===============================================================================
                                  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 July 31, 2004

|_|  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 Auguast 31, 2004 there were 6,464,240 shares of $0.001 par value common stock
outstanding. Such outstanding shares include 122,282 shares issuable in exchange
for the remaining 3,664,220 shares of Vector Energy Corporation.

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

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


<PAGE>


                                EXPLANATORY NOTE

         Failure To Obtain A Review Of The Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have not,
prior to their filing,  been reviewed by an independent  public accountant using
professional   standards  and  procedures  for  conducting   such  reviews,   as
established  by generally  accepted  auditing  standards,  as may be modified or
supplemented by the Securities and Exchange Commission. The Company is using its
best efforts to promptly have the interim financial  statements included in this
deficient filing reviewed as required. The Company cannot however,  predict when
the review will be completed,  its ultimate scope or its outcome or any possible
effect on the Company's financial statements.



                         PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

The unaudited financial statements of the Company appearing at page F-1 through
F-14 hereof are incorporated by reference.

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

     The information in this Form 10-QSB includes  "forward-looking  statements"
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements, other than statements of
historical or present facts, that address activities, events, outcomes and other
matters that the Company plans, expects,  intends, assumes,  believes,  budgets,
predicts,  forecasts,  projects,  estimates or  anticipates  (and other  similar
expressions)  will,  should  or may  occur  in the  future  are  forward-looking
statements.  These forward-looking  statements are based on management's current
belief, based on currently available  information,  as to the outcome and timing
of future events. When considering  forward-looking  statements, you should keep
in mind the risk factors and other cautionary statements in the Company's Annual
Report on Form 10-KSB.

     Forward-looking  statements  may appear in a number of places  and  include
statements  with respect to, among other things:

o any proposed acquisition by the Company and/or any related expected results or
  benefits associated therewith ;

o  estimates  of the  Company's  future  natural  gas and crude oil  production,
   including estimates of any increases in production;

o planned capital expenditures and the availability of capital resources to fund
  capital expenditures;

o estimates of the Company's gas and oil reserves;

o the impact of U.S. political and regulatory developments;

o the Company's future  financial  condition or results of operations and future
  revenues and expenses; and

o the  Company's  business  strategy and other plans and  objectives  for future
  operations.


     Forward-looking   statements   are   subject   to  all  of  the  risks  and
uncertainties,  many of which are beyond the Company's control,  incident to the
exploration for and acquisition,  development, production, marketing and sale of
natural  gas and  crude  oil.  These  risks  include,  but are not  limited  to,
commodity  price  volatility,  third  party  interruption  of sales  to  market,
inflation,  lack of  availability  of goods and services,  environmental  risks,
drilling and other operating risks, regulatory changes, the uncertainty inherent
in estimating proved natural gas and oil reserves and in projecting future rates
of  production  and  timing of  development  expenditures  and the  other  risks
described in the Company's Annual Report on Form 10-K.

     Reserve  engineering  is a  subjective  process of  estimating  underground
accumulations  of natural  gas and oil that  cannot be measured in an exact way.
The accuracy of any reserve  estimate  depends on the quality of available  data
and the interpretation of that data by geological  engineers.  In addition,  the
results of drilling,  testing and production activities may justify revisions of
estimates that were made  previously.  If  significant,  these  revisions  would
change  the  schedule  of  any  further  production  and  development  drilling.
Accordingly,  reserve  estimates are generally  different from the quantities of
natural gas and oil that are ultimately recovered.

     Should  one or  more of the  risks  or  uncertainties  described  above  or
elsewhere  in this  Form 10-Q  occur,  or should  underlying  assumptions  prove
incorrect,  the Company's actual results and plans could differ  materially from
those  expressed in any  forward-looking  statements.  The Company  specifically
disclaims all  responsibility to publicly update any information  contained in a
forward-looking  statement or any forward-looking  statement in its entirety and
therefore disclaims any resulting liability for potentially related damages.

     All  forward-looking  statements  attributable to the Company are expressly
qualified in their entirety by this cautionary statement.

                                      -1-


<PAGE>

Results of Operations

     Comparative  results of  operations  for the three month periods ended July
31, 2004 and 2003 are discussed below.

