2005 and April 30, 2005,
       respectively                                    100,724           14,405
    Investment in Viking Petroleum UK Limited        1,369,570             -
    Other assets                                       106,680           44,600
                                                 --------------   --------------
          Total other assets                         1,649,485          106,035
                                                 --------------   --------------
TOTAL ASSETS                                     $  18,897,058    $  17,171,489
                                                 ==============   ==============




     The accompanying notes are an integral part of the financial statements

                                      -3-
<PAGE>

                                VTEX ENERGY, INC.
                           CONSOLIDATED BALANCE SHEETS


                                                October 31, 2005  April 30, 2005
                                                ----------------  --------------
                                                   Unaudited

    LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES
    Line of credit - banks                             720,304          246,537
    Notes payable, net of discount of $92,715
       and $87,397 at October 31, 2005 and
       April 30, 2005, respectively                  2,409,117        1,377,333
    Production payments payable                        305,504          305,504
    Accounts payable - trade                         2,143,304        1,462,292
    Accrued salaries, officers                          72,500             -
    Royalties payable                                  731,062          720,823
    Working interest revenues payable                   59,070           61,676
    Taxes payable, other                               172,463          172,463
    Advances from related parties                         -              12,500
    Accrued interest                                   299,149           75,810
                                                 --------------   --------------
          Total current liabilities                  6,912,473        4,434,938
                                                 --------------   --------------

 NONCURRENT LIABILITIES
    Line of credit - related party                   3,624,707        3,624,707
    Asset retirement obligations                     1,278,941        1,232,297
                                                 --------------   --------------
          Total noncurrent liabilities               4,903,648        4,857,004
                                                 --------------   --------------
 STOCKHOLDERS' EQUITY
    Preferred stock class AA-1, cumulative
       convertible; $0.01 par value per
       share, 500,000 shares authorized;
       395,879 shares issued and outstanding             3,959            3,959
    Preferred stock class B, noncumulative
       nonconvertible; $0.001 par value per
       share, 500,000 shares authorized;
       500,000 shares issued and outstanding               500              500
    Common stock, $0.001 par value per share;
       150,000,000 shares authorized; 12,708,579
       and 9,769,989 shares issued and
       outstanding at October 31, 2005 and
       April 30, 2005, respectively                     12,709            9,770
    Additional paid-in capital                      34,789,385       32,420,576
    Accumulated deficit                           ( 27,725,616)    ( 24,555,258)
                                                 --------------   --------------
          Total stockholders' equity                 7,080,937        7,879,547
                                                 --------------   --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  18,897,058    $  17,171,489
                                                 ==============   ==============





     The accompanying notes are an integral part of the financial statements


                                      -4-
<PAGE>

                                VTEX ENERGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)



                                                 Three Months Ended October 31,
                                                 -------------------------------
                                                      2005             2004
                                                      ----             ----

REVENUES
   Oil sales                                     $       5,777    $        -
   Natural gas sales                                   207,739          309,379
                                                 --------------   --------------
         Total Revenues                                213,516          309,379
                                                 --------------   --------------

EXPENSES
   Lease operating expense                             179,580          119,075
   Production taxes                                     28,580           33,233
   Depreciation, depletion and
      amortization expense                              46,263           54,722
   General and administrative expense                  722,819        1,133,801
   Accretion expense                                    23,539           22,260
                                                 --------------   --------------
         Total expenses                              1,000,781        1,363,091
                                                 --------------   --------------

OTHER INCOME (EXPENSE)
   Other income                                          5,227              992
   Interest expense                               (    350,641)    (    207,070)
                                                 --------------   --------------
         Total other expense, net                 (    345,414)    (    206,078)
                                                 --------------   --------------

NET LOSS                                         $(  1,132,679)   $(  1,259,790)
                                                 ==============   ==============

NET LOSS PER SHARE - Basic and Diluted           $(       0.09)   $(       0.17)
                                                 ==============   ==============
WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                               13,060,851        7,393,863
                                                 ==============   ==============




     The accompanying notes are an integral part of the financial statements


                                      -5-
<PAGE>

                                VTEX ENERGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)



                                                   Six Months Ended October 31,
                                                 -------------------------------
                                                      2005             2004
                                                      ----             ----

REVENUES
   Oil sales                                     $       5,777    $      57,321
   Natural gas sales                                   407,453          693,865
                                                 --------------   --------------
         Total Revenues                                413,230          751,186
                                                 --------------   --------------

EXPENSES
   Lease operating expense                             285,091          259,067
   Production taxes                                     62,382           78,535
   Depreciation, depletion and
      amortization expense                             104,945          130,515
   General and administrative expense                2,507,329        1,556,918
   Accretion expense                                    46,644           44,110
                                                 --------------   --------------
         Total expenses                              3,006,391        2,069,145
                                                 --------------   --------------

OTHER INCOME (EXPENSE)
   Other income                                          8,523            7,421
   Interest expense                               (    585,720)    (    412,754)
                                                 --------------   --------------
         Total other expense, net                 (    577,197)    (    405,333)
                                                 --------------   --------------

NET LOSS                                         $(  3,170,358)   $(  1,723,292)
                                                 ==============   ==============

NET LOSS PER SHARE - Basic and Diluted           $(       0.27)   $(       0.25)
                                                 ==============   ==============
WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                               11,776,296        6,917,852
                                                 ==============   ==============




     The accompanying notes are an integral part of the financial statements


                                      -6-
<PAGE>
                                VTEX Energy, Inc.
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        Six Months Ended October 31, 2005
<TABLE>
<CAPTION>
                                    Preferred Stock
                    -------------------------------------------
                          Class AA-1             Class B               Common Stock        Additional                     Total
                    --------------------- --------------------- ------------------------     Paid-in     Accumulated   Shareholders'
                      Shares     Amount     shares    Amount       Shares       Amount       Capital       Deficit       Equity
                    --------- ----------- --------- ----------- ------------ ----------- -------------- ------------- -------------
<S>                         <C>       <C>            <C>       <C>            <C>         <C>          <C>            <C>
Balance at
April 30, 2005       395,879  $    3,959   500,000  $      500    9,769,989  $    9,770  $  32,420,576  $(24,555,258) $  7,879,547

Common stock issued
 for consulting
 services               -           -         -           -          39,450          40         11,454                      11,494
Common stock
 obligated to be
 issued for services    -           -         -           -            -            -           40,000                      40,000
Common stock issued
 for consulting
 services incurred
 in the prior year      -           -         -           -         125,771         126   (        126)                       -
Common stock issued
 as loan
 consideration          -           -         -           -         130,000         130         37,770                      37,900
Warrants granted as
 loan consideration     -           -         -           -            -           -            55,090                      55,090
Common stock
 obligated to be
 issued as loan
 consideration          -           -         -           -            -           -            77,787                      77,787
Common stock issued
 for prior year
 loan consideration     -           -         -           -         105,267         105   (        105)                       -
Common stock issued
 for loan extensions    -           -         -           -         233,102         233         75,809                      76,042
Warrants granted
   for loan extensions  -           -         -           -            -           -            35,825                      35,825
Common stock
 obligated to be
 issued for loan
 extensions             -           -         -           -            -           -            29,120                      29,120
Common stock issued
 for prior year
 loan extensions        -           -         -           -         105,000         105   (        105)                       -
Common stock
 issued for loan
 guarantee              -           -         -           -         200,000         200         59,800                      60,000
Warrants granted for
 loan guarantee         -           -         -           -            -           -            28,490                      28,490
Common stock
 options granted for
 stock based
 compensation           -           -         -           -            -           -         1,280,000                   1,280,000
Common stock
 issued for the
 acquisition of Viking  -           -         -           -       2,000,000       2,000        638,000                     640,000
Net loss                -           -         -           -            -           -              -      ( 3,170,358) (  3,170,358)
                    --------- ----------- --------- ----------- ------------ ----------- -------------- ------------- -------------
Balance
April 30, 2005       395,879  $    3,959   500,000  $      500   12,708,579  $   12,709  $  34,789,385 $ (27,725,616)  $ 7,080,937
                    ========  =========== ========= =========== ============ =========== ============== ============  =============
</table>

          The accompanying notes are an integral part of the consolidated
            financial statements
                                      -7-
<PAGE>

                                VTEX Energy, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)


                                                   Six Months Ended October 31,
                                                 -------------------------------
                                                      2005             2004
                                                      ----             ----

 CASH FLOWS FROM OPERATING ACTIVITIES
    Net Loss                                     $(  3,170,358)   $(  1,723,292)
    Adjustments to reconcile net loss to net
       cash provided by (used in)
          operating activities
          Depreciation, depletion and
             amortization expense                      413,561          418,736
          Bad debt expense                                -              28,000
          Accretion expense                             46,644           44,110
          Common stock issued for services              51,494          972,652
          Common stock issued in settlement
             of accounts payable                          -              13,743
          Advances to related party applied to
             travel costs                                 -              79,537
          Stock based compensation                   1,280,000             -
    Changes in operating assets and liabilities
          Accounts receivable                     (    148,915)          42,324
          Other assets                            (    190,965)          31,208
          Accounts payable - trade                (     62,682)         163,887
          Accrued salaries,officers                     72,500             -
          Royalties and working interest
             revenues payable                            7,633           69,989
          Other current liabilities                    249,805          122,567
                                                 --------------   --------------
Net cash (used in) provided by
   operating activities                           (  1,451,283)         263,461
                                                 --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in certificates of deposit         (      2,890)    (     23,917)
    Oil and natural gas capital expenditures      (    326,620)    (    972,306)
    Proceeds from sales of oil and
       natural gas properties                          445,000             -
    Purchase of property and equipment, other     (      8,482)    (     18,905)
    Acquisition of Viking International
       Petroleum, PLC, net of cash acquired       (    121,619)            -
    Payments received on note receivable                  -              67,000
    Advances to related party                             -        (    114,537
    Payments received o2 advances to
       related party                                      -              45,000
                                                 --------------   --------------
Net cash provided by (used in)
   investing activities                           (     14,611)    (  1,017,665)
                                                 --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on notes payable                      1,124,595          700,000
    Repayments of notes payable                   (    113,958)    (    111,434)
    Borrowings on lines of credit                      475,000          149,300
    Repayments of lines of credit                 (      1,233)    (      2,763)
    Repayments of advances from related parties   (     12,500)    (      7,500)
    Deferred offering costs                               -        (     53,631)
                                                 --------------   --------------
Net cash provided by financing activities            1,471,904          673,972
                                                 --------------   --------------

 NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                 6,010     (     80,232)

 CASH AND CASH EQUIVALENTS,
    BEGINNING OF PERIOD                                 37,582          156,575
                                                 --------------   --------------

 CASH AND CASH EQUIVALENTS,
    END OF PERIOD                                $      43,592    $      76,343
                                                 ==============   ==============



     The accompanying notes are an integral part of the financial statements
                                      -8-
<PAGE>

                                VTEX Energy, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                October 31, 2005

Note 1.  Management's Representation of Interim Financial Information

The  accompanying  consolidated  financial  statements  have  been  prepared  by
management of VTEX Energy, Inc. (formerly Vector Energy  Corporation),  a Nevada
corporation  and  its  subsidiaries,   Vector   Exploration,   Inc.  and  Viking
International  Petroleum,  PLC ("Viking"),  collectively  the "Company"  without
audit pursuant to the rules and regulations of the SEC. Certain  information and
footnote  disclosure  normally included in the financial  statements prepared in
accordance  with  U.S.  generally  accepted  accounting   principles  have  been
condensed or omitted as allowed by such rules and  regulations,  and  management
believes that the disclosures are adequate to make the information presented not
misleading.  These financial  statements include all of the adjustments that, in
the  opinion of  management,  are  necessary  for the fair  presentation  of the
financial  position and results of  operations of the Company.  These  financial
statements should be read in conjunction with the audited consolidated financial
statements  for the year  ended  April  30,  2005,  which  are  included  in the
Company's annual report on Form 10-KSB filed with the SEC on August 15, 2005.

