===============================================================================
                                  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, 2003

|_|  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 |_|

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court Yes |_| No |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

At November  30,  2003 there were  4,394,947  shares of $0.001 par value  common
stock  outstanding.  Such outstanding  shares include 144,980 shares issuable in
exchange for the remaining 4,345,101 shares of Vector Energy Corporation.

Transitional Small Business Disclosure Format (Check one) Yes |_| No |X|

===============================================================================





<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

The unaudited financial statements of the Company appearing at page F-1 through
F-13 hereof are incorporated by reference.

Item 2.     Management's Discussion and Analysis or Plan of Operation

On October 31, 2003, The Company had a working  capital  deficit of $ 4,646,445.
This is primarily due to net payables  assumed in the acquisition of oil and gas
properties,  and the  classification  of the  Company's  production  payments as
current.  The Company has begun to settle  many of the  assumed  payables  for a
combination  of cash and the Company's  common stock.  Management  believes that
they will be able to continue this.

     On May 8, 1998, the Company acquired various working and royalty  interests
in wells located in Texas,  Louisiana and Oklahoma.  To effect the  transaction,
the  Company  issued  30,000  shares  of class AA  preferred  stock,  valued  at
$3,000,000, and 313,124 shares of common stock, valued at $939,372. In addition,
the Company  assumed  $6,100,000 in bank debt and $511,465 in accounts  payable,
net of accounts  receivable  and cash  acquired.  The  Company  has  capitalized
$251,704  in   expenses   incurred  in   conjunction   with  this   transaction.
Subsequently,  the Company  issued  116,014  shares of common  stock,  valued at
$163,065,  for  additional  working  interests  in  certain  of  the  properties
acquired.

     On November 4, 1998,  the Company  acquired  various  working  interests in
wells located in Louisiana,  Texas and Oklahoma. To effect the transaction,  the
Company issued  1,226,667  shares of common stock,  valued at $1,840,000,  and a
$120,000  non-interest  bearing note payable to the  sellers.  In addition,  the
Company  assumed  $690,522 in bank debt and  $600,954 in accounts  payable.  The
Company has capitalized  $15,145 in expenses  incurred in conjunction  with this
transaction.  The Company  was also  required to expend a minimum of $500,000 in
capital investment on the properties  acquired within nine months.  Because such
capital  investment  was not made,  the  sellers  were  entitled  to  receive an
additional 500,000 shares of common stock.  Subsequently,  the Company exchanged
the working  interests  acquired in certain  properties in Texas and $30,000 for
additional working interests in the properties acquired in Louisiana.

     On March 7, 2000,  the Company  closed a purchase and sale agreement with a
company,  which is a debtor in possession in a Chapter 11 Bankruptcy.  Under the
agreement, the Company acquired all of the Bankrupt Debtor's interest in a block
located in the Offshore Texas,  Mustang Island Area for 550,000 shares of common
stock  valued  at  $550,000.  In  accordance  with the  agreement,  the  Company
immediately  repurchased 16,667 shares of common stock at $3.00 per share, for a
total of $50,000. Under the terms of the agreement,  in the event that the daily
rate of production from the properties  acquired averages at least 5,000 Mcf per
day over a  complete  calendar  month the  seller  has the right to put  150,000
shares of common stock to the Company at $3.00 per share. If the seller fails to
exercise such right,  the Company has the right to call 150,000 shares of common
stock at $3.00 per share.


                                      -1-
<PAGE>

     On November 22, 2000, the Company exchanged pipeline,  meter stations,  and
related equipment  acquired in the Mustang Island transaction for a cash payment
of $150,000 and a 20% interest in Mustang  Island  Gathering,  LLC ("the LLC") a
Texas  limited  liability  company  and  pipeline  operator.   As  part  of  the
transaction, the Company entered into a five year natural gas purchase agreement
with the LLC. As a member of the LLC, the Company has been required to guarantee
a portion of the LLC's bank debt,  which is  approximately  $1.1  million in the
aggregate.  At April 30, 2003, the Company's percentage ownership in the LLC was
approximately 15%. In addition, any member of the LLC has the right, but not the
obligation, to transfer all of its membership units in the LLC to the Company in
exchange for shares of its common stock.

     Effective  November 15, 2002,  the Company  reincorporated  into Nevada and
changed its name to VTEX Energy,  Inc. The  reincorporation  and name change was
accomplished  by a merger of Vector Energy  Corporation  into a new wholly owned
subsidiary,  VTEX Energy, Inc. One new share of VTEX Energy, Inc. was issued for
each 30 shares of Vector  Energy  Corporation  held on November  15,  2002,  the
effective date for the reincorporation.

Liquidity and Capital Resources

     On October  19,  2000,  the  Company  sold  18,107  shares of common  stock
together with a warrant to purchase  18,107 shares of common stock at $15.00 per
share and an undivided  2.2% working  interest in two  nonproducing  oil and gas
wells to a private  investor for a total  consideration  of $100,000.00 in cash.
The investor is also entitled to recoup his investment out of future  production
from the wells,  if any. On October 19,  2000,  the closing  price of the common
stock was $0.24 per share.  On November 24, 2000,  the Company sold an undivided
1.85%  interest in a  nonproducing  oil and gas well to the same  investor for a
total cash  consideration  of  $25,000.  The  investor is entitled to recoup his
investment  out of 50% of the  future  production  from the  well,  if any.  The
proceeds  of these  transactions  were used to fund  development  of the Mustang
Island Properties.