     Crude oil revenues  decreased by 59% from 2003 to 2004,  primarily due to a
decrease in sales volume from 4,813 barrels to 1,628  barrels.  Such decrease is
primarily  due to the fact that 2003  included a large sale that  resulted  from
pigging operations performed at the Company's Mustang Island Field. In addition,
the  Company's  main  oil  producing  well  at its  Bateman  Lake  Field  showed
production declines in 2004. The sales volume decrease was partially offset by a
20% increase,  from $29.27 in 2003 to $35.20 in 2004, in the average sales price
per barrel.

     Natural gas revenues increased by 46% from 2003 to 2004, primarily due to a
33% increase in sales volume from 45,974 MCF in 2003 to 60,982 MCF in 2004. Such
increase was primarily due to the Company's  Mustang Island Field.  In addition,
the average  sales price  increased by 10%,  from $5.72 per MCF in 2003 to $6.30
per MCF in 2004.

     Production expenses remained essentially unchanged from 2003 to 2004.

     General and Administrative expenses decreased by 23%, from $443,869 in 2003
to $341,753 in 2004. The decrease was primarily due to a reduction in consulting
fees incurred by the Company through the issuance of its common stock.

         Depletion expense increased from $46,830 in 2003 to $75,793 in 2004.
This 62% increase was primarily due to a decrease in reserve volume estimates
from April 30, 2003 to April 30, 2004.

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 three months
ended July 31,  2004 and 2003,  the  Company  reported  losses of  $232,102  and
$329,372, respectively. The Company's continuing negative operating results have
produced a working capital deficit of $5,645,585 at July 31, 2004. 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 on
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 gas prospects and the Company's  ability to increase  profitability  and
sustain a cash flow level that will ensure support for continuing operations.


                                       -2-
<PAGE>

     The  Company  has a $10  million  revolving  credit  line  with  an  entity
controlled by the brother of the  Company's  president.  However,  the borrowing
base under the revolving  credit line is  $1,839,143 at July 31, 2004,  which is
equal to the outstanding balance. The borrowing base cannot be increased without
the consent of the lender.  The Company also has a 250,000 line of credit with a
bank. The outstanding  balance under this line of credit is $249,300 at July 31,
2004, and is due upon demand.

     The Company has outstanding production payments in the amount of $1,188,518
at July 31,  2004.  The  holders of such  production  payments  have agreed to a
temporary  forbearance of the Company's  obligation.  If such forbearance is not
continued,  the Company will be required to remit the revenue from a substantial
portion of the Company's production.

     Recently,  the State Texas modified the bonding  requirements for operators
of certain wells.  The Company is currently  unable to meet these  requirements.
Continued failure by the Company to meet these  requirements could result in the
Company's  being  unable to continue  operating  its wells until a bond or other
satisfactory security can be arranged

     For the past three  months,  the  Company's  oil and gas revenues have been
sufficient  to  satisfy  its oil and gas  operating  expenses  and  general  and
administrative  expenses.  The Company has funded the development of its oil and
gas  properties  through  additional  borrowings  under its line of  credit  and
through short term investor notes. 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 which are 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.

     On July 13, 2004, the Company entered into an option with CLK Energy,  Inc.
("CLK").  Under the option,  the  Company  will  purchase  from CLK 50% of CLK's
interest in the Bayou  Choctaw  Field,  located in the  Iberville and West Baton
Rouge  Parishes.  Upon  completion  of the  purchase,  the Company has agreed to
reimburse CLK for its acquisition costs, as adjusted for intervening operations,
and will deliver a commitment to fund future well workover and field development
drilling. Under the terms of the option, CLK will be issued warrants to purchase
500,000 shares of the Company's  common stock at an exercise price of $ 0.50 per
share.

     At the  exercise  of the  option  the  Company  will  further  issue to CLK
benefit, warrants to purchase 1,500,000 shares of additional common stock in the
Company  at an  exercise  price of $ 0.50 per  share.  CLK has agreed to combine
operations,  technical and executive staff within the Company's  expanded future
operations. In further consideration, the Company will cause to be issued 10% of
its then fully  diluted  common shares to CLK. The Company will expand its Board
of Directors to  accommodate  nomination of certain  members of CLK's  executive
management.


                                       -3-


<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-14 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: September 20, 2004


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

                                            Date: September 20, 2004

                                       -3-

<PAGE>























                                VTEX Energy, Inc.

