**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549




**FORM
      10-KSB**




**[X]
      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




For
      the
      fiscal year ended September 30, 2006




**[
       ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE**


**ACT
      OF 1934**




For
      the
      transition period from to





*Commission
      file number:***000-31987**





**TEXHOMA
      ENERGY, INC.**


(Name
      of
      small business issuer in its charter)







**Nevada**
            **20-4858058**(State
                of organization)
            (I.R.S.
                Employer Identification No.)





**100
      Highland Park Village**


**Dallas,
      Texas 75205**


(Address
      of principal executive offices)





**(214)
      295-3380**


(Registrant's  telephone  number)




**SECURITIES
      REGISTERED PURSUANT TO SECTION 12(B)**


**OF
      THE EXCHANGE
      ACT:**




**None**




**SECURITIES
      REGISTERED PURSUANT TO SECTION 12(G)**


**OF
      THE EXCHANGE
      ACT:**





**Common
      Stock, $0.001 par value per share**




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter periods that the registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90 days. Yes
      [  ] No [X].





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB [  ].






1




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes [  ] No [X].




The
      issuer's revenues for the fiscal year ended September 30, 2006 were
      $2,258,425.




The
      aggregate market value of the
      issuer's voting and non-voting common equity held by non-affiliates computed
      by
      reference to the average bid and ask price of such common equity as of October
      23, 2007 was $0, as the issuer’s common stock currently is only traded on a
      sporadic basis on the Pinksheets.com, which quotes the issuer does not believe
      provides an accurate and/or useful basis for the aggregate market value of
      the
      issuer’s common stock.




At
      October 15, 2007 there were 231,149,724 shares of the issuer's common stock
      outstanding.




While
      the
      Issuer’s Financial Statements and Results of Operations as disclosed in this
      Report on Form 10-KSB are as of the year ended September 30, 2006 and 2005,
      the
      other Items disclosed herein have been updated to be current to the best of
      the
      Company’s ability (unless otherwise stated) as of the date this Report was
      filed.



















2




**TABLE
      OF CONTENTS**




PART
      I





ITEM
                1.
            DESCRIPTION
                OF BUSINESS
            4ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            14ITEM
                3.
            LEGAL
                PROCEEDINGS
            17ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            17




PART
      II





ITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            18ITEM
                6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            22ITEM
                7
            FINANCIAL
                STATEMENTS
            F-1ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            36ITEM
                8A.
            CONTROLS
                AND PROCEDURES
            37ITEM
                8B.
            OTHER
                INFORMATION
            37




PART
      III




ITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(A) OF THE EXCHANGE ACT
            38ITEM
                10
            EXECUTIVE
                COMPENSATION
            41ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            43ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            45ITEM
                13.
            EXHIBITS
            51ITEM
                14
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            55SIGNATURES









3


**PART
      I**




**FORWARD-LOOKING
      STATEMENTS**




ALL
      STATEMENTS IN THIS DISCUSSION THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING
      STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT
      OF
      1934, AS AMENDED. STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT OTHERWISE INCLUDE
      THE WORDS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS", "PROJECTS",
      "ESTIMATES", "PLANS", "MAY INCREASE", "MAY FLUCTUATE" AND SIMILAR EXPRESSIONS
      OR
      FUTURE OR CONDITIONAL VERBS SUCH AS "SHOULD", "WOULD", "MAY" AND "COULD" ARE
      GENERALLY FORWARD-LOOKING IN NATURE AND NOT HISTORICAL FACTS. THESE
      FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED
      UTILIZING NUMEROUS IMPORTANT ASSUMPTIONS AND OTHER IMPORTANT FACTORS THAT COULD
      CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
      STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING OUR
      FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY, PROJECTED PLANS AND OBJECTIVES.
      THESE FACTORS INCLUDE, AMONG OTHERS, THE FACTORS SET FORTH BELOW UNDER THE
      HEADING "RISK FACTORS." ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED
      IN
      THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE
      RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOST OF THESE FACTORS
      ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. WE
      ARE
      UNDER NO OBLIGATION TO PUBLICLY UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS
      TO
      REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
      OCCURRENCE OF UNANTICIPATED EVENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE
      RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.   REFERENCES IN
      THIS FORM 10-KSB, UNLESS ANOTHER DATE IS STATED, ARE TO SEPTEMBER 30,
      2006.  AS USED HEREIN, THE “COMPANY,” “TEXHOMA,” “WE,” “US,” “OUR” AND
      WORDS OF SIMILAR MEANING REFER TO TEXHOMA ENERGY, INC. AND ITS WHOLLY OWNED
      DELAWARE SUBSIDIARY, TEXAURUS ENERGY, INC., UNLESS OTHERWISE
      STATED.




**ITEM
      1. DESCRIPTION OF BUSINESS**




**Business
      History**





Texhoma
      Energy, Inc. (“we,” “us,” the “Company”, and “Texhoma”), was originally formed
      as a Nevada corporation on September 28, 1998 as Pacific Sports Enterprises,
      Inc. Our business objective was to own and operate a professional basketball
      team that would be a member of the American Basketball Association. The American
      Basketball Association was not successful in organizing the league, and
      consequently the member teams ceased operating activities in 1999. Thereafter,
      we were dormant without any business operations until October 20,
      2000.





In
      May
      2001, we changed our name to Make Your Move, Inc. and on September 20, 2004,
      we
      changed our name to Texhoma Energy, Inc. in connection with our change in
      business focus to oil and gas exploration and production.





Effective
      May 28, 2004, we affected a 1:150 reverse stock split of our issued and
      outstanding shares of common stock. Effective November 9, 2004, we affected
      a
      4:1 forward split of our issued and outstanding common stock. Unless otherwise
      stated all share amounts listed throughout this filing retroactively take into
      account both the May 28, 2004 reverse stock split and the November 9, 2004
      forward stock split.





On
      November 5, 2004, we entered into a Sale and Purchase Agreement with Capersia
      Pte. Ltd., a Singapore company (“Capersia”), to acquire 40% of an oil and gas
      exploration license operated by Black Swan
      Petroleum Pty. Ltd. (“Black Swan”) and its wholly owned subsidiary Black Swan
      Petroleum (Thailand) Limited (“Black Swan Thai”). Black Swan Thai owned the
      license, permits and title to a petroleum concession in the Chumphon Basin
      in
      the Gulf of Thailand, referred to as “Block B7/38” (the
“Concession”).






4





Black
      Swan recommenced exploration operations of the Concession and Black Swan drilled
      two exploration wells in February and March 2005, which proved void of
      commercially viable hydrocarbons. In June 2005 after completion of the
      exploration activities, the venturers decided to discontinue the exploration
      efforts in Thailand and relinquished the Concession back to the government
      of
      Thailand.





On
      January 20, 2006 we divested our shareholding in Black Swan and Black Swan
      Thai.





After
      the
      exploration venture in Thailand the Board of Directors of the Company decided
      to
      shift its focus to domestic oil and gas exploration and production, with a
      particular focus on south Louisiana and east Texas, including near-shore Gulf
      of
      Mexico.





On
      February 2, 2006, we executed a Sale and Purchase Agreement (the “Clovelly SPA”)
      with Sterling Grant Capital, Inc. pursuant to which we acquired a 5% (five
      percent) working interest in the Clovelly South prospect (bringing our total
      working interest to 11%) located in Lafourche Parish, Louisiana. As a result,
      the Company agreed to fund the work program for the Clovelly South project
      in
      accordance with the Joint Operating Agreement for the property. The
      Allain-Lebreton No. 2 well was drilled and plugged and abandoned in September
      2006.





On
      March
      15, 2006, our wholly-owned subsidiary, Texaurus Energy, Inc., which was formed
      in March 2006 as a Delaware corporation ("Texaurus"), entered into a Sales
      and
      Purchase Agreement with Structured Capital Corp., a Texas corporation to
      purchase certain oil and gas leases in Vermillion Parish, Louisiana. The 8%
      working interest (5.38167% net revenue interest) in the Intracoastal City field
      was acquired for a) two million five hundred thousand dollars ($2,500,000)
      and
      b) the issuance of 37,500,000 shares of our common stock.





On
      March
      28, 2006 Texaurus entered into a Securities Purchase Agreement ("Securities
      Purchase Agreement") with Laurus Master Fund, Ltd. ("Laurus"); a Registration
      Rights Agreement with Laurus; issued Laurus a Common Stock Purchase Warrant;
      entered into a Master Security Agreement with Laurus; sold Laurus a Secured
      Term
      Note in the amount of $8,500,000, and entered into various other agreements.
      Additionally, in connection with the closing, we issued Laurus a Common Stock
      Purchase Warrant to purchase up to 10,625,000 shares of our common stock at
      an
      exercise price of $0.04 per share.




In
      addition Laurus can acquire up to 961 shares of Texaurus’ common stock at an
      exercise price of $0.001 per share, representing 49% of Texaurus’ outstanding
      common stock.  This will be valued at Fair Market Value as of the date
      of the transaction.





The
      Securities Purchase Agreement and Laurus March 2006 funding is described in
      greater detail below under “March 2006 Laurus Master Fund, Ltd.
      Funding.”





On
      March
      28, 2006, with an effective date of January 1, 2006, Texaurus closed a Sales
      & Purchase Agreement to purchase certain interests in the Barnes Creek gas
      field and the Edgerly field from Kilrush Petroleum, Inc. Texaurus paid the
      $5,225,000 purchase price with proceeds received from its sale of the Secured
      Term Note with Laurus.





**March
      2006 Funding with Laurus Master Fund, Ltd.**





On
      March
      28, 2006 (the "Closing"), Texaurus entered into a Securities Purchase Agreement
      ("Securities Purchase Agreement") with Laurus Master Fund, Ltd. ("Laurus");
      a
      Registration Rights Agreement with Laurus ("Registration Rights Agreement");
      issued Laurus a Common Stock Purchase Warrant (the "Texaurus
      Warrant"); entered into a Master Security Agreement with Laurus; sold Laurus
      a
      Secured Term Note in the amount of $8,500,000 (the "Note"), and entered into
      various other agreements described below. Additionally, in connection with
      the
      Closing, we issued Laurus a Common Stock Purchase Warrant (the "Texhoma
      Warrant"), which agreements are described in greater detail below.







5


**SECURED
      TERM NOTE**





The
      Secured Term Note (the "Note") in the amount of $8,500,000, which was sold
      by
      Texaurus to Laurus in connection with the Closing, is due and payable in three
      years from the Closing on March 27, 2009 (the "Maturity Date"), and bears
      interest at the Wall Street Journal Prime Rate (the "Prime Rate"), plus two
      percent (2%) (the "Contract Rate"), based on a 360 day year, payable monthly
      in
      arrears, beginning on April 1, 2006, provided however that the Contract Rate
      shall never be less than eight percent (8%). As of October 23, 2007, the
      Contract Rate is nine and three-quarters percent (9.75%) per year, with the
      Prime Rate at seven and three-quarters percent (7.75%) as of October 23,
      2007.





Additionally,
      the Note provided for principal payments on the funds to be made each month,
      beginning on June 1, 2006, and continuing up to and including the Maturity
      Date.
      The amount of these monthly principal payments is equal to eighty percent (80%)
      of the gross production revenue received by Texaurus, relating to all oil and
      gas properties owned by Texaurus, for the prior calendar month, provided that
      the principal payments shall increase to one hundred percent (100%) of such
      gross production revenue if an Event of Default occurs (as defined in the
      Note).





If
      an
      Event of Default occurs under the Note, the Note shall bear additional interest
      in the amount of two percent (2%) per month above the then current interest
      rate
      of the Note, until such Event of Default is cured or waived. Additionally,
      upon
      the occurrence of and during the continuance of any Event of Default, Laurus
      can
      at its option, demand repayment in full of all obligations and liabilities
      owing
      by Texaurus to Laurus by way of a default payment equal to 130% of the
      outstanding principal amount of the Note and any accrued but unpaid interest
      thereon.




Additionally,
      we agreed to guaranty the Note and other obligations owing to Laurus pursuant
      to
      a Guaranty, the entry into a Master Security Agreement (described below) and
      the
      entry into a Stock Pledge Agreement, whereby we pledged 100% of the outstanding
      stock of Texaurus to Laurus to guarantee the payment and performance of all
      obligations and indebtedness owed to Laurus by Texaurus.





In
      connection with the Closing, Texaurus paid Laurus Capital Management, LLC,
      the
      manager of Laurus, a closing payment equal to 3.5% of the Note, or $297,500;
      Energy Capital Advisors, LLC, an advisory fee equal to $495,000; certain amounts
      paid to various other parties, including our law firm, Laurus' law firm and
      certain of our advisors; and the $5,225,000 paid for the Kilrush, represented
      the entire $8,500,000 received in connection with the sale of the Note, as
      well
      as $300,000 of the funding provided by our former Executive Chairman and
      Director, Frank Jacobs.





Additionally,
      in consideration for advisory services rendered in connection with the Closing,
      we granted Energy Capital Solutions, LLC, warrants to purchase up to 1,062,500
      shares of our common stock at an exercise price of $0.04 per share. Energy
      Capital Solutions, LLC's warrants expire if unexercised at 5:00 P.M. C.S.T.
      on
      March 28, 2011.





**REGISTRATION
      RIGHTS AGREEMENT**





In
      connection with the Closing, we entered into a Registration Rights Agreement
      with Laurus, by which we agreed to file a registration statement covering the
      shares exercisable in connection with the Texhoma Warrant within sixty (60)
      days
      of the date of the Closing, and that such registration statement would be
      effective within one hundred and eighty (180) days of the Closing date, which
      registration statement we have been unable to file to date, due to the fact
      that
      we are not current in our filings with the Commission; however, in November
      2007, we entered into the First Amendment with Laurus (described below), pursuant
      to which Laurus agreed to amend the date we are required to gain effectiveness
      of the Registration Statement by, to April 30, 2008.






6





**TEXAURUS
      WARRANT**





In
      connection with the Closing, Texaurus issued Laurus the Texaurus Warrant, which
      provides Laurus the right to purchase up to 961 shares of Texaurus common stock,
      representing 49% of Texaurus' outstanding common stock at an exercise price
      of
      $0.001 per share. The Texaurus Warrant is exercisable by Laurus at any time
      after the payment by Texaurus in full of the Note. The Texaurus Warrant will
      be
      subject to identical rights to registration as described above in connection
      with the Texhoma Registration Rights Agreement, when and if Texaurus completes
      an initial public offering and/or otherwise becomes publicly
      traded.





**TEXHOMA
      WARRANT**




In
      addition to the Texaurus Warrant granted to Laurus by Texaurus, at the Closing,
      we granted Laurus a Common Stock Purchase Warrant (the "Texhoma Warrant"),
      to
      purchase up to 10,625,000 shares of our common stock at an exercise price of
      $0.04 per share, which if exercised in full would provide us aggregate
      consideration of $425,000.   The Texhoma Warrant expires if
      unexercised at 5:00 P.M. on March 28, 2011. The Texhoma Warrant contains a
      provision whereby Laurus is not able to exercise any portion of the Warrant,
      which exercise would cause it to hold more than 4.99% of our issued and
      outstanding common stock, unless an Event of Default under the Note has occurred
      (as described above) and/or if Laurus provides us 75 days prior written notice
      of their intent to hold greater than 4.99% of our issued and outstanding common
      stock.





**MASTER
      SECURITY AGREEMENT**





To
      secure
      the payment of the obligations of Texaurus incurred in connection with the
      Closing, Texaurus and we entered into a Master Security Agreement with Laurus,
      whereby Texaurus and we agreed to grant Laurus a continuing security interest
      in
      all of our cash, cash equivalents, accounts, accounts receivable, deposit
      accounts (including the amount in the Restricted Account, as described above),
      inventory, equipment, goods, fixtures, documents, instruments, contract rights,
      general intangibles, chattel paper, investment property, letter-of-credit
      rights, trademarks and applications, patents and applications, copyrights and
      applications and other intellectual property which Texaurus has or hereafter
      acquires; the Kilrush Property and any additional properties or interests
      acquired by Texaurus, as well as certain other interests associated with such
      properties.





**SIDE
      LETTER AGREEMENT**





In
      connection with the issuance of the Texaurus Warrant, we and Texaurus entered
      into a "Side Letter Agreement," whereby we and Texaurus agreed that following
      the exercise of the Texaurus Warrant by Laurus, we and Laurus would negotiate
      in
      good faith the terms of a shareholders agreement in connection with Texaurus,
      which among other things would provide for Laurus' consent to certain actions
      to
      be taken by Texaurus or us, including, declaring or paying any dividends,
      selling or disposing of any assets, entering into any transactions outside
      of
      the normal course of business, creating any mortgage, lien, charge or other
      form
      of encumbrance with respect to any assets, entering into any agreements with
      third parties, issuing or selling any capital stock, warrants or convertible
      securities, or appointing or replacing any outside accountants or
      auditors.






7









**Significant
      Transactions Affected During 2006 and 2007:**





Lucayan
      Oil and Gas Investments, Ltd. Transactions





On
      April
      10, 2006, we entered into a Debt Conversion Agreement with Lucayan Oil and
      Gas
      Investments, Ltd., a Bahamas corporation, formerly Devon Energy Thai Holdings,
      Ltd. ("LOGI"). We had owed $895,000 to LOGI as of the date of the Debt
      Conversion Agreement in connection with money received by the Company for the
      drilling in Thailand in February and March 2005. Pursuant to the Debt Conversion
      Agreement, the Company and LOGI agreed to convert $160,000 of the $895,000
      which
      LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each
      $0.04 of debt converted) of newly issued shares of the Company's restricted
      common stock. The conversion price used in the Debt Conversion Agreement is
      based on 80% of the average market price of the shares for the 30 days preceding
      the conversion agreement.  This was considered to be the Fair Market
      Value at the time of the transaction.  The Director and 50% owner of
      LOGI is Max Maxwell, who became a Director of the Company on April 10, 2006,
      and
      President of the Company on April 12, 2006, and resigned as President and
      Director on May 1, 2007. Mr. Maxwell obtained his 50% ownership in LOGI on
      April
      10, 2006 in consideration for joining LOGI as an officer and director and
      introducing Texhoma to various oil and gas opportunities.





On
      April
      10, 2006, the Company entered into a convertible note with LOGI evidencing
      the
      $735,000 of debt which was still owed to LOGI after the Debt Conversion
      Agreement. The terms of the convertible note provided for the same conversion
      price as the previously mentioned Debt Conversion Agreement.  On May
      15, 2006, LOGI provided the Company notice of its desire to convert its $735,000
      Promissory Note into 18,375,000 shares of the Company's common stock which
      the
      Company issued in consideration for the debt conversion.  This
      conversion rate was considered Fair Market Value at the date of
      conversion.





On
      May
      31, 2006, Texhoma entered into six (6) participation agreements to purchase
      various oil and gas leases from Sunray Operating Company LLC.





