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, 2005

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




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

                                     Nevada
                         (State or other jurisdiction of
                         incorporation or organization)

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

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

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

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

        Yes  |X|  No  |_|

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

        Yes  |_|  No  |X|

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

        As of August 31, 2005, there were 10,785,992 shares of common stock,
$0.001 par value, outstanding.

Transitional Small Business Disclosure Format (Check one).

        Yes  |_|  No  |X|

<PAGE>


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

                                     INDEX

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

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

     Item 3. Procedures and Controls                                  224

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings                                        25

     Item 2. Changes in Securities and Use of Proceeds                25

     Item 3. Defaults Upon Senior Securities                          26

     Item 4. Submission of Matters to a Vote of Security Holders      26

     Item 5. Other Information                                        26

     Item 6. Exhibits                                                 26

SIGNATURES                                                            26


                                      -2-

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                                VTEX ENERGY, INC.
                           CONSOLIDATED BALANCE SHEETS


                                                 July 31, 2005    April 30, 2005
                                                 --------------   --------------
                                                   Unaudited

    ASSETS

 CURRENT ASSETS
    Cash                                         $      81,297    $      37,582
    Certificates of deposit                            101,807           98,917
    Accounts receivable, oil and natural gas           182,262           78,702
    Joint interest billings receivable                 132,600          106,118
    Other current assets                               164,155             -
                                                 --------------   --------------
         Total current assets                          662,121          321,319
                                                 --------------   --------------

 OIL AND NATURAL GAS PROPERTIES - Full
    cost method of accounting                       18,079,851       18,325,280

    Less accumulated depreciation,
       depletion and amortization                 (  1,635,857)    (  1,581,145)
                                                 --------------   --------------
          Oil and natural gas
             properties, net                        16,443,994       16,744,135
                                                 --------------   --------------

 OTHER ASSETS
    Other property and equipment, less
       accumulated depreciation of $115,199
       and $111,229 at July 31, 2005 and
       April 30, 2005, respectively                     68,306           47,030
    Deferred loan costs, net of accumulated
       amortization of $407,240 and $362,558
       at July 31, 2005 and April 30, 2005,
       respectively                                    135,088           14,405
    Investment in Viking Petroleum UK Limited        1,369,570             -
    Other assets                                       106,343           44,600
                                                 --------------   --------------
          Total other assets                         1,679,307          106,035
                                                 --------------   --------------
TOTAL ASSETS                                     $  18,785,422    $  17,171,489
                                                 ==============   ==============




     The accompanying notes are an integral part of the financial statements

                                      -3-
<PAGE>

                                VTEX ENERGY, INC.
                           CONSOLIDATED BALANCE SHEETS


                                                 July 31, 2005    April 30, 2005
                                                 --------------   --------------
                                                   Unaudited

    LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES
    Line of credit - banks                             596,537          246,537
    Notes payable, net of discount of $103,724
       and $87,397 at July 31, 2005 and
       April 30, 2005, respectively                  1,744,943        1,377,333
    Production payments payable                        305,504          305,504
    Accounts payable - trade                         2,128,607        1,462,292
    Royalties payable                                  706,126          720,823
    Working interest revenues payable                   59,205           61,676
    Taxes payable                                      172,463          172,463
    Advances from related parties                         -              12,500
    Accrued interest                                   163,440           75,810
                                                 --------------   --------------
          Total current liabilities                  5,876,825        4,434,938
                                                 --------------   --------------

 NONCURRENT LIABILITIES
    Line of credit - related party                   3,624,707        3,624,707
    Asset retirement obligations                     1,255,402        1,232,297
                                                 --------------   --------------
          Total noncurrent liabilities               4,880,109        4,857,004
                                                 --------------   --------------
 STOCKHOLDERS' EQUITY
    Preferred stock class AA-1, cumulative
       convertible; $0.01 par value per
       share, 500,000 shares authorized;
       395,879 shares issued and outstanding             3,959            3,959
    Preferred stock class B, noncumulative
       nonconvertible; $0.001 par value per
       share, 500,000 shares authorized;
       500,000 shares issued and outstanding               500              500
    Common stock, $0.001 par value per share;
       150,000,000 shares authorized; 10,785,992
       and 9,769,989 shares issued and
       outstanding at July 31, 2005 and
       April 30, 2005, respectively                     10,786            9,770
    Additional paid-in capital                      34,606,180       32,420,576
    Accumulated deficit                           ( 26,592,937)    ( 24,555,258)
                                                 --------------   --------------
          Total stockholders' equity                 8,028,488        7,879,547
                                                 --------------   --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  18,785,422    $  17,171,489
                                                 ==============   ==============





     The accompanying notes are an integral part of the financial statements


                                      -4-
<PAGE>

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



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

REVENUES
   Oil sales                                     $        -       $      57,321
   Natural gas sales                                   199,714          384,486
                                                 --------------   --------------
         Total Revenues                                199,714          441,807
                                                 --------------   --------------

EXPENSES
   Lease operating expense                             105,511          139,992
   Production taxes                                     33,802           45,302
   Depreciation, depletion and
      amortization expense                              58,682           79,869
   General and administrative expense                1,784,510          419,041
   Accretion expense                                    23,105           21,850
                                                 --------------   --------------
         Total expenses                              2,005,610          706,054
                                                 --------------   --------------

OTHER INCOME (EXPENSE)
   Other income                                          3,296            6,429
   Interest expense                               (    235,079)    (    205,684)
                                                 --------------   --------------
         Total other expense, net                 (    231,783)    (    199,255)
                                                 --------------   --------------

NET LOSS                                         $(  2,037,679)   $(    463,502)
                                                 ==============   ==============

NET LOSS PER SHARE - Basic and Diluted           $(       0.20)   $(       0.07)
                                                 ==============   ==============
WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                               10,433,609        6,449,646
                                                 ==============   ==============




     The accompanying notes are an integral part of the financial statements


                                      -5-
<PAGE>

                                VTEX Energy, Inc.
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        Three Months Ended July 31, 2005
<TABLE>
<CAPTION>
                                    Preferred Stock
                    -------------------------------------------
                          Class AA-1             Class B               Common Stock        Additional                     Total
                    --------------------- --------------------- ------------------------     Paid-in     Accumulated   Shareholders'
                      Shares     Amount     shares    Amount       Shares       Amount       Capital       Deficit       Equity
                    --------- ----------- --------- ----------- ------------ ----------- -------------- ------------- -------------
<S>                         <C>       <C>            <C>       <C>            <C>         <C>          <C>            <C>
April 30, 2003       395,879  $    3,959   500,000  $      500    9,769,989  $    9,770  $  32,420,576  $(24,555,258) $  7,879,547

Common stock issued
 for consulting
 services               -           -         -           -          37,465          37         10,663                      10,700
(restated)
Common stock
 obligated to be
 issued for services    -           -         -           -            -            -           10,794                      10,794
Common stock issued
 for consulting
 services incurred
 in the prior year      -           -         -           -         125,771         126   (        126)                       -
Common stock issued
 as loan
 consideration          -           -         -           -         130,000         130         37,770                      37,900
Warrants granted as
 loan consideration     -           -         -           -            -           -            25,674                      25,674
Common stock
 obligated to be
 issued as loan
 consideration          -           -         -           -            -           -            16,187                      16,187
Common stock issued
 for prior year
 loan consideration     -           -         -           -         105,267         105   (        105)                       -
Common stock issued
 for loan extensions    -           -         -           -         223,500         113         32,512                      32,625
Warrants granted
   for loan extensions  -           -         -           -            -           -            15,130                      15,130
Common stock
 obligated to be
 issued for loan
 extensions             -           -         -           -            -           -            29,120                      29,120
Common stock issued
 for prior year
 loan extensions        -           -         -           -         105,000         105   (        105)                       -
Common stock
 obligated to be
 issued for loan
 guarantee              -           -         -           -            -           -            60,000                      60,000
Warrants granted for
 loan guarantee         -           -         -           -            -           -            28,490                      28,490
Common stock
 options granted for
 stock based
 compensation           -           -         -           -            -           -         1,280,000                   1,280,000
Common stock
 issued for the
 acquisition of Viking  -           -         -           -         400,000         400        127,600                     128,000
Common stock
 obligated to be
 issued for the
 acquisition of Viking  -           -         -           -            -           -           512,000                     512,000
Net loss                -           -         -           -            -           -              -      ( 2,037,679) (  2,037,679 )
                    --------- ----------- --------- ----------- ------------ ----------- -------------- ------------- -------------
Balance
April 30, 2005       395,879  $    3,959   500,000  $      500   10,785,992  $   10,786  $  34,606,180 $ (26,592,937)  $ 8,028,488
                    ========  =========== ========= =========== ============ =========== ============== ============  =============
</table>

