##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 BAYOU CITY EXPLORATION, INC.
  NEVADA
    
    61-1306702(State or Other Jurisdiction of
    
    (IRS Employer Identification No.)Incorporation of Organization)
 
 
 
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
þ
  o þ
 
 Title or Class
    

Share
Outstanding on October 31, 2008Common Stock, $0.005 par value
    
    
    26,653,633Preferred Stock, $0.001 par value
    
    
    0
  o þ




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##### 



PART I
FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS (UNAUDITED)FINANCIAL STATEMENTS OF REGISTRANTBALANCE SHEETS AS OF SEPTEMBER 30, 2008 (UNAUDITED) AND
DECEMBER 31, 2007
    
    
    3STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2008 AND 2007 (UNAUDITED)
    
    
    4STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2008 AND 2007 (UNAUDITED)
    
    
    5NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
    
    
    6ITEM 2.
    

MANAGEMENTS DISCUSSION AND ANALYSIS OF OPERATIONS
    
    
    7ITEM 3.
    

CONTROLS AND PROCEDURES
    
    
    11PART II
OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    12ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    12ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    12ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    12ITEM 5.
    
    OTHER INFORMATION
    
    
    12ITEM 6.
    
    EXHIBITS
    
    
    12EX-31.1EX-31.2EX-32.1EX-32.2
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September 30
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    48,097
    
    
    $
    21,714Accounts Receivable:Trade and other (net of reserves  $192,376 as of
September 30, 2008 and 241,363 as of December 31, 2007)
    
    
    23,895
    
    
    
    13,457TOTAL CURRENT ASSETS
    
    
    71,992
    
    
    
    35,171PROPERTY, PLANT, AND EQUIPMENT, NET
    
    
    32,733
    
    
    
    494,718OTHER NONCURRENT ASSETS
    
    
    0
    
    
    
    7,024TOTAL ASSETS
    
    $
    104,725
    
    
    $
    536,913LIABILITIES
& STOCKHOLDERS DEFICIT:CURRENT LIABILITIES:Accounts payable and acrued expenses
    
    $
    360,037
    
    
    $
    519,051Accounts payable  related party
    
    
    236,835
    
    
    
    281,965AFE advances from JIB owners
    
    
    51,186
    
    
    
    51,186Current portion of long-term debt  related parties
    
    
    563,190
    
    
    
    539,895Current portion of long-term debt  other
    
    
    4,791
    
    
    
    12,243TOTAL CURRENT LIABILITIES
    
    
    1,216,039
    
    
    
    1,404,340LONG TERM LIABILITY  P&A COSTS
    
    
    43,806
    
    
    
    43,806LONG TERM DEBT
    
    
    
    
    
    
    TOTAL LIABILITIES
    
    
    1,259,845
    
    
    
    1,448,146COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS DEFICIT:Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; 0 shares issued and outstanding as of
September 30, 2008 and December 31, 2007
    
    
    
    
    
    
    Common Stock, $0.005 par value; 150,000,000 shares
authorized; 26,653,633 shares issued and
outstanding at September 30, 2008 and
December 31, 2007
    
    
    133,268
    
    
    
    133,268Additional paid in capital
    
    
    13,276,765
    
    
    
    13,276,765Accumulated deficit
    
    
    (14,565,153
    )
    
    
    (14,321,266
    )TOTAL STOCKHOLDERS DEFICIT
    
    
    (1,155,120
    )
    
    
    (911,233
    )TOTAL LIABILITIES & SHAREHOLDERS DEFICIT
    
    $
    104,725
    
    
    $
    536,913
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007OPERATING REVENUES:Oil and gas sales
    
    $
    19,054
    
    
    $
    16,080
    
    
    $
    53,214
    
    
    $
    35,588TOTAL OPERATING REVENUES
    
    
    19,054
    
    
    
    16,080
    
    
    
    53,214
    
    
    
    35,588OPERATING COSTS AND EXPENSES:Lease operating expenses
    
    
    (5,396
    )
    
    
    12,237
    
    
    
    (3,541
    )
    
    
    34,269Impairment, abandonment and dry hole costs
    
    
    3,750
    
    
    
    
    
    
    
    3,750
    
    
    
    11,598Exploration costs
    
    
    
    
    
    
    54,910
    
    
    
    14,899
    
    
    
    186,819Depreciation, depletion and amortization
    
    
    
    
    
    
    20,763
    
    
    
    31,147
    
    
    
    62,297Marketing costs
    
    
    
    
    
    
    5,791
    
    
    
    
    
    
    
    12,779General and administrative costs
    
    
    37,931
    
    
    
    90,898
    
    
    
    225,970
    
    
    
    715,673TOTAL OPERATING COSTS
    
    
    36,285
    
    
    
    184,599
    
    
    
    272,225
    
    
    