On
      June
      8, 2006, we entered into a Promissory Note and Security Agreement (the
      "Promissory Note"), with Polaris Holdings, Inc., which held 12,500,000 shares
      of
      our common stock ("Polaris"). Pursuant to the Promissory Note, Polaris gave
      us a
      $250,000 loan. The Promissory Note was due and payable on August 10, 2006,
      with
      interest at 12% per annum. Although the note has not been paid in full to date,
      the note had been paid down to $60,000 as of May 2007, and since that date,
      an
      additional approximately $35,000 has been repaid leaving a balance of
      approximately $25,000 as of the filing of this report. We also gave Polaris
      an
      Option to participate in our Clovelly Field interests in connection with the
      Promissory Note (described below). We agreed pursuant to the Promissory Note
      to
      repay the amounts owed to Polaris by way of (a) two-thirds of the net proceeds
      we receive from any stock sales while the Promissory Note is outstanding, and
      (b) one-third of our share of the production income we receive from our oil
      and
      gas interests in Vermillion Parish, Louisiana, which represents a 10% working
      interest (7.3% net revenue interest) in such leases and our oil and gas
      interests in the Barnes Creek Field, located in Allen Parish, Louisiana and
      the
      Edgerly Field located in Calcasieu Parish, Louisiana from Kilrush Petroleum,
      Inc., which constitutes a 7.42% working interest (a 5.38% net revenue interest)
      in the Barnes Creek gas field, and an 11.76% working interest (8.47% net revenue
      interest) in the Edgerly oil field (the "Texaurus Interests").





We
      used
      the proceeds from the Promissory Note to pay for the cost of drilling the
      Allain-LeBreton No. 2 well in the Clovelly prospect of which we own an 11%
      working interest. The prospect is located in Lafourche Parish, Louisiana and
      operated by ORX Resources, Inc. ("ORX").  Our former Director,
      President and Chief Executive Officer was a Director of ORX at the time of
      the
      Company’s entry into the Promissory Note.





In
      consideration for Polaris agreeing to loan us the money pursuant to and in
      connection with the Promissory Note, we agreed to provide Polaris an option
      to
      participate in Clovelly field for a three percent (3%) working interest, which
      option Polaris can elect after reviewing the logs of the Allain-LeBreton No.
      2
      well at target depth, but before the completion of the well (the "Option").
      In
      the event that Polaris elects to exercise its Option and participate in the
      Allain-LeBreton No. 2 well, we will surrender 3/11ths of our 11% working
      interest in the well and Polaris will reimburse Texhoma for the drilling costs
      incurred by use for the three percent (3%) working interest from the
      commencement of the drilling operations.






8





In
      the
      event that we are unable to repay the Promissory Note to Polaris when due,
      we
      agreed pursuant to the Promissory Note to assign one hundred percent (100%)
      of
      the cash flow from our portion of the Texaurus Interests to Polaris or its
      nominee until the Promissory Note is paid in full.  Although as
      described above, we have not repaid the note to date, we are currently working
      with Polaris to repay the note, and they have not declared an event of
      default.





On
      October 10, 2006, ORX Resources, Inc., operator of the Clovelly Prospect well,
      notified Texhoma that the jointly owned well had been plugged and abandoned
      on
      September 23, 2006.





In
      June
      and August 2006, Texhoma closed the purchase of three (3) of the participation
      agreements, entering into Assignments and Bill of Sales for purchase from Sunray
      Operating Company LLC (“Sunray”) of the following Leases:





·
            Leases
                covering approximately 196 acres of land in Brazoria County, Texas.
                In the
                purchase, Texhoma acquired an undivided 37.5% interest, subject to
                existing overriding royalty interests equal to 25% of 8/8. Additionally,
                Sunray is entitled to a five-eighths of eight-eighths (62.5% of 8/8)
                working interest, proportionally reduced at payout; and·
            Leases
                covering approximately 20 acres of land in Brazoria County, Texas.
                In the
                purchase, Texhoma acquired an undivided 35% interest in the leases,
                subject to existing overriding royalty interests equal to 25% of
                8/8.


·
            Leases
                covering approximately 280 acres of land in Brazoria County, Texas.
                In the
                purchase, Texhoma acquired an undivided 72.5% interest in the leases,
                subject to existing overriding royalty interests equal to 28% of
                8/8.
                Texhoma simultaneously sold a 42.5% interest leaving a 30%
                interest.·
            Texhoma
                declined to participate in the purchase of the leases covering
                approximately 80 acres in Brazoria County. In September 2006, this
                well
                was a dry hole and participation in subsequent wells was
                declined.  However, Texhoma continues to hold a 12.5% back in
                Working Interest.


·
            Two
                leases for another 160 acre site and a 60 acre site which were declined
                by
                Texhoma and in which we retained a 12.5% back in Working
                Interest.





We
      purchased the Leases from Sunray for aggregate consideration of $143,161, of
      which $113,161 was paid in cash and $30,000 was paid in the form of shares
      of
      our common stock, by the issuance of an aggregate of 375,000 units (each a
      "Unit"), which each include one (1) share of common stock and one (1) warrant,
      which entitles the holder of such warrant to purchase one (1) share of our
      common stock at an exercise price of $0.15 per share, prior to the one (1)
      year
      anniversary of such warrant grant, which Units were valued at $0.08 per
      Unit.  Approximately $50,000 remained due to Sunray in connection with
      the purchase of the Leases outstanding as of October 31, 2007.




Upon
      the
      closing of the Purchases we and Sunray agreed to enter into an operating
      agreement in connection with the development of the leases. Additionally, both
      we and Sunray agreed that should either party be unable or unwilling, for any
      reason, to participate in the drilling of the initial well on any of the leases
      described above, the non-participating party shall, at least 90 days prior
      to
      any expiration or any rental date under the leases, assign the participating
      party all of its right, title and interest in such lease.





Amendment
      to Certificate of Incorporation





On
      September 20, 2006, with an effective date of filing of September 21, 2006,
      we
      filed a Certificate of Amendment to our Articles of Incorporation to increase
      our authorized shares of common stock to three hundred million (300,000,000)
      shares of common stock, $0.001 par value per share, and to re-authorize one
      million (1,000,000) shares of preferred stock, $0.001 par value per share (the
      "Amendment").






9


Additionally,
      the Amendment provided that shares of our preferred stock may be issued from
      time to time in one or more series, with distinctive designation or title as
      shall be determined by our Board of Directors prior to the issuance of any
      shares thereof. The preferred stock shall have such voting powers, full or
      limited, or no voting powers, and such preferences and relative, participating,
      optional or other special rights and such qualifications, limitations or
      restrictions thereof, as shall be stated in such resolution or resolutions
      providing for the issue of such class or series of preferred stock as may be
      adopted from time to time by our Board of Directors prior to the issuance of
      any
      shares thereof. The number of authorized shares of preferred stock may be
      increased or decreased (but not below the number of shares thereof then
      outstanding) by the affirmative vote of the holders of a majority of the voting
      power of all the then outstanding shares of the capital stock of the corporation
      entitled to vote generally in the election of directors, voting together as
      a
      single class, without a separate vote of the holders of the preferred stock,
      or
      any series thereof, unless a vote of any such holders is required pursuant
      to
      any preferred stock designation.





Promissory
      Note





On
      or
      about October 19, 2006, the Company issued a Promissory Note to Jacobs Oil
&
Gas Limited, an entity controlled by Mr. Frank Jacobs, our former Director, in
      the amount of $493,643.77, which amount represented funds advanced to the
      Company by Mr. Jacobs and management fees owed to Mr. Jacobs (the “Jacobs'
      Note”). The Jacobs' Note bears interest at the rate of 6% per annum until paid,
      and is payable by the Company at any time on demand. The Jacobs' Note may be
      pre-paid at any time without penalty. Any amounts not paid on the Jacobs' Note
      when due shall bear interest at the rate of 15% per annum. The Company also
      entered into a Security Agreement with Mr. Jacobs under which Agreement the
      Board of Directors ratified the transfer of 200,000 shares of the common stock
      of Morgan Creek Energy Corp., which shares were held by the Company, to Mr.
      Frank Jacobs as security for the money that is owed pursuant to the Jacobs'
      Note.





On
      or
      about June 5, 2007, we entered into an Agreement with Jacobs Oil & Gas
      Limited (“Jacobs”), pursuant to which Jacobs agreed that no interest would be
      due from us and/or accrue on the principal or accrued interest to date on his
      outstanding Promissory Note for the period of one (1) year from the date of
      the
      Agreement and that he would not try to collect the principal and/or accrued
      interest on such note for a period of one (1) year.





Letter
      Agreement





On
      or
      about May 15, 2007, we entered into a Letter Agreement with Matrixx Resource
      Holdings Inc. (“Matrixx”) to sell our 11% working interest in the property known
      as the Clovelly Prospect (the “Clovelly Prospect”) for $150,000. In connection
      with and pursuant to the Letter Agreement, we expected to receive an earnest
      money deposit of $25,000 on or about May 25, 2007, with the remainder of the
      purchase price to be paid on or before June 30, 2007; however, we have not
      received any funds or any deposit from Matrixx and the Letter Agreement has
      been
      terminated.





Management
      Services Agreement





On
      or
      about May 15, 2007, we entered into a Management Services Agreement with Valeska
      Energy Corp. (“Valeska”), whose Chief Executive Officer is William M. Simmons,
      who became an officer and Director of us on or about June 4, 2007, as described
      below, which was subsequently amended on or about June 1, 2007 (collectively
      the
“Management Agreement”).





Pursuant
      to the Management Agreement, we agreed to enter into a Joint Venture agreement
      with Valeska (the “Joint Venture”), described below; Valeska agreed to provide
      us management services and act as a Management Consultant to us, for a monthly
      fee of $10,000 (plus expenses), or 15% of any revenue we generate, whichever
      is
      greater (excluded from this definition however are asset sales and/or income
      of
      a capital nature, and included in the definition are 20% of the revenues we
      receive from our Joint Venture with Laurus Master Fund, Ltd.); and we also
      agreed to issue Valeska 15,200,000 restricted shares of our common
      stock. We also agreed pursuant to the Management Agreement, as amended, that
      we
      would issue Valeska an additional 18,200,000 shares of our common stock upon
      such time as we are able to bring our public reporting requirements current
      with
      the Commission and seek reinstatement on the Over-The-Counter Bulletin Board.
      These shares will be valued at Fair Market Value using the most appropriate
      valuation method.  The Management Agreement had a minimum term of
      three months, beginning on May 1, 2007.  The Management Services
      Agreement was later amended and extended by the parties’ entry into the Second
      Amendment to Management Services Agreement with Valeska Energy Corp. in August,
      2007, as described below.




10





Joint
      Venture Agreement





On
      or
      about May 15, 2007, we entered into a Joint Venture Relationship Agreement
      with
      Valeska (the “Joint Venture Agreement”), pursuant to which we and Valeska agreed
      to form a new Texas limited partnership (the “Joint Venture”), of which Valeska
      will serve as general partner. The Joint Venture Agreement contemplates that
      Valeska will cause funds to be invested, arrange financial and strategic
      partnerships, and that both parties would bring investment opportunities to
      the
      Joint Venture. Pursuant to the Joint Venture Agreement, Valeska has
      co-investment rights in the Joint Venture. Any distributions from the Joint
      Venture will be paid first to Valeska and the Company, in an amount equal to
      8%
      to Valeska and 2% to the Company, subject to investor approval; then to any
      investors as negotiated therewith; and finally Valeska and the Company will
      share any remaining distributions, with Valeska receiving 80% of such
      distributions and the Company receiving 20% of such distributions.





The
      Joint
      Venture Agreement also provides that Valeska has the right to require us to
      purchase its interest in the Joint Venture at any time, in exchange for shares
      of our common stock. In the event that Valeska exercises this right, the
      valuation of the Joint Venture will be valued in a negotiated manner or at
      30%
      greater than the gross acquisition cost of any property acquired by the Joint
      Venture, and the number of shares exchangeable for such interest will be equal
      to the market price of our shares of common stock on the date that such right
      is
      exercised by Valeska.





Additionally,
      we have the right, pursuant to the Joint Venture Agreement, to veto any deal
      which Valeska proposes to include in the Joint Venture.





Voting
      Agreement





On
      or
      about June 5, 2007, certain of our largest shareholders, including Capersia
      Pte.
      Ltd.; Frank A. Jacobs, our former officer and Director; and Valeska Energy,
      Inc., which is controlled by William M. Simmons, the President and Director
      of
      the Company, and is majority owned by Daniel Vesco, the Company’s Chief
      Executive Officer and a Director of the Company, through an entity which he
      controls (“Valeska” and collectively the “Shareholders”) entered into a Voting
      Agreement (the “Voting Agreement”).  Pursuant to the terms of the
      Voting Agreement the Shareholders agreed that for the Term of the Voting
      Agreement, as defined below, no Shareholder would vote any of the shares of
      common stock (the “Shares”) which they hold for (i.e. in favor of) the removal
      of William M. Simmons or Daniel Vesco, our Directors (the “New
      Directors”).  The Shareholders also agreed that in the event of any
      shareholder vote of the Company (either by Board Meeting, a Consent to Action
      with Meeting, or otherwise) relating to the removal of the New Directors; the
      re-election of the New Directors; and/or the increase in the number of directors
      of the Company during the Term of the Voting Agreement, that such Shareholders
      would vote their Shares against the removal of the New Directors; for the
      re-election of such New Directors; and/or vote against the increase in the
      number of directors of the Company, without the unanimous consent of the New
      Directors, respectively.





The
      Voting Agreement further provided that in the event that either of the New
      Directors breaches his fiduciary duty to the Company, including, but not limited
      to such Director’s conviction of an act or acts constituting a felony or other
      crime involving moral turpitude, dishonesty, theft or fraud; such Director’s
      gross negligence in connection with his service to the Company as a Director
      and/or in any executive capacity
      which he may hold; and/or if any Shareholder becomes aware of information which
      would lead a reasonable person to believe that such Director has committed
      fraud
      or theft from the Company, or a violation of the Securities laws, the Voting
      Agreement shall not apply, and the Shareholders may vote their shares as they
      see fit.




11





The
      Term
      of the Voting Agreement is until June 5, 2009 (the “Term”).  The
      Shareholders agreed to enter into the Voting Agreement in consideration for
      the
      New Directors agreeing to serve the Company as Directors of the
      Company.





On
      or
      about July 12, 2007, another one of our significant shareholders, Lucayan Oil
      and Gas Investments, Ltd. (“LOGI”), which is 50% owned by Max Maxwell, our
      former President and Director, entered into a Voting Agreement with us, which
      was amended by a First Amendment to Voting Agreement, which provided that the
      shares of common stock held by LOGI would be subject to the identical terms
      of
      our June 5, 2007 Voting Agreement with the Shareholders.





Cooperation
      Agreement and Mutual Release





On
      or
      about July 12, 2007, LOGI; Mr. Maxwell; Meredith Maxwell, Mr. Maxwell’s daughter
      and our former employee; and A.E. Buzz Jehle, our former consultant
      (collectively the “Former Interested Parties”) entered into a Cooperation
      Agreement and Mutual Release (the “Release”) with us and Texaurus Energy, Inc.
      (“Texaurus”), our wholly owned Delaware subsidiary (for the purposes of the
      description of the Release, all references to “we,” “us,” the “Company” or
      similar words include Texaurus).  In connection with the Release, we
      and the Former Interested Parties agreed to release each other (including
      employees, officers, directors, representatives, employees and assigns) from
      any
      and all claims, rights, causes of action and obligations which were known or
      unknown at the time of the entry into the Release, subject only to the
      Assignment by the Former Interested Parties of their rights, causes of actions
      or demands against any former officers or Directors of us to the Company and
      the
      New Directors (the “Assignment”) and the Extension.  The release we
      provided to the Former Interested Parties was against any and all claims,
      rights, causes of action and obligations which were known at the time of the
      entry into the Release, or which are not brought to the attention of the New
      Directors or the Company by 5:00 P.M. Central Standard Time, on September 30,
      2007 (the “Extension”).




Additionally,
      in connection with the Release, Mr. Maxwell personally agreed, to the best
      of
      his ability, to cooperate with us in connection with an audit of us and
      Texaurus; to provide a list of the known liabilities of the Company which Mr.
      Maxwell was aware of; and to personally certify the accuracy and completeness
      of
      any financial statements which the Company prepares covering the time period
      during which Mr. Maxwell was President of the Company, in a form similar to
      the
      Certification Of Chief Executive Officer and Chief Financial Officer Pursuant
      To
      Section 302 of The Sarbanes-Oxley Act Of 2002 and Certification of Chief
      Executive Officer; and (ii) Certification of Chief Financial Officer Pursuant
      To
      18 U.S.C. Section 1350, as Adopted Pursuant To Section 906 Of The Sarbanes-Oxley
      Act Of 2002, which reporting companies are required to file as attachments
      to
      each periodic filing with the Commission.




Mr.
      Maxwell also agreed pursuant to the terms of the Release that any options which
      he vested pursuant to the June 2006 options which he was granted by us would
      expire if unexercised on August 1, 2007; and that we owe him no rights to
      contribution or indemnification in connection with his service to the Company.
      Mr. Maxwell also certified that the shares of common stock granted to LOGI
      were
      issued for valid consideration and fully paid and non-assessable (the
“Certification”).  Additionally, pursuant to the terms of the Release,
      we agreed to indemnify Mr. Maxwell and Mr. Jehle against any dispute regarding
      the shares issued to LOGI, provided that such Certification is valid and
      correct.





Consulting
      Agreement




Effective
      July 1, 2007, we entered into a Consulting Agreement with Ibrahim Nafi Onat,
      our
      Director (the “Consulting Agreement”), pursuant to which Mr. Onat agreed to
      serve as our Director and Vice President of
      Operations for an initial term of twelve (12) months, which term is renewable
      month to month thereafter with the mutual consent of the
      parties.  Pursuant to the Consulting Agreement we agreed to pay Mr.
      Onat $2,500 per month during the term of the Consulting Agreement, to issue
      him
      500,000 restricted shares of common stock valued at the market price on the
      date
      of issuance, in connection with his entry into the Consulting Agreement and
      500,000 restricted shares of common stock assuming he is still employed under
      the Consulting Agreement at the expiration of six (6) months from the effective
      date of the Consulting Agreement (the “Six Month Issuance”).  The
      Consulting Agreement is described in greater detail below under “Directors,
      Executive Officers, Promoters and Control Persons; Compliance With Section
      16(A)
      Of The Exchange Act.”




12





Material
      Corporate Events





On
      July
      17, 2007, the Company's Board of Directors unanimously agreed by a written
      consent to action without a meeting, to adopt a Certificate of Designations
      for
      the creation of a Series A preferred stock (the "Series A Preferred
      Stock").





The
      Series A Preferred Stock has a par value of $0.001 per share. The Series A
      Preferred Stock consists of one thousand (1,000) shares, each having no dividend
      rights, no liquidation preference, and no conversion or redemption rights.
      However, the one thousand (1,000) shares of Series A Preferred Stock have the
      right, voting in aggregate, to vote on all shareholder matters equal to
      fifty-one percent (51%) of the total vote. For example, if there are 10,000,000
      shares of the Company's common stock issued and outstanding at the time of
      a
      shareholder vote, the holders of Series A Preferred Stock, voting separately
      as
      a class, will have the right to vote an aggregate of 10,400,000 shares, out
      of a
      total number of 20,400,000 shares voting.