                              FINANCIAL STATEMENTS

                                  July 31, 2004

                                   (Unaudited)
















                                       F-1



<PAGE>
















                                    CONTENTS



                                                                            Page
                                                              ----

UNAUDITED CONSOLIDATED BALANCE SHEETS                         F-3 to F-4

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME                   F-5

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS               F-6

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS          F-7 to F-14









                                       F-2


<PAGE>

                                VTEX Energy, Inc.
                           CONSOLIDATED BALANCE SHEET




                                                 July 31, 2004    April 30, 2004
                                                  (Unaudited)       (Audited)
                                                ---------------  ---------------

ASSETS

CURRENT ASSETS
  Cash                                            $    137,816     $    156,575
  Certificates of deposit                               75,000           75,000
  Revenue accounts receivable                          213,706          165,262
  JIB accounts receivable                               49,821           25,865
  Note receivable                                         -              67,000
  Other current assets                                  24,370           82,051
                                                 --------------    ------------
     Total current assets                              500,713          571,751
                                                 --------------    ------------
PROVED OIL AND GAS PROPERTIES, USING THE
  FULL COST METHOD OF ACCOUNTING                    17,216,586       16,763,114


Less accumulated depreciation, depletion,
 amortization and impairment                         1,416,860        1,341,067
                                                ---------------    ------------
Net oil and gas properties                          15,799,726       15,422,047
                                                ---------------    ------------
OTHER ASSETS
  Other property and equipment, less accumulated depreciation of $95,796 and
    $91,720 at July 31, 2004 and April 30,
    2004, respectively                                  37,199           34,941
  Long term accounts receivable                        148,000          148,000
  Deferred loan costs - net                               -             134,350
  Other assets                                          38,277           19,277
                                                ---------------    ------------
     Total other assets                                223,476          336,568
                                                ---------------    ------------
                                                $  16,523,915      $ 16,330,368
                                                ===============    ============

    The accompanying notes are an integral part of the financial statements


                                       F-3

<PAGE>


                                VTEX Energy, Inc.
                           CONSOLIDATED BALANCE SHEET


                                                 July 31, 2004    April 30, 2004
                                                  (Unaudited)       (Audited)
                                                ---------------  ---------------


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Line of Credit - related party                 $   1,839,143     $   1,839,143
  Line of credit - bank                                249,300          100,000
  Notes payable                                        299,285          306,092
  Production payments payable to related party         934,518          934,518
  Production payments payable                          254,000          254,000
  Accounts payable - trade                             762,702          681,744
  Royalties payable                                    734,189          654,191
  Working interest revenues payable                     84,503           94,232
  Taxes payable                                        201,728          201,478
  Advances from related party                          244,906          242,406
  Accrued interest                                     542,024          486,043
                                                 --------------   --------------
     Total current liabilities                       6,146,298        5,793,847
                                                 --------------   --------------

NONCURRENT LIABILITIES
  Asset retirement obligations                         954,442          940,337
                                                 --------------   --------------
     Total noncurrent liabilities                      954,442          940,337
                                                 --------------   --------------

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                              50,000           50,000
 Common stock, $0.001 par value; 150,000,000
    shares authorized; 6,464,240 and 5,848,681
    shares issued and outstanding at July 31,
    2004 and April 30, 2004, respectively                6,464            5,849
  Additional paid-in capital                        29,903,101       29,844,623
  Retained earnings                                (20,540,349)     (20,308,247)
                                                  -------------   --------------
     Total stockholders' equity                      9,423,175        9,596,184
                                                  -------------   --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 16,523,915     $ 16,330,368
                                                  =============   ==============

    The accompanying notes are an integral part of the financial statements

                                       F-4


<PAGE>

                                VTEX Energy, Inc.
                        CONSOLIDATED STATEMENT OF INCOME


                                                 Three Months      Three Months
                                                     Ended           Ended
                                                 July 31, 2004    April 30, 2004
                                                  (Unaudited)       (Audited)
                                                ---------------  ---------------



REVENUES

  Oil sales                                      $      57,321    $     140,850
  Gas sales                                            384,486          262,818
  Interest Income                                          392              266
                                                ---------------   --------------
      Total revenues                                   442,199          403,934
                                                ---------------   --------------
EXPENSES