    1,023,435OPERATING LOSS
    
    
    (17,231
    )
    
    
    (168,519
    )
    
    
    (219,011
    )
    
    
    (987,847
    )OTHER INCOME (EXPENSE):Interest expense
    
    
    (9,352
    )
    
    
    (6,191
    )
    
    
    (28,208
    )
    
    
    (12,837
    )Gain (loss) on sale of assets
    
    
    
    
    
    
    
    
    
    
    (22,129
    )
    
    
    Forgiveness of debt
    
    
    10,880
    
    
    
    
    
    
    
    24,898Miscellaneous Expense (Income)
    
    
    563
    
    
    
    
    
    
    
    563
    
    
    
    NET LOSS BEFORE INCOME TAX
    
    
    (15,140
    )
    
    
    (174,710
    )
    
    
    (243,887
    )
    
    
    (1,000,684
    )Income Tax Provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    
    (15,140
    )
    
    
    (174,710
    )
    
    
    (243,887
    )
    
    
    (1,000,684
    )Series E Preferred Stock Cash Dividends
    
    
    
    
    
    
    (6,990
    )
    
    
    
    
    
    
    (20,970
    )NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS
    
    $
    (15,140
    )
    
    $
    (181,700
    )
    
    $
    (243,887
    )
    
    $
    (1,021,654
    )NET LOSS PER COMMON SHARE
    
    $
    (0.00
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )Weighted Average Common Shares Outstanding 
Basic and Diluted
    
    
    26,653,633
    
    
    
    26,281,133
    
    
    
    26,653,633
    
    
    
    26,281,133
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Nine MONTHS ENDEDSeptember 30,2008
    
    
    2007CASH FLOW FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (243,887
    )
    
    $
    (1,000,684
    )Adjustments to reconcile net loss to net cash flows
used in operating activities:Depreciation, depletion, and amortization
    
    
    31,147
    
    
    
    62,297Impairment, abandonment, and dry hole costs
    
    
    3,750
    
    
    
    11,598Loss on sale of assets
    
    
    22,129
    
    
    
    Change in operating assets and liabilities:Accounts Receivable  trade
    
    
    (10,438
    )
    
    
    435,706Accounts receivable  related party
    
    
    
    
    
    
    17,276Prepaid expense and other assets
    
    
    7,024
    
    
    
    46,593AFE advances  JIB owners
    
    
    
    
    
    
    (323,319
    )Accounts payable  related party
    
    
    (45,130
    )
    
    
    56,416Accounts payable and accrued liabilities
    
    
    (159,014
    )
    
    
    (651,240
    )Long term liability  P&A costs
    
    
    
    
    
    
    (6,630
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (394,419
    )
    
    
    (1,351,987
    )CASH FLOW FROM INVESTING ACTIVITIES:Purchase of furniture and computer equipment
    
    
    (3,977
    )
    
    
    (10,821
    )Purchase of oil and gas properties
    
    
    
    
    
    
    (64,208
    )Proceeds from sale of assets
    
    
    408,936
    
    
    
    NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    404,959
    
    
    
    (75,029
    )CASH FLOWS FROM FINANCIANG ACTIVITIES:Payments on long term debt
    
    
    (7,452
    )
    
    
    (13,319
    )Increase in long term debt  related parties
    
    
    23,295
    
    
    
    337,879Dividends paid
    
    
    
    
    
    
    (20,970
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    15,843
    
    
    
    303,590NET INCREASE (DECREASE) IN CASH
    
    
    26,383
    
    
    
    (1,123,426
    )CASH AT BEGINNING OF PERIOD
    
    
    21,714
    
    
    
    1,178,946CASH AT END OF PERIOD
    
    $
    48,097
    
    
    $
    55,520
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BAYOU CITY EXPLORATION, INC.
 
 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 INTERIM REPORTING
   2. GOING CONCERN
   3. SALE OF PROPERTY:
    6




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MANAGEMENTS DISCUSSION AND ANALYSIS OF OPERATIONS
 GENERAL OPERATIONS
            7




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DESCRIPTION OF PROPERTIES
    Key Developed Properties :
    Key Undeveloped Properties :
  RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
  OPERATING REVENUES
  8




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DIRECT OPERATING COSTS
  EXPLORATION COSTS
  OTHER OPERATING EXPENSES
  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
   OPERATING REVENUES
    9




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DIRECT OPERATING COSTS
  EXPLORATION COSTS
  OTHER OPERATING EXPENSES
  INCOME TAX PROVISION
  CAPITAL RESOURCES AND FINANCIAL CONDITION
     10




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CONTROLS AND PROCEDURES
     11




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PART II
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 
 SIGNATURES
  BAYOU CITY EXPLORATION, INC.Date: November 17, 2008
    By
    /s/ Robert D. BurrChief Executive Officer andPresident and Acting Chief FinancialOfficer 12