Additionally,
      the Company shall not adopt any amendments to the Company's Bylaws, Articles
      of
      Incorporation, as amended, make any changes to the Certificate of Designations,
      or effect any reclassification of the Series A Preferred Stock, without the
      affirmative vote of at least 66-2/3% of the outstanding shares of Series A
      Preferred Stock. However, the Company may, by any means authorized by law and
      without any vote of the holders of shares of Series A Preferred Stock, make
      technical, corrective, administrative or similar changes to the Certificate
      of
      Designations that do not, individually or in the aggregate, adversely affect
      the
      rights or preferences of the holders of shares of Series A Preferred
      Stock.





On
      or
      about July 26, 2007, with an effective date of July 31, 2007, we entered into
      a
      Termination of Lease Agreement (the “Termination Agreement”) with our landlord
      at 2200 Post Oak Blvd., Suite 340, Houston, Texas 77056 (the “Post Oak
      Office”).  Pursuant to the terms of the Termination Agreement, we and
      the landlord agreed to terminate the lease on the Post Oak Office space, and
      we
      agreed to pay the landlord approximately $4,090 as a termination fee, $3,331
      as
      payment of past due rental fees; and we also agreed to forfeit any right to
      our
      security deposit of approximately $1,578 held by the landlord pursuant to the
      terms of our lease in connection with such Termination Agreement.





On
      or
      about August 13, 2007, we entered into a Second Amendment to Management Services
      Agreement with Valeska Energy Corp. (“Valeska” and the “Second
      Amendment”).





Pursuant
      to the Second Amendment, we and Valeska agreed to extend the term of the
      Management Services Agreement until September 30, 2008, and to pay Valeska
      the
      following consideration in connection with agreeing to perform the services
      required by the original Management Services Agreement, and in consideration
      for
      allowing Daniel Vesco and William M. Simmons to serve as Directors of the
      Company, bringing on personnel to assist the Company with the day to day
      operations of the Company, and help bring the Company current in its filings
      (the “Services”):




·
            1,000
                shares of the Company’s Series A Preferred
                Stock;


·
            A
                monthly fee of $20,000 per month during the extended term of the
                Second
                Amendment, plus reasonable and actual costs incurred by Valeska (or
                individuals or designees brought on by Valeska, including lodging,
                car
                rental and telephone expenses therewith) in connection with such
                Services;







13


·
            10,000,000
                restricted shares of the Company’s common stock; and·
            60,000,000
                options to purchase shares of the Company’s common stock, which have a
                cashless exercise provision, are valid for a period of three years
                from
                their grant date, and have an exercise price of greater than 110%
                of the
                trading price of the Company’s common stock on the Pinksheets on the day
                of such grant, which exercise price is equal to $0.02 per
                share.





On
      or
      about October 30, 2007, we entered into a Cooperation Agreement and Mutual
      Release with our former consultant Terje Reiersen (“Reiersen” and the “Reiersen
      Release”).  Pursuant to the Reiersen Release, Reiersen agreed to
      release us, our current and former officers, agents, directors, servants,
      attorneys, representatives, successors, employees and assigns from any and
      all
      rights, obligations, claims, demands and causes of action in contract or tort,
      under any federal or state law, whether known or unknown, relating to his
      services with the Company or the Company in general for any matter whatsoever
      other than in connection with any claims against any former officers or
      Directors of the Company, which claims Reiersen assigned to the
      Company.  Reiersen also agreed to cooperate fully with us in
      connection with any reasonable requests from us for a period of sixty (60)
      days
      from the date of the Reiersen Release, that we would not owe him any rights
      of
      contribution or indemnification in connection with any services he rendered
      on
      our behalf and that we would not owe him any other consideration other than
      what
      we agreed to provide him in connection with the Reiersen Release (as described
      in greater detail below).





In
      connection with the Reiersen Release, we agreed to pay Reiersen $2,500 within
      ten (10) business days of the parties entry into the Reiersen Release (which
      funds have not been paid to date), and issue Reiersen 250,000 restricted shares
      of our common stock, which shares have not been issued to date within ten (10)
      days of the parties entry into the Reiersen Release.





On
      or
      about November 2, 2007, we entered into a First Amendment to Securities Purchase
      Agreement, Secured Term Note and Registration Rights Agreement with Laurus
      (the
“First Amendment”).  Pursuant to the First Amendment, Laurus agreed
      to:





(a)
            waive
                any default which may have occurred as a result of our failure to
                become
                current in our filings with the Commission, assuming that we become
                current in our filings prior to December 15,
                2007;





(b)
            amend
                the terms of the Laurus Note to provide that a “Change of Control” of
                Texaurus under the Note, which requires approval of Laurus, includes
                any
                change in Directors such that Daniel Vesco and William M. Simmons
                are no
                longer Directors of Texaurus; and





(c)
            amend
                the terms of the Registration Rights Agreement with Laurus to provide
                that
                the date we are required to gain effectiveness of a registration
                statement
                registering the shares of common stock issuable in connection with
                the
                exercise of the Laurus Warrant in the Company is amended to no later
                than
                April 30, 2008, and that the effective date of any additional registration
                statements required to be filed by us in connection with the Registration
                Rights Agreement, shall be thirty (30) days from such filing
                date.





**ITEM
      2. DESCRIPTION OF PROPERTY**





Office
      Space Lease





Effective
      June 11, 2007, we entered into a lease for office space at 100 Highland Park
      Village - Suite 200, Dallas, Texas. Pursuant to the office space lease, we
      agreed to rent approximately 80 square feet of office space for total monthly
      rent of $586 per month from the effective date of the agreement until June
      30,
      2008, and
      to
      rent another approximately 80 square feet of office space for total monthly
      rent
      of $1,675 starting September 1, 2007. Therefore, the total monthly rent due
      under the agreement will be $586 from June 11, 2007 until September 1, 2007,
      and
      $1,675 thereafter for the term of the agreement. The lease also includes
      approximately $500 of additional monthly expenses associated with internet
      access, telephone and fax costs and answering services per month.




14




Oil
      and Gas Properties




Texaurus
      Energy, Inc. currently owns interests in three oil and natural gas
      producing fields, and an exploration project:





The
      Barnes Creek field is located in Allen Ph, Louisiana and operated by Zachry
      Exploration, Ltd.  The 320-acre unit is produced by one well, which is
      L&H Partnership # 1.  Oil and gas production is obtained from
      10,200 ft deep Yegua sand formation.  Texaurus interests in this field
      are 7.42299% working interest(“WI”) and 5.38167% net revenue interest
      (“NRI”).  Geological and engineering data demonstrate that one well
      can adequately drain 320 acres in this formation, therefore no future well
      is
      planned in this unit.





Edgerly
      field is located in Calcasieu Ph, Louisiana and operated by Peoples Energy
      Prod.
      The field has four producing wells and a potential to drill two additional
      offset wells.  Producing wells are North American Land No 1, No. 2,
      No. 3 and No. 4.  These wells are producing from Marg Tex 1 & 2
      sands.  Texaurus interests in this field are 11.75625% WI and 8.51919%
      NRI.





Intracoastal
      field, which is also called Little White Lake field, is located in Vermillion
      Ph, Louisiana and operated by Key Operating.  The field has three
      producing wells, which are Lease S/L 16995# 1, #2, and # 3.  The wells
      demonstrate additional hydrocarbon production potential behind pipe for future
      recompletion.  Texaurus interests in this field are 8.0% WI, and 5.84%
      NRI.





Clovelly
      project is located in LaFourche, Louisiana and consists of two drilling
      locations.  One of these locations is classified as proved undeveloped
      (“PUD”), and the other one is an exploratory drill site.  Texaurus
      interests in the lease are approximately 11% working interest and 7.7% NRI
      before payout and 8.8% WI and 6.61% NRI after payout.





Below
      is
      an estimate of the reserves and future production and income attributable to
      certain leasehold interests held by us as of January 1, 2007, as prepared by
      R.A. Lenser and Associates, Inc., of Houston, Texas. The subject properties
      are
      located in the Barnes Creek, Edgerly, and Intracoastal City Fields, Allen,
      Calcasieu, and Vermilion Parishes, Louisiana. The results of this study are
      summarized below:






15







**Texhoma
      Energy, Inc.**


**Estimated
      Net Reserves and Income Data**


**Attributable
      to Certain Leasehold Interests**


**As
      of January 1, 2007**









Proved
                Developed
            TotalProducing
            Behind
                Pipe
            Undeveloped
            ProvedRemaining
                ReservesOil/Condensate
                - MBbls
            66
            4
            133
            203Gas-MMCF
            298
            46
            66
            410





Liquid
      Hydrocarbon Volumes are expressed in thousands of barrels (MBbls). A barrel
      is
      equivalent to 42 United States gallons. Gas Volumes are expressed in millions
      of
      standard cubic feet (MMCF) at the contract temperature and pressure base of
      the
      state of Louisiana.




Reserve
      Definitions





The
      proved reserves disclosed above conform to the definitions as set forth in
      the
      Securities and Exchange Commission's Regulation S-X Part 210.4-10 (a) as
      clarified by various Commission Staff Accounting Bulletins and to the
      definitions endorsed by the Society of Petroleum Engineers (SPE), the Society
      of
      Petroleum Evaluation Engineers (SPEE) and the World Petroleum Congresses
      (WPC).





Estimate
      of Reserves





Estimates
      of reserves were prepared by the use of geological and engineering methods
      generally accepted by the petroleum industry. The method or combination of
      methods utilized in the analysis of each reservoir was tempered by experience
      in
      the area, stage of development, quality and completeness of basic data, and
      production history.





Where
      applicable, the volumetric method was employed for determining the original
      quantities of hydrocarbons in place. Where sufficient geological data was
      available, structural maps were prepared to delineate each reservoir and
      isopachous maps were constructed to determine reservoir volumes. Electrical
      logs, core analysis, and other available data were used to prepare these maps
      as
      well as to determine representative values for porosity and interstitial water
      saturation. Reserves based upon volumetric calculations or other methods such
      as
      analogy with offset wells are usually subject to greater revision than those
      based upon production and/or pressure performance data. Therefore, it may be
      necessary to revise these estimates up or down in the future as more reliable
      engineering data becomes available.





Reserves
      of depletion-type reservoirs or those whose performance disclosed reliable
      decline in production-rate trends or other diagnostic characteristics were
      estimated by the application of appropriate decline curves or other performance
      relationships. In the analysis of production decline curves, reserves were
      established only to a calculated economic limit.





16


Estimate
      of Future Producing Rates




Initial
      production rates were based on the current rates for those reservoirs now on
      production. If no production decline was established, a decline profile
      analogous to similar wells was used. If a decline trend was established, this
      trend was used as the basis for estimating future rates.





General





The
      reserves above are estimates only and should not be construed as being exact
      quantities. They may or may not be actually recovered and, if recovered, the
      revenues there from and the actual costs related thereto could be more or less
      than the currently estimated amounts. Also, estimates of reserves may increase
      or decrease as a result of future operations.





**Plan
      of Operations**





Since
      the
      Company does not own the majority interests in the producing wells and in the
      leases, it is difficult to project future development and exploration
      activities.  Based on previous reports and correspondence, a well is
      expected to be drilled in the Clovelly Prospect in 2007.





Texhoma
      is aggressively pursuing new acquisitions in order to increase its production,
      oil and gas reserves.





**ITEM
      3. LEGAL PROCEEDINGS**




Management
      of the Company is not aware of any legal proceedings contemplated by any
      governmental authority or other party involving the Company or its subsidiaries
      or its properties other than those described below. No director, officer or
      affiliate of the Company is (i) a party adverse to the Company in any legal
      proceedings; or (ii) has an adverse interest to the Company in any legal
      proceedings. Management is not aware of any other legal proceedings pending
      or
      that have been threatened against the Company, its subsidiaries or its
      properties, other than those described below.





The
      Company has been threatened with arbitration by ORX Resources, Inc. in
      connection with funds which ORX believes it is due in connection with fees
      and
      expenses owed by the Company in connection with the Clovelly Joint
      Venture.  Our former President and Director, Max Maxwell, formerly
      served as Vice President of ORX.  ORX has not filed any formal
      proceeding against the Company, and the Company hopes to work with ORX in this
      matter and avoid any formal legal proceedings.




Matrixx
        Resource Holdings Inc. (“Matrixx”) claims the Company owes it approximately
        $60,000 in connection with funds that it paid for a backend interest in two
        of
        the Company’s wells on its Manville property, which wells were eventually found
        to be dry. The Company believes however, that it does not owe Matrixx the
        return
        of any funds in connection with such payments, as the wells were dry and
        as such
        there was no interest to transfer to Matrixx. In addition, the Company believes
        that Matrixx owes it approximately $16,000 in connection with additional
        fees
        and expenses which were paid by the Company, but attributable to Matrixx’s
        interest, and which were in addition to the $60,000 previously paid by Matrixx.
        While the parties are currently in discussions regarding such debt and we
        have
        been threatened with litigation by Matrixx, neither the Company nor Matrixx
        has
        filed any formal legal proceedings in connection with such debts to
        date.


The
      Company is currently in discussions with its former Chief Executive Officer,
      former Chief Financial Officer, former Executive Chairman and former Director,
      Frank Jacobs regarding amounts owed on Mr. Jacobs Promissory Note, described
      herein and owed to Mr. Jacobs' company, Jacobs Oil & Gas Limited, as well as
      certain other issues relating to Mr. Jacobs’ prior services to the
      Company.  The Company has not filed any formal legal proceedings
      against Mr. Jacobs, but has not ruled out filing such proceedings in the future
      depending on the outcome of the Company’s discussions with Mr.
      Jacobs.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS**




None.




17




**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**




Our
      common stock currently trades on the "pink sheets" published by the National
      Quotation Bureau under the symbol "TXHE". However, the fact that our securities
      have limited and sporadic trading on the pink sheets does not by itself
      constitute a public market, and as such, historical price quotations relating
      to
      trades in our stock on the pink sheets have not been included in this filing.
      In
      the future, we plan to apply for quotation on the Over-The-Counter Bulletin
      Board, assuming that we are able to become current in our periodic filings
      with
      the Commission, of which there can be no assurance.  As of October 23,
      2007, the Company had approximately 231,149,724 shares of common stock
      outstanding held by approximately 184 shareholders of record.




Recent
      Sales Of Unregistered Securities




In
      December 2005, an aggregate of 4,000,000 shares of common stock were issued
      to
      two entities in connection with a private placement of $0.10 share for which
      the
      Company received $400,000. We claim an exemption from registration afforded
      by
      Section 4(2) of the Securities Act of 1933, since the foregoing issuance did
      not
      involve a public offering, the recipients took the shares for investment and
      not
      resale and we took appropriate measures to restrict transfer.





In
      February 2006, 2,000,000 shares of common stock were issued to Sterling Grant
      Capital, Inc., in connection with the acquisition of a 5% working interest
      in
      the Clovelly South field. We claim an exemption from registration afforded
      by
      Section 4(2) of the Securities Act of 1933, since the foregoing issuance did
      not
      involve a public offering, the recipient took the shares for investment and
      not
      resale and we took appropriate measures to restrict transfer.





On
      March
      24, 2006, Mr. Jacobs, the Company’s then Chief Executive Officer, subscribed for
      7,500,000 shares of the Company's common stock at $0.04 per share, for aggregate
      consideration of $300,000, which amount was paid from his personal funds, which
      funds were immediately used by the Company as a portion of the consideration
      paid by the Company for the purchase of certain oil and gas interests. We claim
      an exemption from registration afforded by Section 4(2) of the Securities Act
      of
      1933, since the foregoing issuance did not involve a public offering, the
      recipient took the shares for investment and not resale and we took appropriate
      measures to restrict transfer.





On
      March
      28, 2006, in connection with the Closing, we granted Laurus a Common Stock
      Purchase Warrant to purchase up to 10,625,000 shares of our common stock at
      an
      exercise price of $0.04 per share, which warrants expire if unexercised at
      5:00
      P.M. C.S.T. on March 28, 2011. We claim an exemption from registration afforded
      by Rule 506 of Regulation D under the Securities Act of 1933 (the "Act"), for
      the issuance of the Common Stock Purchase Warrant and Note.





On
      March
      28, 2006, in connection with the Closing, Texaurus granted Laurus a Common
      Stock
      Purchase Warrant, which provides Laurus the right to purchase up to 961 shares
      of Texaurus' common stock, representing 49% of Texaurus' outstanding common
      stock at an exercise price of $0.001 per share. Texaurus claims an exemption
      from registration afforded by Rule 506 of Regulation D under the Act, for
      the grant of the Common Stock Purchase Warrant.





On
      March
      28, 2006, in consideration for advisory services rendered in connection with
      the
      Closing, we granted Energy Capital Solutions, LLC, warrants to purchase up
      to
      1,062,500 shares of our common stock at an exercise price of $0.04 per share,
      which warrants expire if unexercised at 5:00 P.M. C.S.T. on March 28, 2011.
      We
      claim an exemption from registration afforded by Rule 506 of Regulation D under
      the Act, for the issuance of the warrants.





On
      April
      10, 2006, we issued 37,500,000 shares to Structured Capital Corporation
      (which was later distributed among several entities) in connection with our
      purchase of certain oil and gas interests in Louisiana.
      We claim an exemption from
      registration afforded by Section 4(2) of the Securities Act of 1933, since
      the
      foregoing issuance did not involve a public offering, the recipient(s) took
      the
      shares for investment and not resale and we took appropriate measures to
      restrict transfer.




18





On
      April
      10, 2006, Texhoma entered into a Debt Conversion Agreement with Lucayan Oil
      and
      Gas Investments, Ltd., a Bahamas corporation ("LOGI"). Texhoma owed $895,000
      to
      LOGI as of the date of the Debt Conversion Agreement in connection with money
      received by the Company for the drilling in Thailand in March 2005. Pursuant
      to
      the Debt Conversion Agreement, the Company and LOGI agreed to convert $160,000
      of the $895,000 which LOGI was owed into an aggregate of 4,000,000 shares (or
      one (1) share for each $0.04 of debt converted) of newly issued shares of the
      Company's restricted common stock. We claim an exemption from registration
      afforded by Section 4(2) of the Securities Act of 1933, since the foregoing
      issuance did not involve a public offering, the recipient took the shares for
      investment and not resale and we took appropriate measures to restrict
      transfer.





On
      May
      15, 2006, LOGI provided the Company notice of its desire to convert its $735,000
      Promissory Note, which amount remained from LOGI’s Debt Conversion Agreement
      entered into with Texhoma in April 2006, into 18,375,000 shares of the Company's
      common stock and as a result of such conversion, LOGI now owns an aggregate
      of
      22,375,000 shares of Company common stock. The Director and 50% owner of LOGI
      is
      Max Maxwell, who became a Director of the Company on April 10, 2006, and
      President of the Company on April 12, 2006. We claim an exemption from
      registration afforded by Section 4(2) of the Securities Act of 1933, since
      the
      foregoing issuance did not involve a public offering, the recipient took the
      shares for investment and not resale and we took appropriate measures to
      restrict transfer.