  Production taxes                                      45,302           36,680
  Lease operating expense                              135,733          148,672
  Depletion of oil and gas properties                   75,793           46,830
  Accretion expense                                     14,105             -
  Interest expense                                      61,615           57,255
  General and administrative expense                   341,753          443,869
                                                ---------------   --------------
      Total expenses                                   674,301          733,306
                                                ---------------   --------------

NET LOSS                                         $ (   232,102)   $  (  329,372)
                                                ===============   ==============

NET LOSS PER COMMON SHARE
   Basic                                               $ (0.04)         $ (0.06)
                                                      =========        =========

 WEIGHTED AVERAGE NUMBER SHARES OUTSTANDING          6,122,710        5,969,546
                                                 ==============   ==============


    The accompanying notes are an integral part of the financial statements

                                       F-5


<PAGE>

                                VTEX Energy, Inc.
                      CONSOLIDATED STATEMENT OF CASH FLOWS


                                                 Three Months      Three Months
                                                     Ended           Ended
                                                 July 31, 2004    April 30, 2004
                                                  (Unaudited)       (Audited)
                                                ---------------  ---------------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                      $  (  232,102)  $  (   329,372)
  Adjustments to reconcile net loss to
    net cash used by operating activities:
      Depletion of oil and gas properties              75,793            46,830
      Amortization expense                            134,350              -
      Depreciation expense                              4,076             3,296
      Accretion expense                                14,105              -
      Stock issued for consulting fees                 45,350           291,000
      Stock issued for accounts payable                13,743              -
      Increase in accounts receivable              (   72,400)      (    70,947)
      Decrease in other assets                         58,681              -
      Increase in accounts payable                     80,958            42,361
      Increase in royalties and revenues payable       70,269           292,732
      Increase in other current liabilities            56,231            65,236
                                                ---------------  ---------------
  Net cash provided from operating activities         249,054            341,136
                                                ---------------  ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Development Costs Incurred                      (   453,472)      (   131,020)
  Property and equipment, other                   (     6,334)             -
                                                ---------------  ---------------
  Net cash used by investing activities           (   459,806)      (   131,020)
                                                ---------------  ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payments received on note receivable                 67,000              -
  Issuance of notes payable                            50,000            14,948
  Note repayments                                 (    56,807)      (    76,054)
  Borrowings under line of credit                     149,300              -
  Advances from related parties                         2,500              -
  Advances to relaed parties                      (    40,000)             -
  Repayments to related parties                          -          (    18,000)
  Repaymentd from related parties                      20,000              -
  Issuance of common stock                               -               40,000
                                               ---------------   ---------------
  Net cash (used by) provided from
    financing activities                               191,990      (    39,106)
                                               ---------------   ---------------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                            (    18,759)          171,000

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                 156,575            14,542
                                               ---------------   ---------------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                 $     137,816           185,552
                                               ===============   ===============


    The accompanying notes are an integral part of the financial statements

                                       F-6


<PAGE>

                                VTEX Energy, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                  July 31, 2004

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, 2004.  This quarterly  report on From 10QSB as of and for the three
months  ended July 31,  2004 has been  filed  without  review by an  independent
accounting firm


Business and Organization

VTEX Energy , Inc.  (Formerly Vector Energy  Corporation),  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  more fully described in Note 3. 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 July 31, 2004 and April 30, 2004,
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.

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.


                                       F-7
<PAGE>
                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  July 31, 2004

The following is a summary of all  significant  noncash  investing and financing
activities  and payments made for interest and income taxes for the three months
ended July 31, 2004 and 2003:

                                                          2004          2003
                                                       ----------   -----------
Noncash activities:
     Common stock issued for consulting fees           $   45,350   $   291,000
     Stock issued in settlement of accounts payable    $   13,743   $      -

Cash payments:
     Interest                                          $    5,634   $     1,779

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 10,437 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  capitalized  $251,704 in
expenses  incurred  in  conjunction  with this  transaction.  Subsequently,  the
Company issued 3,867 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  40,889  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
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 or the sellers would be
entitled to receive an additional  16,667 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 August 23, 1999, the Company issued 16,667 shares of common stock
valued at  $1,187,500  to the sellers  under the terms of the  purchase and sale
agreement.