Business and Organization

The  Company was  incorporated  under the laws of the State of Texas on June 18,
1998 as Vector Energy Corporation.  Effective November 15, 2002, the Company was
reincorporated  into Nevada. The  reincorporation  was effected by the merger of
Vector Energy  Corporation with and into a newly created wholly owned subsidiary
VTEX Energy, Inc., a Nevada corporation,  which became the surviving entity. The
Company is primarily  engaged in the  acquisition,  development,  production and
exploration of oil and natural gas properties in the United States.  The Company
also has,  through its wholly  owned  subsidiary  Viking,  a 26%  interest in an
entity that owns a gas field in the United Kingdom.

Going Concern

For the year ended April 30, 2005 our independent  registered  public accounting
firm issued a going concern opinion. As shown in the financial  statements,  the
Company has  historically  incurred net losses from  operations and has incurred
net losses of  approximately  $3,170,000 and $1,723,000 for the six months ended
October 31, 2005 and 2004, respectively,  and losses are expected to be incurred
in the near term. Current  liabilities  exceeded current assets by approximately
$6,194,000 and $4,114,000 at October 31, 2005 and April 30, 2005,  respectively,
and the accumulated  deficit is  approximately  $27,726,000 at October 31, 2005.
Amounts  outstanding  and payable to creditors are in arrears and the Company is
in  negotiations   with  creditors  to  obtain  extensions  and  settlements  of
outstanding  amounts.   Management   anticipates  that  significant   additional
expenditures  will be  necessary  to develop the  Company's  oil and natural gas
properties,  which consist primarily of proved reserves that are  non-producing,
before  significant  positive  operating  cash flows will be  achieved.  Without
outside  investment  from the sale of equity  securities  or debt  financing our
ability to execute  our  business  plan will be  limited.  These  factors are an
indication that the Company may be unable to continue in existence. Furthermore,
the Texas Railroad  Commission declined a request by the Company for a reduction
in bonding requirements which were recently increased by the State of Texas. The
Company  has not  secured a new bond  which may  impact  operations  at  Mustang
Island. See Note 7.

Management's  plans to alleviate these conditions  include the  renegotiation of
certain  trade  payables,  settlements  of debt amounts with stock,  deferral of
certain  scheduled  payments,  and sales of non core  properties,  as considered
necessary by management. In addition, management is pursuing business partnering
arrangements  for the acquisition  and  development of additional  properties as
well as debt and equity funding through private placements.

The  accompanying  consolidated  financial  statements  are  prepared  as if the
Company will continue as a going concern. The consolidated  financial statements
do not  contain  adjustments,  including  adjustments  to  recorded  assets  and
liabilities,  which might be necessary if the Company were unable to continue as
a going concern.

Note 2.  Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial statements include the accounts of VTEX Energy, Inc.
and  its  wholly  owned  subsidiaries,   Vector  Exploration,  Inc.  and  Viking
International   Petroleum,   PLC  ("Viking")   (see  Note  4).  All  significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
The Company  applies the equity method of accounting  when it is determined that
it can exert  significant  influence,  but not  control,  over the  policies and
decisions of the entity.

                                      -9-
<PAGE>

Certain  prior  period  amounts  have been  reclassed  to conform to the current
period presentation.  These  reclassifications  did not effect the amount of the
net loss, total assets or net equity.

Oil and Natural Gas Properties

The Company  follows the full cost method of accounting  for its oil and natural
gas properties. All costs associated with property acquisition, exploration, and
development  activities  are  capitalized in a single cost center located within
the United  States.  Internal costs directly  identified  with the  acquisition,
exploration  and  development  activities  of the Company are also  capitalized.
Capitalized costs are amortized on the unit-of-production basis using proved oil
and natural gas reserves.  Capitalized costs are subject to a "ceiling test" and
limited to the present  value of estimated  future net revenues  less  estimated
future  expenditures using a discount factor of ten percent.  Should capitalized
costs exceed the present value of our reserves  discounted  at ten percent,  the
excess is charged to operations. Once incurred, an impairment of oil and natural
gas  properties  can not be  reversed  at a later  date.  Impairment  of oil and
natural gas properties is assessed on a quarterly basis in conjunction  with our
quarterly filings with the SEC. Sales of proved and unproved oil and natural gas
properties are treated as reductions of the capitalized  cost pool,  unless such
adjustments would significantly alter the relationship between capitalized costs
and proved reserves. At October 31, 2005 and April 30, 2005, there were no costs
of unproved properties or major development projects included in the capitalized
cost  pool.  The  depletion  rates per Mcfe for the three and six  months  ended
October   31,  2005  and  2004  were  $1.61  and  $1.61  and  $1.00  and  $1.04,
respectively.

The equity  investment  held by Viking is a 26% ownership in an entity that owns
and operates  various oil and natural gas properties.  The Company subjects this
equity  investment to the same  impairment  criteria used to evaluate its direct
ownership interests in proved oil and natural gas properties.  No impairment was
required as of October 31, 2005 for this equity investment.

Asset Retirement Obligations

The  Company  records a  liability  for legal  obligations  associated  with the
retirement  of  tangible  long-lived  assets  in the  period  in which  they are
incurred in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 143 "Accounting for Asset Retirement  Obligations." The Company adopted this
policy  effective May 1, 2003,  using a cumulative  effect approach to recognize
transition amounts for asset retirement  obligations  ("ARO"),  asset retirement
costs  and  accumulated  accretion  and  depletion.   Under  this  method,  when
liabilities for dismantlement and abandonment  costs,  excluding salvage values,
are  initially  recorded the carrying  amount of the related oil and natural gas
properties are increased.  Accretion of the liability is recognized  each period
using the interest method of allocation,  and the  capitalized  cost is depleted
over the useful life of the  related  asset.  Revisions  to such  estimates  are
recorded as  adjustments  to the ARO,  capitalized  asset  retirement  costs and
charges to operations during the periods in which they become known. At the time
the  abandonment  cost is incurred,  the Company will be required to recognize a
gain or loss if the actual costs do not equal the  estimated  costs  included in
ARO (see Note 6).

Stock-Based Compensation

The Company  accounts for stock based  compensation  to employees under the fair
value  method   prescribed  by  SFAS  No.  123,   "Accounting   for  Stock-Based
Compensation." Under the fair value method, compensation cost is measured at the
grant date of each common stock option or warrant based on the fair value of the
award and is recognized  over the vesting  period,  which is usually the service
period.  For common stock options and warrants,  fair value is determined  using
the Black-Scholes  option-pricing model that takes into account the common stock
market price at the grant date,  the exercise  price,  the expected  life of the
common stock option or warrant,  the market  volatility of the underlying common
stock, the dividend yield and the risk-free interest rate over the expected life
of the common stock  option or warrant.  The fair value of a common stock option
or warrant is estimated at the grant date and is not  subsequently  adjusted for
changes in the assumptions used.

Loss Per Share

Loss per share has been calculated  using the weighted  average number of shares
outstanding. Outstanding warrants and other potentially dilutive securities have
been excluded from the  calculation of loss per share,  as their effect would be
anti-dilutive due to the Company incurring a net loss for all periods presented.
At  October  31,  2005 and  2004,  there  were  516,446  and  1,043,249  shares,
respectively,  that the Company was  obligated to issue.  The  weighted  average
effects of these  shares was  370,826 and  746,766  for the three  months  ended
October  31,  2005 and 2004,  respectively,  and 239,219 and 532,514 for the six

                                      -10-
<PAGE>

months ended  October 31, 2005 and 2004,  respectively.  At October 31, 2005 and
2004, there were 250,000 warrants that were potentially dilutive common shares.

Statement of Cash Flows

For purposes of the consolidated  statement of cash flows, the Company considers
all highly  liquid  investments  purchased  with an  original  maturity of three
months or less to be cash and cash equivalents.

The  following  is a summary of all payments  made for interest and  significant
noncash financing activities for the six months ended October 31, 2005 and 2004,
respectively.

Supplemental Disclosures of Cash Flow Information:
                                                            Six Months Ended
                                                              October 31,
                                                           2005         2004
                                                           ----         ----
Cash Payments
   Interest                                           $    28,635   $    10,639

Noncash financing activities
   Accrued interest converted into note payable       $    26,466   $      -
   Common stock issued for services                        51,494       972,652
   Common stock and warrants issued to note
      holders recorded as debt discounts                  170,177        66,048
   Common stock and warrants issued for debt
      extensions and a guarantee                          229,477       221,449
   Common stock issued to settle accounts payable            -           13,743
   Common stock warrants issued for option to
      purchase oil and gas properties                        -          215,000
   Common stock options issued for stock
      based compensation                                1,280,000          -
   Common stock issued as consideration
      for the acquisition of Viking International
      Petroleum, PLC                                      640,000          -
   Net liabilities acquired in the acquisition
      of Viking International Petroleum, PLC
      (net of cash acquired)                              607,951          -

Guarantees

Guarantees  are  accounted for in  accordance  with the  provisions of Financial
Accounting Standards Board ("FASB")  Interpretation No. ("FIN")  45,"Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of  Others."  FIN 45  establishes  disclosure  and
liability-recognition  requirements for direct and indirect debt guarantees with
specified characteristics.

Note 3.  Certificates of Deposit

At October 31, 2005 and April 30, 2005, the Company had  certificates of deposit
totaling $101,807 and $98,917, respectively.  Such certificates bear interest at
rates ranging from 2.52% to 2.81% at October 31, 2005. The maturity dates of the
certificates  ranged from March 20, 2006 to June 3, 2006.  The  certificates  of
deposit  are  collateral   for  letters  of  credit,   with   expiration   dates
corresponding  to the  maturity  dates of the  certificates,  issued in favor of
governmental  agencies  in states in which the  Company  operates  wells.  It is
anticipated that such certificates of deposit and the  corresponding  letters of
credit will be renewed at maturity.