     On October  27,  2000,  the  Company  sold  13,580  shares of common  stock
together with a warrant to purchase  13,580 shares of common stock at $15.00 per
share and an undivided  2.2% working  interest in two  nonproducing  oil and gas
wells to a private  investor for a total  consideration  of $100,000.00 in cash.
The investor is also entitled to recoup his investment out of future  production
from the wells,  if any. On October 27,  closing  price of the common  stock was
$0.155 per share.  On November  24, 2000,  the Company  sold an undivided  1.85%
interest in a  nonproducing  oil and gas well to the same  investor  for a total
cash consideration of $25,000. The investor is entitled to recoup his investment
out of 50% of the future production from the well, if any. The proceeds of these
transactions were used to fund development of the Mustang Island Properties.

     Both of the transactions in October 2000 and November 2000 were treated, by
the Company, as loans repayable out of production for accounting purposes.  Such
production  loans began accruing  interest on January 1, 2001 at a variable rate
equal to the rate on the  Company's  bank debt. At October 31, 2003 the rate was
5.25%.  Accrued  interest on the loans totaled  $35,164 at October 31, 2003. The
stock  issued was booked at its fair  market  value and  treated as a loan cost,
which was amortized over six months.


                                      -2-

<PAGE>

     On December 27, 2000, the Company sold certain  interest in 5 wells located
in McClain County, Oklahoma and undivided 10% interest in 6 wells located on the
Mustang Island Property to Old Jersey Oil Ventures, LLC. for $1,000,000.00.  The
brother  of the  President  of the  Company  is a  principal  in Old  Jersey Oil
Ventures,  LLC.  At the same time Old  Jersey  Oil  Ventures  LLC,  as holder of
$591,849.41  in  indebtedness  owed by the  Company,  agreed  to  exchange  such
indebtedness for 131,522 shares of the Company's common stock.  This represented
a price of $4.50 per share.  On December  27,  2000,  the  closing  price of the
common stock was $0.125. Old Jersey Oil Ventures, LLC also exercised warrants to
purchase  13,333  shares of the Company's  common stock at $3.00 per share.  All
shares  issued  to Old  Jersey  Oil  Ventures,  LLC.  were  issued  in a private
transaction and may only be transferred in a private  transaction or pursuant to
an applicable exemption to the registration  requirements.  The Company is under
no  obligation to register such shares.  The proceeds of this  transaction  were
used as follows: $250,000.00 to make payments to general creditors;  $300,000.00
to  make  a  principal  payment  to  the  lender  under  the  Company's  secured
indebtedness  as a condition to the  lender's  agreement to enter into the fifth
amendment  to  the  credit  agreement  described  above;   $50,000  for  capital
investment on properties  owned by the Company in St. Mary's Parish,  Louisiana;
and  $400,000.00  to pay principal  and interest due under the Company's  credit
agreement. Old Jersey Oil Ventures, LLC is entitled to recoup its investment out
of future  production  from the wells in  McClain  County,  Oklahoma  and on the
Mustang Island Property.

     The  transaction  in December 2000 was treated,  by the Company,  as a loan
repayable out of production for accounting purposes.  Such production loan began
accruing interest on January 1, 2001 at a variable rate equal to the rate on the
Company's bank debt. At October 31, 2003 the rate was 5.25%. Accrued interest on
the loan totaled $169,276 at October 31, 2003.

     On December 2, 2002,  the Company sold a 12.5%  interest in a  nonproducing
well to a  private  investor  for  $20,000.  The funds  were  used to  perform a
workover on the well. The investor is also entitled to recoup his investment out
of future production form
the well.

     On December 6, 2002, the Company received $4,000 from a private investor to
fund contract lease work on the well necessary to vest title to the Company. The
investor is also entitled to recoup his investment out of future production,  if
any, from the well.

     On February 19, 2003, the Company sold a 12.5% interest in two nonproducing
wells to a  private  investor  for  $35,000.  The  funds  were  used to  perform
workovers on the wells.  The investor is also entitled to recoup his  investment
out of future production from the wells.

     All three of the  transactions  in  December  2002 and  February  2003 were
treated,  by the Company,  as a loans repayable out of production for accounting
purposes.  Such production loans accrue interest at a variable rate equal to the
rate on the Company's bank debt. At October 31, 2003 the rate was 5.25%. Accrued
interest on the loans totaled $2,434 at October 31, 2003.

     On December 27, 2000,  the Company  amended its credit  agreement to reduce
its indebtedness by $3,000,000,  reschedule  principle payments,  and remove all
financial  covenants.  Under  the terms of the  amended  credit  agreement,  the
indebtedness was payable in three monthly  installments of $31,250  beginning on
January 15, 2001, seven monthly  installments of $125,000 beginning on April 15,
2001, and a final installment of $2,400,846 due on November 14, 2001. No further
borrowings are available.  As part of the amended credit agreement,  the Company
issued 3,000 shares of Class A-1 Cumulative  Convertible  Preferred Stock to the
bank in exchange for  $3,000,000  in  outstanding  indebtedness  and pledged its
interest in the Mustang  Island  properties as additional  collateral  under the
loan.

                                      -3-

<PAGE>

     On November 15, 2001,  the Company  amended its credit  agreement to change
the  repayment  schedule to $125,000 due on December 15, 2001 and the balance of
principal and accrued but unpaid interest due on January 15, 2002.

     On January 1, 2002, the Company amended its credit  agreement to change the
repayment  schedule to $25,000 per month in principal and interest  beginning on
January 31, 2002 with the balance of principal  and accrued but unpaid  interest
due on April 15, 2002. In addition,  the Company  agreed to either sell, or have
entered into binding  agreements to sell,  certain of its oil and gas properties
by February  20,  2002 or to enter into a binding  agreement  with a  nationally
recognized  oil and gas  auction  house by March  28,  2002 for the sale of such
properties.  All of the proceeds from the sale of such properties  would be used
to reduce the Company's indebtedness.