On March 7, 2000,  the  Company  closed a  purchase  and sale  agreement  with a
company, which was 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 18,333 shares of common
stock  valued  at  $550,000.  In  accordance  with the  agreement,  the  Company
immediately  repurchased  556 shares of common stock at $90.00 per share,  for a
total of $50,000,  for  payment of  administrative  expenses  in the  Bankruptcy
proceeding.  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 5,000 shares of
common stock to the Company at $90.00 per share. If the seller fails to exercise
such right,  the Company has the right to call 5,000  shares of common  stock at
$90.00 per share. In addition,  the Company  purchased  $120,000 in secured debt
from three of the seller's secured creditors for face value.

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, 2004, 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.  Under the purchase and sale  agreement
to the LLC, the Company  indemnified  the LLC against claims of title. In March,
2004, the LLC settled  litigation  relating to a claim of title. The Company has
agreed  to pay the LLC a total  of  $192,000  for  reimbursement  of  legal  and
settlement  costs.  Such costs were paid through the issuance of a $150,000 note
payable. The note is payable in monthly installments,  with interest at 4.5%, at
the  rate  of  $0.03  per  MCF of gas  purchased,  beginning  with  April,  2004
production.  In  addition,  the Company  began  paying  $42,000,  which has been
included in accrued liabilities, at the rate of $0.035 per MCF of gas purchased,
beginning with March, 2004 production.


                                       F-8

<PAGE>

                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2004


On July 13,  2004,  the Company  entered  into an option  with CLK Energy,  Inc.
("CLK").  Under the option,  the  Company  will  purchase  from CLK 50% of CLK's
interest in the Bayou  Choctaw  Field,  located in the  Iberville and West Baton
Rouge  Parishes.  Upon  completion  of the  purchase,  the Company has agreed to
reimburse CLK for its acquisition costs, as adjusted for intervening operations,
and will deliver a commitment to fund future well workover and field development
drilling. Under the terms of the option, CLK will be issued warrants to purchase
500,000 shares of the Company's  common stock at an exercise price of $ 0.50 per
share.

At the  exercise of the option the Company  will  further  issue to CLK benefit,
warrants to purchase  1,500,000 shares of additional common stock in the Company
at an exercise price of $ 0.50 per share. CLK has agreed to combine  operations,
technical and executive staff within the Company's  expanded future  operations.
In further  consideration,  the Company  will cause to be issued 10% of its then
fully  diluted  common  shares to CLK.  The  Company  will  expand  its Board of
Directors  to  accommodate  nomination  of certain  members  of CLK's  executive
management.

The Company has  engaged the  services of a broker  dealer in order to conduct a
private  placement in the range of five to seven million  dollars.  The proceeds
from such a private  placement would be utilized for general  corporate  working
capital and transaction  costs,  exercise of the Bayou Choctaw option,  drilling
and rework costs, and repayment of debt.

Lines 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

                                       F-9

<PAGE>

                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2004

On September 10, 2002, the Company  renegotiated the terms of its  indebtedness.
Under the terms of the new  agreement,  the Company  was to pay  $300,000 to its
lender by September 30, 2002. The Company would then be relieved of all payments
until December 2, 2002. The Company had 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  agreed to convert  all of its $3  million  preferred  stock and  accrued
dividends  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  $17,340  in cash and  $250,000  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 were  pledged
against the line of credit. The Bank's rights in the retained debt was senior to
those of Old Jersey in the remaining debt.

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 affect 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. The options were
valued at $200,000,  which approximates their value using a Black-Scholes option
pricing model. Such value was included in additional paid in capital.

Under the currently  scheduled  reductions in the borrowing  base, the principal
balance outstanding under the line of credit at July 31, 2004 and April 30, 2004
of $1,839,143 will be due at maturity on January 31, 2005.

On April 8, 2004, the Company entered into a $250,000 revolving credit agreement
with Hibernia Bank.  Interest on the note is payable  monthly at a floating rate
of Prime plus 1.097%,  and was 5.097% at July 31, 2004 and April 30,  2004.  The
outstanding balance under the note, which was $ 249,300 and $100,000 at July 31,
2004 and April 30, 2004, respectively, is due upon demand.