Note 4.  Acquisitions and Dispositions of Oil and Natural Gas Properties

On January 13, 2005,  the Company  executed a purchase and sale  agreement  with
ARCOA Oil & Gas, Inc. ("ARCOA"),  which was subsequently  amended in March 2005.
Under the terms of the  agreement,  as  amended,  ARCOA  acquired a net  profits
interest  in three  wells  on the  Company's  Bateman  Lake  property  for up to
$1,150,000.  The net  profits  interest is  initially  payable out of 75% of the
monthly cash flows, as defined,  attributable to the Company's  interest in such
wells until  payout,  including a 12% rate of return.  The net profits  interest
will then be reduced to 65% until the well has produced a total of $7 million of
net cash flow to the Company's working  interest.  The net profits interest will
be further reduced to 60% when the net cash flows  attributable to the Company's
working  interest  reaches a total of $9 million.  At that time, the net profits
interest will be reduced to 30% which will be the net profits  percentage  there
after. To the extent that ARCOA elects to acquire a net profits interest of less
than $1,150,000 the net profits amounts will be proportionately reduced. Further
more,  after June 1, 2006,  ARCOA may elect to convert its net profits  interest
into common  stock of the Company at a conversion  rate of $1.25 per share.  The

                                      -11-
<PAGE>
value of the net profits  interest  will be  determined  based upon the net cash
flows attributable to the reserves, discounted at 15%. ARCOA has until December,
31, 2005 to fund and close the transaction.  However,  such date may be extended
by mutual  agreement.  The Company has  received a total of $645,000 in payments
from ARCOA from inception of this agreement  through  October 31, 2005, of which
$445,000 was received during the six months ended October 31, 2005, representing
its purchase of net profits interests in certain oil and natural gas wells.

On  July  29,  2005,  the  Company  completed  the  acquisition  of  all  of the
outstanding shares of Viking.  Viking is a UK registered company with offices in
London and owns a 26%  interest in a company that owns the North  Yorkshire  gas
fields  (an  extension  of the  Southern  North  Sea  Gas  Basin  onshore).  The
properties  include  licenses  covering   approximately  100,000  acres  onshore
including,  four proved  producing  fields,  two proved  undeveloped  fields and
additional  seismically mapped low risk exploration  potential.  Upon closing of
this  acquisition,  the Company  delivered  400,000  shares of its common stock,
valued at $128,000,  to Viking for  distribution  to its  shareholders,  with an
obligation  to deliver an additional  1.6 million  shares of its common stock no
later than six months from the acquisition,  or earlier if certain defined goals
are met, unless there is a foreclosure on the assets of Viking's interest in the
gas fields.  Such additional  shares,  valued at $512,000 were issued on October
18,  2005.  Viking's  interest in the gas fields is security  for debt in Viking
Petroleum  UK,  Limited.  Such debt is not  currently  in  default,  however the
Company has no assurance that an event of default will not occur.  Additionally,
prior to the closing of the acquisition, the Company advanced $127,757 to Viking
for working  capital  purposes.  This amount is  considered  a component  of the
purchase price paid to acquire the stock of Viking.  This  transaction  has been
recorded  using the purchase  method of accounting and the results of operations
subsequent  to July  29,  2005  are  recorded  in the  consolidated  results  of
operations of the Company.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed of Viking:

     Current assets, including cash of $6,138               $      54,892
     Fixed assets                                                  25,246
     Other assets                                                  61,743
     Investment in Viking Petroleum UK Limited                  1,369,570
     Current liabilities                                     (    743,694)
                                                            --------------
     Total purchase price                                   $     767,757
                                                            ==============

The following table summarizes the components of the purchase price of Viking:

     Working capital advances made to Viking
        prior to the date of acquisition                    $     127,757
     Fair value of common stock issued                            128,000
     Fair value of common stock obligated to be issued            512,000
                                                            ---------------
     Total purchase price                                   $     767,757
                                                            ===============

On October 7, 2005, the Company entered into an agreement with Marathon Capital,
LLC ("Marathon") and U.S. Energy Systems,  Inc.  ("USEY") to jointly acquire the
assets owned by Viking Petroleum UK Limited, an entity in which the Company owns
a 26% interest through its wholly owned subsidiary  Viking. The acquisition will
be made  through  a newly  created  entity  which  will be owned  25% by each of
Marathon and the Company in consideration of their contribution of assets and/or
services, and 50% will be owned by an entity USEY will organize in consideration
of a  capital  contribution  of up to $5  million.  It is  anticipated  that the
aggregate  purchase price for the assets will be approximately  $60 million,  of
which $5 million will consist of the contributed capital.  Additional funding of
the  acquisition  is  expected  to consist of project  financing  secured by the
acquired assets.
                                      -12-
<PAGE>
Note 5.  Debt

Total debt at October 31, 2005 and April 30, 2005 consists of the following:

                                        October 31, 2005   April 30, 2005
                                        ----------------   --------------

       Lines-of-credit                   $   4,345,011     $   3,871,244
       Production payments payable             305,504           305,504
       Other notes payable, net of
          discount                           2,409,117         1,377,333
                                         --------------    --------------
                                             7,059,632         5,554,081
       Less current portion             (    3,434,925)     (  1,929,374)
                                        ---------------    --------------
                                        $    3,624,707     $   3,624,707
                                        ===============    ==============

Lines of Credit

The Company has a $10.0 million  revolving credit line with an entity controlled
by the  brother  of the  Company's  president.  The  borrowing  base  under this
revolving  credit line is $3,624,707 at October 31, 2005,  which is equal to the
outstanding  balance at that time and cannot be increased without the consent of
the  lender.  The line of  credit is  secured  by all of the  Company's  oil and
natural gas properties and bears interest at the rate of 7.5%.  Accrued interest
on the line of credit totaled $137,044 at October 31, 2005. Under its terms, the
line of credit accrues interest through October 31, 2005, at which time interest


will  be  due  monthly.  Beginning  in  November  2006,  the  principal  balance
outstanding  under the line of credit  converts to a term note and is payable in
48 equal monthly installments along with current interest.

On April 8, 2004, the Company entered into a $250,000 revolving credit agreement
with  Hibernia  Bank.  The note has been  guaranteed  by a private  investor who
received  100,000  shares of the  Company's  common  stock  with a fair value of
$49,000 as consideration for such guarantee.  The fair value of the common stock
was  expensed  when  incurred.  Interest  on this note is  payable  monthly at a
floating  rate of prime plus  1.097%  (7.847% and 6.847% at October 31, 2005 and
April 30, 2005, respectively.) The outstanding balance under the note, which was
$245,304 and $246,537 at October 31, 2005 and April 30, 2005,  respectively,  is
due upon demand.

On June 21, 2005, the Company entered into a $500,000 revolving credit agreement
with Bank of Texas.  The note was guaranteed by a private  investor who received
200,000  shares of the Company's  common stock and warrants to purchase  100,000
shares of the Company's common stock at $0.50. The value of the common stock and
warrants,  which is $88,490,  has been  included  in deferred  loan costs and is
being  amortized  over the life of the loan.  Interest  on this note is  payable
quarterly at the prime rate, which was 6.75% at October 31, 2005. The note has a
balance of $475,000 at October 31, 2005 and matures on June 20, 2006.

Other Notes Payable

Included in other notes  payable are unsecured 9% to 10% notes issued to vendors
in settlement of accounts payable. Certain of the notes are past their due dates
and are due on demand. These notes totaled $42,842 at October 31, 2005 and April
30, 2005.

In March,  2004,  the Company  issued a $150,000 note payable to Mustang  Island
Gathering,  LLC (the "LLC") for indemnification of litigation  settlement costs.
Mustang  Island  Gathering,  LLC  purchases  the natural gas  produced  from the
Company's  Mustang Island property,  and the Company is an approximate 10% owner
in the LLC. The note is payable in monthly installments,  with interest at 4.5%,
at the rate of $0.03 per MCF of natural gas purchased, beginning with April 2004
production The balance due under the note was $75,049 and $96,220 at October 31,
2005 and April 30, 2005, respectively.

Also  included in other notes  payable is a financing  obligation  for insurance
premiums,  payable in monthly  installments,  with  interest  at 7.48%,  through
February 2006. Such obligation had a balance of $66,809 at October 31, 2005.

During  December 2003 and January 2004, the Company issued a series of 12% notes
totaling $40,000 to investors for working capital loans. The Company also issued
the investors  40,000 shares of its common stock.  The stock issued was recorded
at its fair market value of $27,600 and treated as deferred  loan cost which was
amortized  over four months.  The notes were due on dates ranging from April 29,
2004 to May 26, 2004 and were in default.  These notes were  subject to a demand
for payment at any time.  However,  the Company  subsequently  reached agreement
with the  investors  to extend the due dates of the notes to dates  ranging from
April 29,  2005 to May 26, 2005 in return for the  issuance of 28,250  shares of

                                     -13-
<PAGE>
its common stock and warrants to purchase  5,000 shares of the Company's  common
stock at $0.50 per  share  which  expire  on  January  26,  2006.  The stock and
warrants  issued were recorded at their fair market value of $17,048 and treated
as deferred loan cost which is being amortized over one year.  During June 2005,
the Company  reached  agreements  with the holders of notes totaling  $30,000 to
further  extend the  maturity  dates of the notes to December 31, 2005 in return
for the issuance of 18,000 shares of the Company's  common stock.  The stock was
recorded  at its fair market  value of $5,220 and treated as deferred  loan cost
which is being amortized over the terms of the extensions.  At October 31, 2005,
the 18,000 shares of common stock  remained  unissued,  however their fair value
has been included in  stockholders'  equity.  In July 2005, the Company paid the
remaining  $10,000  principal balance and $1,792 in accrued interest on the only
note which was not extended.  Accrued interest on these notes totaled $6,549 and
$6,276 at October 31, 2005 and April 30, 2005, respectively.

During March 2005,  the Company  issued a $250,000  unsecured  note payable to a
private  investor.  The note bears interest at 12% and the principal and accrued
interest is due in one payment upon the demand of the holder.  The note provided
for the issuance to the investor of 50,000 shares of the Company's  common stock
and warrants to purchase  40,000 shares of the  Company's  common stock at $0.50
per share which  expire on March 10, 2007.  The common  stock and warrants  were
recorded at their fair value of $33,516 and treated as a debt discount which was
immediately  amortized into interest expense. At October 31, 2005, the shares of
common  stock  remained  unissued,  however  their  fair value was  included  in
stockholders' equity. Accrued interest on the note totaled $19,315 and $4,192 at
October 31, 2005 and April 30, 2005, respectively.