     On April 1, 2002,  the Company  amended its credit  agreement to extend the
final due date of principal and accrued but unpaid interest to June 24, 2002. In
addition,  the date by which the  Company  had to enter into a binding  contract
with an auction house was extended to April 30, 2002.

     On June 24, 2002,  the Company  amended its credit  agreement to extend the
final due date of principal and accrued but unpaid interest to July 24, 2002.

     On July 24, 2002,  the Company  amended its credit  agreement to remove the
$25,000  per month  payment  and to extend the final due date of  principal  and
accrued but unpaid interest to August 24, 2002.

     In  accordance  with the terms of the credit  agreement,  as  amended,  the
Company  entered into a binding  contract  with an auction house on two separate
occasions for the sale of certain of its producing properties.  On June 6, 2002,
the Company closed a sale of certain of its producing  properties for total cash
consideration  of $600,100.  Net proceeds  received from the sale, which totaled
$481,027, were used to pay down the Company's bank debt.

     On  September  10,  2002,  the  Company   renegotiated  the  terms  of  its
indebtedness.  Under  the  terms  of the new  agreement,  the  Company  will pay
$300,000 to its lender by September 30, 2002.  The Company will then be relieved
of all payments  until December 2, 2002. The Company has the option on or before
December  2, 2002 to pay the lender  either an  additional  $300,000  in cash or
$150,000  in cash and  $200,000  in  production  payments  in  exchange  for the
forgiveness of the remainder of its indebtedness amounting to approximately $1.6
million.  In  addition,  the lender has agreed to convert  all of its $3 million
preferred stock into common stock equivalent to a 45% ownership  position in the
Company.

     On August 30, 2002,  the Company  closed a sale of certain of its producing
oil and gas properties for total cash  consideration  of $301,600.  Net proceeds
received  from the sale,  which  totaled  $276,697,  were paid to the  Company's
lender as part of the $300,000 payment due by September 30, 2002. The balance of
the $300,000 payment was made by the due date.

     On November 25, 2002, the Company closed a sale of certain of its producing
oil and gas properties  for total cash  consideration  of $95,000.  Net proceeds
received from the sale, which totaled $82,660, were paid to the Company's lender
as part of the payment due by December 2, 2002.

     The Company failed to make the remaining  $67,340 payment due to the lender
by December 2, 2002.  However,  the Company reached a verbal  agreement with the
lender to accept an  additional  payment  of  $17,740  in cash and  $150,000  in
production payments. Such cash payment was made on December 13, 2002.

                                      -4-
<PAGE>

     Effective  December 1, 2002,  the  Company's  line of credit was  partially
assigned to Old Jersey Oil Ventures, L.L.C. ("Old Jersey"), an entity controlled
by the brother of the President of the Company.  The Bank retained the rights to
$250,000  of the line of  credit,  payable  out of 50% of the net  profits  from
specified  oil and gas  properties  owned by the  Company  and which are pledged
against the line of credit.

     On February  11, 2003 the Company  amended and  restated  the terms of its'
credit agreement with Old Jersey. The amended and restated agreement changed the
interest  rate on the line of credit to a fixed  rate of  7.50%,  increased  the
borrowing  base to  $2,500,000,  and extended  the maturity  date to January 31,
2005. Under the terms of the amended and restated agreement,  the borrowing base
will decrease by $10,000 per month  beginning April 30, 2003. If at any time the
amount  outstanding  under the line of credit  exceeds the borrowing  base,  the
Company  must make a mandatory  principal  prepayment  in an amount equal to the
excess.  The amended and restated agreement did not effect the $250,000 interest
retained by the bank.

     During the six months  ended  October 31,  2003,  the Company  sold 225,000
shares of restricted common stock to two private investors for total proceeds of
$63,750.

     On August 8, 2003, the Company  completed a transaction  with Wachovia Bank
whereby the Company  acquired all of the bank's  holdings in VTEX  Energy,  Inc.
securities,  which consisted of 2,369,033  shares of the Company's common stock,
and received cancellation of the $250,000 note payable to the bank in return for
a payment  of $50,000  and  warrants  to  purchase  up to 250,000  shares of the
Company's common stock at $0.10 per share until August 8, 2006.

     On December 8, 2003,  the Company issued stock  appreciation  rights on one
million  shares of its common stock to a former officer and director in exchange
for advances  and accrued  payroll owed by the Company  totaling  $503,974.  The
Stock  appreciation  rights grant the holder the right to receive the difference
between  $0.10  per  share and the  current  market  price,  as  defined  in the
agreement,  of the Company's common stock. The holder can exercise its rights at
any time and the Company,  at its option, may deliver common stock valued at the
current market price in lieu of cash payment.

     For the past six  months,  the  Company's  oil and gas revenues have been
sufficient  to  satisfy  its oil and gas  operating  expenses  and  general  and
administrative expenses.  Additional equity funding will be required to meet the
capital needs of the Company.  Any inability of the Company to raise  additional
capital under such  circumstances  will limit the development of most of its oil
and  gas   properties  and  may  prevent  the  Company  from  meeting  its  cash
requirements.  If the wells currently  being brought into production  perform as
expected such financing should be available; however, there is no assurance that
such  financing  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  Company is  currently  negotiating  with many of the vendors for which
accounts  payable  were  assumed  in the  asset  acquisition  transactions,  and
believes that a significant  portion of these payables can be satisfied  through
the  issuance  of  common  stock.  If  the  Company  is  unsuccessful  in  these
negotiations,  additional  equity  funding may be needed in order to comply with
the terms of the revolving credit note.