On
      June
      1, 2006, the Company's Board of Directors approved the grant of an
      aggregate of 10,000,000 options to the Company's officers, Directors and
      employees, pursuant to the Company's 2006 Stock Incentive Plan. All the options
      were at an exercise price of $0.13 per share, which was equal to the average
      of
      the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company’s
      common stock on June 1, 2006, multiplied by 110%. Options were granted to Max
      Maxwell, Frank Jacobs, Brian Alexander, and Terje Reiersen.  These
      options will be valued using the Black Scholes valuation method.  We
      claim an exemption from registration afforded by Section 4(2) of the Securities
      Act of 1933, since the foregoing issuances did not involve a public offering,
      the recipients took the securities for investment and not resale and we took
      appropriate measures to restrict transfer.





Additionally,
      on June 1, 2006, the Board of Directors approved the grant of 2,000,000
      options to another consultant to the Company in consideration for investor
      relations services rendered to the Company. The options have an exercise price
      of $0.13 per share, vest at a rate of 250,000 options every three months and
      expire if unexercised on June 1, 2009, or as provided in an Option Agreement
      to
      be drafted subsequent to the grant, to evidence such options.  These
      options will be valued using the Black Scholes valuation method.  We
      claim an exemption from registration afforded by Section 4(2) of the Securities
      Act of 1933, since the foregoing grant did not involve a public offering,
      the recipient took the securities for investment and not resale and we took
      appropriate measures to restrict transfer.





On
      June
      3, 2006, Texhoma entered into a Subscription Agreement with an individual,
      pursuant to which such individual purchased 1,925,000 units (each consisting
      of
      one restricted share of our common stock and one warrant to purchase one share
      of our common stock at an exercise price of $0.15 per share), which warrant
      expires if unexercised on June 3, 2007, for aggregate consideration of $154,000.
      We claim an exemption from registration afforded by Section 4(2) of the
      Securities Act of 1933, since the foregoing issuance did not involve a public
      offering, the recipient took the securities for investment and not resale and
      we
      took appropriate measures to restrict transfer.





On
      June
      3, 2006, Texhoma entered into a Subscription Agreement with an individual,
      pursuant to which such individual purchased 1,000,000 units (each consisting
      of
      one restricted share of our common stock and one warrant to purchase one share
      of our common stock at an exercise price of $0.15 per share), which warrant
      expires if unexercised on June 3, 2007, for aggregate consideration of $80,000.
      We claim an exemption from registration afforded by Section 4(2) of the
      Securities Act of 1933, since the foregoing issuance
      did not involve a public offering, the recipient took the securities for
      investment and not resale and we took appropriate measures to restrict
      transfer.




19





On
      June
      29, 2006, in connection with our entry into a Bill of Sales, in connection
      with
      the purchase of two (2) oil and gas leases from Sunray Operating Company, LLC,
      we agreed to issue an aggregate of 375,000 shares of common stock and an
      aggregate of 375,000  warrants, which entitle the holder of such warrant to
      purchase one (1) share of our common stock at an exercise price of $0.15 per
      share, prior to the one (1) year anniversary of such warrant grant. We claim
      an
      exemption from registration afforded by Section 4(2) of the Securities Act
      of
      1933, since the foregoing issuances did not involve a public offering, the
      recipients took the securities for investment and not resale and we took
      appropriate measures to restrict transfer.





In
      June
      2006, Texhoma entered into a Subscription Agreement with an individual, pursuant
      to which such individual purchased 250,000 units (each consisting of one
      restricted share of our common stock and one warrant to purchase one share
      of
      our common stock at an exercise price of $0.15 per share), which warrant expires
      if unexercised on or about June 12, 2007, for aggregate consideration of
      $20,000. We claim an exemption from registration afforded by Section 4(2) of
      the
      Securities Act of 1933, since the foregoing issuance did not involve a public
      offering, the recipient took the securities for investment and not resale and
      we
      took appropriate measures to restrict transfer.





On
      July
      1, 2006, Texhoma entered into a Subscription Agreement with an individual,
      pursuant to which such individual purchased 1,000,000 units (each consisting
      of
      one restricted share of our common stock and one warrant to purchase one share
      of our common stock at an exercise price of $0.15 per share), which warrant
      expires if unexercised on July 1, 2007, for aggregate consideration of $80,000.
      We claim an exemption from registration afforded by Section 4(2) of the
      Securities Act of 1933, since the foregoing issuance did not involve a public
      offering, the recipient took the securities for investment and not resale and
      we
      took appropriate measures to restrict transfer.





On
      September 15, 2006, we entered into a Subscription Agreement with an entity,
      pursuant to which such entity purchased 625,000 units for aggregate
      consideration of $50,000 (each consisting of one restricted share of our common
      stock and one warrant to purchase one share of our common stock at an exercise
      price of $0.15 per share), which warrant expires if unexercised on September
      15,
      2007. We claim an exemption from registration afforded by Section 4(2) of the
      Securities Act of 1933, for the above issuance, since the issuance did not
      involve a public offering, the recipient took the securities for investment
      and
      not resale and the Company took appropriate measures to restrict transfer.
      A 6%
      commission was paid by the Company in connection with the sale of the 625,000
      units.





On
      September 19, 2006, Mr. Brian Alexander decided not to seek re-election as
      a
      director of the Company due to other business and work commitments. In
      connection with monies we owed Mr. Alexander in directors and consulting fees,
      300,000 shares of restricted common stock were issued to Mr. Alexander in lieu
      of cash in connection with Mr. Alexander’s resignation as an officer of the
      Company and in connection with his entry into a Mutual Release with us entered
      into on September 27, 2006. We claim an exemption from registration afforded
      by
      Section 4(2) of the Securities Act of 1933, since the foregoing issuance did
      not
      involve a public offering, the recipient took the securities for investment
      and
      not resale and we took appropriate measures to restrict transfer.




On
      or
      about May 15, 2007, we agreed to issue Valeska 15,200,000 restricted shares
      of
      our common stock in consideration for and in connection with its entry into
      the
      Management Agreement, described above. We claim an exemption from
      registration afforded by Section 4(2) of the Securities Act of 1933, as amended
      for the above issuance, since the issuance did not involve a public offering,
      the recipient took the securities for investment and not resale and the Company
      took appropriate measures to restrict transfer. No underwriters or agents will
      be involved in the issuance and no underwriting discounts or commissions will
      be
      paid by the Company.




20


On
      or
      about May 31, 2007 we sold 4,800,000 shares of our restricted common stock
      pursuant to a subscription agreement to an individual for aggregate
      consideration of $60,000 or $0.0125 per share. We claim an exemption from
      registration afforded by Section 4(2) of the Securities Act of 1933, for the
      above issuance, since the issuance did not involve a public offering, the
      recipient took the securities for investment and not resale and the Company
      took
      appropriate measures to restrict transfer. No underwriters or agents were
      involved in the issuance and no underwriting discounts or commissions were
      paid
      by the Company.





On
      or
      about June 5, 2007, we sold 18,000,000 shares of our common stock to Hobart
      Global Limited, a British Virgin Islands company, in consideration for $225,000
      or $0.0125 per share. We also agreed to provide Hobart piggy-back registration
      rights in connection with the sale. We claim an exemption from registration
      afforded by Section 4(2) of the Securities Act of 1933, for the above issuance,
      since the issuance did not involve a public offering, the recipient took the
      securities for investment and not resale and the Company took appropriate
      measures to restrict transfer. No underwriters or agents were involved in the
      issuance and no underwriting discounts or commissions were paid by the
      Company.





On
      or
      about July 9, 2007, we sold 1,000,000 shares of our common stock to Camecc
      A/S,
      a Norwegian company, in consideration for $12,500 or $0.0125 per share. We
      also
      agreed to provide Camecc A/S piggy-back registration rights in connection with
      the sale. We claim an exemption from registration afforded by Section 4(2)
      of
      the Securities Act of 1933, for the above issuance, since the issuance did
      not
      involve a public offering, the recipient took the securities for investment
      and
      not resale and the Company took appropriate measures to restrict transfer.
      No
      underwriters or agents were involved in the issuance and no underwriting
      discounts or commissions were paid by the Company.





In
      July
      2007, we issued Mr. Ibrahim Nafi Onat an aggregate of 500,000 restricted shares
      of our common stock in connection with his entry into the Consulting Agreement
      (described above).    We claim an exemption from
      registration afforded by Section 4(2) of the Securities Act of 1933, for the
      above issuance, since the issuance did not involve a public offering, the
      recipient took the securities for investment and not resale and the Company
      took
      appropriate measures to restrict transfer. No underwriters or agents were
      involved in the issuance and no underwriting discounts or commissions were
      paid
      by the Company.





In
      August
      2007, we issued 1,000 shares of our Series A Preferred Stock to Valeska in
      connection with the Second Amendment to Management Services Agreement with
      Valeska (described above).   We claim an exemption from registration
      afforded by Section 4(2) of the Securities Act of 1933, for the above issuance,
      since the issuance did not involve a public offering, the recipient took the
      securities for investment and not resale and the Company took appropriate
      measures to restrict transfer. No underwriters or agents were involved in the
      issuance and no underwriting discounts or commissions were paid by the
      Company.





In
      August
      2007, in connection with the Second Amendment to Management Services Agreement
      with Valeska, we agreed to issue Valeska 10,000,000 shares of our restricted
      common stock and options to purchase 60,000,000 shares of our common stock
      at an
      exercise price of 110% of the trading value of our common stock on the grant
      date of such options, which options and shares have been issued as of the date
      of this report. We claimed an exemption from registration afforded by Section
      4(2) of the Securities Act of 1933, for the above issuances, since the issuances
      did not involve a public offering, the recipient took the securities for
      investment and not resale and the Company took appropriate measures to restrict
      transfer. No underwriters or agents were involved in the issuance and no
      underwriting discounts or commissions were be paid by the Company.




In
      connection with the Reiersen Release
      (described above), we agreed to issue Terje Reiersen 250,000 restricted shares
      of our common stock, which shares have not been issued to date within ten (10)
      days of the parties entry into the Reiersen Release.   We will
      claim an exemption from registration afforded by Section 4(2) of the Securities
      Act of 1933, for the above issuance, since the issuance will not involve a
      public offering, the recipient will take the securities for investment and
      not
      resale and the Company will take appropriate measures to restrict transfer.
      No
      underwriters or agents will be involved in the issuance and no underwriting
      discounts or commissions will be paid by the Company.




21





**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**Plan
      of Operations**





The
      Company’s current plan of operations for the next twelve (12) months is to bring
      the Company current in its filings with the Commission, get the Company’s
      accounting and controls and procedures in order and work to decrease the
      Company’s current liabilities.





In
      connection with our properties, a deal we had in place to sell the Clovelly
      Field interests fell through, and we are relying on the operators of our other
      properties regarding the direction of those prospects.  To date, all
      of those operators have indicated that they have no plans to expand their
      current drilling prospects.





We
      currently believe that we can continue our operations for approximately the
      next
      six months with funds raised in June 2007, and anticipate needing to raise
      approximately $300,000 in the next twelve months to pay our current liabilities
      and maintain our current rate of monthly expenditures, of which there can be
      no
      assurance.  Additionally, due to the fact that the assets held by
      Texaurus are not generating the level of revenue as we originally anticipated,
      we may need to raise additional capital in Texaurus to repay the Laurus Note
      and/or for working capital purposes in the future, which funds may be raised
      through the sale of debt and/or equity in Texaurus.





**RESULTS
      OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 COMPARED
      TO THE FISCAL YEAR ENDED SEPTEMBER 30, 2005**




We
      reported revenues of $2,258,000 for the year ended September 30, 2006 compared
      with $0 for the year ended September 30, 2005.  These revenues are the
      result of our interest in various oil and gas properties purchased in March
      2006
      as well other interests we had previously obtained.




We
      had
      oil and gas exploration expenses of $4,003,000 for the year
      ended  September 30, 2006, as compared to $1,709,000 for the year
      ended September 30, 2005.  The oil and gas exploration expenses for
      the year ended September 30, 2006, were related to the joint operating costs
      of
      the producing properties as well as the write down of investments that proved
      to
      be non-producing and were abandoned.  In addition the future
      production of the Little White Lake Property was estimated to be less than
      the
      value originally anticipated and as such an impairment of $2,682,000 was
      recognized for the year ended September 30, 2006.  Oil and gas
      exploration expenses for the year ended September 30, 2005, solely consisted
      of
      expenses in connection with the operations of Black Swan, which have since
      been
      discontinued. Consequently expenses increased by $2,294,000 from the year ended
      September 30, 2005, to the year ended September 30, 2006.





Depletion
      of $1,302,000 was recorded for the year ended September 30, 2006 as compared
      with $0 for the year ended September 30, 2005.





We
      had
      total general and administrative expenses of $810,000 for the year ended
      September 30, 2006, compared to $1,123,000 for the year ended September 30,
      2005, a decrease of $313,000 from the prior period.  The decrease in
      general and administrative expenses was in connection with our focus on domestic
      oil and gas exploration for the year ended September 30, 2006, compared to
      our
      focus on our Black Swan investment during the year ended September 30, 2005,
      which investment was eventually written off.





In
      connection with our raising the necessary capital funding to pursue the planned
      oil and gas purchases we issued stock warrants to new subscribers of our common
      stock as well and our lenders.  As a result we recognized $1,065,000
      in related stock accretion expense for September 30, 2006 as compared with
      $0
      for the year ended September 30, 2005.




22


In
      order
      to raise capital, we also sold a portion of our working interest acquisitions
      to
      other parties and as a result earned $161,000 on these sales for the year ended
      September 30, 2006, as compared with $0 in the prior year.





We
      incurred net interest expense of $582,000 for the year ended September 30,
      2006,
      mainly in connection with the payment of the Laurus Note as compared with no
      interest for the year ended September 30, 2005.




We
      incurred a net loss of $5,443,000 for the year ended September 30, 2006 as
      compared to a net loss of $2,832,000 for the year ended September 30, 2005,
      an
      increase in net loss of $2,611,000.  The main reason for the increase
      in net loss was the impairment of the Little White Lake property and other
      properties as well as interest expense and stock accretion expenses incurred
      in
      connection with our financing activities, offset by revenues earned from our
      producing properties in the year ended September 30, 2006, which revenues were
      not present during the year ended September 30, 2005.




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      September 30, 2006, we had total assets of $7,678,000, consisting of cash of
      $135,000 and restricted cash, in connection with the funding by Laurus, which
      cash is only distributable with the consent of Laurus of $355,000, net oil
      and
      gas properties of $5,342,000 and other assets of $1,145,000.





We
      had
      current liabilities of  $1,405,000 and a long term note payable of
      $8,381,000 at September 30, 2006.  Our current liabilities included
      notes payable due to affiliates of $603,000, which notes were payable to
      Capersia, Clover Capital and MFS Technology.





We
      had
      negative working capital of $215,000 and a retained deficit of $12,817,000
      as of
      September 30, 2006.





For
      the
      year ended September 30, 2006, we had cash provided by operating activities
      of
      $402,000 and we used cash for investing activities of $11,191,000, which amount
      was used for the purchase of various oil and gas property
      interests.





We
      received $11,129,000 in cash provided by financing activities for the year
      ended
      September 30, 2006, through the placement of loans from Laurus and other
      sources, as well as the sale of our common stock  to raise funds for
      our investing activities.





FUNDING
      TRANSACTIONS:





In
      March
      2006, our wholly owned Subsidiary Texaurus entered into a Securities Purchase
      Agreement with Laurus Master Fund, Ltd. (“Laurus”), whereby Texaurus sold a
      Secured Term Note in the amount of $8,500,000 to Laurus.





Texaurus
      subsequently used all but approximately $218,000 to fund the acquisition of
      Little White Lake Property and Kilrush Properties, with the remaining amount
      going into a restricted account for use only by Texaurus in connection with
      further development of the properties held by Texaurus.





In
      March
      2006, we raised $300,000 from the sale of 7,500,000 shares of our common stock,
      which shares were sold at $0.04 per share, to our former Chief Executive Officer
      and former Director, Frank Jacobs.





We
      raised
      an aggregate of $384,000 through the sale of 4,800,000 units at a price of
      $0.08
      per unit during June through December 2006, which units each included one (1)
      share of common stock and one (1) one-year warrant to purchase one (1) share
      of
      our common stock at an exercise price of $0.15 per share.




23


We
      raised
      an aggregate of $297,500 through the sale of 23,800,000 shares of common stock
      at $0.0125 per share between May and July 2007.





We
      have
      subsequently used the majority of this funding to pay our general and
      administrative expenses and certain acquisitions including the purchase of
      the
      Leases from Sunray and the Management Agreement with Valeska, as described
      above.





We
      believe that we have sufficient funds to repay the interest and principal
      payments on amortizing payment required on the Secured Term Note with Laurus,
      through the payment of production payments on the properties owned by Texaurus,
      as such amortizing payments do not have any minimum payment amount, and as
      such,
      the required payment of such amortizing payment on the Secured Term Note will
      not adversely impact our future current assets or cash on
      hand.  However we will need to repay $8,500,000 (minus any payment of
      principal on the Note which we are able to make through our 80% production
      payments to Laurus) on March 27, 2009, which funds we do not currently have
      and
      which we can provide no assurances will be available when such Note is
      due.




Additionally,
      to continue our planned oil and gas operations the Company remains reliant
      on
      raising further equity funds and our growth and continued operations could
      be
      impaired by limitations on our access to the capital markets. In the event
      that
      we or Texaurus do not generate the amount of revenues from our oil and gas
      properties which we anticipate, and/or we or Texaurus decide to purchase
      additional oil and gas properties and are required to raise additional
      financing, we may have to raise additional capital and/or scale back our
      operations which would have a material adverse impact upon our ability to pursue
      our business plan. There can be no assurance that capital from outside sources
      will be available, or if such financing is available, it may involve issuing
      securities senior to our common stock, the common stock of Texaurus or
      additional shares of the common stock of Texaurus or equity financings which
      are
      dilutive to holders of our common stock. In addition, in the event we do not
      raise additional capital from conventional sources, it is likely that our growth
      will be restricted and we may need to scale back or curtail implementing our
      business plan.





We
      have
      no current commitments from our officers and Directors or any of our
      shareholders to supplement our operations or provide us with financing in the
      future. If we are unable to raise additional capital from conventional sources
      and/or additional sales of stock in the future, we may be forced to curtail
      or
      cease our operations. Even if we are able to continue our operations, the
      failure to obtain financing could have a substantial adverse effect on our
      business and financial results.

















24








**RISK
      FACTORS**





You
      should carefully consider the following risk factors and other information
      in
      this annual report on Form 10-KSB before deciding to become a holder of our
      Common Stock. If any of the following risks actually occur, our business and
      financial results could be negatively affected to a significant
      extent.