During the period June 2004 through April 2005,  the Company  issued a series of
12% notes totaling $1,035,667 to private investors for working capital purposes.
The notes also provided for the issuance to the  investors of 557,767  shares of
its common stock and warrants to purchase 252,633 shares of the Company's common
stock at $0.50 per share  which  expire on dates  ranging  from June 18, 2006 to
April 27, 2007.  The common stock and warrants were recorded at their fair value
of $399,610 and treated as a debt  discount  which is being  amortized  over the
term of the loan.  At  October  31,  2005,  10,000  shares of the  common  stock
remained  unissued,  however  their fair  value was  included  in  stockholders'
equity.  Interest on the notes is payable  quarterly and the principal  balances
had  original  maturity  dates  ranging from June 18, 2005 to December 31, 2005.
Accrued  interest on the notes totaled  $107,481 and $63,027 at October 31, 2005
and April 30,  2005,  respectively.  Unamortized  debt  discount was $12,307 and
$87,397  at October  31,  2005 and April 30,  2005,  respectively.  The  Company
subsequently  reached  agreement with certain of the investors to extend the due
dates of the notes to dates ranging from March 2, 2005 to June 8, 2005 in return
for the issuance of 195,000  shares of its common stock and warrants to purchase
40,000 shares of the  Company's  common stock at $0.50 per share which expire on
dates ranging from March 2, 2007 to March 8, 2007. The stock and warrants issued
were recorded at their fair market value of $77,414 and treated as deferred loan
cost which is being amortized over the term of the extension.  In June 2005, the
Company  reached  agreements to further  extend the maturity dates of all of the
12% notes to investors that had matured,  to December 31, 2005 in return for the
issuance of 197,500 shares of its common stock and warrants to purchase  105,000
shares of the  Company's  common  stock at $0.50 per share which  expire in June
2007. The stock and warrants  issued were recorded at their fair market value of
$71,655 and treated as deferred loan cost which is being amortized over the term
of the extension.  At October 31, 2005, 85,000 shares of the common stock remain
unissued, however their fair value was included in stockholders' equity.

During the period May 2005 through July 2005, the Company issued a series of 12%
notes totaling $351,466 to private  investors for working capital purposes.  The
notes also provided for the issuance to the  investors of 130,000  shares of its
common  stock and warrants to purchase  65,000  shares of the  Company's  common
stock at $0.50 per share which expire on dates  ranging from May 2, 2007 to June
27, 2007.  The common stock and  warrants  were  recorded at their fair value of
$55,880 and treated as a debt discount  which is being  amortized over the terms
of the  loan.  Interest  on the notes is  payable  quarterly  and the  principal
balances  mature on December 31,  2005.  Accrued  interest on the notes  totaled
$15,732 at October 31, 2005.  Unamortized  debt  discount was $16,674 at October
31, 2005.

During August 2005,  the Company  issued a $100,000  unsecured note payable to a
private  investor.  The note bears interest at 12% and the principal and accrued
interest is due in one payment upon the demand of the holder.  Accrued  interest
on the note totaled $2,433 at October 31, 2005.

During the period August 2005 through  October 2005, the Company issued a series
of 12%  notes  totaling  $526,466  to  private  investors  for  working  capital
purposes.  The notes also  provided for the issuance to the investors of 210,586
shares of its  common  stock and  warrants  to  purchase  105,293  shares of the
Company's  common  stock at $0.50 per share which  expire on dates  ranging from
July 27, 2007 to October 20, 2007.  The common stock and warrants  were recorded
at their fair value of $114,898  and treated as a debt  discount  which is being
amortized  over the terms of the loan.  At October 31, 2005 the shares of common
stock remained unissued,  however their fair value was included in stockholders'

                                      -14-
<PAGE>
equity.  Interest on the notes is payable  quarterly and the principal  balances
mature on December 31, 2005.  Accrued  interest on the notes  totaled  $9,474 at
October 31, 2005. Unamortized debt discount was $63,734 at October 31, 2005.

Production Payments Payable

During  October and November of 2000,  the Company  issued  31,687 shares of its
common stock and  undivided  working  interests,  ranging from 3.7% to 4.4%,  in
three  nonproducing  wells in the Mustang Island Field to private  investors for
total cash consideration of $254,000. The proceeds were used to fund development
of the wells.  The investors are entitled to recoup their investment out of 100%
of the future  production,  if any,  from the  wells.  These  transactions  were
treated,  by the Company,  as loans  repayable out of production from designated
wells for accounting purposes.  The stock issued was recorded at its fair market
value as a loan cost which has been fully amortized.  The production loans began
accruing  interest on January 1, 2001 at 5.25% and accrued interest on the loans
totaled $2,147 and $1,992 at October 31, 2005 and April 30, 2005,  respectively.
Although  certain  of the  wells  covered  by the  production  loans  have  been
producing,  the Company has not made any principal  payments under the loans. In
January and February of 2004,  the Company  issued the holders of the production
loans  100,000  shares  of the  Company's  common  stock  in  return  for  their
forbearance  under the  production  loans  until the  earlier of the first month
following  the month in which the  Company has  positive  cash flow or August 1,
2004.  The stock  issued was  recorded at its fair  market  value of $57,500 and
treated as deferred loan cost which was amortized  over six months.  In December

of 2004,  the  Company  reached an  agreement  with the  holders of the loans to
increase the interest rate to 6%, begin paying interest monthly on the loans and
to convert the accrued  interest of $51,503 into principal.  In August 2005, the
Company  agreed to issue the holders of the  production  loans 120,602 shares of
its common stock and warrants to purchase 60,300 shares of the Company's  common
stock at $0.50 per share  which  expire on August  15,  2007 in return for their
forbearance  under the loans  until  December  31,  2005.  The common  stock and
warrants  were  recorded  at their fair value of $64,112 and treated as deferred
loan  costs  which are being  amortized  over the terms of the  forbearance.

In December  2000,  the Company  issued an  undivided  10% interest in six wells
located in the Mustang  Island  Field to Old Jersey Oil  Ventures,  LLC for cash
consideration  of  $1,000,000.  The brother of the president of the Company is a
principal  in Old Jersey Oil  Ventures,  LLC.  Old Jersey Oil  Ventures,  LLC is
entitled to recoup its investment out of future production from the wells in the
Mustang Island Field.  The  transaction was treated,  by the Company,  as a loan
repayable out of production from designated wells for accounting  purposes.  The
production  loan began accruing  interest on January 1, 2001 at 5.25%. In March,
2004,  the Company  issued Old Jersey Oil  Ventures,  LLC 400,000  shares of the
Company's  common stock in return for forbearance  under the production  payment
until the  earlier of the first month  following  the month in which the Company
has positive  cash flow or August 1, 2004.  The stock issued was recorded at its
fair  market  value of $176,000  and  treated as a deferred  loan cost which was
amortized  over five  months.  On April 30,  2005,  the  production  payment and
$240,438 in accrued  interest was transferred  into the Company's line of credit
with Old Jersey Oil Ventures, LLC.

Note 6.  Asset Retirement Obligations

Beginning  in fiscal  2004,  SFAS No. 143  requires  the Company to recognize an
estimated  liability for the plugging and abandonment of its oil and natural gas
wells  and  associated  pipelines,  platforms,  and  equipment.  This  statement
requires  the  Company  to record a  liability  in the period in which its asset
retirement  obligation  ("ARO") is  incurred.  Upon initial  recognition  of the
liability,  the Company must capitalize a corresponding  asset cost equal to the
amount of the  liability.  Upon adoption of SFAS No. 143 the Company  recognized
(1) a liability  for any existing  ARO's,  (2)  corresponding  capitalized  cost
related  to  the  liability,   (3)  accumulated   depletion,   depreciation  and
amortization on that capitalized cost, and (4) a cumulative effect of accounting
change.

The  estimated  liability  is based on  historical  experience  in plugging  and
abandoning wells and associated pipelines,  platforms, and equipment,  estimated
remaining lives of those wells based on reserve  estimates and federal and state
regulatory   requirements.   The  liability  is  discounted   using  an  assumed
credit-adjusted  risk-free rate of 7.5%.  Revisions to the liability could occur
due to changes in estimates of plugging and  abandonment  costs,  changes in the
risk-free  rate  or  remaining  lives  of the  wells,  or if  federal  or  state
regulators  enact new plugging  and  abandonment  requirements.  At the time the
abandonment  cost is incurred,  the Company will be required to recognize a gain
or loss if the actual  costs do not equal the  estimated  costs  included in the
ARO.

The adoption of SFAS No. 143 was effective beginning May 1, 2003 and resulted in
an adjustment to record (1) an  $1,084,028  ARO, (2) a $850,194  increase in the
carrying  value of proved  properties,  (3) a $41,699  increase  in  accumulated
depletion, and (4) a $275,533 one-time cumulative effect of change in accounting
principle.

                                      -15-
<PAGE>
The following table describes all changes to the Company's ARO liability:

                                                  Six Months Ended October 31,
                                              ----------------------------------
                                                    2005              2004
                                                    ----              ----

Beginning asset retirement obligations        $   1,232,297     $     1,165,330
   Accretion expense                                 46,644              44,110
                                              --------------    ----------------
Ending asset retirement obligations           $   1,278,941     $     1,209,440
                                              ==============    ================

Note 7.  Commitments and Contingencies

The Texas Railroad  Commission declined a request by the Company for a reduction
in bonding  requirements which were recently increased by the State of Texas for
operators of certain  wells  located in offshore and bay State of Texas  waters.
The Company is working on obtaining a bond at this increased  level but does not
have such bond in place at this time. The Company has requested  reconsideration
by the Texas  Railroad  Commission  of this  decision  and such request has been
granted.  Until a final decision in this matter,  the Company will be allowed to
continue  its  operations  under its  current  bond.  Should the  Company not be
successful in reducing the bond level, or in the alternative obtaining a bond at


the increased  level, or provide other  satisfactory  security the Company could
outsource offshore operations of the property.

In June 2001, the Company  entered into a long-term  lease for office space with
an annual rent of $65,124.  Rent  expense for the six months  ended  October 31,
2005 and 2004 was $32,562. As of October 31, 2005, future minimum lease payments
under this lease were as follows:

              Fiscal Year
            Ended April 30,
            ---------------

                  2006                        32,562
                  2007                        16,281
                                         ------------
                  Total                  $    48,843
                                         =============

As a member of Mustang Island Gathering,  LLC, a Texas limited liability company
and pipeline  operator,  the Company has been required to guarantee a portion of
the LLC's bank debt, which is approximately  $1.1 million in the aggregate.  The
Company's  share of such  guarantee is  approximately  $40,000.  Due to positive
financial  performance of the pipeline,  the likelihood that the Company will be
required to perform under this guarantee is remote thus no amount is recorded to
reflect the obligation under this guarantee.

Subsequent  to June 1,  2006,  ARCOA  shall  have the right to  convert  its net
profits  interest into common stock of the Company at a conversion rate of $1.25
per share.  The value of the net profits  interest will be determined based upon
the net cash flows attributable to the reserves, discounted at 15%.

From time to time,  the  Company is party to certain  legal  actions  and claims
arising in the ordinary  course of  business.  While the outcome of these events
cannot be predicted with certainty,  management does not expect these matters to
have a materially adverse effect on the financial position of the Company.