          The accompanying notes are an integral part of the consolidated
            financial statements
                                      -6-
<PAGE>

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


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

 CASH FLOWS FROM OPERATING ACTIVITIES
    Net Loss                                     $(  2,037,679)   $(    463,502)
    Adjustments to reconcile net loss to net
       cash provided by (used in)
          operating activities
          Depreciation, depletion and
             amortization expense                      166,798          223,938
          Bad debt expense                                -              28,000
          Accretion expense                             23,105           21,850
          Common stock issued for services              21,494          185,100
          Common stock issued in settlement
             of accounts payable                          -              13,743
          Advances to related party applied to
             travel costs                                 -              20,000
          Stock based compensation                   1,280,000             -
    Changes in operating assets and liabilities
          Accounts receivable                     (    130,042)    (     72,400)
          Other assets                            (    115,401)          58,681
          Accounts payable - trade                (     77,379)         101,470
          Royalties and working interest
             revenues payable                     (     17,168)          70,269
          Other current liabilities                    114,096           56,231
                                                 --------------   --------------
Net cash (used in) provided by
   operating activities                           (    772,176)          243,380
                                                 --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in certificates of deposit         (      2,890)            -
    Oil and natural gas capital expenditures      (     24,571)    (    447,798)
    Proceeds from sales of oil and
       natural gas properties                          270,000             -
    Purchase of property and equipment, other             -        (      6,334)
    Acquisition of Viking International
       Petroleum, PLC, net of cash acquired       (    121,619)            -
    Payments received on note receivable                  -              67,000
    Advances to related party                             -        (     30,000
    Payments received o2 advances to
       related party                                      -              20,000
                                                 --------------   --------------
Net cash provided by (used in)
   investing activities                                120,920     (    397,132)
                                                 --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on notes payable                        425,000           50,000
    Repayments of notes payable                   (     67,529)    (     56,807)
    Borrowings on lines of credit                      350,000          149,300
    Repayments of advances from related parties   (     12,500)    (      7,500)
                                                 --------------   --------------
Net cash provided by financing activities              694,971          134,993
                                                 --------------   --------------

 NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                43,715     (     18,759)

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

 CASH AND CASH EQUIVALENTS,
    END OF PERIOD                                $      81,297    $     137,816
                                                 ==============   ==============



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

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

Note 1.  Management's Representation of Interim Financial Information

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

Business and Organization

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

Going Concern

For the year ended April 30, 2005 our independent  registered  public accounting
firm issued a going concern opinion. As shown in the financial  statements,  the
Company has  historically  incurred net losses from  operations and has incurred
net losses of  approximately  $2,038,000 and $464,000 for the three months ended
July 31, 2005 and 2004, respectively,  and losses are expected to be incurred in
the near term.  Current  liabilities  exceeded  current assets by  approximately
$5,215,000 and $4,114,000 at July 31, 2005 and April 30, 2005, respectively, and
the accumulated  deficit is approximately  $26,593,000 at July 31, 2005. Amounts
outstanding  and  payable  to  creditors  are in arrears  and the  Company is in
negotiations  with creditors to obtain extensions and settlements of outstanding
amounts. Management anticipates that significant additional expenditures will be
necessary to develop the Company's oil and natural gas properties, which consist
primarily of proved reserves that are non-producing, before significant positive
operating cash flows will be achieved.  Without outside investment from the sale
of equity  securities or debt financing our ability to execute our business plan
will be limited.  These factors are an indication that the Company may be unable
to continue in existence.

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

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

Note 2.  Summary of Significant Accounting Policies

Principles of Consolidation

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

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

                                       -8-
<PAGE>
Revenue Recognition

The  Company  recognizes  oil and  natural gas  revenue  from its  interests  in
producing  wells as oil and natural gas is produced  and sold from those  wells.
Oil and natural gas sold by the Company is not significantly  different from the
Company's share of production.

Oil and Natural Gas Properties

The Company  follows the full cost method of accounting  for its oil and natural
gas properties. All costs associated with property acquisition, exploration, and
development  activities  are  capitalized in a single cost center located within
the United  States.  Internal costs directly  identified  with the  acquisition,
exploration  and  development  activities  of the Company are also  capitalized.
Capitalized costs are amortized on the unit-of-production basis using proved oil
and natural gas reserves.  Capitalized costs are subject to a "ceiling test" and
limited to the present  value of estimated  future net revenues  less  estimated
future  expenditures using a discount factor of ten percent.  Should capitalized
costs exceed the present value of our reserves  discounted  at ten percent,  the
excess is charged to operations. Once incurred, an impairment of oil and natural
gas  properties  can not be  reversed  at a later  date.  Impairment  of oil and
natural gas properties is assessed on a quarterly basis in conjunction  with our
quarterly filings with the SEC. Sales of proved and unproved oil and natural gas
properties are treated as reductions of the capitalized  cost pool,  unless such
adjustments would significantly alter the relationship between capitalized costs
and proved reserves. At July 31, 2005 and April 30, 2005, there were no costs of
unproved  properties or major  development  projects included in the capitalized
cost pool. The depletion rates per Mcfe for the three months ended July 31, 2005
and 2004 were $1.60 and $1.07, respectively.

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

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.  Repair and  maintenance  costs are  expensed  as  incurred  while  costs
incurred that extend the useful life are capitalized.

Deferred Loan Costs

Deferred loan cost  consists of direct costs of securing  financing and includes
primarily  the fair  value of common  stock and  warrants  issued as part of the
underlying  debt  instruments,  loan  origination  fees  paid to third  parties,
extension  fees,  and legal  costs to prepare  loan  documents.  These costs are
capitalized and amortized over the life of the loan on a straight line basis.

Asset Retirement Obligations

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

Stock-Based Compensation

The Company  accounts for stock based  compensation  to employees under the fair
value  method   prescribed  by  SFAS  No.  123,   "Accounting   for  Stock-Based
Compensation." Under the fair value method, compensation cost is measured at the
grant date of each common stock option or warrant based on the fair value of the

                                       -9-
<PAGE>
award and is recognized  over the vesting  period,  which is usually the service
period.  For common stock options and warrants,  fair value is determined  using
the Black-Scholes  option-pricing model that takes into account the common stock
market price at the grant date,  the exercise  price,  the expected  life of the
common stock option or warrant,  the market  volatility of the underlying common
stock, the dividend yield and the risk-free interest rate over the expected life
of the common stock  option or warrant.  The fair value of a common stock option
or warrant is estimated at the grant date and is not  subsequently  adjusted for
changes in the assumptions used.

Loss Per Share

Loss per share has been calculated  using the weighted  average number of shares
outstanding. Outstanding warrants and other potentially dilutive securities have
been excluded from the  calculation of loss per share,  as their effect would be
anti-dilutive due to the Company incurring a net loss for all periods presented.
At July 31,  2005 and 2004,  there are  250,000  warrants  that are  potentially
dilutive common shares.