     The Company is aggressively  seeking additional property  acquisitions with
near term revenue generating  capability and future development  potential.  The
Company is  currently  evaluating  several  potential  acquisitions  which would
utilize a combination  of the issuance of its equity  securities  and additional
debt financing.

                                      -5-

<PAGE>


                           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  thereunder,  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

The  information  required by this item is  provided  in the Notes to  Financial
Statements  appearing at pages F-7 through F-13 hereof and are  incorporated  by
reference.

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 and Reports on Form 8-K

            (A) Additional Exhibits
                Exhibit 31.1 Certification pusuant to Rule 13a-14(a) under the
                             Securities Exchange Act of 1934, as amended
                Exhibit 32.1 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
                (B) Reports on Form 8-K
                             None

                                   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/ Randal B. McDonald, Jr,
                                            ------------------------------------
                                            Randal B. McDonald, Jr.
                                            Chief Financial Officer
                                            Principal Financial and Accounting
                                            Officer

                                            Date: December 17, 2003


                                        By  /S/ Stephen F. Noser,
                                            ------------------------------------
                                            Stephen F. Noser
                                            President
                                            Principal Executive Officer

                                            Date: December 17, 2003

                                       -6-

<PAGE>























                               VTEX Energy, Inc.

                              FINANCIAL STATEMENTS

                                October 31, 2003

                                   (Unaudited)
















                                       F-1



<PAGE>
















                                    CONTENTS



                                                              Page
                                                              ----

UNAUDITED CONSOLIDATED BALANCE SHEET                          F-3 to F-4

UNAUDITED CONSOLIDATED STATEMENT OF INCOME                    F-5

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS                F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                    F-7 to F-13









                                       F-2


<PAGE>

                               VTEX Energy, Inc.
                           CONSOLIDATED BALANCE SHEET
                                October 31, 2003
                                   (Unaudited)






ASSETS

CURRENT ASSETS
  Cash                                                       $    116,818
  Certificates of deposit                                          75,000
  Revenue accounts receivable                                     221,531
  JIB accounts receivable                                          66,620
                                                             ------------
     Total current assets                                         479,969
                                                             ------------
PROVED OIL AND GAS PROPERTIES, USING THE
  FULL COST METHOD OF ACCOUNTING                               16,762,170


Less accumulated depreciation, depletion, amortization
  and impairment                                                1,118,844
                                                             ------------
Net oil and gas properties                                     15,643,326
                                                             ------------
OTHER ASSETS
  Other property and equipment, less accumulated
    depreciation of $84,035                                        22,626
  Long term accounts receivable                                   148,000
  Other assets                                                     19,277
                                                             ------------
     Total other assets                                           189,903
                                                             ------------
                                                             $ 16,313,198
                                                             ============

    The accompanying notes are an integral part of the financial statements


                                       F-3

<PAGE>


                               VTEX Energy, Inc.
                           CONSOLIDATED BALANCE SHEET
                                October 31, 2003
                                   (Unaudited)



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable                                                    54,315
  Production payments payable                                   1,243,518
  Accounts payable - trade                                      1,554,980
  Royalties payable                                               654,894
  Working interest revenues payable                               286,970
  Taxes payable                                                   197,309
  Advances from related party                                     636,461
  Accrued payroll                                                 106,883
  Accrued interest                                                391,084
                                                             -------------
     Total current liabilities                                  5,126,414
                                                             -------------

LINE OF CREDIT                                                  1,814,143
                                                             -------------

STOCKHOLDERS' EQUITY
  Preferred stock class B, noncumulative nonconvertible;
    $0.001 par value per share, 500,000 shares authorized;
    500,000 shares issued and outstanding                          50,000
Common stock, $0.001 par value; 150,000,000
    shares authorized; 4,394,947 shares issued and
    outstanding at October 31, 2003                                 4,395
  Additional paid-in capital                                   28,144,267
  Retained earnings                                           (18,826,021)
                                                             -------------
     Total stockholders' equity                                 9,372,641
                                                             -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 16,313,198
                                                             =============

    The accompanying notes are an integral part of the financial statements

                                       F-4


<PAGE>

                               VTEX Energy, Inc.
                        CONSOLIDATED STATEMENT OF INCOME
                                Six Months Ended
                                October 31, 2003
                                   (Unaudited)





REVENUES

  Oil sales                                                  $     179,585
  Gas sales                                                        533,129
  Forgiveness of debt                                              200,000
  Interest Income                                                      624
                                                             --------------
      Total revenues                                               913,338
                                                             --------------
EXPENSES

  Production taxes                                                  73,694
  Lease operating expense                                          297,574
  Depletion of oil and gas properties                               87,163
  Interest expense                                                 109,305
  General and administrative expense                               633,971
                                                             --------------
      Total expenses                                             1,201,707
                                                             --------------

NET LOSS                                                     $  (  288,369)
                                                             ==============

NET LOSS PER COMMON SHARE
   Basic                                                           $ (0.05)
                                                                   ========

 WEIGHTED AVERAGE NUMBER SHARES OUTSTANDING                      5,263,235
                                                             ==============


    The accompanying notes are an integral part of the financial statements

                                       F-5


<PAGE>

                               VTEX Energy, Inc.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                Six Months Ended
                                October 31, 2003
                                   (Unaudited)





CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                   $  (   288,369)
  Adjustments to reconcile net loss to
    net cash used by operating activities:
      Depletion of oil and gas properties                            87,163
      Depreciation expense                                            6,521
      Stock issued for consulting fees                              355,577
      Forgiveness of debt                                       (   200,000)
      Increase in accounts receivable                           (    43,947)
      Increase in accounts payable                                   35,577
      Increase in royalties and revenues payable                    296,842
      Increase in other current liabilities                         116,088
                                                             ---------------
         Net cash provided from operating activities                365,452
                                                             ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Development Costs Incurred                                    (   132,203)
                                                             ---------------
         Net cash use by investing activities                   (   132,203)
                                                             ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings under notes payable                                     14,948
  Note repayments                                               (   122,171)
  Sale of common stock                                               63,750
  Repayment of line of credit                                   (    50,000)
  Repayment of advances from related parties                    (    37,500)
                                                             ---------------
         Net cash used by financing activities                  (   130,973)
                                                             ---------------
NET INCREASE IN CASH
  AND CASH EQUIVALENTS                                              102,276

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                                14,542
                                                             ---------------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                              $      116,818
                                                             ===============


    The accompanying notes are an integral part of the financial statements

                                       F-6


<PAGE>

                               VTEX Energy, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                October 31, 2003

Management's Representation of Interim Financial Information

The accompanying  financial  statements have been prepared by VTEX Energy,  Inc.
(The  Company)  without  audit  pursuant  to the  rules and  regulations  of the
Securities and Exchange Commission.  Certain information and footnote disclosure
normally  included  in the  financial  statements  prepared in  accordance  with
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  which, in the opinion of
management,  are  necessary to a fair  presentation  of  financial  position and
results of operations.  These financial statements should be read in conjunction
with the audited financial  statements included in the Company's Form 10-KSB, as
of April 30, 2003.

Business and Organization

VTEX Energy,  Inc., a Nevada corporation  (together with its subsidiary,  Vector
Exploration, Inc., collectively, "the Company") was formed on June 18, 1998 as a
result of an  agreement  and plan of  reorganization.  The Company is  primarily
engaged in the acquisition,  development,  production and exploration of oil and
natural gas properties in the United States.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly  owned  subsidiary.   All  significant   intercompany  accounts  and
transactions have been eliminated in consolidation.

Oil and Gas Properties

The  Company  follows  the full cost  method of  accounting  for its oil and gas
properties.  All costs associated with property  acquisition,  exploration,  and
development  activities are capitalized in a single,  United States cost center.
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 gas reserves.
Capitalized  costs are  limited to the  present  value of  estimated  future net
revenues  less  estimated  future  expenditures  using a discount  factor of ten
percent.  Sales  and  abandonments  of oil and gas  properties  are  treated  as
reductions  of the  capitalized  cost pool.  At October 31, 2003,  there were no
costs of  unproved  properties  or major  development  projects  included in the
capitalized cost pool.

Other Property and Equipment

Other  property  and  equipment  of the Company  consists  primarily of computer
equipment,  vehicles and  furniture  and fixtures,  which are  depreciated  over
estimated  useful lives,  ranging from three to seven years,  on a straight-line
basis.


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.


                                      F-7
<PAGE>
                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (continued)
                                October 31, 2003


Statement of Cash Flows

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

The following is a summary of all  significant  noncash  investing and financing
activities  and payments made for interest and income taxes for the period ended
October 31, 2003:

Noncash activities:
     Common stock issued for consulting fees                    $   355,577
Cash payments:
     Interest                                                   $     8,668

Acquisitions of Oil and Gas Properties

On May 8, 1998, the Company  acquired  various working and royalty  interests in
wells located in Texas,  Louisiana and Oklahoma. To effect the transaction,  the
Company issued 30,000 shares of class AA preferred stock,  valued at $3,000,000,
and 313,124 shares of common stock, valued at $939,372. In addition, the Company
assumed  $6,100,000  in bank  debt and  $511,465  in  accounts  payable,  net of
accounts receivable and cash acquired.  The Company has capitalized  $251,704 in
expenses  incurred  in  conjunction  with this  transaction.  Subsequently,  the
Company  issued  116,014  shares  of  common  stock,  valued  at  $163,065,  for
additional working interests in certain of the properties acquired.

On November 4, 1998, the Company  acquired  various  working  interests in wells
located in Louisiana, Texas and Oklahoma. To effect the transaction, the Company
issued  1,226,667 shares of common stock,  valued at $1,840,000,  and a $120,000
non-interest  bearing  note payable to the  sellers.  In  addition,  the Company
assumed $690,522 in bank debt and $600,954 in accounts payable.  The Company has
capitalized  $15,145 in expenses  incurred in conjunction with this transaction.
The  Company  was also  required  to expend a minimum  of  $500,000  in  capital
investment on the properties  acquired within nine months.  Because such capital
investment  was not made,  the sellers  were  entitled to receive an  additional
500,000 shares of common stock. Subsequently,  the Company exchanged the working
interests  acquired in certain  properties  in Texas and $30,000 for  additional
working interests in the properties acquired in Louisiana.

On March 7, 2000,  the  Company  closed a  purchase  and sale  agreement  with a
company,  which is a debtor in possession in a Chapter 11 Bankruptcy.  Under the
agreement, the Company acquired all of the Bankrupt Debtor's interest in a block
located in the Offshore Texas,  Mustang Island Area for 550,000 shares of common
stock  valued  at  $550,000.  In  accordance  with the  agreement,  the  Company
immediately  repurchased 16,667 shares of common stock at $3.00 per share, for a
total of $50,000. Under the terms of the agreement,  in the event that the daily
rate of production from the properties  acquired averages at least 5,000 Mcf per
day over a  complete  calendar  month the  seller  has the right to put  150,000
shares of common stock to the Company at $3.00 per share. If the seller fails to
exercise such right,  the Company has the right to call 150,000 shares of common
stock at $3.00 per share.