The  operations  and financial  position of the Company  continue to be affected
from time to time in varying  degrees by domestic and political  developments as
well as  legislation  and  regulations  pertaining  to  restrictions  on oil and
natural gas  production,  natural gas regulation,  tax increases,  environmental
regulations and cancellation of contract rights. Both the likelihood and overall
effect of such occurrences on the Company vary greatly and are not predictable.

Note 8.  Stockholder's Equity

Common Stock

The Company has 150,000,000  shares of authorized $0.001 par value common stock,
of which  12,708,579 and 9,769,989 shares were issued and outstanding at October
31, 2005 and April 30, 2005, respectively.

During the six months ended October 31, 2005,  the Company  issued 39,450 shares
of its common  stock having a fair value of $11,494 for  services.  In addition,
the Company is obligated  to issue an  additional  142,860  shares of its common
stock under the terms of consulting agreements.  The unissued common stock has a

                                      -16-
<PAGE>
fair value of $40,000  which has been  expensed  and  included in  stockholders'
equity.  The Company also issued 125,771 shares of its common stock for services
which had been performed prior to April 30, 2005 and whose value was included in
stockholders' equity at April 30, 2005.

During the six months ended October 31, 2005,  the Company issued 130,000 shares
of its common stock having a fair value of $37,900 to investors  under the terms
of notes payable.  In addition,  the Company is obligated to issue an additional
210,586  shares  of its  common  stock to  investors  under  the  terms of notes
payable.  The unissued  common stock has a fair value of $77,788  which has been
included in stockholders'  equity. The Company also issued 105,267 shares of its
common  stock  under the terms of notes  payable  for  which the  obligation  of
issuance  arose  prior to April  30,  2005  and  whose  value  was  included  in
stockholders' equity at April 30, 2005.

During the six months ended October 31, 2005,  the Company issued 233,102 shares
of its common  stock  having a fair value of  $76,042 to  investors  in order to
extend the due dates of notes payable. In addition,  the Company is obligated to
issue an additional  103,000  shares of its common stock to investors  under the
terms extensions of notes payable. The unissued common stock has a fair value of
$29,120 which has been included in stockholders' equity. The Company also issued
105,000  shares of its  common  stock  under the  terms of  extensions  of notes
payable for which the  obligation of issuance  arose prior to April 30, 2005 and
whose value was included in stockholders' equity at April 30, 2005.


During the six months  ended  October 31,  2005,  the Company  issued  2,000,000
shares of its common stock, valued at $640,000, to the shareholders of Viking in
exchange for all of its outstanding shares (see Note 4).

Stock Options and Warrants

As of April 30, 2005,  the Company had granted  options to certain key employees
to purchase  69,336  shares of the  Company's  common  stock at purchase  prices
ranging from $4.50 to $6.90 per share. On August 25, 2005, 62,669 of the options
expired without being exercised.  The remaining 6,667 options expire on March 1,
2006 and are non-transferable.

On July 29,  2005,  in  conjunction  with  changes  in the  Company's  executive
management  and board of  directors,  the  Company  issued  options to  purchase
4,000,000  of its common  stock at $0.50 per share to  certain of the  Company's
executive  officers and  directors.  The options expire on July 29, 2015 and are
fully vested. The fair value of the options was $1,280,000 on the date of grant,
and such amount was charged to expense during the quarter ended July 31, 2005.

The options, which were issued at a price equal to or exceeding the market value
of the underlying stock on the date of the grant, are not intended to qualify as
incentive  stock  options under  Internal  Revenue Code Section 422. The Company
follows the  provisions of SFAS No. 123 recording the fair value of common stock
options on the date of grant using a Black Scholes  option  pricing  model.  The
amounts are charged to expense  over the  vesting  period,  which is usually the
service period.

In August 2003 the Company  issued  warrants to the former holder of its line of
credit to purchase  250,000  shares of the Company's  common stock at a purchase
price of $0.10  per  share.  The  warrants  expire  on  August  8,  2006 and are
transferable.

As of April 30, 2005, the Company had granted various other warrants to purchase
2,337,633 shares of its common stock at $0.50 per share. Such warrants expire on
dates ranging from January 26, 2006 to April 27, 2007.

During the six months ended  October 31, 2005,  the Company  issued  warrants to
purchase  385,593  shares of its  common  stock at $0.50 per share to  investors
under the terms of notes  payable and for  extensions  to the maturity  dates of
notes  payable.  The  warrants  had a fair value of $119,405 and expire on dates
ranging from May 2, 2007 to October 20, 2007.

Note 9.  Related Party Transactions

From time to time,  officers,  directors  and  shareholders  of the Company make
unsecured advances to the Company.  The Company made repayments of such advances
in the amount of $12,500 and $7,500 during the six months ended October 31, 2005
and 2004, respectively. As of October 31, 2005, all such advances to the Company
had been repaid.

                                      -17-
<PAGE>
The Company is obligated  under a line of credit to an entity  controlled by the
brother of the Company's president.  At October 31, 2005 and April 30, 2004, the
balance due under line of credit was  $3,624,707.  The line of credit is secured
by all of the Company's oil and natural gas properties and bears interest at the
rate of 7.5%. Accrued interest on the line of credit totaled $137,044 at October
31, 2005.  Under its terms,  the line of credit accrues interest through October
31, 2005,  at which time  interest  will be due  monthly.  Beginning in November
2006, the principal  balance  outstanding under the line of credit converts to a
term note and is payable in 48 equal  monthly  installments  along with  current
interest.

In March,  2004,  the Company  issued a $150,000 note payable to Mustang  Island
Gathering,  LLC for  indemnification  of litigation  settlement  costs.  Mustang
Island  Gathering,  LLC  purchases  the natural gas produced  from the Company's
Mustang Island property, and the Company is an approximate 10% owner in the LLC.
The note is payable in monthly installments,  with interest at 4.5%, at the rate
of $0.03 per MCF of natural gas purchased, beginning with April 2004 production.
The  balance  due under the note was $75,049 and $96,220 at October 31, 2005 and
April 30, 2005, respectively.

During July, 2005, the Company executed employment agreements with its officers.
Certain of the  officers  have  elected  to defer  payment of a portion of their
salary  under  such  agreements  until  such  time as the  Company's  cash  flow
improves. At October 31, 2005, $72,500 of deferred compensation has been accrued
and is recorded as accrued salaries, officers.

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

     The  following  is  management's  discussion  and  analysis of  significant
factors  that have  affected  certain  aspects  of our  financial  position  and
operating  results  during the periods  included in the  accompanying  unaudited
condensed consolidated  financial statements.  This discussion should be read in
conjunction with the accompanying  unaudited  condensed  consolidated  financial
statements  included  elsewhere  in  this  Form  10-QSB  and  with  Management's
Discussion and Analysis of Financial Condition and Results of Operations and our
audited consolidated  financial statements included in our annual report on Form
10-KSB for the year ended April 30, 2005.

Forward-Looking Statements

     The statements contained in all parts of this document,  including, but not
limited to, those relating to our outlook,  including any expectations regarding
increases  in our  liquidity  or  available  credit,  our  ability to access the
capital  markets  to raise  additional  capital,  our  drilling  plans,  capital
expenditures,  future  capabilities,  the  sufficiency of capital  resources and
liquidity  to support  working  capital  and capital  expenditure  requirements,
reinvestment  of cash flows,  use of NOLs, tax rates,  the outcome of litigation
and audits,  and any other  statements  regarding future  operations,  financial
results,  business  plans,  sources  of  liquidity  and  cash  needs  and  other
statements that are not historical  facts are forward looking  statements.  When
used in this document,  the words  "anticipate,"  "estimate,"  "expect,"  "may,"
"project,"  "believe,"  "budgeted,"  "intend," "plan," "potential,"  "forecast,"
"might,"  "predict,"  "should" and similar  expressions are intended to be among
the statements that identify forward looking statements. Such statements involve
risks and  uncertainties,  including,  but not limited to, those relating to the
results  of and our  dependence  on our  exploratory  and  development  drilling
activities,  the  volatility of oil and natural gas prices,  the need to replace
reserves  depleted  by  production,  operating  risks  of oil  and  natural  gas
operations,  our  dependence  on key  personnel,  our reliance on  technological
development and possible  obsolescence  of the technology  currently used by us,
the  significant  capital  requirements  of our  exploration and development and
technology  development programs, the potential impact of government regulations
and  liability for  environmental  matters,  results of  litigation  and audits,
expansion of our capital  budgets,  our ability to manage our growth and achieve
our business  strategy,  competition  from larger oil and natural gas companies,
the  uncertainty  of  reserve  information  and future  net  revenue  estimates,
property  acquisition  risks and other factors  detailed in this Form 10-QSB for
the quarterly  period ended October 31, 2005 and in our Form 10-KSB for the year
ended April 30, 2005 and other filings with the SEC ("SEC").  Should one or more
of these risks or uncertainties  materialize,  or should underlying  assumptions
prove incorrect,  actual outcomes may vary materially from those indicated.  All
subsequent  written  and oral  forward-looking  statements  attributable  to the
Company or the persons  acting on its behalf are  expressly  qualified  in their
entirety by the reference to these risks and uncertainties.

General Overview

     VTEX Energy, Inc., a Nevada corporation (the "Company"),  is an independent
oil and natural gas company  engaged in acquiring,  exploiting,  developing  and
operating oil and natural gas  properties,  with a focus on Texas and Louisiana.

                                      -18-
<PAGE>
The Company has two wholly  owned  subsidiaries,  Vector  Exploration,  Inc. and
Viking Petroleum International, PLC, and is headquartered in Houston, Texas.

     The Company was  incorporated  under the laws of the State of Texas on June
18,  1998 as Vector  Energy  Corporation  ("Vector")  which  was a wholly  owned
subsidiary of Sunburst Acquisitions II, Inc. ("Sunburst"). Vector was formed for
the purpose of  completing  a reverse  merger  with  Sunburst in order to change
Sunburst's name to Vector Energy Corporation and its state of incorporation from
Colorado  to Texas.  This  merger  was  completed  on June 19,  1998.  Effective
November 15, 2002, the Company was reincorporated in Nevada. The reincorporation
was effected by the merger of Vector with and into a newly created, wholly owned
subsidiary, VTEX Energy, Inc., a Nevada Corporation,  which became the surviving
entity.

     From its inception through March 2000, the Company  consummated a series of
oil and natural gas property  acquisitions  in Texas,  Louisiana  and  Oklahoma.
These  acquisitions  were funded primarily through the issuance of the Company's
stock and the Company's assumption of debt and other liabilities. The properties
acquired were a combination of producing properties and properties considered to
have future development potential.

     A lack of working capital and the service  requirements of the debt assumed
by the Company in its  acquisitions  prevented the Company from fully developing
the  properties  it had  acquired.  Accordingly,  the Company  identified  those
properties that had the most potential for future development,  and beginning in
July  2002  began  selling  its non  core  non  strategic  oil and  natural  gas
properties.  The proceeds from the property  sales allowed the Company to reduce
and restructure its debt, while retaining enough capital to begin development of
the properties retained.