Income Taxes

The Company  accounts  for income  taxes under the  provisions  of SFAS No. 109,
"Accounting  for  Income  Taxes,"  which  provides  for an asset  and  liability
approach for  accounting  for income taxes.  Under this  approach,  deferred tax
assets  and  liabilities  are  recognized   based  on  anticipated   future  tax
consequences,  using  currently  enacted tax laws,  attributable  to differences
between financial statement carrying amounts of assets and liabilities and their
respective tax bases.  The Company's most significant  timing  difference is its
net operating loss ("NOL") carry forwards and the timing difference  between the
book and tax basis if its oil and natural gas properties.  Management determined
that it is more likely than not that NOL's accumulated  through July 31, 2005 of
approximately  $29,000,000  will not be  recoverable.  Accordingly,  a valuation
allowance  has been  provided  for the full  value  of its net tax  assets.  The
Company's NOL carry forwards begin to expire in 2013.

Statement of Cash Flows

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

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

Supplemental Disclosures of Cash Flow Information:
                                                           Three Months Ended
                                                                July 31,
                                                           2005         2004
                                                           ----         ----
Cash Payments
   Interest                                           $    14,204   $     5,634

Noncash financing activities
   Accrued interest converted into note payable       $    26,466   $      -
   Common stock issued for services                   $    21,494   $   185,100
   Common stock and warrants issued to note
      holders recorded as debt discounts              $    79,761   $    77,587
   Common stock and warrants issued for debt
      extensions and a guarantee                      $   165,365   $    17,048
   Common stock issued to settle accounts payable     $      -      $    13,743
   Common stock options issued for stock
      based compensation                              $ 1,280,000   $      -
   Common stock issued as partial consideration
      for the acquisition of Viking International
      Petroleum, PLC                                  $   128,000   $      -
   Common stock to be issued as partial
      consideration for the acquisition of Viking
      International Petroleum, PLC                    $   512,000   $      -
   Net liabilities acquired in the acquisition
      of Viking International Petroleum, PLC
      (net of cash acquired)                          $   607,951   $      -

Guarantees

Guarantees  are  accounted for in  accordance  with the  provisions of Financial
Accounting Standards Board ("FASB")  Interpretation No. ("FIN")  45,"Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect

                                      -10-
<PAGE>
Guarantees  of  Indebtedness  of  Others."  FIN 45  establishes  disclosure  and
liability-recognition  requirements for direct and indirect debt guarantees with
specified characteristics.

Use of Estimates

The  preparation  of financial  statements  in  conformity  with U.S.  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of contingent  assets and liabilities as of the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual amounts could differ from these estimates.

Significant  estimates  include  volumes of oil and natural gas reserves used in
calculating  depletion,  depreciation and amortization of proved oil and natural
gas properties,  asset  retirement  obligations,  bad debts,  contingencies  and
litigation.  Oil and  natural  gas  reserve  estimates,  which are the basis for
unit-of-production  depletion  and the  ceiling  test,  have  numerous  inherent
uncertainties. The accuracy of any reserve estimate is a function of the quality
of available data and of engineering and geological interpretation and judgment.
Results of  drilling,  testing,  and  production  subsequent  to the date of the
estimate  may  justify  revision  of  such  estimate   (positive  or  negative).
Accordingly,  reserve  estimates are most often different from the quantities of
oil and  natural  gas  that  are  ultimately  recovered.  In  addition,  reserve
estimates are vulnerable to changes on wellhead  prices of crude oil and natural
gas.  Such  prices  have been  volatile  in the past and can be  expected  to be
volatile in the future.

Note 3.  Certificates of Deposit

At July 31, 2005 and April 30,  2005,  the Company had  certificates  of deposit
totaling $101,807 and $98,917, respectively.  Such certificates bear interest at
rates  ranging  from  1.88% to 2.52% at July 31,  2005 and April 30,  2005.  The
maturity  dates of the  certificates  ranged  from  October 6, 2005 to March 20,
2006. The  certificates  of deposit are  collateral for letters of credit,  with
expiration dates corresponding to the maturity dates of the certificates, issued
in favor of governmental agencies in states in which the Company operates wells.
It is  anticipated  that such  certificates  of  deposit  and the  corresponding
letters of credit will be renewed at maturity.

Note 4.  Acquisitions of Oil and Natural Gas Properties

On January 13, 2005,  the Company  executed a purchase and sale  agreement  with
Arcoa Oil & Gas, Inc. ("Arcoa"),  which was subsequently  amended in March 2005.
Under the terms of the  agreement,  as  amended,  Arcoa  acquired a net  profits
interest  in three  wells  on the  Company's  Bateman  Lake  property  for up to
$1,150,000.  The net  profits  interest is  initially  payable out of 75% of the
monthly cash flows, as defined,  attributable to the Company's  interest in such
wells until  payout,  including a 12% rate of return.  The net profits  interest
will then be reduced to 65% until the well has produced a total of $7 million of
net cash flow to the Company's working  interest.  The net profits interest will
be further reduced to 60% when the net cash flows  attributable to the Company's
working  interest  reaches a total of $9 million.  At that time, the net profits
interest will be reduced to 30% which will be the net profits  percentage  there
after. To the extent that ARCOA elects to acquire a net profits interest of less
than $1,150,000 the net profits amounts will be proportionately reduced. Further
more,  after June 1, 2006,  ARCOA may elect to convert its net profits  interest
into common  stock of the Company at a conversion  rate of $1.25 per share.  The
value of the net profits  interest  will be  determined  based upon the net cash
flows attributable to the reserves,  discounted at 15%. ARCOA has until October,
10, 2005 to fund and close the transaction.  However,  such date may be extended
by mutual  agreement.  The Company has  received a total of $470,000 in payments
from ARCOA  through  July 31,  2005  representing  its  purchase  of net profits
interests in certain oil and natural gas wells.

On  July  29,  2005,  the  Company  completed  the  acquisition  of  all  of the
outstanding shares of Viking.  Viking is a UK registered company with offices in
London and owns a 26%  interest in a company that owns the North  Yorkshire  gas
fields  (an  extension  of the  Southern  North  Sea  Gas  Basin  onshore).  The
properties  include  licenses  covering   approximately  100,000  acres  onshore
including,  four proved  producing  fields,  two proved  undeveloped  fields and
additional  seismically mapped low risk exploration  potential.  Upon closing of
this  acquisition,  the Company  delivered  400,000  shares of its common stock,
valued at $128,000,  to Viking for  distribution  to its  shareholders,  with an
obligation  to deliver an additional  1.6 million  shares of its common stock if
certain defined goals are met or six months from the  acquisition,  unless there
is a foreclosure on the assets of Viking's interest in the gas fields.  Viking's
interest in the gas fields is security for debt in Viking Petroleum UK, Limited.
Such debt is not currently in default, however the Company has no assurance that
an event of  default  will not  occur.  Due to what  management  of the  Company
believes to be the remote  possibility  that the  contingent  shares will not be
issued,  they have been valued at $512,000  and  included as a component  of the
purchase  price.  Additionally,  prior to the  closing of the  acquisition,  the

                                      -11-
<PAGE>

Company advanced $127,757 to Viking for working capital purposes. This amount is
considered  a  component  of the  purchase  price paid to  acquire  the stock of
Viking.  This  transaction  has been  recorded  using  the  purchase  method  of
accounting and the results of operations from July 31, 2005 forward are recorded
in the consolidated results of operations of the Company.