                                      F-10

<PAGE>

                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2004

Certificates of Deposit

At July 31, 2004 and April 30,  2004,  the Company had  certificates  of deposit
totaling $75,000.  Such certificates bore interest at rates ranging from 0.9% to
1.1% at July 31,  2004 and 1.1% at April 30,  2004.  The  maturity  dates of the
certificates ranged from February 8, 2005 to March 20, 2005 at July 31, 2004 and
June 13, 2004 to March 20, 2005 at April 30, 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.

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 April 30,  2004 and 2003 the
rate was 5.25%.  Accrued  interest on the loans  totaled  $43,808 and $34,647 at
April 30, 2004 and 2003,  respectively.  The stock issued was booked at its fair
market value and treated as a loan cost which was amortized over six months.  In
January and February of 2004,  the Company  issued the holders of the production
payments  100,000  shares of the  Company's  common  stock in  return  for their
forbearance  under the production  payments 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  booked at its fair  market  value of  $57,500  and
treated as a loan cost which is being 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 was entitled to recoup its  investment
out of future  production from the wells in McClain County,  Oklahoma and on the
Mustang Island Property.

                                      F-11

<PAGE>

                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2004

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 April 30,  2004 and 2003 the rate was  5.25%.  Accrued
interest on the loan  totaled  $191,376 and $144,180 at April 30, 2004 and 2003,
respectively.  In March,  2004,  the Company issued the holder of the production
payment  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 booked at its fair  market  value of  $176,000  and treated as a loan
cost which is being amortized over five months.

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  was 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. The funds were used to perform workovers on the
wells. The investor was 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 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 April 30, 2004 and 2003 the rate was 5.25%.  Accrued
interest  on the  loans  totaled  $295  and  $873 at April  30,  2004 and  2003,
respectively.  On February 23, 2004, the Company  repurchased the 12.5% interest
in the nonproducing  wells for $6,846 in cash and 25,000 shares of the Company's
common  stock  valued at $14,250.  In addition  the Company paid the $55,000 due
under the production payments and $3,154 in accrued interest. On March 22, 2004,
the  Company  sold the  property,  which  had  been  covered  by the  production
payments,  for  $175,000  in  cash,  a note  receivable  for  $100,000  and  the
assumption of $114,409 of the Company's accounts payable.

Other notes payable

Included in other notes are  unsecured  10% to 13.6% notes  issued to vendors in
settlement  of accounts  payable.  Certain of the notes are past their due dates
and are due on demand. Such notes had balances totaling $42,850 at July 31, 2004
and April 30, 2004.

Also  included is a financing  obligation  for  insurance  premiums,  payable in
monthly  installments,  with  interest  at 5.57%,  through  October  2004.  Such
obligation  had a balance of $31,840  and 63,242 at July 31,  2004 and April 30,
2004.

In November, 2003, the Company issued a note payable for the purchase of seismic
data. The note is payable in monthly  installments,  with interest at 6%, and is
due August 21,  2004.  Such note had a balance of $6,000 and $10,000 at July 31,
2004 and April 30, 2004, respectively.

During  October and November of 2003,  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 a loan cost which is being
amortized  over six months.  The notes were due on dates  ranging from April 29,
2004 to May 26, 2004.

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 15% 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 gas purchased, beginning with April 2004 production.

                                      F-12

<PAGE>
                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2004

Asset Retirement Obligations

Beginning in fiscal 2004,  Statement of Financial  Accounting Standards No. 143,
"Asset Retirement Obligations" ("SFAS 143") requires the Company to recognize an
estimated  liability for the plugging and  abandonment  of its oil and gas wells
and associated  pipelines,  platforms,  and equipment.  Consistent with industry
practice,  historically  the  Company  had  assumed  the  cost of  plugging  and
abandonment would be offset by salvage value received.  This statement  requires
the  Company to record a liability  in the period in which its asset  retirement
obligation ("ARO") is incurred.  After initial recognition of the liability, the
Company  must  capitalize  an  additional  asset cost equal to the amount of the
liability. In addition to any obligation that arises after the effective date of
SFAS 143, upon initial  adoption the Company must  recognize (1) a liability for
any existing  ARO's,  (2)  capitalized  cost related to the  liability,  and (3)
accumulated  depreciation,  depletion and  amortization on that capitalized cost
adjusting for the salvage value of related equipment.