     The  estimated  proved oil and natural gas reserves of the Company at April
30, 2005 were 103,000  barrels of crude oil and  condensate  and  9,424,000  Mcf
(thousand  cubic feet) of natural gas.  These  reserves  have an  estimated  $30
million  in future net cash  flow,  discounted  at 10%.  Of these  reserves,  an
estimated  50,000  barrels  of crude oil and  condensate  and  4,130,000  MCF of
natural gas with an estimated $13 million in future net cash flow, discounted at
10%, are considered to be proved developed.  The Company's  reserves are located
in two fields, Bateman Lake and Mustang Island 818-L.
<TABLE>
<CAPTION>
                                                                Percent of          Percent of        Percent of
                                                              April 30, 2005          Revenue          Revenue
                                                             Estimated Future         Quarter          Quarter
                                                              Net Cash Flows           Ended            Ended
          Field                       Location               Discounted at 10%     July 31, 2005    July 31, 2004
          -----                       --------               -----------------     -------------    -------------
<S>                        <C>                               <C>                   <C>              <C>
Bateman Lake               St. Mary Parish, Louisiana             48.60%               0.67%            16.50%

Mustang Island 818-L       State Waters Offshore Texas            51.40%              99.33%            83.50%

</TABLE>

Results of Operations

Three Months Ended October 31, 2005 Compared to Three Months Ended
October 31, 2004

     Oil and natural gas revenues  for the three  months ended  October 31, 2005
decreased  31% to  $213,516,  compared to $309,379 for the same period in fiscal
2005.  Production  volumes for natural gas during the three months ended October
31, 2005  decreased  53%,  to 25,487  Mcf,  compared to 54,479 Mcf for the three
months ended October 31, 2004.  Average  natural gas prices for the three months
ended October 31, 2005 increased 43% to $8.15 per Mcf, compared to $5.68 per Mcf
for the same  period in fiscal  2005.  Production  volumes for oil for the three
months ended October 31, 2005 increased to 92 barrels  compared to none produced
during the three months ended October 31, 2004. Average oil prices for the three
months  ended  October 31, 2005 were $62.79 per barrel.  The decrease in oil and
natural gas  production was primarily due to the wells at the Bateman Lake Field
being shut-in pending completion of certain repairs.

                                      -19-
<PAGE>
     The following table summarizes production volumes, average sales prices and
operating  revenues for the  Company's  oil and natural gas  operations  for the
three months ended October 31, 2005 and 2004.
<TABLE>
<CAPTION>
                                                                             Fiscal 2006 Period
                                                                          Compared to 2005 Period
                                Three Months Ended October 31,       --------------------------------
                               --------------------------------       Increase         % Increase
                                    2005              2004            Decrease)        (Decrease)
                               --------------    --------------    --------------    --------------
<S>                            <C>               <C>               <C>               <C>
Production volumes -
   Oil (Bbls)                             92              -                   92              100%
   Natural Gas (MCF)                  25,487            54,479      (     28,992)     (        53%)
Average sales prices -
   Oil (per Bbl)               $       62.79     $        -        $       62.79              100%
   Natural gas (per MCF)                8.15              5.68              2.47               43%
Operating revenue
   Oil                         $       5,777     $        -        $       5,777     $        100%
   Natural gas                       207,739           309,379      (    101,640)     (        33%)
                               --------------    --------------    --------------
                                     213,516           309,379      (     95,863)     (        31%)
                               ==============    ==============    ==============
</TABLE>

     Production  expenses for the three months ended October 31, 2005  increased
37% to  $208,160  compared  to  $152,308  for the same  period in  fiscal  2005.
Production expense per equivalent unit increased to $7.99 per Mcfe for the three
months  ended  October 31,  2005  compared to $2.80 in the same period in fiscal

2005.  This increase in  production  expense per Mcfe is caused by the effect of
fixed lease operating expenses combined with a decrease in production volumes.

     Depreciation  and depletion  expense  decreased  from $54,722 for the three
months ended  October 31, 2004 to $46,263 for the three months ended October 31,
2005.  This 15% decrease was primarily due to a 52% decrease in Mcfe  production
volumes  partially  offset by a negative  revision in reserve  volume  estimates
since April 30, 2004 which increased the depletion rate on an Mcfe basis.

     General and administrative  expenses for the three months ended October 31,
2005  decreased  by $410,982 to $722,819  compared to  $1,133,801  for the three
months ended October 31, 2004.  The decrease was primarily due to the fair value
of stock options issued to executive  officers and directors of $1,280,000 which
was expensed in the first  quarter of fiscal 2006.  This decrease in general and
administrative  expense was partially  offset by the general and  administrative
expenses of Viking,  which were included in the Company's  operations  beginning
July 29, 2005.

     Accretion  expense for the three months ended October 31, 2005 increased by
$1,279 to $23,539  compared to $22,260 for the three  months  ended  October 31,
2004. This increase was due to the normal compound effect of the discount factor
attributable to the Company's asset retirement obligation.

     Interest  expense for the three months ended October 31, 2005  increased by
69% to $350,641 from  $207,070 for the same period in fiscal 2005.  The increase
in interest  expense was due  primarily to an increase in weighted  average debt
from  $3,996,278  for the three months ended October 31, 2004 to $6,791,088  for
the three  months  ended  October 31, 2005.  Amortization  of loan  discount and
deferred loan costs included in interest expense increased from $135,729 for the
three  months  ended  October 31, 2004 to $200,501  for the three  months  ended
October 31, 2005.

     Six Months Ended  October 31, 2005 Compared to Six Months Ended October 31,
2004

     Oil and  natural gas  revenues  for the six months  ended  October 31, 2005
decreased  45% to  $413,230,  compared to $751,186 for the same period in fiscal
2005. Production volumes for natural gas during the six months ended October 31,
2005  decreased  48%, to 59,661 Mcf,  compared to 115,461 Mcf for the six months
ended  October 31,  2004.  Average  natural gas prices for the six months  ended
October 31, 2005  increased 14% to $6.83 per Mcf,  compared to $6.01 per Mcf for
the same period in fiscal  2005.  Production  volumes for oil for the six months
ended October 31, 2005 decreased to 92 barrels compared to 1,628 produced during
the six months  ended  October 31,  2004.  Average oil prices for the six months
ended October 31, 2005 increased 78% to $62.79 per barrel compared to $35.21 per
barrel for the same period in fiscal  2005.  The decrease in oil and natural gas
production  was  primarily  due to the wells at the  Bateman  Lake  Field  being
shut-in pending completion of certain repairs.

                                      -20-
<PAGE>
     The following table summarizes production volumes, average sales prices and
operating  revenues for the Company's oil and natural gas operations for the six
months ended October 31, 2005 and 2004.

<TABLE>
<CAPTION>
                                                                           Fiscal 2006 Period
                                                                        Compared to 2005 Period
                                 Six Months Ended October 31,      --------------------------------
                               --------------------------------       Increase         % Increase
                                    2005              2004            Decrease)        (Decrease)
                               --------------    --------------    --------------    --------------
<S>                            <C>               <C>               <C>               <C>
Production volumes -
   Oil (Bbls)                             92             1,628      (      1,536)     (        94%)
   Natural Gas (MCF)                  59,661           115,461      (     55,800)     (        48%)
Average sales prices -
   Oil (per Bbl)               $       62.79     $       35.21     $       27.58               78%
   Natural gas (per MCF)                6.83              6.01              0.82               14%
Operating revenue
   Oil                         $       5,777     $      57,321     $(     51,544)    $(        90%)
   Natural gas                       407,453           693,865      (    286,412)     (        41%)
                               --------------    --------------    --------------
                                     413,230           751,186      (    337,956)     (        45%)
                               ==============    ==============    ==============
</TABLE>

     Production  expenses for the six months ended October 31, 2005 increased 3%
to $347,473 compared to $337,602 for the same period in fiscal 2005.  Production
expense per equivalent unit increased to $5.77 per Mcfe for the six months ended
October 31,  2005  compared  to $2.70 in the same  period in fiscal  2005.  This

increase in  production  expense per Mcfe is caused by the effect of fixed lease
operating expenses combined with a decrease in production volumes.

     Depreciation  and  depletion  expense  decreased  from $130,515 for the six
months ended  October 31, 2004 to $104,945 for the six months ended  October 31,
2005.  This 20% decrease was primarily due to a 52% decrease in Mcfe  production
volumes  partially  offset by a negative  revision in reserve  volume  estimates
since April 30, 2004 which increased the depletion rate on an Mcfe basis.

     General and  administrative  expenses for the six months ended  October 31,
2005  increased by $950,411 to  $2,507,329  compared to  $1,556,918  for the six
months ended October 31, 2004.  The increase was primarily due to the fair value
of stock options issued to executive  officers and directors of $1,280,000 which
was expensed in the first quarter of fiscal 2006.

     Accretion  expense for the six months ended  October 31, 2005  increased by
$2,534 to $46,644 compared to $44,110 for the six months ended October 31, 2004.
This  increase  was due to the normal  compound  effect of the  discount  factor
attributable to the Company's asset retirement obligation.

     Interest expense for the six months ended October 31, 2005 increased by 42%
to $585,720  from  $412,754 for the same period in fiscal 2005.  The increase in
interest  expense was due primarily to an increase in weighted average debt from
$3,761,926  for the six months ended October 31, 2004 to $6,325,289  for the six
months ended October 31, 2005.  Amortization  of loan discount and deferred loan
costs  included in interest  expense  decreased from $321,735 for the six months
ended October 31, 2004 to $308,616 for the six months ended October 31, 2005.

Financial Condition and Capital Resources

     Since its  inception,  the  Company  has  suffered  recurring  losses  from
operations and has been dependent on existing  stockholders and new investors to
provide  the cash  resources  to sustain its  operations.  During the six months
ended October 31, 2005 and 2004, the Company  reported  losses of  approximately
$3,170,000  and  $1,723,000,  respectively.  The Company's  continuing  negative
operating  results  have  produced a working  capital  deficit of  approximately
$6,194,000 at October 31, 2005. These factors raise  substantial doubt about the
Company's  ability to  continue  as a going  concern.  The  Company's  long-term
viability as a going concern is dependent  upon the Company's  ability to obtain
sources of outside  financing to support near term  operations  and to allow the
Company to make strategic investments in new oil and natural gas prospects which
will provide the Company the ability to increase revenue and  profitability  and
sustain a cash flow level that will ensure support for continuing operations.