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

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

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

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

Note 5.  Debt

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

                                          July 31, 2005    April 30, 2005
                                         --------------    --------------

       Lines-of-credit                   $   4,221,244     $   3,871,244
       Production payments payable             305,504           305,504
       Other notes payable, net of
          discount                           1,744,943         1,377,333
                                         --------------    --------------
                                             6,271,691         5,554,081
       Less current portion             (    2,646,984)     (  1,929,374)
                                        ---------------    --------------
                                        $    3,624,707     $   3,624,707
                                        ===============    ==============

Lines of Credit

The Company has a $10.0 million  revolving credit line with an entity controlled
by the  brother  of the  Company's  president.  The  borrowing  base  under this
revolving  credit line is  $3,624,707  at July 31,  2005,  which is equal to the
outstanding  balance at that time and cannot be increased without the consent of
the  lender.  The line of  credit is  secured  by all of the  Company's  oil and
natural gas properties and bears interest at the rate of 7.5%.  Accrued interest
on the line of credit  totaled  $68,522 at July 31, 2005.  Under its terms,  the
line of credit accrues interest through October 31, 2005, at which time interest
will  be  due  monthly.  Beginning  in  November  2006,  the  principal  balance
outstanding  under the line of credit  converts to a term note and is payable in
48 equal monthly installments along with current interest.

On April 8, 2004, the Company entered into a $250,000 revolving credit agreement
with  Hibernia  Bank.  The note has been  guaranteed  by a private  investor who
received  100,000  shares of the  Company's  common  stock  with a fair value of
$49,000 as consideration for such guarantee.  The fair value of the common stock
was  expensed  when  incurred.  Interest  on this note is  payable  monthly at a
floating rate of prime plus 1.097% (7.347% and 6.847% at July 31, 2005 and April
30, 2005,  respectively.)  The  outstanding  balance  under the note,  which was
$246,537 at July 31, 2005 and April 30, 2005, is due upon demand.

On June 21, 2005, the Company entered into a $500,000 revolving credit agreement
with Bank of Texas.  The note was  guaranteed  by a private  investor  who is to
receive  200,000  shares of the Company's  common stock and warrants to purchase
100,000 shares of the Company's  common stock at $0.50.  The value of the common
stock and warrants,  which is $88,490,  has been included in deferred loan costs
and is being  amortized over the life of the loan. At July 31, 2005, the 200,000
shares  of common  stock  remained  unissued,  however  the fair  value has been

                                      -12-
<PAGE>

included in stockholders' equity.  Interest on this note is payable quarterly at
the prime  rate,  which was 6.00% at July 31,  2005.  The note has a balance  of
$350,000 at July 31, 2005 and matures on June 20, 2006.

Other Notes Payable

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

In March,  2004,  the Company  issued a $150,000 note payable to Mustang  Island
Gathering,  LLC (the "LLC") for indemnification of litigation  settlement costs.
Mustang  Island  Gathering,  LLC  purchases  the natural gas  produced  from the
Company's  Mustang Island property,  and the Company is an approximate 10% owner
in the LLC. The note is payable in monthly installments,  with interest at 4.5%,
at the rate of $0.03 per MCF of natural gas purchased, beginning with April 2004
production  The  balance  due under the note was $88,692 and $96,220 at July 31,
2005 and April 30, 2005, respectively.

During  December 2003 and January 2004, the Company issued a series of 12% notes
totaling $40,000 to investors for working capital loans. The Company also issued
the investors  40,000 shares of its common stock.  The stock issued was recorded
at its fair market value of $27,600 and treated as deferred  loan cost which was
amortized  over four months.  The notes were due on dates ranging from April 29,
2004 to May 26, 2004 and were in default.  These notes were  subject to a demand
for payment at any time. However, The Company subsequently reached agreement
with the  investors  to extend the due dates of the notes to dates  ranging from
April 29,  2005 to May 26, 2005 in return for the  issuance of 28,250  shares of
its common stock and warrants to purchase  5,000 shares of the Company's  common
stock at $0.50 per  share  which  expire  on  January  26,  2006.  The stock and
warrants  issued were recorded at their fair market value of $17,048 and treated
as deferred loan cost which is being amortized over one year.  During June 2005,
the Company  reached  agreements  with the holders of notes totaling  $30,000 to
further  extend the  maturity  dates of the notes to December 31, 2005 in return
for the issuance of 18,000 shares of the Company's  common stock.  The stock was
recorded  at its fair market  value of $5,220 and treated as deferred  loan cost
which is being amortized over the terms of the extensions. At July 31, 2005, the
18,000 shares of common stock  remained  unissued,  however their fair value has
been  included in  stockholders'  equity.  In July 2005,  the  Company  paid the
remaining  $10,000  principal balance and $1,792 in accrued interest on the only
note which was not extended.  Accrued interest on these notes totaled $5,642 and
$6,276 at July 31, 2005 and April 30, 2005, respectively.

During March 2005,  the Company  issued a $250,000  unsecured  note payable to a
private  investor.  The note bears interest at 12% and the principal and accrued
interest is due in one payment upon the demand of the holder.  The note provided
for the issuance to the investor of 50,000 shares of the Company's  common stock
and warrants to purchase  40,000 shares of the  Company's  common stock at $0.50
per share which  expire on March 10, 2007.  The common  stock and warrants  were
recorded at their fair value of $33,516 and treated as a debt discount which was
immediately  amortized  into  interest  expense.  Accrued  interest  on the note
totaled $11,753 and $4,192 at July 31, 2005 and April 30, 2005, respectively.

During the period June 2004 through April 2005,  the Company  issued a series of
12% notes totaling $1,085,667 to private investors for working capital purposes.
The notes also provided for the issuance to the  investors of 557,767  shares of
its common stock and warrants to purchase 252,633 shares of the Company's common
stock at $0.50 per share  which  expire on dates  ranging  from June 18, 2006 to
April 27, 2007.  The common stock and warrants were recorded at their fair value
of $399,610 and treated as a debt  discount  which is being  amortized  over the
term of the loan. At July 31, 2005 and April 30, 2005, 60,000 and 165,267 shares
of the common stock remained unissued,  however their fair value was included in
stockholders'  equity.  Interest  on the  notes  is  payable  quarterly  and the
principal  balances had original  maturity  dates  ranging from June 18, 2005 to
December 31, 2005.  Accrued interest on the notes totaled $69,810 and $63,027 at
July 31, 2005 and April 30, 2005,  respectively.  Unamortized  debt discount was
$38,630  and  $87,397 at July 31,  2005 and April 30,  2005,  respectively.  The
Company  subsequently  reached agreement with certain of the investors to extend
the due dates of the notes to dates  ranging  from March 2, 2005 to June 8, 2005
in return for the issuance of 195,000 shares of its common stock and warrants to
purchase  40,000 shares of the  Company's  common stock at $0.50 per share which
expire  on dates  ranging  from  March 2, 2007 to March 8,  2007.  The stock and
warrants  issued were recorded at their fair market value of $77,414 and treated
as deferred loan cost which is being  amortized  over the term of the extension.
In June 2005,  the Company  reached  agreements  to further  extend the maturity
dates of all of the 12% notes to  investors  that had  matured,  to December 31,
2005 in return  for the  issuance  of  197,500  shares of its  common  stock and
warrants to purchase  105,000 shares of the Company's  common stock at $0.50 per
share which expire in June 2007. The stock and warrants  issued were recorded at

                                      -13-
<PAGE>

their fair market  value of $71,655  and treated as deferred  loan cost which is
being amortized over the term of the extension.  At July 31, 2005, 85,000 shares
of the common stock remain  unissued,  however  their fair value was included in
stockholders' equity.

