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 JUNE 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 
Incorporation of Organization)
    
    (IRS Employer Identification No.)
 
 
 
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ
 
 Title or Class
    
    Share Outstanding on July 31, 2008Common Stock, $0.005 par value
    
    26,653,633Preferred Stock, $0.001 par value
    
    0
  o þ




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##### 



PART IFINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (UNAUDITED)FINANCIAL STATEMENTS OF REGISTRANTBALANCE SHEETS AS OF JUNE 30, 2008 AND DECEMBER 31, 2007
    
    
    3STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2008 AND 2007
    
    
    4STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE
30, 2008 AND 2007
    
    
    5NOTES TO FINANCIAL STATEMENTS
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF OPERATIONS
    
    
    7ITEM 3. CONTROLS AND PROCEDURES
    
    
    11PART IIOTHER 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
    
    
    12
  2




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##### 



June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    73,668
    
    
    $
    21,714Accounts Receivable:Trade and other (net of reserves  $241,363 as of
June 30, 2008 and December 31, 2007)
    
    
    29,916
    
    
    
    13,457TOTAL CURRENT ASSETS
    
    
    103,584
    
    
    
    35,171PROPERTY, PLANT, AND EQUIPMENT, NET
    
    
    36,483
    
    
    
    494,718OTHER NONCURRENT ASSETS
    
    
    7,024
    
    
    
    7,024TOTAL ASSETS
    
    $
    147,091
    
    
    $
    536,913LIABILITIES & STOCKHOLDERS EQUITY:CURRENT LIABILITIES:Accounts
payable and accrued expenses
    
    $
    395,645
    
    
    $
    519,051Accounts payable  related party
    
    
    227,511
    
    
    
    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
    
    
    5,733
    
    
    
    12,243TOTAL CURRENT LIABILITIES
    
    
    1,243,265
    
    
    
    1,404,340LONG TERM LIABILITY  P&A COSTS
    
    
    43,806
    
    
    
    43,806LONG TERM DEBT
    
    
    
    
    
    
    TOTAL LIABILITIES
    
    
    1,287,071
    
    
    
    1,448,146COMMITMENTS AND CONTINGENCIES:
    
    
    
    
    
    
    STOCKHOLDERS EQUITY (DEFICIT):Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; 0 shares issued and outstanding as of
June 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 June 30, 2008 and
December 31, 2007
    
    
    133,268
    
    
    
    133,268Additional paid in capital
    
    
    13,276,765
    
    
    
    13,276,765Accumulated deficit
    
    
    (14,550,013
    )
    
    
    (14,321,266
    )TOTAL STOCKHOLDERS DEFICIT
    
    
    (1,139,980
    )
    
    
    (911,233
    )TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    147,091
    
    
    $
    536,913
 
 3




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##### 



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007OPERATING REVENUES:Oil and gas sales
    
    $
    29,066
    
    
    $
    15,398
    
    
    $
    34,160
    
    
    $
    19,508TOTAL OPERATING REVENUES
    
    
    29,066
    
    
    
    15,398
    
    
    
    34,160
    
    
    
    19,508OPERATING COSTS AND EXPENSES:Lease operating expenses
    
    
    (3,989
    )
    
    
    3,483
    
    
    
    1,855
    
    
    
    22,032Impairment, abandonment and dry hole costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,598Exploration costs
    
    
    1,459
    
    
    
    102,543
    
    
    
    14,899
    
    
    
    131,909Depreciation, depletion and amortization
    
    
    14,441
    
    
    
    25,763
    
    
    
    31,147
    
    
    
    41,534Marketing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,988General and administrative costs
    
    
    120,875
    
    
    
    224,293
    
    
    
    188,039
    
    
    
    624,775TOTAL OPERATING COSTS
    
    
    132,786
    
    
    
    356,082
    
    
    
    235,940
    
    
    
    838,836OPERATING LOSS
    
    
    (103,720
    )
    