     For the past three months,  the Company's oil and natural gas revenues have
been  sufficient  to satisfy its oil and natural gas  operating  expenses  and a
portion of its general and administrative  expenses.  The Company has funded the

                                      -21-
<PAGE>
remainder of its general and administrative  expenses and the development of its
oil and natural gas properties through additional  borrowings under its lines of
credit, through short term investor notes, proceeds from the sale of its oil and
gas properties and issuance of its common stock.  Additional equity funding will
be  required  in the near term to meet the  capital  needs of the  Company.  The
Company is evaluating  various  financing  alternatives  such as the issuance of
debt,  private  placements of its common and preferred stock, sales of interests
in some of its oil and natural gas  properties  and joint ventures with industry
partners. There is no guarantee that the Company will be successful in obtaining
such  financing,  or that the terms of any  financing  obtained will be on terms
favorable  to the  Company.  Any  inability  of the Company to raise  additional
capital will limit the development of most of its oil and natural gas properties
and may prevent the Company  from  meeting its cash  requirements.  If the wells
which are  currently  being  brought into  production  through  development  and
workovers perform as expected  additional cash flows may be available;  however,
there is no assurance that such cash flows will in fact be available or that the
wells  will,  in  fact,  perform  as  expected.  In the  absence  of  such  well
performance  or  financing,  the Company will not be able to meet its  financial
obligations.

     The Texas  Railroad  Commission  declined  a request by the  Company  for a
reduction in bonding  requirements which were recently increased by the State of
Texas for  operators of certain wells located in offshore and bay State of Texas
waters.  The Company is working on obtaining a bond at this increased  level but
does not  have  such  bond in place at this  time.  The  Company  has  requested
reconsideration  by the Texas  Railroad  Commission  of this  decision  and such
request has been  granted.  Until a final  decision in this matter,  the Company
will be allowed to continue its  operations  under its current bond.  Should the
Company not be  successful  in reducing  the bond level,  or in the  alternative
obtaining a bond at the increased level, or provide other satisfactory  security
the Company could outsource offshore operations of the property.

     The  Company is  currently  negotiating  with many of the vendors for which
accounts  payable  were  assumed in prior asset  acquisition  transactions,  and
believes that a significant  portion of these payables can be satisfied  through
the issuance of common stock.

Financing Arrangements

     The  Company  has a $10.0  million  revolving  credit  line  with an entity
controlled by the brother of the Company's  president.  The borrowing base under
this revolving  credit line is $3,624,707 at October 31, 2005, which is equal to
the outstanding balance at that time and cannot be increased without the consent
of the  lender.  The line of credit is secured by all of the  Company's  oil and
natural gas properties and bears interest at the rate of 7.5%.  Accrued interest
on the line of credit totaled $137,044 at October 31, 2005. Under its terms, the
line of credit accrues interest through October 31, 2005, at which time interest
will  be  due  monthly.  Beginning  in  November  2006,  the  principal  balance
outstanding  under the line of credit  converts to a term note and is payable in
48 equal monthly installments along with current interest.

     On April 8, 2004,  the Company  entered  into a $250,000  revolving  credit
agreement with Hibernia Bank. The note has been guaranteed by a private investor
who received  100,000 shares of the Company's  common stock with a fair value of
$49,000 as consideration for such guarantee.  The fair value of the common stock
was  expensed  when  incurred.  Interest  on this note is  payable  monthly at a
floating  rate of prime plus  1.097%  (7.847% and 6.847% at October 31, 2005 and
April 30, 2005, respectively.) The outstanding balance under the note, which was
$245,304 and $246,537 at October 31, 2005 and April 30, 2005,  respectively,  is
due upon demand.

     On June 21,  2005,  the Company  entered into a $500,000  revolving  credit
agreement with Bank of Texas.  The note was guaranteed by a private investor who
received  200,000 shares of the Company's  common stock and warrants to purchase
100,000 shares of the Company's  common stock at $0.50.  The value of the common
stock and warrants,  which is $88,490,  has been included in deferred loan costs
and is being  amortized  over the life of the  loan.  Interest  on this  note is
payable  quarterly at the prime rate,  which was 6.75% at October 31, 2005.  The
note has a balance of $475,000 at October 31, 2005 and matures on June 20, 2006.

     The Company has outstanding  production  payments in the amount of $305,504
at October 31, 2005. In August 2005,  the Company agreed to issue the holders of
the production loans 120,602 shares of its common stock and warrants to purchase
60,300 shares of the  Company's  common stock at $0.50 per share which expire on
August 15, 2007 in return for their  forbearance  under the loans until December
31, 2005.  The common stock and  warrants  were  recorded at their fair value of
$64,112 and treated as deferred  loan costs which are being  amortized  over the
terms of the forbearance. If such forbearance is not continued, the Company will
be required to remit the revenue  from a  substantial  portion of the  Company's
production.

                                      -22-
<PAGE>
     From time to time the Company  incurs notes  payable to settle  outstanding
accounts  payable  and other  liabilities,  finance  expenditures  and  generate
working  capital.  The  balances  of such  notes  payable  were  $2,409,117  and
$1,377,333 at October 31, 2005 and April 30, 2005, respectively.

     As a member of Mustang Island Gathering,  LLC ( the "LLC"), a Texas limited
liability  company and  pipeline  operator,  the  Company  has been  required to
guarantee a portion of the LLC's bank debt, which is approximately  $1.1 million
in the  aggregate.  The  Company's  share  of such  guarantee  is  approximately
$40,000. Due to the financial  performance of the pipeline,  the likelihood that
the Company will be required to perform  under this  guarantee is remote thus no
amount is recorded to reflect the obligation under this guarantee.

Net Cash Provided by Operating Activities

     Cash flows used in operating  activities were $1,451,283 for the six months
ended October 31, 2005 as compared to $263,461 provided by operating  activities
for the six months ended  October 31, 2004.  This  decrease was primarily due to
the Company  beginning  to utilize  some of the working  capital  raised by debt
offerings to pay past operating  costs which had been deferred,  combined with a
decrease in oil and natural gas  revenues and an increase in  professional  fees
incurred.

Net Cash Used in Investing Activities

     Cash flows used in  investing  activities  was  $14,611  for the six months
ended  October  31,  2005 as compared  to  $1,017,665  for the six months  ended
October 31, 2004.  This  increase was due primarily to a decrease of $645,686 in
oil and natural gas capital  expenditures  incurred  related to workovers  and a
recompletion  performed on three wells in the Bateman  Lake field during  fiscal
2005. In addition, the Company had proceeds from the sale of oil and natural gas
properties of $445,000 during the six months ended October 31, 2005.

Net Cash Provided by Financing Activities

     Net cash flows provided by financing  activities totaled $1,471,904 for the
six months ended October 31, 2005 primarily from borrowings  under a new line of
credit from a bank and notes payable to investors  combined totaling  $1,599,595
offset by debt repayments  totaling  $115,191.  Net cash provided from financing
activities  totaled $673,972 for the six months ended October 31, 2004 primarily
from  borrowings  under a new line of credit  from a bank and notes  payable  to
investors  totaling  $849,300  offset  by the net  repayments  of debt  totaling
$114,197.

Critical Accounting Policies

         The following summarizes several of our critical accounting policies:

Use of Estimates

     The preparation of financial  statements in conformity with U.S.  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 the  reported  amounts  of  revenues  and  expenses  during  the
reporting periods. Actual results could differ from these estimates.  The use of
these estimates  significantly  affects  natural gas and oil properties  through
depletion and the full cost ceiling test, as discussed in more detail below.

Oil and Natural Gas Properties

     We account  for  investments  in natural gas and oil  properties  using the
full-cost  method  of  accounting.   All  costs  directly  associated  with  the
acquisition,  exploration  and development of natural gas and oil properties are
capitalized.  These costs  include  lease  acquisitions,  seismic  surveys,  and
drilling and completion  equipment.  We expense  maintenance and repairs as they
are incurred.

     We amortize natural gas and oil properties based on the  unit-of-production
method using  estimates  of proved  reserve  quantities.  The  amortizable  base
includes   estimated   future   development   costs  and,   where   significant,
dismantlement,  restoration  and  abandonment  costs,  net of estimated  salvage
values.  The depletion rates per Mcfe for the three and six months ended October
31, 2005 and 2004 were $1.61 and $1.61 and $1.00 and $1.04, respectively.

                                      -23-
<PAGE>
     We  account  for   dispositions  of  natural  gas  and  oil  properties  as
adjustments to capitalized  costs with no gain or loss  recognized,  unless such
adjustments would significantly alter the relationship between capitalized costs
and proved reserves.  We have not had any transactions that significantly  alter
that relationship.

     The net  capitalized  costs of proved oil and  natural gas  properties  are
subject to a "ceiling  test" which  limits such costs to the  estimated  present
value,  discounted  at a 10% interest  rate,  of future net revenues from proved
reserves, based on current economic and operating conditions. If net capitalized
costs exceed this limit, the excess is charged to operations  through depletion,
depreciation and amortization.

Oil and Natural Gas Reserve Estimates

     The reserve data  included in this document for the fiscal year ended April
30, 2005 and  thereafter  are  estimates  prepared  by D.  Raymond  Perry,  Jr.,
Independent  Petroleum Engineer.  Reserve engineering is a subjective process of
estimating underground  accumulations of hydrocarbons that cannot be measured in
an exact manner.  The process relies on  interpretation  of available  geologic,
geophysical,   engineering  and  production   data.  The  extent,   quality  and
reliability  of this data can vary. The process also requires  certain  economic
assumptions  regarding  drilling and operating  expense,  capital  expenditures,
taxes and availability of funds. The SEC mandates some of these assumptions such
as oil and natural gas prices and the present value discount rate.

         You should not assume that the present value of future net cash flows
     is the current market value of our estimated proved reserves. In accordance
with
SEC requirements, we based the estimated discounted future net cash flows from
proved reserves on prices and costs on the date of the estimate.

     Our rate of recording depreciation,  depletion and amortization expense for
proved properties  depends on our estimate of proved reserves.  If these reserve
estimates decline, the rate at which we record these expenses will increase.

Asset Retirement Obligations

     The Company records a liability for legal  obligations  associated with the
retirement  of  tangible  long-lived  assets  in the  period  in which  they are
incurred in  accordance  with SFAS No.  143,  "Accounting  for Asset  Retirement
Obligations."  The Company  adopted this policy  effective May 1, 2003,  using a
cumulative effect approach to recognize  transition amounts for asset retirement
obligations,  asset  retirement  costs and accumulated  accretion and depletion.
Under this method,  when liabilities for  dismantlement  and abandonment  costs,
excluding  salvage values,  are initially  recorded,  the carrying amount of the
related oil and natural gas properties are increased. Accretion of the liability
is  recognized  each period using the  interest  method of  allocation,  and the
capitalized cost is depleted over the useful life of the related asset.

Contingencies

     Liabilities and other contingencies are recognized upon determination of an
exposure,  which when analyzed  indicates that it is both probable that an asset
has been  impaired or that a liability  has been incurred and that the amount of
such loss is reasonably estimable.