During the period May 2005 through July 2005, the Company issued a series of 12%
notes totaling $351,466 to private  investors for working capital purposes.  The
notes also provided for the issuance to the  investors of 180,586  shares of its
common  stock and warrants to purchase  90,293  shares of the  Company's  common
stock at $0.50 per share which expire on dates  ranging from May 2, 2007 to July
27, 2007.  The common stock and  warrants  were  recorded at their fair value of
$79,761 and treated as a debt discount which is being amortized over the term of
the loan. At July 31, 2005,  50,586 shares of the common stock remain  unissued,
however their fair value was included in stockholders'  equity.  Interest on the
notes is payable  quarterly  and the principal  balances  mature on December 31,
2005. Accrued interest on the notes totaled $5,945 on July 31, 2005. Unamortized
debt discount was $65,094 at July 31, 2005.

Production Payments Payable

During  October and November of 2000,  the Company  issued  31,687 shares of its
common stock and  undivided  working  interests,  ranging from 3.7% to 4.4%,  in
three  nonproducing  wells in the Mustang Island Field to private  investors for
total cash consideration of $254,000. The proceeds were used to fund development
of the wells.  The investors are entitled to recoup their investment out of 100%
of the future  production,  if any,  from the  wells.  These  transactions  were
treated,  by the Company,  as loans  repayable out of production from designated
wells for accounting purposes.  The stock issued was recorded at its fair market
value as a loan cost which has been fully amortized. The production loans began
accruing  interest on January 1, 2001 at 5.25% and accrued interest on the loans
totaled  $2,094 and $1,992 at July 31,  2005 and April 30,  2005,  respectively.
Although  certain  of the  wells  covered  by the  production  loans  have  been
producing,  the Company has not made any principal  payments under the loans. In
January and February of 2004,  the Company  issued the holders of the production
loans  100,000  shares  of the  Company's  common  stock  in  return  for  their
forbearance  under the  production  loans  until the  earlier of the first month
following  the month in which the  Company has  positive  cash flow or August 1,
2004.  The stock  issued was  recorded at its fair  market  value of $57,500 and
treated as deferred loan cost which was amortized  over six months.  In December
of 2004,  the  Company  reached an  agreement  with the  holders of the loans to
increase the interest rate to 6%, begin paying interest monthly on the loans and
to convert the accrued interest of $51,503 into principal.  Negotiations between
the Company and the holders of the loans are being held on further restructuring
of the terms of the  loans.  However,  there can be no  assurance  that any such
restructuring will occur.

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

Note 6.  Asset Retirement Obligations

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

The  estimated  liability  is based on  historical  experience  in plugging  and
abandoning wells and associated pipelines,  platforms, and equipment,  estimated
remaining lives of those wells based on reserve  estimates and federal and state
regulatory   requirements.   The  liability  is  discounted   using  an  assumed
credit-adjusted  risk-free rate of 7.5%.  Revisions to the liability could occur
due to changes in estimates of plugging and  abandonment  costs,  changes in the

                                      -14-
<PAGE>
risk-free  rate  or  remaining  lives  of the  wells,  or if  federal  or  state
regulators  enact new plugging  and  abandonment  requirements.  At the time the
abandonment  cost is incurred,  the Company will be required to recognize a gain
or loss if the actual  costs do not equal the  estimated  costs  included in the
ARO.

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

The following table describes all changes to the Company's ARO liability:

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

Beginning asset retirement obligations        $   1,232,297     $     1,165,330
   Accretion expense                                 23,105              21,850
                                              --------------    ----------------
Ending asset retirement obligations           $   1,255,402     $     1,187,180
                                              ==============    ================

Note 7.  Commitments and Contingencies

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

In June 2001, the Company entered into a long-term lease for office space with
an annual rent of $65,124. Rent expense for the three months ended July 31, 2005
and 2004 was $16,281. As of July 31, 2005, future minimum lease payments under
this lease were as follows:

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

                  2006                        48,843
                  2007                        16,281
                                         ------------
                  Total                  $    65,124
                                         =============

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

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

As a condition to the  acquisition of Viking,  which was effective July 29 2005,
the Company is obligated to issue to the  stockholders  of Viking an  additional
1.6  million  shares of common  stock if  certain  defined  goals are met or six
months from the acquisition date, unless there is a foreclosure on the assets of
Viking's interest in the gas fields.

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

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

                                      -15-
<PAGE>
Note 8.  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 a $3,000,000  reduction in the Company's
secured indebtedness.  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 a
$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 warrants  were valued at  $200,000,  which
approximates  their fair value using the  Black-Scholes  option  pricing  model.
These warrants were recorded as additional paid in capital.  As of July 31, 2005
and April 30, 2005,  there were no shares of Class A-1 Preferred Stock issued or
outstanding.

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 has a par value of $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 (or 39,588 shares) when and as declared by the Board of Directors. At July
31, 2005, no dividends  have been declared.  The aggregate  amount of cumulative
dividend shares in arrears was approximately  51,100 and 41,200 at July 31, 2005
and April 30, 2005, respectively.  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 20 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 by
the holder  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.

The Company is authorized to issue  500,000  shares of Class B Preferred  Stock,
par value  $0.001 per share.  The  holders  of Class B  Preferred  Stock are not
entitled  to receive  any  dividends.  As of July 31,  2005 and April 30,  2005,
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 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
Company.  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 10,785,992 and 9,769,989 shares were issued and outstanding at July 31,
2005 and April 30, 2005, respectively.

During the three months ended July 31, 2005, the Company issued 37,465 shares of
its common stock having a fair value of $10,700 for services. In addition, the
Company is obligated to issue an additional 37,700 shares of its common stock
under the terms of consulting agreements. The unissued common stock has a fair
value of $10,794 which has been expensed and included in stockholders' equity.
The Company also issued 125,771 shares of its common stock for services which
had been performed prior to April 30, 2005 and whose value was included in
stockholders' equity at April 30, 2005.

                                      -16-
<PAGE>
During the three months ended July 31, 2005,  the Company  issued 130,000 shares
of its common stock having a fair value of $37,900 to investors  under the terms
of notes payable.  In addition,  the Company is obligated to issue an additional
50,586 shares of its common stock to investors under the terms of notes payable.
The unissued common stock has a fair value of $16,187 which has been included in
stockholders' equity. The Company also issued 105,267 shares of its common stock
under the terms of notes  payable for which the  obligation  of  issuance  arose
prior to April 30, 2005 and whose value was included in stockholders'  equity at
April 30, 2005.

During the three months ended July 31, 2005,  the Company  issued 112,500 shares
of its common  stock  having a fair value of  $32,625 to  investors  in order to
extend the due dates of notes payable. In addition,  the Company is obligated to
issue an additional  103,000  shares of its common stock to investors  under the
terms extensions of notes payable. The unissued common stock has a fair value of
$29,120 which has been included in stockholders' equity. The Company also issued
105,000  shares of its  common  stock  under the  terms of  extensions  of notes
payable for which the  obligation of issuance  arose prior to April 30, 2005 and
whose value was included in stockholders' equity at April 30, 2005.

On July 29, 2005, the Company issued 400,000 shares of its common stock,  valued
at  $128,000,  to  the  shareholders  of  Viking  in  exchange  for  all  of its
outstanding shares (see Note 4).

Stock Options and Warrants

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

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

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

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

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

During the three  months  ended July 31, 2005,  the Company  issued  warrants to
purchase  245,293  shares of its  common  stock at $0.50 per share to  investors
under the terms of notes  payable and for  extensions  to the maturity  dates of
notes  payable.  The  warrants  had a fair value of $69,294  and expire on dates
ranging from May 2, 2007 to June 27, 2007.

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 were fully vested upon issuance,  had 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 stock
appreciation rights 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
                                      -17-
<PAGE>
exercise price. The stock  appreciation  rights were valued at $240,000,  on the
date of grant, using the Black-Scholes option pricing model and were included in
stockholders' equity at that time. 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, 2005, there remain no stock appreciation rights to be
exercised.  The Company has elected to pay all of the stock appreciation  rights
by the issuance of the Company's common stock.