**WE
      WILL NEED ADDITIONAL FINANCING TO CONTINUE OUR BUSINESS PLAN AND DRILL AND
      STUDY
      ADDITIONAL WELLS, WHICH FINANCING, IF WE ARE UNABLE TO RAISE MAY FORCE US TO
      SCALE BACK OR ABANDON OUR BUSINESS PLAN.**





We
      raised
      $8,500,000 from the sale of a Secured Term Note to Laurus Master Fund, Ltd.
      ("Laurus") in March 2006. However, approximately $7,894,235 of the amount
      borrowed from Laurus was subsequently used to purchase the Intracoastal City
      property, the interests in the Barnes Creek gas field and the Edgerly field
      and
      to pay closing costs and fees in connection with the various funding
      transactions.





We
      raised
      an aggregate of $384,000 through the sale of 4,800,000 units at a price of
      $0.08
      per unit during June through December 2006, which units each included one (1)
      share of common stock and one (1) one-year warrant to purchase one (1) share
      of
      our common stock at an exercise price of $0.15 per share. We raised an aggregate
      of $297,500 through the sale of 23,800,000 shares of common stock at $0.0125
      per
      share between May and July 2007.





We
      believe that the funds remaining from the sale of the Note to Laurus, the funds
      raised through the placement of new equity, and revenue received from the sale
      of oil and gas production will allow us to pay our outstanding liabilities
      and
      continue our business operations for at least the next six months, not including
      any amounts due on the Laurus Note and believe that we will require
      approximately $200,000 of additional funding to continue our business operations
      for the next 12 months. However, as described below, we cannot be sure that
      we
      will find any oil and/or gas on our properties in the future, our current
      properties will continue to produce, nor can we provide any assurances that
      if
      found, that the oil and/or gas will be in commercial quantities, that we will
      be
      able to extract it from the ground, that we will not face liability in
      connection with our extraction efforts, and/or that we will be able to generate
      the revenues we expect from the future sale of any oil and gas we may discover
      in the future.




Additionally,
      we may choose to spend additional monies on the purchases of oil and gas
      properties in the future. Depending on the decisions of our management, the
      volatility of the prices of oil and/or gas, our exploration activities, and/or
      potential liability, and the amount of money we receive from the sale of oil
      and
      gas, if any, we may need to raise additional capital substantially faster than
      six months, which we currently estimate such previously borrowed monies will
      last. We do not currently have any additional commitments or identified sources
      of additional capital from third parties or from our officers, directors or
      majority shareholders. We can provide no assurance that additional financing
      will be available on favorable terms, if at all. If we are not able to raise
      the
      capital necessary to continue our business operations, we may be forced to
      abandon or curtail our business plan and/or suspend our exploration
      activities.





**WE
      OWE LAURUS MASTER FUND, LTD., A SUBSTANTIAL AMOUNT OF MONEY WHICH WE DO NOT
      HAVE.**





In
      connection with the Securities Purchase Agreement, Laurus Master Fund, Ltd.
      ("Laurus"), purchased a $8,500,000 Secured Term Note from Texaurus, which we
      have guaranteed, and which bears interest at the rate of 9.75% per year (as
      of
      October 23, 2007), which is due and payable on March 27, 2009, and which
      principal is repayable by way of a production payments equal to 80% of the
      gross
      production revenue received by Texaurus in connection with the Intracoastal
      City
      Field, the Edgerly and the Barnes Creek Properties.





There
      can
      be no assurance that we will have sufficient funds to pay any principal or
      interest on the Note when due on March 27, 2009, if such repayment amount is
      not
      sufficiently covered by the payment of production
      proceeds to Laurus, as described above, and we do not currently believe that
      such production payments will be sufficient to repay such Note as of the date
      of
      this filing. If we do not have sufficient funds to pay the total remaining
      amount of the Note (after taking into account payments of principal, which
      we
      may not have sufficient funds to pay) when due, we will be in default and Laurus
      may take control of substantially all of our assets (as described in more detail
      under "Risks Relating to the Company's Securities"). As a result, we will need
      to raise or otherwise generate approximately $8,500,000 to repay the Note (not
      including any adjustments for payment of principal in connection with production
      payments paid by Texaurus) by March 27, 2009. If we fail to raise this money,
      we
      could be forced to abandon or curtail our business operations, which could
      cause
      any investment in the Company to become worthless.




25





**WE
      HAVE BEEN CONTACTED BY THE SEC REGARDING OUR DEFICIENT PERIODIC FILINGS AND
      HAVE
      BEEN NOTIFIED THAT WE COULD BE SUBJECT TO AN ADMINISTRATIVE PROCEEDING TO REVOKE
      OUR REGISTRATION UNDER THE SECURITIES ACT OF 1934, AS AMENDED, WITHOUT
      NOTICE.**





In
      November 2007, we were contacted via letter by the SEC in connection with our
      deficient periodic filings with the SEC.  The letter stated that if we
      were not current in our filing obligations with the SEC within fifteen days
      from
      the date of the letter, we could be subject to a proceeding by the SEC’s
      Division of Enforcement, pursuant to Section 12(j) of the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”), without notice, which would revoke
      our registration under the Exchange Act, and/or subject us to a trading
      suspension under Section 12(k) of the Exchange Act (the
“Actions”).  We have been unable to speak directly with the SEC
      regarding this matter to date; however, our current management is committed
      to
      bringing our filings current with the SEC and has made progress during the
      past
      few months in filing our deficient filings (including this filing), and as
      such,
      we do not believe that we are a proper candidate of the
      Actions.  There is a risk however, that moving forward, the SEC could
      institute Actions against us without further notice, and may suspend and/or
      revoke the registration of our securities pursuant to Section 12(j) of the
      Exchange Act, and/or suspend or revoke the trading of our securities on the
      Pinksheets pursuant to Section 12(k) of the Exchange Act.  If either
      of the Actions were instituted by the SEC, and we were unable to avoid or stay
      such Actions, it would have a material adverse effect on the Company, could
      cause our securities to cease trading on the Pinksheets, and our shares would
      have little to no liquidity and/or could cause the value of any of our
      securities to become worthless.





**WE
      RELY HEAVILY ON WILLIAM M. SIMMONS AND DANIEL VESCO, OUR OFFICERS AND
      DIRECTORS, AND IF THEY WERE TO LEAVE, WE COULD FACE SUBSTANTIAL COSTS IN
      SECURING SIMILARLY QUALIFIED OFFICERS AND DIRECTORS.**




Our
      success depends upon the personal efforts and abilities of William M. Simmons,
      our President and Director and Daniel Vesco, our Chief Executive Officer and
      Director. Our ability to operate and implement our exploration activities is
      heavily dependent on the continued service of Mr. Simmons and Mr. Vesco and
      our
      ability to attract qualified contractors and consultants on an as-needed
      basis.




We
      face
      continued competition for such contractors and consultants, and may face
      competition for the services of Mr. Simmons and/or Mr. Vesco in the future.
      We
      do not have any employment contracts with Mr. Simmons or Mr. Vesco, nor do
      we
      currently have any key man insurance on Mr. Simmons or Mr. Vesco. Mr. Simmons
      and Mr. Vesco are our driving forces and are responsible for maintaining our
      relationships and operations. We cannot be certain that we will be able to
      retain Mr. Simmons and Mr. Vesco and/or attract and retain such contractors
      and
      consultants in the future. The loss of either Mr. Simmons and Mr. Vesco, or
      both
      and/or our inability to attract and retain qualified contractors and consultants
      on an as-needed basis could have a material adverse effect on our business
      and
      operations.




26





**WE
      HAVE BECOME AWARE THAT SPAM EMAILS REFERENCING THE COMPANY HAVE BEEN
      DISSEMINATED IN THE PAST, WHICH COULD AFFECT THE MARKET FOR AND/OR THE VALUE
      OF
      OUR COMMON STOCK.**





It
      has
      come to our attention that during the month of October 2006 certain spam-emails,
      containing false and misleading information about our company, were disseminated
      over the internet. The spam-emails distributed by third parties that are not
      associated with the Company or its Officers or Directors have not been
      authorized, sanctioned or paid for by the Company. We caution investors to
      review our most recent Form 8-K with the Commission, our official press releases
      and our periodic filings, which we anticipate filing and amending in the future,
      before making any investment in us.





While
      we
      are not responsible for the dissemination of the spam-emails and are not aware
      of who was responsible, we were contacted by the Commission and were requested
      to voluntarily provide shareholder information and disclosures in connection
      with the origins of the dissemination of such spam emails. The Company
      cooperated fully with the Commission.





The
      fact
      that someone disseminated spam emails about our company and the fact that the
      Commission previously looked into such emails may be perceived by potential
      investors as a negative factor which could adversely affect the market for
      and/or the value of our stock.





**BECAUSE
      OF THE SPECULATIVE NATURE OF OIL AND GAS EXPLORATION, THERE IS SUBSTANTIAL
      RISK
      THAT NO ADDITIONAL COMMERCIALLY EXPLOITABLE OIL OR GAS WILL BE FOUND AND THAT
      OUR BUSINESS WILL FAIL.**




The
      search for commercial quantities of oil as a business is extremely risky. We
      cannot provide investors with any assurance that our properties contain
      commercially exploitable quantities of oil and/or gas.




The
      exploration expenditures to be made by us may not result in the discovery of
      commercial quantities of oil and/or gas and problems such as unusual or
      unexpected formations and other conditions involved in oil and gas exploration,
      and often result in unsuccessful exploration efforts. If we are unable to find
      commercially exploitable quantities of oil and gas, and/or we are unable to
      commercially extract such quantities, we may be forced to abandon or curtail
      our
      business plan, and as a result, any investment in us may become
      worthless.





**OUR
      TOTAL AMOUNT OF ISSUED AND OUTSTANDING SHARE AMOUNTS MAY BE INCORRECT, AND
      WE
      MAY HAVE OUTSTANDING SHARES WHICH ARE UNACCOUNTED FOR.**





We
      recently became aware of a subscription agreement relating to the sale of
      certain shares of our common stock in February 2005, which shares have not
      been
      issued to date, and which subscription agreement we have been unable to verify
      as of the date of this filing.  As a result of the subscription
      agreement, and our previous failure to issue shares in connection with such
      subscription agreement, we may have potential liability for such shareholders
      loss of liquidity and/or the decline in the value of our common
      stock.  Additionally, there may be other subscription agreements which
      we are not aware of relating to the sale of our common stock, which sales and
      issuances are not currently reflected with our Transfer Agent and/or in the
      number of outstanding shares of common stock disclosed throughout this report.
      As a result, we may have a larger number of shares outstanding than we currently
      show on our shareholders list. This difference, if present, may force us to
      revise our filings and/or may mean that the ownership percentage of certain
      shares of common stock disclosed throughout this report is
      incorrect.  If we are required to issue additional shares of common
      stock in the future relating to previous subscription agreements which our
      current management was and/or is not aware, it could cause substantial dilution
      to our existing shareholders and/or we could face potential liability in
      connection with our failure to issue such shares when originally
      subscribed.




27


**BECAUSE
      OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS EXPLORATION, THERE IS A RISK
      THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS OPERATIONS,
      WHICH COULD FORCE US TO EXPEND A SUBSTANTIAL AMOUNT OF MONEY IN CONNECTION
      WITH
      LITIGATION AND/OR A SETTLEMENT.**





The
      oil
      and natural gas business involves a variety of operating hazards and risks
      such
      as well blowouts, pipe failures, casing collapse, explosions, uncontrollable
      flows of oil, natural gas or well fluids, fires, spills, pollution, releases
      of
      toxic gas and other environmental hazards and risks. These hazards and risks
      could result in substantial losses to us from, among other things, injury or
      loss of life, severe damage to or destruction of property, natural resources
      and
      equipment, pollution or other environmental damage, cleanup responsibilities,
      regulatory investigation and penalties and suspension of operations. In
      addition, we may be liable for environmental damages caused by previous owners
      of property purchased and leased by us. As a result, substantial liabilities
      to
      third parties or governmental entities may be incurred, the payment of which
      could reduce or eliminate the funds available for exploration, development
      or
      acquisitions or result in the loss of our properties and/or force us to expend
      substantial monies in connection with litigation or settlements. As such, there
      can be no assurance that any insurance obtained by us will be adequate to cover
      any losses or liabilities. We cannot predict the availability of insurance
      or
      the availability of insurance at premium levels that justify our purchase.
      The
      occurrence of a significant event not fully insured or indemnified against
      could
      materially and adversely affect our financial condition and operations. We
      may
      elect to self-insure if management believes that the cost of insurance, although
      available, is excessive relative to the risks presented. In addition, pollution
      and environmental risks generally are not fully insurable. The occurrence of
      an
      event not fully covered by insurance could have a material adverse effect on
      our
      financial condition and results of operations, which could lead to any
      investment in us becoming worthless.





**WE
      REQUIRE SUBSTANTIAL ADDITIONAL FINANCING TO CONTINUE OUR EXPLORATION AND
      DRILLING ACTIVITIES, WHICH FINANCING IS OFTEN HEAVILY DEPENDENT ON THE CURRENT
      MARKET PRICE FOR OIL AND GAS, WHICH WE ARE UNABLE TO
      PREDICT.**





Our
      growth and continued operations could be impaired by limitations on our access
      to capital markets. If the market for oil and/or gas were to weaken for an
      extended period of time, our ability to raise capital would be substantially
      reduced. There can be no assurance that capital from outside sources will be
      available, or that if such financing is available, that it will not involve
      issuing securities senior to the common stock or equity financings which will
      be
      dilutive to holders of common stock. Such issuances, if made, would likely
      cause
      a decrease in the value of our common stock.


****





**THE
      MARKET FOR OIL AND GAS IS INTENSELY COMPETITIVE, AND AS SUCH, COMPETITIVE
      PRESSURES COULD FORCE US TO ABANDON OR CURTAIL OUR BUSINESS
      PLAN.**





The
      market for oil and gas exploration services is highly competitive, and we only
      expect competition to intensify in the future. Numerous well-established
      companies are focusing significant resources on exploration and are currently
      competing with us for oil and gas opportunities. Additionally, there are
      numerous companies focusing their resources on creating fuels and/or materials
      which serve the same purpose as oil and gas, but are manufactured from renewable
      resources. As a result, there can be no assurance that we will be able to
      compete successfully or that competitive pressures will not adversely affect
      our
      business, results of operations and financial condition. If we are not able
      to
      successfully compete in the marketplace, we could be forced to curtail or even
      abandon our current business plan, which could cause any investment in us to
      become worthless.




28





**WE
      MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH, WHICH COULD LEAD TO OUR
      INABILITY TO IMPLEMENT OUR BUSINESS PLAN.**





Our
      growth is expected to place a significant strain on our managerial, operational
      and financial resources, especially considering that we currently only have
      three Directors and a small number of executive officers and employees. Further,
      as we enter into additional contracts, we will be required to manage multiple
      relationships with various consultants, businesses and other third parties.
      These requirements will be exacerbated in the event of our further growth or
      in
      the event that the number of our drilling and/or extraction operations
      increases. There can be no assurance that our systems, procedures and/or
      controls will be adequate to support our operations or that our management
      will
      be able to achieve the rapid execution necessary to successfully implement
      our
      business plan. If we are unable to manage our growth effectively, our business,
      results of operations and financial condition will be adversely affected, which
      could lead to us being forced to abandon or curtail our business plan and
      operations.





**THE
      PRICE OF OIL AND NATURAL GAS HAS HISTORICALLY BEEN VOLATILE AND IF IT WERE
      TO
      DECREASE SUBSTANTIALLY, OUR PROJECTIONS, BUDGETS, AND REVENUES WOULD BE
      ADVERSELY EFFECTED, AND WE WOULD LIKELY BE FORCED TO MAKE MAJOR CHANGES IN
      OUR
      OPERATIONS.**





Our
      future financial condition, results of operations and the carrying value of
      our
      oil and natural gas properties depend primarily upon the prices we receive
      for
      our oil and natural gas production. Oil and natural gas prices historically
      have
      been volatile and likely will continue to be volatile in the future, especially
      given current world geopolitical conditions. Our cash flows from operations
      are
      highly dependent on the prices that we receive for oil and natural gas. This
      price volatility also affects the amount of our cash flows available for capital
      expenditures and our ability to borrow money or raise additional capital. The
      prices for oil and natural gas are subject to a variety of additional factors
      that are beyond our control. These factors include:





o
                the level of consumer demand for oil and natural gas;o
                the domestic and foreign supply of oil and natural gas;o
                the ability of the members of the Organization of Petroleum Exporting
                Countries ("OPEC") to agree to and maintain oil price and production
                controls;o
                the price of foreign oil and natural gas;o
                domestic governmental regulations and taxes;o
                the price and availability of alternative fuel sources;o
                weather conditions;o
                market uncertainty due to political conditions in oil and natural
                gas
                producing regions, including the Middle East; ando
                worldwide economic conditions.





These
      factors as well as the volatility of the energy markets generally make it
      extremely difficult to predict future oil and natural gas price movements with
      any certainty. Declines in oil and natural gas prices would not only reduce
      our
      revenue, but could reduce the amount of oil and natural gas that we can produce
      economically and, as a result, could have a material adverse effect upon our
      financial condition, results of operations, oil and natural gas reserves and
      the
      carrying values of our oil and natural gas properties. If the oil
      and
      natural gas industry experiences significant price declines, we may be unable
      to
      make planned expenditures, among other things. If this were to happen, we may
      be
      forced to abandon or curtail our business operations, which would cause the
      value of an investment in us to decline in value, or become
      worthless.




29





**OUR
      ESTIMATES OF RESERVES COULD HAVE FLAWS, OR MAY NOT ULTIMATELY TURN OUT TO BE
      CORRECT OR COMMERCIALLY EXTRACTABLE AND AS A RESULT, OUR FUTURE REVENUES AND
      PROJECTIONS COULD BE INCORRECT.**





Estimates
      of reserves and of future net revenues prepared by different petroleum engineers
      may vary substantially depending, in part, on the assumptions made and may
      be
      subject to adjustment either up or down in the future. Our actual amounts of
      production, revenue, taxes, development expenditures, operating expenses, and
      quantities of recoverable oil and gas reserves may vary substantially from
      the estimates.  Oil and gas reserve estimates are necessarily inexact
      and involve matters of subjective engineering judgment. In addition, any
      estimates of our future net revenues and the present value thereof are based
      on
      assumptions derived in part from historical price and cost information, which
      may not reflect current and future values, and/or other assumptions made by
      us
      that only represent our best estimates. If these estimates of quantities, prices
      and costs prove inaccurate, we may be unsuccessful in expanding our oil and
      gas
      reserves base with our acquisitions. Additionally, if declines in and
      instability of oil and gas prices occur, then write downs in the capitalized
      costs associated with our oil and gas assets may be required. Because of the
      nature of the estimates of our reserves and estimates in general, we can provide
      no assurance that additional or further reductions to our estimated proved
      oil
      and gas reserves and estimated future net revenues will not be required in
      the
      future, and/or that our estimated reserves will be present and/or commercially
      extractable. If our reserve estimates are incorrect, the value of our common
      stock could decrease and we may be forced to write down the capitalized costs
      of
      our oil and gas properties.