Volatility of Oil and Natural Gas Prices

     Our  revenues,  future  rate of growth,  results of  operations,  financial
condition and ability to borrow funds or obtain additional  capital,  as well as
the  carrying  value  of  our  properties,   are  substantially  dependent  upon
prevailing prices of oil and natural gas.

Acquisition and Disposition of Oil and Natural Gas Properties

     On January 13, 2005,  the Company  executed a purchase  and sale  agreement
with ARCOA Oil & Gas, Inc.  ("ARCOA"),  which was subsequently  amended in March
2005. Under the terms of the agreement, as amended, ARCOA acquired a net profits
interest  in three  wells  on the  Company's  Bateman  Lake  property  for up to
$1,150,000.  The net  profits  interest is  initially  payable out of 75% of the
monthly cash flows, as defined,  attributable to the Company's  interest in such
wells until  payout,  including a 12% rate of return.  The net profits  interest
will then be reduced to 65% until the well has produced a total of $7 million of
net cash flow to the Company's working  interest.  The net profits interest will

                                      -24-
<PAGE>

be further reduced to 60% when the net cash flows  attributable to the Company's
working  interest  reaches a total of $9 million.  At that time, the net profits
interest will be reduced to 30% which will be the net profits  percentage  there
after. To the extent that ARCOA elects to acquire a net profits interest of less
than $1,150,000 the net profits amounts will be proportionately reduced. Further
more,  after June 1, 2006,  ARCOA may elect to convert its net profits  interest
into common  stock of the Company at a conversion  rate of $1.25 per share.  The
value of the net profits  interest  will be  determined  based upon the net cash
flows attributable to the reserves, discounted at 15%. ARCOA has until December,
31, 2005 to fund and close the transaction.  However,  such date may be extended
by mutual  agreement.  The Company has  received a total of $645,000 in payments
from ARCOA  from the  inception  of this  agreement  through  October  31,  2005
representing  its  purchase of net profits  interests in certain oil and natural
gas wells.

     On July 29,  2005,  the Company  completed  the  acquisition  of all of the
outstanding shares of Viking.  Viking is a UK registered company with offices in
London and owns a 26%  interest in a company that owns the North  Yorkshire  gas
fields  (an  extension  of the  Southern  North  Sea  Gas  Basin  onshore).  The
properties  include  licenses  covering   approximately  100,000  acres  onshore
including,  four proved  producing  fields,  two proved  undeveloped  fields and
additional  seismically mapped low risk exploration  potential.  Upon closing of
this  acquisition,  the Company  delivered  400,000  shares of its common stock,
valued at $128,000,  to Viking for  distribution  to its  shareholders,  with an
obligation  to deliver an additional  1.6 million  shares of its common stock if
certain defined goals are met or six months from the  acquisition,  unless there
is a  foreclosure  on the assets of Viking's  interest  in the gas fields.  Such

     On October 7, 2005,  the Company  entered into an agreement  with  Marathon
Capital,  LLC  ("Marathon")  and U.S. Energy Systems,  Inc.  ("USEY") to jointly
acquire the assets owned by Viking Petroleum UK Limited,  an entity in which the
Company owns a 26%  interest  through its wholly owned  subsidiary  Viking.  The
acquisition  will be made through a newly created entity which will be owned 25%
by each of Marathon and the Company in  consideration  of their  contribution of
assets and/or services, and 50% will be owned by an entity USEY will organize in
consideration of a capital  contribution of up to $5 million.  It is anticipated
that the  aggregate  purchase  price for the assets  will be  approximately  $60
million, of which $5 million will consist of the contributed capital. Additional
funding of the acquisition is expected to consist of project  financing  secured
by the acquired assets.

additional shares,  valued at $512,000 were issued on October 18, 2005. Viking's
interest in the gas fields is security for debt in Viking Petroleum UK, Limited.
Such debt is not currently in default, however the Company has no assurance that
an event of default  will not occur.  Additionally,  prior to the closing of the
acquisition,  the  Company  advanced  $127,757  to Viking  for  working  capital
purposes.  This amount is  considered a component of the purchase  price paid to
acquire  the stock of  Viking.  This  transaction  has been  recorded  using the
purchase  method of accounting and the results of operations  subsequent to July
29, 2005 are recorded in the consolidated results of operations of the Company.

Item 3.     Controls and Procedures

     Disclosure  controls and procedures are controls and other  procedures that
are  designed to ensure that  information  required to be  disclosed  in Company
reports  filed or submitted  under the  Security and Exchange Act are  recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange  Commission's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that information  required to be disclosed in Company reports filed under
the Securities and Exchange Act is accumulated  and  communicated to management,
including the  Company's  President  and Chief  Executive  Officer and the Chief
Financial Officer, as appropriate,  to allow timely decisions regarding required
disclosure.

     The  Company's  Chief  Executive   Officer  and  Chief  Financial   Officer
(collectively,  the "Certifying  Officers") are responsible for establishing and
maintaining  disclosure  controls  and  procedures  (as  defined  in  Securities
Exchange Act Rule  13a-15(e))  for the Company.  Such  officers  have  concluded
(based upon their  evaluation  of these  controls  and  procedures  as of a date
within  90 days of the  filing of this  report)  that the  Company's  disclosure
controls and  procedures  are not adequate  and  effective  for purposes of Rule
13a-14(c)  in timely  alerting  them to  material  information  relating  to the
Company required to be included in the Company's  filings with the SEC under the
Securities  Exchange  Act of 1934.  The reasons for our  determination  that our
internal controls and procedures are not effective are detailed below.

     The Company currently employs one person in the accounting  department (the
Chief  Financial  Officer) who is responsible  for the day to day accounting and
SEC reporting  function of the Company.  Daily  transactions  are accounted for,
reconciled and processed to our accounting  records solely by this person.  This
is   considered   a   material   weakness   due  to  lack  of   segregation   of
responsibilities. The lack of resources in the accounting and reporting function

                                      -25-
<PAGE>
of our internal controls also resulted in the Company not being able to file its
quarterly financial  statements during the year ended April 30, 2005 and for the
quarterly periods ended July 31, 2005 and October 31, 2005 on a timely basis. As
of the date of this  filing the  Company  is  compliant  in all of its  filings.
Furthermore,  during the course of completing the audit for the year ended April
30, 2005, several accounting  adjustments were identified requiring  adjustments
to the current year and  restatement  of the financial  statements  for the year
ended  April 30,  2004 and to various of its Form  10-QSBs  for each  respective
year.

     As a result  of the items  mentioned  above,  the  Company  has a  material
weakness in its internal  control over the financial  reporting  and  disclosure
function due to the lack accounting resources available for the daily processing
of transactions and account  reconciliations  and the reporting of our financial
statements  within the  appropriate  filings in the time required.  This void in
available accounting resources increases the likelihood to more than remote that
a material  misstatement of the Company's annual or interim financial statements
will not be prevented or detected in a timely manner.

     Executive  management of the Company is currently evaluating its accounting
resource needs and anticipates  employing further  accounting  assistance in the
near term. Management believes that additional accounting assistance,  including
increased  technical  resources,  will  mitigate  the  circumstances  that  have
resulted  in our  evaluation  of  internal  controls  and  procedures  as having
material weaknesses.

     There has been no change in our internal controls over financial  reporting
that occurred during the three months ended October 31, 2005 that has materially
affected,  or is reasonably likely to materially  affect,  our internal controls
over financial reporting.

                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

     The Company is involved from time to time in various  claims,  lawsuits and
administrative  proceedings  incidental  to  its  business.  In the  opinion  of
management,  the ultimate liability,  if any, will not have a materially adverse
effect on the financial condition or results of operations of the Company

Item 2.   Changes in Securities and Use of Proceeds

     In May 2005,  the Company  issued 1,750 shares of its common stock to Arcoa
Advisors, LLC in return for services valued at $700.

     In May 2005,  the  Company  issued a total of 135,267  shares of its common
stock to W. D. Moreland as consideration under the terms of a loan agreement and
for the extension of the maturity date of a loan agreement.

     In May 2005,  the  Company  issued a total of 115,000  shares of its common
stock to the  Bargus  Partnership  as  consideration  under  the terms of a loan
agreement and for the extension of the maturity date of a loan agreement.

     In May 2005,  the  Company  issued  125,771  shares of its common  stock to
Marshall Smith in exchange for services performed in the prior year.

     In May 2005,  the  Company  issued a total of 10,000  shares of its  common
stock to Stan Chason as consideration under the terms of a loan agreement.

     In June 2005, the Company issued 35,715 shares of its common stock to Larry
C. Wallace in return for services valued at $10,000.

     In June 2005,  the Company  issued a total of 132,500  shares of its common
stock  to Star  Investments,  Ltd as  consideration  under  the  terms of a loan
agreement and for the extension of the maturity dates of loan agreements.

     In June 2005,  the  Company  issued a total of 60,000  shares of its common
stock to  Select  Properties,  Ltd as  consideration  under  the terms of a loan
agreement and for the extension of the maturity date of a loan agreement.

                                      -26-
<PAGE>
     In September  2005,  the Company issued 1,750 shares of its common stock to
Arcoa Advisors, LLC in return for services valued at $794.

     In September 2005, the Company issued 200,000 shares of its common stock to
J. Virgil Waggoner as consideration for a loan guarantee.

     In September  2005, the Company issued 60,301 shares of its common stock to
Edlen, LLC as consideration for forbearance under a production payment payable.

     In September  2005, the Company issued 60,301 shares of its common stock to
SSSP, LLC as consideration for forbearance under a production payment payable.

     In each of the  aforementioned  cases, the Company issued the shares of its
common stock in reliance upon the exemption from registration under Section 4(2)
of the  Securities  Act of 1933,  as  amended.  The  Company  did not engage any
underwriters in connection with their issuances.

Item 3.   Defaults Upon Senior Securities

         None

Item 4.   Submission of Matters to a Vote of Security Holders

         None


Item 5. Other Information

        None

Item 6. Exhibits

    (a) Additional Exhibits

        Exhibit 31.1 Certification pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002.

        Exhibit 31.2 Certification pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002.

        Exhibit 32.2 Certification of Chief Executive Officer and
                     President of the Company, pursuant to 18 U.S.C. Section
                     1350, as adopted pursuant to Section 906 of the
                     Sarbanes-Oxley Act of 2002.

        Exhibit 32.2 Certification of Chief Financial Officer of the
                     Company, Pursuant to 18 U.S.C. Section 1350, as adopted
                     pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                      -27-
<PAGE>
                                   SIGNATURES

     In accordance  with the Exchange Act, the registrant  caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                         VTEX Energy, Inc.
                         (Registrant)

                         By       /S/ Grant G. Emms
                                  --------------------------
                                  Grant G. Emms
                                  President
                                  Principal Executive Officer
                                  Date:    December 20 2005

                         By       /S/ Randal B. McDonald, Jr.
                                  ---------------------------
                                  Randal B. McDonald, Jr.
                                  Chief Financial Officer
                                  Principal Financial and Accounting Officer
                                  Date:    December 20, 2005

                                      -28-