On November  22, 2000,  the Company  exchanged  pipeline,  meter  stations,  and
related equipment  acquired in the Mustang Island transaction for a cash payment
of $150,000 and a 20% interest in Mustang  Island  Gathering,  LLC ("the LLC") a
Texas  limited  liability  company  and  pipeline  operator.   As  part  of  the
transaction, the Company entered into a five year natural gas purchase agreement
with the LLC. As a member of the LLC, the Company has been required to guarantee
a portion of the LLC's bank debt,  which is  approximately  $1.1  million in the
aggregate.  At April 30, 2003, the Company's percentage ownership in the LLC was
approximately 15%. In addition, any member of the LLC has the right, but not the
obligation, to transfer all of its membership units in the LLC to the Company in
exchange for shares of its common stock.


                                       F-8

<PAGE>

                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                October 31, 2003


Line of Credit

The Company had a $10 million revolving credit note with Wachovia Bank, National
Association (the "Bank"), which terminated on November 15, 2002. Interest on the
note was payable  monthly at a floating  rate. The borrowing base under the note
was  determined  periodically  based upon the  collateral  value assigned to the
mortgaged properties.

On December 27,  2000,  the Company  amended its credit  agreement to reduce its
indebtedness  by  $3,000,000,  reschedule  principle  payments,  and  remove all
financial  covenants.  Under  the terms of the  amended  credit  agreement,  the
indebtedness was payable in three monthly  installments of $31,250  beginning on
January 15, 2001, seven monthly  installments of $125,000 beginning on April 15,
2001, and a final installment of $2,400,846 due on November 14, 2001. No further
borrowings are available.  As part of the amended credit agreement,  the Company
issued 3,000 shares of Class A-1 Cumulative  Convertible  Preferred Stock to the
bank in exchange for  $3,000,000  in  outstanding  indebtedness  and pledged its
interest in the Mustang  Island  properties as additional  collateral  under the
loan.

On November 15,  2001,  the Company  amended its credit  agreement to change the
repayment  schedule  to  $125,000  due on  December  15, 2001 and the balance of
principal and accrued but unpaid interest due on January 15, 2002.

On January 1, 2002,  the  Company  amended  its credit  agreement  to change the
repayment  schedule to $25,000 per month in principal and interest  beginning on
January 31, 2002 with the balance of principal  and accrued but unpaid  interest
due on April 15, 2002. In addition,  the Company  agreed to either sell, or have
entered into binding  agreements to sell,  certain of its oil and gas properties
by February  20,  2002 or to enter into a binding  agreement  with a  nationally
recognized  oil and gas  auction  house by March  28,  2002 for the sale of such
properties.  All of the proceeds from the sale of such properties  would be used
to reduce the Company's indebtedness.

On April 1, 2002, the Company  amended its credit  agreement to extend the final
due date of  principal  and accrued but unpaid  interest  to June 24,  2002.  In
addition,  the date by which the  Company  had to enter into a binding  contract
with an auction house was extended to April 30, 2002.

On June 24, 2002, the Company  amended its credit  agreement to extend the final
due date of principal and accrued but unpaid interest to July 24, 2002.

On July 24, 2002, the Company amended its credit agreement to remove the $25,000
per month  payment and to extend the final due date of principal and accrued but
unpaid interest to August 24, 2002.

In accordance with the terms of the credit  agreement,  as amended,  the Company
entered into a binding contract with an auction house on two separate  occasions
for the sale of  certain  of its  producing  properties.  On June 6,  2002,  the
Company  closed a sale of certain  of its  producing  properties  for total cash
consideration  of $600,100.  Net proceeds  received from the sale, which totaled
$481,027, were used to pay down the Company's bank debt.

On September 10, 2002, the Company  renegotiated the terms of its  indebtedness.
Under the terms of the new  agreement,  the  Company  will pay  $300,000  to its
lender by September 30, 2002.  The Company will then be relieved of all payments
until December 2, 2002. The Company has the option on or before December 2, 2002
to pay the lender either an additional  $300,000 in cash or $150,000 in cash and
$200,000 in production payments in exchange for the forgiveness of the remainder
of its indebtedness  amounting to approximately $1.6 million.  In addition,  the
lender has agreed to convert all of its $3 million  preferred  stock into common
stock equivalent to a 45% ownership position in the Company.


                                       F-9
<PAGE>
                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                October 31, 2003

On August 30, 2002,  the Company  closed a sale of certain of its  producing oil
and gas  properties  for total cash  consideration  of  $301,600.  Net  proceeds
received  from the sale,  which  totaled  $276,697,  were paid to the  Company's
lender as part of the $300,000 payment due by September 30, 2002. The balance of
the $300,000 payment was made by the due date.

On November 25, 2002,  the Company closed a sale of certain of its producing oil
and gas  properties  for total  cash  consideration  of  $95,000.  Net  proceeds
received from the sale, which totaled $82,660, were paid to the Company's lender
as part of the payment due by December 2, 2002.

The Company  failed to make the remaining  $67,340  payment due to the lender by
December 2, 2002.  However,  the  Company  reached a verbal  agreement  with the
lender to accept an  additional  payment  of  $17,740  in cash and  $150,000  in
production payments. Such cash payment was made on December 13, 2002.

At April 30, 2002 the line of credit had an  outstanding  balance of $2,776,400.
During the first seven months of fiscal  2003,  the Company  completed  sales of
producing properties whose proceeds totaled $982,695. Of such proceeds, $917,000
was  paid  against  the  line of  credit,  reducing  the  principal  balance  to
$1,876,482 on December 1, 2002.

Effective  December 1, 2002, the Company's line of credit was partially assigned
to Old Jersey Oil Ventures,  L.L.C. ("Old Jersey"),  an entity controlled by the
brother  of the  President  of the  Company.  The Bank  retained  the  rights to
$250,000  of the line of  credit,  payable  out of 50% of the net  profits  from
specified  oil and gas  properties  owned by the  Company  and which are pledged
against the line of credit.