**OUR
      OPERATIONS ARE HEAVILY DEPENDENT ON CURRENT ENVIRONMENTAL REGULATIONS, WHICH
      WE
      ARE UNABLE TO PREDICT, AND WHICH MAY CHANGE IN THE FUTURE, CAUSING US TO EXPEND
      SUBSTANTIAL ADDITIONAL CAPITAL.**





Public
      interest in the protection of the environment has increased dramatically in
      recent years. Our oil and natural gas production and our processing, handling
      and disposal of hazardous materials, such as hydrocarbons and naturally
      occurring radioactive materials (if any) are subject to stringent regulation.
      We
      could incur significant costs, including cleanup costs resulting from a release
      of hazardous material, third-party claims for property damage and personal
      injuries fines and sanctions, as a result of any violations or liabilities
      under
      environmental or other laws. Changes in or more stringent enforcement of
      environmental laws could force us to expend additional operating costs and
      capital expenditures to stay in compliance.





Various
      federal, state and local laws regulating the discharge of materials into the
      environment, or otherwise relating to the protection of the environment,
      directly impact oil and gas exploration, development and production operations,
      and consequently may impact our operations and costs. These regulations include,
      among others, (i) regulations by the Environmental Protection Agency and various
      state agencies regarding approved methods of disposal for certain hazardous
      and
      non-hazardous wastes; (ii) the Comprehensive Environmental Response,
      Compensation, and Liability Act, Federal Resource Conservation and Recovery
      Act
      and analogous state laws which regulate the removal or remediation of previously
      disposed wastes (including wastes disposed of or released by prior owners or
      operators), property contamination (including groundwater contamination), and
      remedial plugging operations to prevent future contamination; (iii) the Clean
      Air Act and comparable state and local requirements which may result in the
      gradual imposition of certain pollution control requirements with respect to
      air
      emissions from our operations; (iv) the Oil Pollution Act of 1990 which contains
      numerous requirements relating to the prevention of and response to oil spills
      into waters of the United States; (v) the Resource Conservation and Recovery
      Act
      which is the principal federal statute governing the treatment, storage and
      disposal of hazardous wastes; and (vi) state regulations and statutes governing
      the handling, treatment, storage and disposal of naturally occurring radioactive
      material.




30




Management
      believes that we are in substantial compliance with applicable environmental
      laws and regulations. To date, we have not expended any material amounts to
      comply with such regulations, and management does not currently anticipate
      that
      future compliance will have a materially adverse effect on our consolidated
      financial position, results of operations or cash flows. However, if we are
      deemed to not be in compliance with applicable environmental laws, we could
      be
      forced to expend substantial amounts to be in compliance, which would have
      a
      materially adverse effect on our financial condition. If this were to happen,
      any investment in us could be lost.





**THE
      COMPANY HAS ESTABLISHED PREFERRED STOCK WHICH CAN BE DESIGNATED BY THE COMPANY'S
      BOARD OF DIRECTORS WITHOUT SHAREHOLDER APPROVAL AND HAS ESTABLISHED SERIES
      A
      PREFERRED STOCK, WHICH GIVES THE HOLDERS MAJORITY VOTING POWER OVER THE
      COMPANY.**





The
      Company has 1,000,000 shares of preferred stock authorized, and 1,000 shares
      of
      Series A Preferred Stock authorized. Shares of preferred stock of the Company
      may be issued from time to time in one or more series, each of which shall
      have
      distinctive designation or title as shall be determined by the Board of
      Directors of the Company ("Board of Directors") prior to the issuance of any
      shares thereof. The preferred stock shall have such voting powers, full or
      limited, or no voting powers, and such preferences and relative, participating,
      optional or other special rights and such qualifications, limitations or
      restrictions thereof as adopted by the Board of Directors. Because the Board
      of
      Directors is able to designate the powers and preferences of the preferred
      stock
      without the vote of a majority of the Company's shareholders, shareholders
      of
      the Company will have no control over what designations and preferences the
      Company's preferred stock will have. As a result of this, the Company's
      shareholders may have less control over the designations and preferences of
      the
      preferred stock and as a result the operations of the Company.





**THE
      COMPANY HAS ESTABLISHED SERIES A PREFERRED STOCK, WHICH GIVES THE HOLDERS
      MAJORITY VOTING POWER OVER THE COMPANY.**





The
      Company has 1,000 shares of Series A Preferred Stock authorized. All outstanding
      shares of Series A Preferred stock, which are all currently held by Valeska
      Energy Corp., the beneficial owner of which is William M. Simmons, the President
      and Director of the Company, can vote in aggregate on all shareholder matters
      equal to fifty-one percent (51%) of the total vote. For example, if there are
      10,000,000 shares of the Company's common stock issued and outstanding at the
      time of a shareholder vote, the holders of Series A Preferred Stock, voting
      separately as a class, will have the right to vote an aggregate of 10,400,000
      shares, out of a total number of 20,400,000 shares voting. Because of the shares
      of Series A Preferred Stock, Valeska Energy Corp., will effectively exercise
      voting control over the Company. As a result of this, the Company's shareholders
      will have less control over the operations of the Company.





**WILLIAM
      M. SIMMONS, OUR PRESIDENT CAN EXERCISE VOTING CONTROL OVER CORPORATE
      DECISIONS.**





William
      M. Simmons (through his personal beneficial ownership and through his voting
      control over Valeska Energy Corp. (“Valeska”)) beneficially owns 27,200,000
      shares of common stock, additionally; Valeska holds all 1,000 shares of our
      outstanding shares of Series A Preferred Stock, which vote 240,584,407 voting
      shares.  As a result, Mr. Simmons is able to vote 266,784,407 voting
      shares based on 471,734,131 voting shares outstanding (representing 231,149,724
      shares of common stock outstanding and 240,584,407 shares of stock which the
      Series A Preferred Stock are able to vote) representing 56.5% of our outstanding
      voting shares. As a result, our Directors and officers will exercise control
      in
      determining the outcome of all corporate transactions or other matters,
      including the election of directors, mergers, consolidations, the sale of all
      or
      substantially all of our assets, and also the power to prevent or cause a change
      in control. The interests of Mr. Simmons, Mr. Vesco and Mr. Onat may differ
      from
      the interests of the other stockholders and thus result in corporate decisions
      that are adverse to other shareholders.




31


**THE
      REMOVAL OF MR. VESCO AND MR. SIMMONS AS DIRECTORS OF THE COMPANY IS PROTECTED
      BY
      VOTING AGREEMENTS ENTERED INTO WITH THE COMPANY’S MAJORITY
      SHAREHOLDERS.**





Certain
      of the Company’s majority shareholders, including Capersia Pte. Ltd., Lucayan
      Oil and Gas Investments, Ltd., Frank A. Jacobs (the Company’s former Chief
      Executive Officer and Director) and Valeska Energy, Inc. (the “Voting
      Shareholders”) entered into Voting Agreements whereby they agreed that they
      would not vote the aggregate of 71,874,000 shares of common stock which they
      hold for (i.e. in favor of) the removal of Mr. Simmons or Mr. Vesco (the “New
      Directors”) until the expiration of the agreements on June 5,
      2009.  The Voting Shareholders also agreed that in the event of any
      shareholder vote of the Company (either by Board Meeting, a Consent to Action
      without Meeting, or otherwise) relating to the removal of the New Directors;
      the
      re-election of the New Directors; and/or the increase in the number of directors
      of the Company during the term of the Voting Agreements, that such Voting
      Shareholders would vote their shares against the removal of the New Directors;
      for the re-election of such New Directors; and/or vote against the increase
      in
      the number of directors of the Company, without the unanimous consent of the
      New
      Directors, respectively.  The Voting Agreements also included a
      provisions whereby in the event that either of the New Directors breaches his
      fiduciary duty to the Company, including, but not limited to such New Director’s
      conviction of an act or acts constituting a felony or other crime involving
      moral turpitude, dishonesty, theft or fraud; such New Director’s gross
      negligence in connection with his service to the Company as a Director and/or
      in
      any executive capacity which he may hold; and/or if any Voting Shareholder
      becomes aware of information which would lead a reasonable person to believe
      that such New Director has committed fraud or theft from the Company, or a
      violation of the Securities laws  (each a “Breach of Fiduciary Duty”),
      this voting requirement set forth above shall not apply.  As a result
      of the Voting Agreements, it will likely be impossible for the shareholders
      of
      the Company to remove Mr. Simmons or Mr. Vesco as Directors of the Company,
      unless a Breach of Fiduciary Duty occurs, and even then, due to Valeska’s
      ownership of the Series A Preferred Stock (as described above), it will likely
      be impossible for such New Directors to be removed as Directors of the
      Company.





**THE
      INTERESTS OF MR. SIMMONS AND MR. VESCO, OUR PRESIDENT AND CHIEF EXECUTIVE
      OFFICER, RESPECTIVELY, MAY DIFFER FROM THE INTERESTS OF OUR OTHER SHAREHOLDERS,
      AND THEY MAY ALSO COMPETE WITH THE COMPANY OR ENTER INTO TRANSACTIONS SEPARATE
      FROM THE COMPANY.**





Mr.
      Simmons and Mr. Vesco, our President and Chief Executive Officer, respectively,
      are involved in business interests separate from their involvement with the
      Company, including but not limited to Valeska Energy Corp., which business
      and/or companies may also operate in the oil and gas industry similar to and/or
      in competition with the Company. Mr. Simmons and Mr. Vesco are under no
      obligation to include us in any transactions which they undertake. As a result,
      we may not benefit from connections they make and/or agreements they enter
      into
      while employed by us, and they, or companies they are associated with,
      including, but not limited to Valeska, may profit from transactions which they
      undertake while we do not.  As a result, they may find it more
      lucrative or beneficial to cease serving as officers or Directors of the Company
      in the future and may resign from the Company at that time. Furthermore, while
      employed by us, shareholders should keep in mind that they are under no
      obligation to share their contacts and/or enter into favorable contracts and/or
      agreements they may come across with the Company, and as a result may choose
      to
      enter into such contracts or agreements through companies which they own, which
      are not affiliated with us, and from which we will receive no
      benefit.   Finally, certain of the agreements they may enter into
      on our behalf may benefit them more than us, including, but not limited to
      the
      Management Agreement, which currently pays Valeska $10,000 per
      month.




32







**RISKS
      RELATING TO THE COMPANY'S SECURITIES**





**A
      DEFAULT BY US UNDER THE SECURED TERM NOTE, TEXHOMA WARRANT OR TEXAURUS WARRANT,
      WOULD ENABLE LAURUS MASTER FUND, LTD., TO TAKE CONTROL OF SUBSTANTIALLY ALL
      OF
      OUR ASSETS.**





The
      Secured Term Note, Texhoma Warrant and Texaurus Warrant, are secured by Laurus
      by a continuing security interest in all of our assets, including without
      limitation, our cash, cash equivalents, accounts receivable, deposit accounts,
      inventory, equipment, goods, fixtures and other tangible and intangible assets,
      which we own or at any time in the future may acquire rights, title or interest
      to. As a result, if we default under any provision of the Note, Texhoma Warrant
      or Texaurus Warrant or we fail to pay any amounts due to Laurus, Laurus may
      take
      control of substantially all of our assets. If this were to happen, we could
      be
      left with no revenue producing assets, and the value of our common stock could
      become worthless.





**WE
      MAY BE REQUIRED TO PAY PENALTIES TO LAURUS MASTER FUND, LTD. UNDER THE
      REGISTRATION RIGHTS AGREEMENT, WHICH COULD FORCE US TO EXPEND A SUBSTANTIAL
      AMOUNT OF THE MONEY WE HAVE PREVIOUSLY RAISED.**





We
      granted Laurus Master Fund, Ltd., registration rights to the shares issuable
      to
      Laurus in connection with the Texhoma Warrant, pursuant to a Registration Rights
      Agreement, and we plan to register such shares pursuant to a Form SB-2
      Registration Statement, once we become current in our filings with the
      Commission. We agreed pursuant to the Registration Rights Agreement to use
      our
      best efforts to file the Registration Statement by May 29, 2006 (60 days after
      the Closing) and to obtain effectiveness of such registration statement by
      September 25, 2006 (180 days after the Closing), neither of which deadlines
      we
      have met; however, pursuant to the First Amendment (described above), Laurus
      agreed to amend the date we are required to have gained effectiveness of the
      Registration Statement by, to April 30, 2008.. Moving forward, should we fail
      to
      obtain effectiveness of the registration statement, and such failure is deemed
      to be a default under the Note, we could be forced to pay penalties to Laurus.
      As a result, we could be forced to abandon or scale back our current planned
      operations and/or raise additional capital, which could cause substantial
      dilution to our existing shareholders.




**THE
      TEXHOMA WARRANT CONTAINS PROVISIONS WHEREBY LAURUS MASTER FUND, LTD. MAY HOLD
      MORE THAN 4.99% OF OUR COMMON STOCK, PROVIDED THEY PROVIDE US SEVENTY-FIVE
      (75)
      DAYS NOTICE OR AN EVENT OF DEFAULT OCCURS.**




Although
      Laurus may not exercise its Texhoma Warrant if such exercise would cause it
      to
      own more than 4.99% of our outstanding common stock, the Texhoma Warrant also
      contains provisions which provide for the 4.99% limit to be waived provided
      that
      Laurus provides us with 75 days notice of its intent to hold more than 4.99%
      of
      our common stock or upon the occurrence of an event of default (as defined
      under
      the Note). As a result, if we receive 75 days notice from Laurus and/or an
      event
      of default occurs, Laurus may fully exercise the Texhoma Warrant and fully
      convert the Texhoma Warrant into shares of our common stock. If this were to
      happen, it would cause immediate and substantial dilution to our existing
      shareholders and if it were to happen when our Registration Statement covering
      Laurus' securities has been declared effective, the subsequent sale of such
      shares in the marketplace, if affected, could cause the trading value of our
      common stock, if any, to decrease substantially.





**IF
      AN EVENT OF DEFAULT OCCURS UNDER THE NOTE, TEXHOMA WARRANT OR TEXAURUS WARRANT
      OR ANY OF THE RELATED AGREEMENTS, WE COULD BE FORCED TO IMMEDIATELY PAY THE
      AMOUNTS DUE UNDER THE NOTE.**





The
      Secured Term Note, Texhoma Warrant and Texaurus Warrant include provisions
      whereby Laurus Master Fund, Ltd., may make the amounts outstanding under the
      Note due and payable if an event of default occurs under the Note, which events
      of default include:




33





o
            our
                failure to pay amounts due under the
                Note;





o
            breach
                of any covenants under the Note, if not cured in the time periods
                provided;





o
            breach
                of any warranties found in the
                Note;





o
            the
                occurrence of any default under any agreement, which causes any contingent
                obligation to become due prior to its stated maturity or to become
                payable;





o
            any
                change or occurrence likely to have a material adverse effect on
                the
                business, assets, liabilities, financial condition, our operations
                or
                prospects;





o
            an
                indictment or other proceedings against us or any executive officer;
                or




o
            a
                breach by us of any provision of the Securities Purchase Agreement,
                or any
                other Related Agreement entered into in connection with the sale
                of the
                Notes.





If
      any
      event of default were to occur under the Note and Laurus was to make the entire
      amount of the Note immediately due and payable, and we did not have sufficient
      funds on hand to pay such amounts, we could be forced to sell some or all of
      our
      assets at less than fair market value, and/or abandon or curtail our business
      plan and operations.





**THE
      ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE EXERCISE OF THE TEXHOMA WARRANT
      WILL CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION.**





Once
      we
      are able to file a registration statement covering the shares of common stock
      issuable in connection with the exercise of the Texhoma Warrant, which we do
      not
      anticipate being able to file until such time as we are current in our filings,
      the issuance of common stock upon exercise of the Texhoma Warrant will result
      in
      immediate and substantial dilution to the interests of other stockholders since
      Laurus Master Fund, Ltd., may ultimately receive and sell the full amount
      issuable on exercise of the Texhoma Warrant, which has an exercise price of
      $0.04 per share, currently more than the average trading value of our common
      stock during the past thirty days. Although Laurus may not exercise its warrant
      if such conversion or exercise would cause it to own more than 4.99% of our
      outstanding common stock (unless Laurus provides us 75 days notice and/or an
      event of default occurs, this restriction does not prevent Laurus from
      exercising some of its holdings, selling those shares, and then converting
      the
      rest of its holdings, while still staying below the 4.99% limit. In this way,
      Laurus could sell more than this limit while never actually holding more shares
      than this limit prohibits. If Laurus chooses to do this, it will likely cause
      the value of our common stock to decline in value (if such common stock is
      trading at more than $0.04 per share prior to such sales) and will likely also
      cause substantial dilution to our common stock.





**THE
      MARKET FOR OUR COMMON STOCK MAY CONTINUE TO BE VOLATILE, ILLIQUID AND SPORADIC,
      IF WE HAVE A MARKET AT ALL.**





The
      market for our common stock on the Pinksheets has historically been volatile,
      illiquid and sporadic and we anticipate that such market, and the market for
      our
      common stock on the Over-The-Counter Bulletin Board (which we plan to trade
      our
      shares once we become current in our filings, of which there can be no
      assurance) will continue to be subject to wide fluctuations in response to
      several factors, including, but not limited to:





(1)
            actual
                or anticipated variations in our results of operations;(2)
            our
                ability or inability to generate new
                revenues;







34


(3)
            increased
                competition; and(4)
            conditions
                and trends in the oil and gas exploration industry and the market
                for oil
                and gas and petroleum based
                products.





Our
      common stock is traded on the Pinksheets under the symbol "TXHE." In recent
      years, the stock market in general has experienced extreme price fluctuations
      that have oftentimes been unrelated to the operating performance of the affected
      companies. Similarly, the market price of our common stock may fluctuate
      significantly based upon factors unrelated or disproportionate to our operating
      performance. These market fluctuations, as well as general economic, political
      and market conditions, such as recessions, interest rates or international
      currency fluctuations may adversely affect the market price of our common
      stock.





**INVESTORS
      MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO
      FEDERAL REGULATIONS OF PENNY STOCKS.**





Our
      common stock will be subject to the requirements of Rule 15(g)9, promulgated
      under the Securities Exchange Act as long as the price of our common stock
      is
      below $4.00 per share. Under such rule, broker-dealers who recommend low-priced
      securities to persons other than established customers and accredited investors
      must satisfy special sales practice requirements, including a requirement that
      they make an individualized written suitability determination for the purchaser
      and receive the purchaser's consent prior to the transaction. The Securities
      Enforcement Remedies and Penny Stock Reform Act of 1990, also requires
      additional disclosure in connection with any trades involving a stock defined
      as
      a penny stock. Generally, the Commission defines a penny stock as any equity
      security not traded on an exchange or quoted on NASDAQ that has a market price
      of less than $4.00 per share. The required penny stock disclosures include
      the
      delivery, prior to any transaction, of a disclosure schedule explaining the
      penny stock market and the risks associated with it. Such requirements could
      severely limit the market liquidity of the securities and the ability of
      purchasers to sell their securities in the secondary market. In addition,
      various state securities laws impose restrictions on transferring "penny stocks"
      and as a result, investors in the common stock may have their ability to sell
      their shares of the common stock impaired.