Note 9.  Related Party Transactions

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

The Company is obligated  under a line of credit to an entity  controlled by the
brother of the  Company's  president.  At July 31, 2005 and April 30, 2004,  the
balance due under line of credit was  $3,624,707.  The line of credit is secured
by all of the Company's oil and natural gas properties and bears interest at the
rate of 7.5%. Accrued interest on the line of credit totaled $68,522 at July 31,
2005.  Under its terms,  the line of credit accrues interest through October 31,
2005, at which time interest  will be due monthly.  Beginning in November  2006,
the principal  balance  outstanding  under the line of credit converts to a term
note  and is  payable  in 48  equal  monthly  installments  along  with  current
interest.

The  Company  was  obligated  under a  production  payment  to an  entity  whose
principal is the brother of the  Company's  president.  On April 30,  2005,  the
balance due under such production payment, of $934,518,  and accrued interest of
$386,703 was transferred to the Company's line of credit with the same entity.

In March,  2004,  the Company  issued a $150,000 note payable to Mustang  Island
Gathering,  LLC for  indemnification  of litigation  settlement  costs.  Mustang
Island  Gathering,  LLC  purchases  the natural gas produced  from the Company's
Mustang Island property, and the Company is an approximate 10% owner in the LLC.
The note is payable in monthly installments,  with interest at 4.5%, at the rate
of $0.03 per MCF of natural gas purchased, beginning with April 2004 production.
The  balance  due under the note was  $88,692  and  $96,220 at July 31, 2005 and
April 30, 2005, respectively.

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

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

Forward-Looking Statements

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

                                      -18-
<PAGE>
ended April 30, 2005 and other filings with the SEC ("SEC").  Should one or more
of these risks or uncertainties  materialize,  or should underlying  assumptions
prove incorrect,  actual outcomes may vary materially from those indicated.  All
subsequent  written  and oral  forward-looking  statements  attributable  to the
Company or the persons  acting on its behalf are  expressly  qualified  in their
entirety by the reference to these risks and uncertainties.

General Overview

     VTEX Energy, Inc., a Nevada corporation (the "Company"),  is an independent
oil and natural gas company  engaged in acquiring,  exploiting,  developing  and
operating oil and natural gas  properties,  with a focus on Texas and Louisiana.
The Company has two wholly  owned  subsidiaries,  Vector  Exploration,  Inc. and
Viking Petroleum International, PLC, and is headquartered in Houston, Texas.

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

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

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

     The  estimated  proved oil and natural gas reserves of the Company at April
30, 2005 were 103,000  barrels of crude oil and  condensate  and  9,424,000  Mcf
(thousand  cubic feet) of natural gas.  These  reserves  have an  estimated  $30
million  in future net cash  flow,  discounted  at 10%.  Of these  reserves,  an
estimated  50,000  barrels  of crude oil and  condensate  and  4,130,000  MCF of
natural gas with an estimated $13 million in future net cash flow, discounted at
10%, are considered to be proved developed.  The Company's  reserves are located
in two fields, Bateman Lake and Mustang Island 818-L.
<TABLE>
<CAPTION>
                                                                Percent of          Percent of        Percent of
                                                              April 30, 2005          Revenue          Revenue
                                                             Estimated Future         Quarter          Quarter
                                                              Net Cash Flows           Ended            Ended
          Field                       Location               Discounted at 10%     July 31, 2005    July 31, 2004
          -----                       --------               -----------------     -------------    -------------
<S>                        <C>                               <C>                   <C>              <C>
Bateman Lake               St. Mary Parish, Louisiana             66.62%               1.04%            16.50%

Mustang Island 818-L       State Waters Offshore Texas            33.38%              98.96%            83.50%

</TABLE>

Results of Operations

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

     Oil and  natural  gas  revenues  for the three  months  ended July 31, 2005
decreased  55% to  $199,714,  compared to $441,807 for the same period in fiscal
2005.  Production volumes for natural gas during the three months ended July 31,
2005 decreased  44%, to 34,174 Mcf,  compared to 60,982 Mcf for the three months
ended July 31, 2004.  Average natural gas prices for the three months ended July
31, 2005  decreased 7% to $5.84 per Mcf,  compared to $6.30 per Mcf for the same
period in fiscal  2005.  Production  volumes for oil for the three  months ended
July 31, 2005 decreased 100% from 1,628 barrels produced during the three months
ended July 31, 2004. Average oil prices for the three months ended July 31, 2004
were $35.21 per barrel. The decrease in oil and natural gas production was

                                      -19-
<PAGE>

primarily due to the main oil producing wells at both the Bateman Lake Field and
the Mustang Island Field being shut-in pending completion of certain repairs.

         The following table summarizes production volumes, average sales prices
and operating revenues for the Company's oil and natural gas operations for the
three months ended July 31, 2005 and 2004.
<TABLE>
<CAPTION>
                                                                                2006 Quarter
                                                                          Compared to 2005 Quarter
                                 Three Months Ended July 31,       --------------------------------
                               --------------------------------       Increase         % Increase
                                    2005              2004            Decrease)        (Decrease)
                               --------------    --------------    --------------    --------------
<S>                            <C>               <C>               <C>               <C>
Production volumes -
   Oil (Bbls)                           -                1,628      (      1,628)     (       100%)
   Natural Gas (MCF)                  34,174            60,982      (     26,808)     (        44%)
Average sales prices -
   Oil (per Bbl)               $        -        $       35.21     $(      35.21)     (       100%)
   Natural gas (per MCF)                5.84              6.30      (       0.46)     (         7%)
Operating revenue
   Oil                         $        -        $      57,321     $(     57,321)    $(       100%)
   Natural gas                       199,714           384,486      (    184,772)     (        48%)
                               --------------    --------------    --------------
                                     199,714           441,807      (    242,093)     (        55%)
                               ==============    ==============    ==============
</TABLE>

     Production  expenses for the three months ended July 31, 2005 decreased 25%
to $139,313 compared to $185,294 for the same period in fiscal 2005.  Production
expense per  equivalent  unit  increased  to $4.08 per Mcfe for the three months
ended July 31, 2005  compared to $2.62 in the same period in fiscal  2005.  This
increase in  production  expense per Mcfe is caused by the effect of fixed lease
operating expenses combined with a decrease in production volumes.

     Depreciation  and depletion  expense  decreased  from $79,869 for the three
months  ended July 31, 2004 to $58,682 for the three months ended July 31, 2005.
This 27% decrease was primarily due to a 52% decrease in Mcfe production volumes
partially offset by a negative  revision in reserve volume estimates since April
30, 2004 which increased the depletion rate on an Mcfe basis.

     General and  Administrative  expenses  for the three  months ended July 31,
2005  increased by $1,365,469  to $1,784,510  compared to $419,041 for the three
months ended July 31, 2004.  The increase was primarily due to the fair value of
stock options issued to executive officers and directors of $1,280,000 which was
expensed in the first quarter of fiscal 2006. The remaining  increase in general
and  administrative  expense is due to professional fees incurred by the Company
which  increased from $4,080 for the three months ended July 31, 2004 to $84,035
for the three  months  ended July 31, 2005.  This  increase is due  primarily to
increased cost of the Company's annual audit and quarterly reviews.

     Accretion  expense for the three  months  ended July 31, 2005  increased by
$1,255 to $23,105  compared to $21,850 for the three months ended July 31, 2004.
This  increase  was due to the normal  compound  effect of the  discount  factor
attributable to the Company's asset retirement obligation.

     Interest  expense for the three months ended July 31, 2005 increased by 14%
to $235,079  from  $205,684 for the same period in fiscal 2005.  The increase in
interest  expense was due primarily to an increase in weighted average debt from
$3,529,616  for the three months ended July 31, 2004 to $5,843,577 for the three
months ended July 31, 2005.  The impact on interest  expense  resulting from the
increase  in debt was  partially  offset by a decrease in  amortization  of loan
discount and deferred  loan costs from  $144,069 for the three months ended July
31, 2004 to $108,116 for the three months ended July 31, 2005.