    
    (340,684
    )
    
    
    (201,780
    )
    
    
    (819,328
    )OTHER INCOME (EXPENSE):Interest expense
    
    
    (10,993
    )
    
    
    (3,124
    )
    
    
    (18,856
    )
    
    
    (6,646
    )Gain (loss) on sale of assets
    
    
    (79,879
    )
    
    
    
    
    
    
    (22,129
    )
    
    
    Forgiveness of debt
    
    
    14,018
    
    
    
    
    
    
    
    14,018NET LOSS BEFORE INCOME TAX
    
    
    (180,574
    )
    
    
    (343,808
    )
    
    
    (228,747
    )
    
    
    (825,974
    )Income Tax Provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    
    (180,574
    )
    
    
    (343,808
    )
    
    
    (228,747
    )
    
    
    (825,974
    )Series E Preferred Stock Cash Dividends
    
    
    
    
    
    
    (6,990
    )
    
    
    
    
    
    
    (13,980
    )NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    (180,574
    )
    
    $
    (350,798
    )
    
    $
    (228,747
    )
    
    $
    (839,954
    )NET LOSS PER COMMON SHARE
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )Weighted Average Common Shares Outstanding -Basic and Diluted
    
    
    26,653,633
    
    
    
    26,281,133
    
    
    
    26,653,633
    
    
    
    26,281,133
 
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##### 



SIX MONTHS ENDEDJUNE 30,2008
    
    
    2007CASH FLOW FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (228,747
    )
    
    $
    (825,974
    )Adjustments to reconcile net loss to net cash flows
used in operating activities:Depreciation, depletion, and amortization
    
    
    31,147
    
    
    
    41,534Impairment, abandonment, and dry hole costs
    
    
    
    
    
    
    11,598Loss on sale of assets
    
    
    22,129
    
    
    
    Change in operating assets and liabilities:Accounts Receivable  trade
    
    
    (16,459
    )
    
    
    422,490Accounts receivable  related party
    
    
    
    
    
    
    17,276Prepaid expense and other assets
    
    
    
    
    
    
    46,593AFE advances  JIB owners
    
    
    
    
    
    
    (323,319
    )Accounts payable  related party
    
    
    (54,454
    )
    
    
    119,455Accounts payable and accrued liabilities
    
    
    (123,406
    )
    
    
    (578,534
    )Long term liability  P&A costs
    
    
    
    
    
    
    (6,630
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (369,790
    )
    
    
    (1,075,511
    )CASH FLOW FROM INVESTING ACTIVITIES:Purchase of furniture and computer equipment
    
    
    (3,977
    )
    
    
    (10,821
    )Purchase of oil and gas properties
    
    
    
    
    
    
    (62,333
    )Proceeds from sale of assets
    
    
    408,936
    
    
    
    NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES
    
    
    404,959
    
    
    
    (73,154
    )CASH FLOWS FROM FINANCIANG ACTIVITIES:Payments on long term debt
    
    
    (6,510
    )
    
    
    (11,505
    )Increase in long term debt  related parties
    
    
    23,295
    
    
    
    Dividends paid
    
    
    
    
    
    
    (13,980
    )NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
    
    
    16,785
    
    
    
    (25,485
    )NET INCREASE (DECREASE) IN CASH
    
    
    51,954
    
    
    
    (1,174,150
    )CASH AT BEGINNING OF PERIOD
    
    
    21,714
    
    
    
    1,178,946CASH AT END OF PERIOD
    
    $
    73,668
    
    
    $
    4,796
 
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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 JUNE 30, 2008 AND 2007
  OPERATING REVENUES
  8




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DIRECT OPERATING COSTS
  EXPLORATION COSTS
  OTHER OPERATING EXPENSES
  RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 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
   
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
     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: August 19, 2008
    By
    /s/ Robert D. BurrChief Executive Officer andPresident and Acting Chief FinancialOfficer 12