Other
      Considerations





There
      are
      numerous factors that affect our business and the results of its operations.
      Sources of these factors include general economic and business conditions,
      federal and state regulation of business activities, the level of demand for
      the
      Company’s product or services, the level and intensity of competition in the
      industry and the pricing pressures that may result, the Company’s ability to
      develop new services based on new or evolving technology and the market’s
      acceptance of those new services, the Company’s ability to timely and
      effectively manage periodic product transitions, and geographic sales mix of
      any
      particular period, and the ability to continue to improve infrastructure
      including personnel and systems, to keep pace with the growth in its overall
      business activities.




35





**ITEM
      7. FINANCIAL STATEMENTS**





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**






To
        the
        Board of Directors and
  Stockholders
        of Texhoma Energy, Inc.
  We
        have
        audited the accompanying consolidated balance sheets of Texhoma Energy, Inc.
        as
        of September 30, 2006 and 2005, and the related consolidated statements of
        operations, stockholders’ equity, and cash flows for each of the
        years  in the two-year period ended September 30,
        2006.  These financial statements are the responsibility of the
        company’s management. Our responsibility is to express an opinion on these
        financial statements based on our audit.
  We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
  In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Texhoma Energy, Inc.
        as of
        September 30, 2006 and 2005, and the results of its operations and cash flows
        for each of the years in the two-year period ended September 30, 2006 in
        conformity with accounting principles generally accepted in the United States
        of
        America.
  The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 14 to the financial
        statements, the Company has recurring operating losses, negative working
        capital
        and is dependent on financing to continue operations. These factors raise
        substantial doubt about the ability to continue as a going concern. The
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty.
 /s/
                  GLO CPAs, LLPGLO
                  CPAs, LLPHouston,
                  TexasNovember
                  7, 2007


F-1




**TEXHOMA
      ENERGY, INC. AND SUBSIDIARY**


CONSOLIDATED
      BALANCE SHEETS


September
      30, 2006 and September 30, 2005





**ASSETS**
            
            September
              2006
            
            
            September
              2005Current
                AssetsCash
                and cash equivalents
            
            $
            134,852
            
            
            $
            149,805Restricted
                cash
            
            
            355,025
            
            
            
            -Accounts
                receivable-miscellaneous
            
            
            378,415
            
            
            
            -Accounts
                receivable-net oil and gas production
            
            
            322,402
            
            
            
            -Total
                Current Assets
            
            
            1,190,694
            
            
            
            149,805Oil
                and Gas Properties, net of depletion of $1,301,574 at September 30,
                2006
            
            
            5,342,314
            
            
            
            -Other
                Assets
            
            
            1,145,328
            
            
            
            -TOTAL
                ASSETS
            
            $
            7,678,336
            
            
            $
            149,805**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                LiabilitiesAccounts
                payable
            
            $
            414,483
            
            
            $
            27,449Accrued
                expenses
            
            
            387,428
            
            
            
            122,509Notes
                payable related parties
            
            
            603,432
            
            
            
            1,045,000Total
                Current Liabilities
            
            
            1,405,343
            
            
            
            1,194,958Long
                term notes payable
            
            
            8,381,471
            
            
            
            -Commitments
                and Contingencies (Note 11)
            
            
            -
            
            
            
            -Stockholders’
                EquityPreferred
                stock, $0.001 par value, 1,000,000 shares  authorized, none
                issued and outstanding
            
            
            -
            
            
            
            -Common
                stock, $0.001 par value, 300,000,000 shares authorized, 181,662,252
                and
                106,812,252 shares issuedand
                outstanding at  September 30, 2006 and 2005,
                respectively
            
            
            181,662
            
            
            
            106,812Additional
                paid-in capital
            
            
            10,527,155
            
            
            
            6,222,794Retained
                deficit
            
            
            (12,817,295
            )
            
            
            (7,374,759
            )Total
                Stockholders’ Equity
            
            
            (2,208,894
            )
            
            
            (1,045,153
            )TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            7,678,336
            
            
            $
            149,805


See
      accompanying summary of accounting policies and notes to financial
      statements.








F-2


**TEXHOMA
      ENERGY, INC. AND SUBSIDIARY**


CONSOLIDATED
      STATEMENTS OF OPERATIONS


For
      the
      years ended September 30, 2006 and 2005








2006
            
            
            2005RevenuesOil
                and gas interests
            
            $
            2,258,425
            
            
            $
            -Total
                revenues
            
            
            2,258,425
            
            
            
            -Operating
                expenses:Oil
                and gas exploration
            
            
            4,003,313
            
            
            
            1,709,441Gross
                Margin
            
            
            (1,744,888
            )
            
            
            (1,709,441
            )Depletion
            
            
            1,301,574
            
            
            
            -General
                and administrative expenses
            
            
            809,612
            
            
            
            1,122,805Operating
                income (loss)
            
            
            (3,856,074
            )
            
            
            (2,832,246
            )Other
                income (expenses):Research
                and development
            
            
            -
            
            
            
            -Stock
                accretion expense
            
            
            (1,165,211
            )
            
            
            -Foreign
                currency exchange
            
            
            (211
            )
            
            
            -Gain
                on sale of working interest promote
            
            
            161,429
            
            
            
            -Interest
                income
            
            
            18,947
            
            
            
            -Interest
                expense
            
            
            (601,416
            )
            
            
            -Total
                other income (expense)
            
            
            (1,586,462
            )
            
            
            -Income
                (loss) before income taxes
            
            
            (5,442,536
            )
            
            
            (2,832,246
            )Net
                income (loss)
            
            $
            (5,442,536
            )
            
            $
            (2,832,246
            )Weighted
                average common shares outstanding
            
            
            142,059,991
            
            
            
            97,936,239Basic
                earnings (loss) per share:
            
            $
            (0.04
            )
            
            $
            (0.03
            )





See
      accompanying summary of accounting policies and notes to financial
      statements.








F-3


**TEXHOMA
        ENERGY, INC.  AND SUBSIDIARY**
 CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 For
        the
        years ended September 30, 2006 and 2005


**Paid-In**
              
              
              
              
              
              
              
              
              **Total****Capital**
              
              
              
              
              
              
              
              
              **Stockholders'****Common
                  Stock**
              
              
              **Preferred
                  Stock**
              
              
              **Paid-In**
              
              
              **Preferred**
              
              
              **Contributed**
              
              
              **Accumulated**
              
              
              **Equity****Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Capital**
              
              
              **Stock**
              
              
              **Capital**
              
              
              **Deficit**
              
              
              **[Deficit]****Balance,
                  September 30, 2004**
              
              
              30,875,996
              
              
              $
              30,876
              
              
              
              
              
              
              
              
              $
              3,756,886
              
              
              $
              180,000
              
              
              $
              402,390
              
              
              $
              (4,542,513
              )
              
              $
              (172,361
              )Transfer
                  of Preferred Stock Paid in Capital and
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Contributed
                  Capital to Paid in Capital
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              582,390
              
              
              
              (180,000
              )
              
              
              (402,390
              )
              
              
              
              
              
              
              -Shares
                  issued for services, October 5,2004 at $0.075 per share
              
              
              6,336,256
              
              
              
              6,336
              
              
              
              
              
              
              
              
              
              468,883
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              475,219Shares
                  issued for services, October 5,2004 at $0.075 per share
              
              
              7,600,000
              
              
              
              7,600
              
              
              
              
              
              
              
              
              
              562,400
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              570,000Restricted
                  shares issued for acquisition of business, November 4,
                  2004
              
              
              56,000,000
              
              
              
              56,000
              
              
              
              
              
              
              
              
              
              258,441
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              314,441Shares
                  issued, March 7, 2005 at $0.10 per share
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              198,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              200,000Shares
                  issued, August 20, 2005 at $0.10
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              198,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              200,000Shares
                  issued, September 18, 2005 at $0.10 per share
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              198,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              200,000Correction
                  for prior years rounding
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (206
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (206
              )Net
                  (loss) at September 30, 2005
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,832,246
              )
              
              
              (2,832,246
              )**Balance,
                September 30, 2005**
              
              
              **106,812,252**
              
              
              
              **106,812**
              
              
              **-**
              
              
              **-**
              
              
              
              **6,222,794**
              
              
              
              **-**
              
              
              
              **-**
              
              
              
              **(7,374,759**
              **)**
              
              
              **(1,045,153**
              **)**
 See
          accompanying summary of accounting policies and notes to financial
          statements
 F-4
 Shares
                  issued, February 6, 2006 at $0.04 per share
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              
              
              78,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              80,000Shares
                  issued, March 15, 2006 at $0.04 per share
              
              
              37,500,000
              
              
              
              37,500
              
              
              
              
              
              
              
              
              
              
              
              1,462,500
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,500,000Shares
                  issued, March 24, 2006 at $0.04 per share
              
              
              7,500,000
              
              
              
              7,500
              
              
              
              
              
              
              
              
              
              
              
              292,500
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              300,000Shares
                  issued, April 10, 2006 for loan conversion at $0.04 per
                  share
              
              
              4,000,000
              
              
              
              4,000
              
              
              
              
              
              
              
              
              
              
              
              156,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              160,000Shares
                  issued, May 22, 2006 for loan conversion at $0.04 per
                  share
              
              
              18,375,000
              
              
              
              18,375
              
              
              
              
              
              
              
              
              
              
              
              716,625
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              735,000Shares
                  issued, May 31, 2006 for asset purchase at $0.08 per share
              
              
              375,000
              
              
              
              375
              
              
              
              
              
              
              
              
              
              
              
              29,625
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,000Shares
                  issued, June 5, 2006 at $0.08 per share
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              
              
              
              
              
              
              
              
              79,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              80,000Shares
                  issued, June 19, 2006 at $0.08 per share
              
              
              250,000
              
              
              
              250
              
              
              
              
              
              
              
              
              
              
              
              19,750
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              20,000Shares
                  issued, June 27, 2006 at $0.08 per share
              
              
              1,925,000
              
              
              
              1,925
              
              
              
              
              
              
              
              
              
              
              
              152,075
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              154,000Shares
                  issued, July 6, 2006 at $0.08 per share
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              
              
              
              
              
              
              
              
              79,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              80,000Shares
                  issued, September 25, 2006 at $0.08 per share
              
              
              625,000
              
              
              
              625
              
              
              
              
              
              
              
              
              
              
              
              49,375
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              50,000Shares
                  issued, September 28, 2006 for employee services at $0.08 per
                  share
              
              
              300,000
              
              
              
              300
              
              
              
              
              
              
              
              
              
              
              
              24,700
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              25,000Net
                  (loss) at September 30, 2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,442,536
              )
              
              
              (5,442,536
              )Stock
                  accretion forwarrants
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,165,211
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,165,211**Balance,
                  September 30, 2006**
              
              ****
              **181,662,252**
              
              
              ****
              **181,662**
              
              
              ****
              **-**
              
              
              ****
              **-**
              
              
              ****
              **10,527,155**
              
              
              ****
              **-**
              
              
              ****
              **-**
              
              
              ****
              **(12,817,295**
              **)**
              
              ****
              **(2,108,478**
              **)**
  See
        accompanying summary of accounting policies and notes to financial
        statements


F-5












**TEXHOMA
      ENERGY, INC.  AND SUBSIDIARY**


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


Years
      Ended September 30, 2006 and 2005





2006
            
            
            
            2005Cash
                flows from operating activities:
              Net
                loss
            
            $
            (5,442,536
            )
            
            $
            (2,832,246
            )Adjustments
                to reconcile net loss to
              net
                cash provided by (used in) operating activities:Depletion
            
            
            1,301,574
            
            
            
            -Depreciation
                and amortization
            
            
            162,864
            
            
            
            -Stock
                issued for services
            
            
            25,000
            
            
            
            1,045,012Stock
                based compensation
            
            
            -
            
            
            
            -Stock
                accretion expense
            
            
            1,165,211
            
            
            
            -Oil
                and gas exploration costs
            
            
            3,590,082
            
            
            
            1,709,441Change
                in assets and liabilities:Accounts
                receivable
            
            
            (700,817
            )
            
            
            -Accounts
                payable
            
            
            387,034
            
            
            
            (13,912
            )Accrued
                expenses
            
            
            264,919
            
            
            
            (8,490
            )Other
            
            
            (351,578
            )
            
            
            -Net
                cash provided by (used in) operating activities
            
            
            401,753
            
            
            
            (100,195
            )Cash
                flows from investing activities:Investment
                in Black Swan
            
            
            -
            
            
            
            (1,395,000
            )Oil
                and gas property investments
            
            
            (11,190,584
            )Other
                assets
            
            
            -
            
            
            
            -Net
                cash used in investing activities
            
            
            (11,190,584
            )
            
            
            (1,395,000
            )Cash
                flows from financing activities:Loans
                from affiliates
            
            
            413,432
            
            
            
            1,045,000Loan
                repayment to affiliates
            
            
            (105,000
            )
            
            
            -Notes
                payable proceeds
            
            
            11,250,000
            
            
            
            -Repayment
                of notes payable
            
            
            (2,723,529
            )
            
            
            -Stock
                issued for asset purchase
            
            
            1,610,000
            
            
            
            -Proceeds
                from issuance of common stock
            
            
            684,000
            
            
            
            600,000Net
                cash provided by financing activities
            
            
            11,128,903
            
            
            
            1,645,000Increase
                in cash and cash equivalents
            
            
            340,072
            
            
            
            149,805Cash
                and cash equivalents at beginning of period
            
            
            149,805
            
            
            
            -Cash
                and cash equivalents at end of year
            
            $
            489,877
            
            
            $
            149,805





See
      accompanying summary of accounting policies and notes to financial
      statements







F-6




TEXHOMA
      ENERGY, INC.  AND SUBSIDIARY


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


September
      30, 2006 and 2005








**1.
      Summary of Significant Accounting Policies**





*Description
      of Business*- Texhoma Energy, Inc. was originally incorporated as Pacific
      Sports Enterprises, Inc. in 1998.  Texhoma is engaged in the
      exploration for and the production of hydrocarbons, more commonly known as
      the
      exploration and production of crude oil and natural gas.




In
      November 2004, Texhoma acquired a 40% interest in Black Swan Petroleum Pty.
      Ltd.
      and its wholly owned subsidiary, Black Swan Petroleum (Thailand) Ltd.
      (“BSP”).  BSP held a 100% interest in a large offshore petroleum
      concession located in the Gulf of Thailand, adjacent to the Eastern Thai
      coastline, in water depths averaging 20 meters.  The terms of the
      acquisition included issuance of Company stock which resulted in a change in
      control of Texhoma.




The
      Company has also entered into a 6% participation agreement for the exploration
      and development of an area in Louisiana in December 2004.





*Organization
      and Basis of Presentation*– Texhoma’s securities are registered with the
      Securities and Exchange Commission in the United States of America and its
      securities currently trade under the symbol “TXHE.PK” on the pink
      sheets.





The
      financial statements are prepared in accordance with accounting principles
      generally accepted in the United States of America.





*Use
      of Estimates*– Texhoma’s financial statement preparation requires that
      management make estimates and assumptions which affect the reporting of assets
      and liabilities and the related disclosure of contingent assets and liabilities
      in order to report these financial statements in conformity with accounting
      principles generally accepted in the United States of America.  Actual
      results could differ from those estimates.





The
      primary estimates made by management included in these financial statements
      are
      the impairment reserves applied to various long-lived assets and the fair value
      of its stock tendered in various non-monetary transactions.





*Cash
      and Cash Equivalents -*Cash includes all highly liquid investments that are
      readily convertible to known amounts of cash and have original maturities of
      three months or less.





*Restricted
      Cash –*Texaurus maintains the residual cash from the proceeds of the Laurus
      Fund note in a restricted account for as long as Texaurus shall have any
      obligations to Laurus.  Texaurus may request authorization from Laurus
      for access to these funds for the consummation of acquisitions of oil and gas
      assets.   In addition,  the note repayment terms of the
      Laurus funding, provide that 80% of the net oil and gas receipts shall be used
      to repay interest and  principal on the then outstanding note
      balance.  Laurus is authorized to transfer such funds to its account,
      where it is held and applied to the accrued interest and note
      payable.





*Foreign
      Currency Translation -*During the relevant periods, Texhoma’s investment in
      the BSP assets and liabilities were translated from Thailand and Australian
      currency into U.S. currency by use of exchange rates in effect at the balance
      sheet date. Revenues and expenses were translated utilizing the exchange rates
      in effect on the date they were included in income or using weighted-average
      exchange rates. Capital accounts were translated using the exchange rates in
      effect when the foreign entity’s capital stock was acquired or
      issued.  Gains or losses on translating the Thailand currency and
      Australian currency into U.S. currency were reported in Minority Interest in
      Exploration Costs. Foreign currency transaction gains and losses were included
      in net income in the period the exchange rate changed. Translation or
      transaction gains
      or
      losses were not material to the financial statements.  The currency
      translations are in accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 52 *Foreign Currency Translation*, (FAS
      52).  Resulting translation adjustments are reflected in the
      accumulated other comprehensive items component of shareholders’
equity.




F-7




*Fair
      Value of Financial Instruments -*SFAS No. 107, *Disclosures about Fair
      Values of Financial Instruments* (FAS 107), requires disclosing fair values
      to the extent practicable for financial instrument, which are recognized or
      unrecognized in the balance sheet. For certain financial instruments, including
      cash, accounts payable, and accrued expenses and short term debt, it was assumed
      that the carrying value does not materially differ from fair
      value.  The fair value of debt was determined based upon current rates
      at which Texhoma could borrow funds with similar maturities
      remaining.





*Property
      and Equipment-*Property and equipment are recorded at cost less impairment.
      Depreciation is computed using the straight-line basis over the estimated useful
      lives of the assets at the rates in the accompanying table.





Asset
                Category
            Depreciation/
              Amortization
              PeriodBuilding
            30
                YearsPlant
                & Equipment
            7
                YearsProduction
                Tooling
            $10
                per unitAutomotive
                Equipment
            5
                YearsOffice
                Equipment
            5
                to 3 Years








Texhoma’s
      subsidiary purchased oil and gas property interests on March 28, 2006 with
      ownership of their portion of the oil and gas production from the Barnes Creek
      and Edgerly properties becoming effective January 1, 2006.  Depletion
      is computed based upon the estimated remaining proved reserves as determined
      by
      a third party petroleum and geology consulting firm.  Based upon those
      estimations, the total proven reserves for the Barnes Creek leasehold were
      73,310 barrels of oil with 62,364 remaining at September 30, 2006, the property
      was depleted at the rate of 14.9% for the period of acquisition through year
      end.  The Edgerly leasehold had total proven reserves of 210,574
      barrels of oil and an estimated remaining 199,526 barrels, and depletion of
      4.9%
      was reported for the year ended September 30, 2006.  The Little White
      Lakes leasehold purchased effective April 1, 2006 had total estimated proven
      reserves of 27,673 with 21,919 estimated remaining at September 30, 2006 with
      reported depletion of 20.8%.