Financial Condition and Capital Resources

     Since its  inception,  the  Company  has  suffered  recurring  losses  from
operations and has been dependent on existing  stockholders and new investors to
provide the cash  resources to sustain its  operations.  During the three months
ended July 31,  2005 and 2004,  the  Company  reported  losses of  approximately
$2,038,000  and  $464,000,   respectively.  The  Company's  continuing  negative
operating  results  have  produced a working  capital  deficit of  approximately
$5,215,000 at July 31, 2005.  These factors  raise  substantial  doubt about the
Company's  ability to  continue  as a going  concern.  The  Company's  long-term
viability as a going concern is dependent  upon the Company's  ability to obtain

                                      -20-
<PAGE>
sources of outside  financing to support near term  operations  and to allow the
Company to make strategic investments in new oil and natural gas prospects which
will provide the Company the ability to increase revenue and  profitability  and
sustain a cash flow level that will ensure support for continuing operations.

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

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

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

Financing Arrangements

     The  Company  has a $10.0  million  revolving  credit  line  with an entity
controlled by the brother of the Company's  president.  The borrowing base under
this revolving credit line is $3,624,707 at July 31, 2005, which is equal to the
outstanding  balance at that time and cannot be increased without the consent of
the  lender.  The line of  credit is  secured  by all of the  Company's  oil and
natural gas properties and bears interest at the rate of 7.5%.  Accrued interest
on the line of credit  totaled  $68,522 at July 31, 2005.  Under its terms,  the
line of credit accrues interest through October 31, 2005, at which time interest
will  be  due  monthly.  Beginning  in  November  2006,  the  principal  balance
outstanding  under the line of credit  converts to a term note and is payable in
48 equal monthly installments along with current interest.

     On April 8, 2004,  the Company  entered  into a $250,000  revolving  credit
agreement with Hibernia Bank. The note has been guaranteed by a private investor
who received  100,000 shares of the Company's  common stock with a fair value of
$49,000 as consideration for such guarantee.  The fair value of the common stock
was  expensed  when  incurred.  Interest  on this note is  payable  monthly at a
floating rate of prime plus 1.097% (7.347% and 6.847% at July 31, 2005 and April
30, 2005,  respectively.)  The  outstanding  balance  under the note,  which was
$246,537 at July 31, 2005 and April 30, 2005, is due upon demand.

     On June 21,  2005,  the Company  entered into a $500,000  revolving  credit
agreement with Bank of Texas.  The note was guaranteed by a private investor who
is to receive  200,000  shares of the  Company's  common  stock and  warrants to
purchase 100,000 shares of the Company's common stock at $0.50. The value of the
common stock and warrants,  which is $88,490, has been included in deferred loan
costs and is being  amortized  over the life of the loan. At July 31, 2005,  the
200,000  shares of common stock  remained  unissued,  however the fair value has
been  included  in  stockholders'  equity.  Interest  on this  note  is  payable
quarterly at the prime rate,  which was 6.00% at July 31,  2005.  The note has a
balance of $350,000 at July 31, 2005 and matures on June 20, 2006.

                                      -21-
<PAGE>

     The Company has outstanding  production  payments in the amount of $305,504
at July 31,  2005.  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.

     From time to time the Company  incurs notes  payable to settle  outstanding
accounts  payable  and other  liabilities,  finance  expenditures  and  generate
working  capital.  The  balances  of such  notes  payable  were  $1,744,943  and
$1,377,333 at July 31, 2005 and April 30, 2005, respectively.

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

Net Cash Provided by Operating Activities

     Cash flows used in operating  activities were $772,176 for the three months
ended July 31, 2005 as compared to $243,380 provided by operating activities for
the three months ended July 31, 2004.  This  decrease was  primarily  due to the
Company  beginning  to  utilize  some  of the  working  capital  raised  by debt
offerings to pay past operating  costs which had been deferred,  combined with a
decrease in oil and natural gas  revenues and an increase in  professional  fees
incurred.

Net Cash Used in Investing Activities

     Cash flows  provided by  investing  activities  was  $120,920 for the three
months  ended  July  31,  2005 as  compared  to  cash  flows  used by  investing
activities  of $397,132 for the three months ended July 31, 2004.  This increase
was due  primarily  to a decrease  of  $423,227  in oil and  natural gas capital
expenditures incurred related to workovers and a recompletion performed on three
wells in the Bateman Lake field. In addition,  the Company had proceeds from the
sale of oil and natural gas properties of $270,000 during the three months ended
July 31, 2005.

Net Cash Provided by Financing Activities

     Net cash flows provided by financing  activities  totaled  $694,971 for the
three months ended July 31, 2005 primarily from  borrowings  under a new line of
credit from a bank and notes  payable to investors  combined  totaling  $775,000
offset by debt  repayments  totaling  $80,029.  Net cash provided from financing
activities  totaled  $134,993 for the three months ended July 31, 2004 primarily
from  borrowings  under a new line of credit  from a bank and notes  payable  to
investors  totaling  $199,300  offset  by the net  repayments  of debt  totaling
$64,307.

Critical Accounting Policies

     The following summarizes several of our critical accounting policies:

Use of Estimates

     The preparation of financial  statements in conformity with U.S.  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting periods. Actual results could differ from these estimates.  The use of
these estimates  significantly  affects  natural gas and oil properties  through
depletion and the full cost ceiling test, as discussed in more detail below.

Oil and Natural Gas Properties

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

                                      -22-
<PAGE>
     We amortize natural gas and oil properties based on the  unit-of-production
method using  estimates  of proved  reserve  quantities.  The  amortizable  base
includes   estimated   future   development   costs  and,   where   significant,
dismantlement,  restoration  and  abandonment  costs,  net of estimated  salvage
values.  The  depletion  rates per Mcfe for the three months ended July 31, 2005
and 2004 were $1.60 and $1.07, respectively.

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

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

Oil and Natural Gas Reserve Estimates

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

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

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

Asset Retirement Obligations

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

Contingencies

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

Volatility of Oil and Natural Gas Prices

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

                                      -23-
<PAGE>

Acquisition of Oil and Natural Gas Properties

     On January 13, 2005,  the Company  executed a purchase  and sale  agreement
with Arcoa Oil & Gas, Inc.  ("Arcoa"),  which was subsequently  amended in March
2005. Under the terms of the agreement, as amended, Arcoa acquired a net profits
interest  in three  wells  on the  Company's  Bateman  Lake  property  for up to
$1,150,000.  The net  profits  interest is  initially  payable out of 75% of the
monthly cash flows, as defined,  attributable to the Company's  interest in such
wells until  payout,  including a 12% rate of return.  The net profits  interest
will then be reduced to 65% until the well has produced a total of $7 million of
net cash flow to the Company's working  interest.  The net profits interest will
be further reduced to 60% when the net cash flows  attributable to the Company's
working  interest  reaches a total of $9 million.  At that time, the net profits
interest will be reduced to 30% which will be the net profits  percentage  there
after. To the extent that ARCOA elects to acquire a net profits interest of less
than $1,150,000 the net profits amounts will be proportionately reduced. Further
more,  after June 1, 2006,  ARCOA may elect to convert its net profits  interest
into common  stock of the Company at a conversion  rate of $1.25 per share.  The
value of the net profits  interest  will be  determined  based upon the net cash
flows attributable to the reserves,  discounted at 15%. ARCOA has until October,
10, 2005 to fund and close the transaction.  However,  such date may be extended
by mutual  agreement.  The Company has  received a total of $470,000 in payments
from ARCOA  through  July 31,  2005  representing  its  purchase  of net profits
interests in certain oil and natural gas wells.