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 of
abandonment,  the  Company  will  be  required  to  recognize  a gain or loss on
abandonment if the actual costs do not equal the estimated costs.


Stockholder's Equity

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.  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.  The  options  were  valued at
$200,000,  which approximates  their value using a Black-Scholes  option pricing
model. Such value was included in additional paid in capital.

The  Company is  authorized  to issue  500,000  shares of Class AA-1  Cumulative
Convertible  Preferred Stock (Class AA-1 Preferred Stock).  Class AA-1 Preferred
Stock a par  value 0f $0.01  per share and is  entitled  to  receive  cumulative
dividends at the rate of 10% payable  annually in shares of Class AA-1 Preferred
Stock when and as declared by the Board of  Directors.  All shares of Class AA-1
Preferred Stock were issued to holders of judgment liens against the Company, in
the amount of $395,879, on April 15, 2004 and remain outstanding. The holders of
the Class  AA-1  Preferred  Stock  are,  upon the  liquidation  of the  Company,
entitled to receive  $1.00 per share.  Alternatively,  and at the sole option of
the holders, the holders of the Class AA-1 Preferred Stock, upon the liquidation
of the  Company,  may retain the rights  provided  under the  original  judgment
liens.  The Class AA-1 Preferred  Stock is redeemable in whole or in part at any
time, at the option of the Company, at $1.00 per share. The holders of the Class
AA-1  Preferred  Stock  are  entitled  to a twenty  day  written  notice  of the
Company's  intent  to redeem  and the  opportunity  to  convert  the Class  AA-1
Preferred Stock into common stock of the Company. The Class AA-1 Preferred Stock
is convertible into common stock of the Company at any time. Each share of Class
AA-1  Preferred  Stock is  convertible  into one share of the  Company's  common
stock,  adjusted for stock dividends and stock splits. The Holders of Class AA-1
Preferred  Stock have no voting  rights  except as expressly  required by Nevada
law. The Class AA-1  Preferred  Stock is senior to all other series of preferred
stock and all of the Company's common stock.

                                      F-13

<PAGE>
                                VTEX Energy, Inc.
        Notes to Unaudited Consolidated Financial Statements (Continued)
                                  July 31, 2004



The Company is authorized to issue  500,000  shares of Class B Preferred  Stock,
par value  $1.00 per  share.  The  holders  of Class B  Preferred  Stock are not
entitled  to receive  any  dividends.  As of July 31,  2004 and April 30,  2004,
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  Corporation  by  resolution of the  Corporation'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.

Common Stock

The Company has 150,000,000  shares of authorized $0.001 par value common stock,
of which 6,464,240 and 5,848,681  shares were issued and outstanding at July 31,
2004 and April 30, 2004.

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.

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.

Stock Appreciation Rights

On December 5, 2003, the Company granted stock appreciation  rights on 1,000,000
shares of the  Company's  common  stock to a former  officer and director of the
Company  in  exchange  for the  cancellation  of  $503,975  in debt.  Such  debt
consisted  of $397,092 in advances  made to the Company and  $106,883 in accrued
salary.  The stock appreciation  rights are fully vested,  have a grant price of
$0.10 per share and expire on December 5, 2013.  The exercise price of the stock
appreciation  rights is equal to the  average of the means  between the high and
low trading prices of the Company's common stock for the ten consecutive trading
days immediately preceding the date of exercise.  Upon the exercise of the stock
appreciation  rights,  the grantee is due the  difference  between the  exercise
price and the grant price  multiplied  by the number of shares being  exercised.
The Company,  at its sole option,  may elect to pay the grantee in shares of the
Company's  common  stock valued at the exercise  price.  The stock  appreciation
rights  were valued at  $240,000,  on the date of grant,  using a  Black-Scholes
option pricing model. The difference between the value of the stock appreciation
rights and the debt cancelled has been recorded as a contribution of capital. As
of  July  31,  2004  and  April  30,  2004,  The  grantee  has  exercised  stock
appreciation  rights on 747,167 and 347,167 shares of the Company's common stock
as of July 31, 2004 and April 30, 2004, respectively. The Company has elected to
pay all of the stock  appreciation  rights with the  issuance  of the  Company's
common stock.

                                      F-14