On February  11, 2003 the Company  amended and restated the terms of its' credit
agreement  with Old  Jersey.  The  amended and  restated  agreement  changed the
interest  rate on the line of credit to a fixed  rate of  7.50%,  increased  the
borrowing  base to  $2,500,000,  and extended  the maturity  date to January 31,
2005. Under the terms of the amended and restated agreement,  the borrowing base
will decrease by $10,000 per month  beginning April 30, 2003. If at any time the
amount  outstanding  under the line of credit  exceeds the borrowing  base,  the
Company  must make a mandatory  principal  prepayment  in an amount equal to the
excess.  The amended and restated agreement did not effect the $250,000 interest
retained by the bank.

On August 8, 2003,  the  Company  completed a  transaction  with  Wachovia  Bank
whereby the Company  acquired all of the bank's  holdings in VTEX  Energy,  Inc.
securities,  which consisted of 2,369,033  shares of the Company's common stock,
and received cancellation of the $250,000 note payable to the bank in return for
a payment  of $50,000  and  warrants  to  purchase  up to 250,000  shares of the
Company's common stock at $0.10 per share until August 8, 2006.

Certificates of Deposit

At October 31, 2003, the Company had certificates of deposit  totaling  $75,000.
Such  certificates  bore interest at 1.1% and mature at dates ranging from March
20,  2003 to June 13,  2004.  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.

                                      F-10
<PAGE>
                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2003

Production Payments Payable

On October 19,  2000,  the Company sold 18,107  shares of common stock  together
with a warrant to purchase 18,107 shares of common stock at $15.00 per share and
an undivided 2.2% working  interest in two  nonproducing  oil and gas wells to a
private investor for a total  consideration of $100,000.00 in cash. The investor
is also  entitled to recoup his  investment  out of future  production  from the
wells,  if any. On October 19, 2000,  the closing  price of the common stock was
$0.24 per share.  On November  24, 2000,  the Company  sold an  undivided  1.85%
interest in a  nonproducing  oil and gas well to the same  investor  for a total
cash consideration of $25,000. The investor is entitled to recoup his investment
out of 50% of the future production from the well, if any. The proceeds of these
transactions were used to fund development of the Mustang Island Properties.

On October 27,  2000,  the Company sold 13,580  shares of common stock  together
with a warrant to purchase 13,580 shares of common stock at $15.00 per share and
an undivided 2.2% working  interest in two  nonproducing  oil and gas wells to a
private investor for a total  consideration of $100,000.00 in cash. The investor
is also  entitled to recoup his  investment  out of future  production  from the
wells,  if any. On October 27,  closing price of the common stock was $0.155 per
share.  On November 24, 2000, the Company sold an undivided  1.85% interest in a
nonproducing   oil  and  gas  well  to  the  same  investor  for  a  total  cash
consideration of $25,000.  The investor is entitled to recoup his investment out
of 50% of the future  production  from the well,  if any.  The proceeds of these
transactions were used to fund development of the Mustang Island Properties.

Both of the transactions in October 2000 and November 2000 were treated,  by the
Company,  as loans  repayable out of production  for accounting  purposes.  Such
production  loans began accruing  interest on January 1, 2001 at a variable rate
equal to the rate on the  Company's  bank debt. At October 31, 2003 the rate was
5.25%.  Accrued  interest on the loans totaled  $35,164 at October 31, 2003. The
stock  issued was booked at its fair  market  value and  treated as a loan cost,
which was amortized over six months.

On December 27, 2000,  the Company sold certain  interest in 5 wells  located in
McClain  County,  Oklahoma and  undivided 10% interest in 6 wells located on the
Mustang Island Property to Old Jersey Oil Ventures, LLC. for $1,000,000.00.  The
brother  of the  President  of the  Company  is a  principal  in Old  Jersey Oil
Ventures,  LLC.  At the same time Old  Jersey  Oil  Ventures  LLC,  as holder of
$591,849.41  in  indebtedness  owed by the  Company,  agreed  to  exchange  such
indebtedness for 131,522 shares of the Company's common stock.  This represented
a price of $4.50 per share.  On December  27,  2000,  the  closing  price of the
common stock was $0.125. Old Jersey Oil Ventures, LLC also exercised warrants to
purchase  13,333  shares of the Company's  common stock at $3.00 per share.  All
shares  issued  to Old  Jersey  Oil  Ventures,  LLC.  were  issued  in a private
transaction and may only be transferred in a private  transaction or pursuant to
an applicable exemption to the registration  requirements.  The Company is under
no  obligation to register such shares.  The proceeds of this  transaction  were
used as follows: $250,000.00 to make payments to general creditors;  $300,000.00
to  make  a  principal  payment  to  the  lender  under  the  Company's  secured
indebtedness  as a condition to the  lender's  agreement to enter into the fifth
amendment  to  the  credit  agreement  described  above;   $50,000  for  capital
investment on properties  owned by the Company in St. Mary's Parish,  Louisiana;
and  $400,000.00  to pay principal  and interest due under the Company's  credit
agreement. Old Jersey Oil Ventures, LLC is entitled to recoup its investment out
of future  production  from the wells in  McClain  County,  Oklahoma  and on the
Mustang Island Property.

The  transaction  in  December  2000  was  treated,  by the  Company,  as a loan
repayable out of production for accounting purposes.  Such production loan began
accruing interest on January 1, 2001 at a variable rate equal to the rate on the
Company's bank debt. At October 31, 2003 the rate was 5.25%. Accrued interest on
the loan totaled $169,276 at October 31, 2003.