     On July 29,  2005,  the Company  completed  the  acquisition  of all of the
outstanding shares of Viking.  Viking is a UK registered company with offices in
London and owns a 26%  interest in a company that owns the North  Yorkshire  gas
fields  (an  extension  of the  Southern  North  Sea  Gas  Basin  onshore).  The
properties  include  licenses  covering   approximately  100,000  acres  onshore
including,  four proved  producing  fields,  two proved  undeveloped  fields and
additional  seismically mapped low risk exploration  potential.  Upon closing of
this  acquisition,  the Company  delivered  400,000  shares of its common stock,
valued at $128,000,  to Viking for  distribution  to its  shareholders,  with an
obligation  to deliver an additional  1.6 million  shares of its common stock if
certain defined goals are met or six months from the  acquisition,  unless there
is a foreclosure on the assets of Viking's interest in the gas fields.  Viking's
interest in the gas fields is security for debt in Viking Petroleum UK, Limited.
Such debt is not currently in default, however the Company has no assurance that
an event of  default  will not  occur.  Due to what  management  of the  Company
believes to be the remote  possibility  that the  contingent  shares will not be
issued,  they have been valued at $512,000  and  included as a component  of the
purchase  price.  Additionally,  prior to the  closing of the  acquisition,  the
Company advanced $127,757 to Viking for working capital purposes. This amount is
considered  a  component  of the  purchase  price paid to  acquire  the stock of
Viking.  This  transaction  has been  recorded  using  the  purchase  method  of
accounting and the results of operations from July 31, 2005 forward are recorded
in the consolidated results of operations of the Company.

Item 3.     Controls and Procedures

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

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

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

                                      -24-
<PAGE>
of our internal controls also resulted in the Company not being able to file its
quarterly financial  statements during the year ended April 30, 2005 and for the
quarterly  period ended July 31, 2005 on a timely basis.  As of the date of this
filing the Company is compliant in all of its filings.  Furthermore,  during the
course of  completing  the  audit for the year  ended  April 30,  2005,  several
accounting adjustments were identified requiring adjustments to the current year
and  restatement  of the financial  statements for the year ended April 30, 2004
and to various of its Form 10-QSBs for each respective year.

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

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

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


                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

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

Item 2.   Changes in Securities and Use of Proceeds

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

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

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

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

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

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

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

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

                                      -25-

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

Item 3. Defaults Upon Senior Securities

        None

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

        None

Item 5. Other Information

        None

Item 6. Exhibits

    (a) Additional Exhibits

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

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

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

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


                                   SIGNATURES

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

                         VTEX Energy, Inc.
                         (Registrant)

                         By       /S/ Grant G. Emms
                                  --------------------------
                                  Grant G. Emms
                                  President
                                  Principal Executive Officer
                                  Date:    September 28, 2005

                         By       /S/ Randal B. McDonald, Jr.
                                  ---------------------------
                                  Randal B. McDonald, Jr.
                                  Chief Financial Officer
                                  Principal Financial and Accounting Officer
                                  Date:    September 28, 2005

                                      -26-

<PAGE>



                                                                    Exhibit 31.1

                                 CERTIFICATIONS
                             Chief Executive Officer



I, Grant G. Emms, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of VTEX Energy, Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  small  business  issuer's  other  certifying   officer(s)  and  I  are
     responsible  for  establishing  and  maintaining  disclosure  controls  and
     procedures  (as defined in Exchange Act Rules  13a-15(e)  and 15d-15(e) for
     the small business issuer and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision, to ensure that material information relating to the small
          business  issuer,  including its  consolidated  subsidiaries,  is made
          known to us by others within those entities,  particularly  during the
          period in which this report is being prepared;

     b)   Omitted

     c)   Evaluated the effectiveness of the small business issuer's  disclosure
          controls and procedures  and presented in this report our  conclusions
          about the effectiveness of the disclosure controls and procedures,  as
          of the  end of the  period  covered  by  this  report  based  on  such
          evaluation; and

     d)   Disclosed  in this  report any change in the small  business  issuer's
          internal  control over financial  reporting  that occurred  during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's  fourth fiscal  quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5.   The  small  business  issuer's  other  certifying  officer(s)  and  I  have
     disclosed,  based on our most recent  evaluation  of internal  control over
     financial reporting,  to the small business issuer's auditors and the audit
     committee of the small  business  issuer's  board of directors  (or persons
     performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the small  business  issuer's
          ability   to  record,   process,   summarize   and  report   financial
          information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a significant  role in the small business  issuer's
          internal control over financial reporting.




     Date: September 28, 2005       By: /s/ Grant G. Emms
           ------------------           ------------------
                                        Grant G. Emms
                                        Chief Executive Officer



<PAGE>



                                                                    Exhibit 31.2

                                 CERTIFICATIONS
                             Chief Financial Officer



I, Randal B. McDonald, Jr., certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of VTEX Energy, Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  small  business  issuer's  other  certifying   officer(s)  and  I  are
     responsible  for  establishing  and  maintaining  disclosure  controls  and
     procedures  (as defined in Exchange Act Rules  13a-15(e)  and 15d-15(e) for
     the small business issuer and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision, to ensure that material information relating to the small
          business  issuer,  including its  consolidated  subsidiaries,  is made
          known to us by others within those entities,  particularly  during the
          period in which this report is being prepared;

     b)   Omitted

     c)   Evaluated the effectiveness of the small business issuer's  disclosure
          controls and procedures  and presented in this report our  conclusions
          about the effectiveness of the disclosure controls and procedures,  as
          of the  end of the  period  covered  by  this  report  based  on  such
          evaluation; and

     d)   Disclosed  in this  report any change in the small  business  issuer's
          internal  control over financial  reporting  that occurred  during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's  fourth fiscal  quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5.   The  small  business  issuer's  other  certifying  officer(s)  and  I  have
     disclosed,  based on our most recent  evaluation  of internal  control over
     financial reporting,  to the small business issuer's auditors and the audit
     committee of the small  business  issuer's  board of directors  (or persons
     performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the small  business  issuer's
          ability   to  record,   process,   summarize   and  report   financial
          information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a significant  role in the small business  issuer's
          internal control over financial reporting.




     Date: September 28, 2005       By: /s/ Randal B. McDonald, Jr.
           ------------------           ---------------------------
                                        Randal B. McDonald, Jr.
                                        Chief Financial Officer


<PAGE>


                                                                   Exhibit 32.1


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of VTEX Energy,  Inc. (the "Company") on
Form  10-QSB for the period  ending July 31,  2005 (the  "Report"),  I, Grant G.
Emms,  Chief Executive  Officer of the Company,  certify,  pursuant to 18 U.S.C.
Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
2002, that:

1)   The Report fully  complies with the  requirement of Section 13(a) or 15 (d)
     of the Securities Exchange Act of 1934; and

2)   The information  contained in the Report fairly  presents,  in all material
     respects, the Company's financial position and results of operations.



/s/Grant G. Emms
----------------
Grant G. Emms
Chief Executive Officer
September 28, 2005


<PAGE>


                                                                    Exhibit 32.2


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of VTEX Energy,  Inc. (the "Company") on
Form 10-QSB for the period  ending July 31,  2004 (the  "Report"),  I, Randal B.
McDonald, Jr., Chief Financial Officer of the Company,  certify,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that:

1)   The Report fully  complies with the  requirement of Section 13(a) or 15 (d)
     of the Securities Exchange Act of 1934; and

2)   The information  contained in the Report fairly  presents,  in all material
     respects, the Company's financial position and results of operations.



/s/Randal B. McDonald, Jr.
--------------------------
Randal B. McDonald, Jr.
Chief Financial Officer
September 28, 2005