                                      F-11

<PAGE>
                               VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                October 31, 2003

On December 2, 2002, the Company sold a 12.5% interest in a nonproducing well to
a private investor for $20,000. The funds were used to perform a workover on the
well.  The  investor  is also  entitled to recoup his  investment  out of future
production form the well.

On December 6, 2002, the Company received $4,000 from a private investor to fund
contract  lease work on the well  necessary  to vest title to the  Company.  The
investor is also entitled to recoup his investment out of future production,  if
any, from the well.

On February 19,  2003,  the Company  sold a 12.5%  interest in two  nonproducing
wells to a  private  investor  for  $35,000.  The  funds  were  used to  perform
workovers on the wells.  The investor is also entitled to recoup his  investment
out of future production from the wells.

All three of the  transactions  in December 2002 and February 2003 were treated,
by the Company, as a loans repayable out of production for accounting  purposes.
Such  production  loans accrue  interest at a variable rate equal to the rate on
the  Company's  bank debt.  At  October  31,  2003 the rate was  5.25%.  Accrued
interest on the loans totaled $2,434 at October 31, 2003.

Notes Payable

Other notes payable at October 31, 2003  consisted of $54,315 in unsecured 9% to
18% notes issued to vendors in  settlement of accounts  payable.  Certain of the
notes are past their due dates and are due on demand.

Stockholder's Equity

Common Stock

The Company has 150,000,000  authorized shares of $0.001 par value common stock.
At  October  31,  2003,  4,394,947  shares  of  common  stock  were  issued  and
outstanding.

In July,  2003, the Company sold 125,000 shares of restricted  common stock to a
private investor for $40,000.

In August, 2003, the Company sold 100,000 shares of restricted common stock to a
private investor for $23,750.

On August 8, 2003,  2,369,033 shares of the Company's  common stock,  which were
owned by Wachovia  Bank,  were  returned  and  cancelled in  conjunction  with a
settlement of a portion of the Company's line of credit.

During the six months ended October 31, 2003,  the Company issued 746,344 shares
of its common stock, valued at $355,577, in exchange for consulting services.

Effective November 15, 2002, the Company  reincorporated into Nevada and changed
its  name  to  VTEX  Energy,  Inc.  The  reincorporation  and  name  change  was
accomplished  by a merger of Vector Energy  Corporation  into a new wholly owned
subsidiary,  VTEX Energy, Inc. One new share of VTEX Energy, Inc. was issued for
each 30 shares of Vector  Energy  Corporation  held on November  15,  2002,  the
effective date for the reincorporation.  At the effective date, 2,886,203 shares
of VTEX Energy,  Inc. were issuable in exchange for the outstanding common stock
of Vector Energy  Corporation.  At August 31, 2003,  4,396,896  shares of common
stock of Vector Energy  Corporation  remain  unexchanged.  The 146,708 shares of
common  stock of VTEX  Energy,  Inc.  issuable in exchange  for these  shares of
Vector Energy  Corporation have been included in the outstanding common stock of
VTEX Energy,  Inc. VTEX Energy,  Inc. may seek to enforce the mandatory exchange
by cancellation of any unexchanged shares.


                                      F-12

<PAGE>
                               VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                October 31, 2003

Preferred Stock

The Company has 50,000,000 authorized shares of preferred stock.

The  Company  is  authorized  to issue  3,000  shares  of Class  A-1  Cumulative
Convertible  Preferred  Stock (Class A-1 Preferred  Stock).  Class A-1 Preferred
Stock was issued for $1,000 per share and is entitled to receive cumulative cash
dividends  at the annual  rate of 8%  payable  annually  in  arrears  commencing
December 1, 2001 when and as declared by the Board of  Directors.  All shares of
Class A-1  Preferred  Stock  were  issued  to the  Company's  secured  lender on
December 27, 2000 as  consideration  for the reduction in the Company's  secured
indebtedness by  $3,000,000.00.  On January 16, 2003 all shares of the Class A-1
Preferred Stock, and accrued and unpaid dividends in the amount of $510,000 were
converted into 2,361,439 shares of the Company's common stock.

The Company is authorized to issue  500,000  shares of Class B Preferred  Stock,
par value  $0.001 per share.  Class B  Preferred  Stock is senior to any and all
capital  stock.  The  holders of Class B  Preferred  Stock are not  entitled  to
receive any  dividends.  As of January 31, 2003,  500,000  shares of the Class B
Preferred  Stock were issued and  outstanding.  The Class B  Preferred  Stock is
redeemable in whole, but not in part, at the option of the Company by resolution
of the Company's Board of Directors at anytime at $1.00 per share. Each share of
Class B  Preferred  Stock  has the  voting  rights  equal to 100  shares  of the
Company's  common stock.  The holders of Class B shares are entitled to elect at
least two directors to the Board of Directors of the Corporation. The holders of
Class B Preferred  Stock voting as a class will have the right to remove without
cause at any time and replace any director such holders have elected.

Stock Options and Warrants

The Company has 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.  These options  expire on dates ranging from August 25, 2005 to
March 1, 2006 and are  non-transferable.  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
Statement of Financial  Accounting Standards No. 123, Accounting for Stock Based
Compensation (SFAS No. 123) using a Black Scholes option pricing model.

Also  outstanding  at October 31, 2003 are  warrants for the purchase of 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.

On December 8, 2003, the Company issued stock appreciation rights on one million
shares of its common  stock to a former  officer and  director  in exchange  for
advances and accrued payroll owed by the Company  totaling  $503,974.  The Stock
appreciation rights grant the holder the right to receive the difference between
$0.10 per share and the current market price,  as defined in the  agreement,  of
the Company's  common stock.  The holder can exercise its rights at any time and
the  Company,  at its option,  may deliver  common  stock  valued at the current
market price in lieu of cash payment.

                                      F-13