*Oil
      and Natural Gas Exploration and Development -*BSP records its exploration
      operations in accordance with SFAS 19, *Financial Accounting and Reporting by
      Oil and Gas Producing Companies*(FAS 19). Exploration involves identifying
      areas that may warrant inspection and/or examination of specific areas that
      indicate they may possess the presence of oil and gas reserves, including the
      drilling of exploration wells and collecting seismic data.




BSP
      adopted “Successful Efforts” accounting for exploration costs as defined in FAS
      19.  Under this method, geological and geophysical costs, the costs of
      carrying and retaining undeveloped properties such as delay rentals, ad valorem
      taxes on properties, legal costs for the title defense, maintenance of land
      and
      lease records, and dry and bottom hole contributions are charged to expense
      as
      incurred.  The cost of drilling exploratory wells is capitalized,
      pending determination of whether the well can produce
      hydrocarbons.  If it is determined the well has no commercial
      potential, the capitalized costs, net of any salvage value are
      expensed.




F-8





If
      it is
      determined subsequent to a financial reporting period and prior to the issuance
      of financial statements for that reporting period, that an exploratory well
      has
      not found commercially exploitable hydrocarbons, any costs incurred through
      the
      end of that reporting period, net of salvage value, must be written off in
      that
      prior period under FASB Interpretation No. 36, *Accounting for Exploratory
      Wells in Progress at the End of the Period*(FAS 36).





*Equity
      Method of Accounting for Investments in Common Stock -*The equity method of
      accounting for investments in Common Stock when the ownership is 50 percent
      or
      less of the voting stock of the enterprise is governed by APB Opinion No. 18,
      *The Equity Method of Accounting for Investments in Common Stock* (APB
      18).  It states that use of the equity method of accounting for an
      investment is required if the investor exercises significant influence over
      the
      operating and financial policies of the investee.  APB 18 includes
      presumptions, based on the investor’s percentage of ownership, as to whether the
      investor has that ability.





In
      accordance with APB No. 18, Texhoma treated its 40% ownership in BSP under
      the
      equity method of accounting and recorded the investment, adjusted by net losses
      of $1,245,000.  In March 2005 Texhoma received a final drilling report
      and the Board of Directors voted to agree with recommendations to abandon and
      plug the well.  An impairment loss of $464,441 was recorded for the
      investment ***(see note 2 Concession).***





*Long-Lived
      Assets* - The Company's accounting policy regarding the assessment of the
      recoverability of the carrying value of long-lived assets, including property,
      equipment and purchased intangible assets with finite lives, is to review the
      carrying value of the assets if the facts and circumstances suggest that they
      may be impaired. If this review indicates that the carrying value will not
      be
      recoverable, as determined based on the projected undiscounted future cash
      flows, the carrying value is reduced to its estimated fair value.





*Income
      Taxes* - Management evaluates the probability of the realization of its
      deferred income tax assets.  The Company has estimated a $2,466,000
      deferred income tax asset at September 30, 2006 relating to net operating loss
      carryforwards and deductible temporary differences.  Of that amount,
      an estimated $931,000 is related to the net operating loss generated for the
      year ended September  30, 2006.  Management determined that
      because the Company has not yet generated taxable income, because of the change
      in control that has occurred in the past and the fact that certain losses have
      been generated outside of the United States, it is more likely than not that
      a
      tax benefit will not be realized from these operating loss carryforwards and
      deductible temporary differences.    Accordingly, the
      deferred income tax asset is offset by a full valuation allowance.





If
      the
      Company begins to generate taxable income, management may determine that some
      or
      all of the deferred income tax asset may be recognized.  Recognition
      of the asset could increase after tax income in the future.  The net
      operating tax loss carry forward of approximately $3,100,000 expires from 2011
      to 2025.  The future utilization of the net operating losses is
      uncertain.




*Loss
      Per Share* - Per SFAS No. 128, *Earnings per Share*(FAS 128),
      earnings per share (or loss per share), is computed by dividing the earnings
      (loss) for the period by the weighted average number of common stock shares
      outstanding for the period.  Diluted earnings (loss) per share
      reflects the potential dilution of securities by including other potential
      common stock, including stock options and warrants, in the weighted average
      number of common shares outstanding for the period, if
      dilutive.  Therefore because including options and warrants issued
      would have an anti-dilutive effect on the loss per share, only the weighted
      average (loss) per share is reported.





*Share-Based
      Payment* - In December 2004, the FASB issued SFAS No. 123R,
*Accounting for Stock-Based Compensation* (FAS 123(R)), which supersedes
      APB 25. Accordingly, Texhoma is  required to measure all stock-based
      compensation awards using a fair value method and recognize such expense in
      its
      financial statements as services are performed. In addition, the adoption of
      FAS
      No. 123(R) will require additional accounting related to the income tax effects
      and additional disclosure regarding the cash flow effects resulting
      from share-based payment arrangements. FAS No. 123(R) became effective for
      small
      business issuers as of the first interim or annual reporting period that begins
      after December 31, 2005.




F-9




The
      effects of the adoption of FAS No. 123(R) on Texhoma’s results of operations and
      financial position are dependent upon a number of factors, including the number
      of employee stock options outstanding and unvested, the number of stock-based
      awards which may be granted in the future, the life and vesting features of
      stock-based awards which may be granted in the future, the future market value
      and volatility of Texhoma’s stock, movements in the risk free rate of interest,
      award exercise and forfeiture patterns, and the valuation model used to estimate
      the fair value of each award.. In addition, Texhoma utilizes restricted stock
      units as a key component of its ongoing employee stock-based compensation plan.
      These awards generally are recognized at their fair value, equal to the quoted
      market price of Texhoma’s common stock on the date of issuance, and this amount
      is amortized over the vesting period of the shares of restricted stock held
      by
      the grantee




*Non-monetary
      Exchange* - In December 2004, the FASB issued SFAS No. 153,
*Exchanges of Non-monetary Assets, an amendment of APB Opinion
      No. 29* (FAS 153)*,* The amendments made by FAS  153
      eliminate the exception for non-monetary exchanges of similar productive assets
      and replace it with a general exception for exchanges of non-monetary assets
      that do not have commercial substance. A non-monetary exchange has commercial
      substance if the future cash flows of the entity are expected to change
      significantly as a result of the exchange. The provisions of this statement
      became effective for non-monetary asset exchanges occurring in Texhoma’s fourth
      quarter of 2005. The adoption of FAS  153 did not have a material impact on
      Texhoma’s financial statements.





*Conditional
      Asset Retirement* - In March 2005, the FASB issued FASB Interpretation (FIN)
      No. 47, *Accounting for Conditional Asset Retirement Obligations–an
      Interpretation of SFAS 143* (FIN 47).  FIN 47 clarifies the timing
      of liability recognition for legal obligations associated with the retirement
      of
      a tangible long-lived asset when the timing and/or method of settlement are
      conditional on a future event.  FIN 47 is effective no later than
      December 31, 2005 and did not impact the Company’s financial
      statements.





*Foreign
      Earnings Repatriation Provision within the American Jobs* - In December
      2004, the FASB issued FASB Staff Position (“FSP”) No. FAS 109-2, *Accounting
      and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
      the American Jobs Creation Act of 2004*(FSP FAS 109-2)*.*The
      American Jobs Creation Act (“AJCA”) introduces a special one-time dividend
      received deduction on the repatriation of certain foreign earnings to a U.S.
      taxpayer (“repatriation provision”), provided certain criteria are met. FSP FAS
      109-2 provides accounting and disclosure guidance for the repatriation
      provision. Texhoma completed its evaluation of this FSP and decided not to
      repatriate foreign earnings under these provisions as it would not be beneficial
      to Texhoma.





*Accounting
      Changes and Error*Corrections - In May 2005, the FASB issued SFAS
      No. 154*, Accounting Changes and Error Corrections* (FAS
      154)*.*This statement replaces APB Opinion No. 20,
*Accounting Changes*, and SFAS No. 3, *Reporting Accounting
      Changes in Interim Financial Statements,*and changes the requirements for
      the accounting and reporting of a change in accounting principle. This statement
      applies to all voluntary changes in accounting principles. It also applies
      to
      changes required by an accounting pronouncement in the unusual instance that
      the
      pronouncement does not include specific transition provisions. When a
      pronouncement includes specific transition provisions, those provisions should
      be followed. FAS 154 requires retrospective application to prior periods’
financial statements of voluntary changes in accounting principles. FAS 154
      is effective for accounting changes and corrections of errors made during 2007,
      beginning on January 1, 2007. Texhoma does not believe the adoption of FAS
      154
      will have a material impact on its financial statements.





*Inventory
      Cost* - In November 2004, the FASB issued SFAS No. 151*,
      Inventory Costs—an Amendment of ARB No. 43, Chapter 4*(FAS
      151)*.* FAS 151 amends Accounting Research Bulletin (“ARB”) No. 43,
      Chapter 4, to clarify that abnormal amounts of idle facility expense,
      freight, handling costs, and wasted materials (spoilage) should be
      recognized as current-period charges. In addition, this statement requires
      that
      allocation of fixed production overheads to the costs of conversion be based
      on
      the normal capacity of the production facilities. The provisions of this
      statement are effective for inventory costs incurred beginning in Texhoma’s
      first quarter of 2006. Texhoma does not believe that the adoption of FAS 151
      will have a material impact on its financial statements.




F-10





**2.
      CONCESSION**





Texhoma
      had a 40% interest in BSP which owned an exploration concession located in
      the
      Gulf of Thailand.  The concession was signed on March 3, 1999 and
      allowed for three exploration periods of three years each (the second and third
      periods are optional) followed by a possible twenty-year production period
      to
      develop commercial hydrocarbons found during the exploration phase.





At
      the
      time of the acquisition of Black Swan by Texhoma, the shareholders of Black
      Swan
      were then comprised of Texhoma (40%), Dormley Pty. Ltd. (36%), Capersia Pte.
      Ltd. (14%) and Nuenco NL (10%), respectively.  In January 2005,
      Capersia and Dormley acquired Nuenco’s interest.  Due to the ownership
      division, although Texhoma was a minority percentage owner, the Company
      controlled the majority of the joint venture and as such reported its interest
      on a consolidated basis.  As a result of the unsuccessful outcome the
      investment was expensed in the third quarter 2005.  The acquisition of
      Black Swan was recorded by Texhoma at $464,441, based upon its 40% ownership
      interest, which amount was included in the June 30, 2005 write down during
      the
      year ended September 30, 2005.





The
      work
      program for the First Obligation Period included reprocessing seismic data,
      acquisition of a 300 sq. km. 3D-seismic program and the drilling of one well.
      With Thai Government approval, the commitment well was postponed to the 3rd year of
      the Second
      Obligation Period (ending March 2, 2005).   In accordance with
      the terms of the Concession, Black Swan Thai was required to drill two wells
      and
      expend $400,000 on other work-programs prior to March 2, 2005.  The
      obligations were fulfilled in the first half of 2005 upon the Concession being
      relinquished to the Thai government after it was determined the exploration
      efforts and the drilling were unsuccessful.





In
      March
      2005 the board of directors voted to plug and abandon the concession and
      Thailand oil exploration.  The Company still owed $1,115,000 in unpaid
      past cash calls and contributions to the joint venture.  The unpaid
      cash contribution was forgiven and paid by the remaining joint venture
      members.  The Company has no commitment or contingency for those
      unpaid cash calls and contributions as represented by prior
      management.  In August 2005 Texhoma’s Board elected to withdraw its
      support for continued exploration with BSP and write off its investment
      effective June 30, 2005.





On
      January 20, 2006, we divested our shareholding in Black Swan Petroleum Pty.
      Ltd.
      and Black Swan Petroleum (Thailand) Limited by transferring such shares to
      Pacific Spinner Limited. Pacific Spinner had, pursuant to a Letter Agreement,
      agreed to use its best efforts to further sell such shares and to pay us 20%
      (twenty percent) of any proceeds received from such sale. However, the Company
      has learned that Black Swan has deregistered itself as an active company in
      Australia and Black Swan Thai has gone into voluntary receivership with little
      chance of the Company receiving any further benefit from the
      divestment





**3.  PROPERTY
      AND EQUIPMENT**




Texhoma  and
      its subsidiary, Texaurus Energy, Inc. acquired oil and gas leasehold properties
      at a cost  of $11.191 million during the year ended September 30,
      2006.  During the year $916,000 of those acquisitions proved to be
      unsuccessful and were written off for the financial statement
      presentation.  In addition, third party engineering reports projected
      that the future value of the Little White Lake interest retained significantly
      less future value than was reflected in the depleted amount per the balance
      sheet at September 30, 2006 and as such recorded an impairment of $2,682,000
      for
      the year.





**4.   SHARE
      CAPITAL**





*Stock
      for Services Compensation Plan* - In accordance with Texhoma’s Stock for
      Services Compensation Plan, on August 26, 2004, the Company filed a registration
      statement on Form S-8 with the Securities and Exchange Commission, for
      registration under the Securities Act of 1933 of Securities to Be Offered to
      Employees Pursuant to Employee Benefit Plans to register the shares of common
      stock under Texhoma’s  Plan
      in an amount of up to 11,000,000 pre forward split shares and 44,000,000 post
      forward split shares at various exercise prices.  The Board of
      Directors is authorized, without further approval; to issue shares of common
      stock under the plan from time to time of up to an aggregate of 44,000,000
      post
      forward split shares of the Company’s common stock.




F-11





*Common
      Stock* - On October 5, 2004, Texhoma issued 1,584,064 shares of common stock
      (6,336,256 shares subsequent to the forward split) in settlement of
      approximately $161,700 in debt with a former director of the
      Company.  Texhoma recorded $284,500 as an expense.  The
      Company issued 1,900,000 shares of common stock (7,600,000 shares subsequent
      to
      the forward split) in settlement of $38,000 in debt with a consultant of the
      Company; Texhoma recorded $504,800 in expenses.




On
      November 4, 2004, the Company issued 14,000,000 shares of restricted common
      stock (56,000,000 post forward split shares) for the acquisition of a 40%
      shareholding interest in the capital of Black Swan.  The acquisition
      was accounted for using the equity method of accounting, and was the only
      operation recorded as an investment in Black Swan.





In
      February, March and August 2005, the Company issued 6,000,000 (post forward
      split shares) shares of restricted common stock for proceeds of
      $600,000.  These proceeds were used to fund portions of the cash call
      for the oil and gas operation in Thailand.





*Forward
      Stock Split*- On October 14, 2004, Texhoma approved a 4:1 forward stock
      split of its common stock.  The forward stock split, which was
      effected on November 9, 2004, increased Texhoma’s issued and outstanding shares
      from 25,203,063 shares to 100,812,252 shares of common stock.  The
      Statements of Stockholders’ Equity was reclassified as of September 30, 2004 to
      reflect the 4:1 forward stock split.





In
      March
      2006, our former Executive Chairman and Director, Frank Jacobs subscribed for
      7,500,000 shares of our common stock at $0.04 per share, for aggregate
      consideration of $300,000, which funds were immediately used by us in connection
      with the Closing of the Kilrush Property (described below).





On
      March  28,  2006,  Texaurus closed  the
      purchase of certain interests from Structured Capital in exchange
      for  a) two million five hundred thousand dollars ($2,500,000) and b)
      the issuance of 37,500,000 shares of our common stock at $0.04 per
      share.





In
      March
      2006, the Company issued 1,062,500 warrants to purchase 1,062,500 shares at
      $0.04 cents per share and expiring in five years.  The warrants were
      issued to Energy Capital Solutions in consideration for raising capital for
      the
      Company.  In addition, up to 10,625,000 warrants to purchase Texhoma
      common stock at $0.04 per share, expiring in five years, as well as 961 warrants
      at $0.001 per share to purchase common shares of Texaurus Energy, Inc., a wholly
      owned subsidiary of Texhoma, at any time following Texhoma’s repayment of all
      obligations were issued to Laurus Master Fund Ltd.





On
      April
      10, 2006, Texhoma Energy, Inc. (the "Company") entered into a Debt Conversion
      Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation,
      formerly Devon Energy Thai Holdings, Ltd. ("LOGI").  The Company and
      LOGI agreed to convert $160,000 of the $895,000 which LOGI was owed into an
      aggregate of 4,000,000 shares (or one (1) share for each $0.04 of debt
      converted) of newly issued shares of the Company's restricted common stock.
      The
      Director and 50% owner of LOGI is Max Maxwell, who became a Director of the
      Company on April 10, 2006, President of the Company on April 12, 2006, and
      Chief
      Executive Officer of the Company on June 5, 2006, and resigned as President,
      Chief Executive Officer and Director on May 1, 2007.





On
      May
      15, 2006, Lucayan Oil and Gas Investments, Ltd. ("LOGI") provided the Company
      notice of its desire to convert its $735,000 Promissory Note into 18,375,000
      shares of the Company's common stock. The Company's Board of Directors approved
      such issuance on May 18, 2006.





In
      June
      2006, the Company accepted subscriptions for 3,175,000 shares of its common
      stock at $0.08 share for $254,000 in cash.  The Company also granted
      warrants to purchase 3,175,000 shares at $0.15 per share expiring in one
      year.




F-12





In
      June
      2006, the Company accepted subscriptions for 1,000,000 shares of our common
      stock at $0.08 per share for $80,000 in cash and the Company also granted
      warrants to purchase 1,000,000 shares with an exercise price of $0.15 per
      share expiring in one year.





In
      conjunction with the acquisition of three of the Sunray properties, we issued
      375,000 shares of common stock and granted warrants to purchase 375,000 shares
      at an exercise price of $0.15 per share expiring in one year.





In
      July
      2006 the Company accepted subscriptions for 1,000,000 shares of our common
      stock
      at $0.08 per share for $80,000 in cash and the Company also granted warrants
      to
      purchase 1,000,000 shares with an exercise price of $0.15 per share
      expiring in one year.





In
      September, 2006 the Company accepted subscriptions for 625,000 shares of our
      common stock at $0.08 per share for $50,000 and the Company also granted
      warrants to purchase 625,000 shares with an exercise price of $0.15 per
      share expiring in one year.





On
      September 19, 2006, Mr. Brian Alexander decided not to seek re-election as
      a
      director of the Company and as a result, In connection with monies we owed
      Mr.
      Alexander in director and consulting fees, 300,000 shares of restricted common
      stock were issued to Mr. Alexander in lieu of cash.





**5.  STOCK
      OPTIONS**





On
      June
      1, 2006, the Company's Board of Directors approved the grant of an aggregate
      of
      10,000,000 options to the Company's then officers, Directors and employees,
      pursuant to the Company's 2006 Stock Incentive Plan (the "Plan"). All of the
      options were at an exercise price of $0.13 per share, which was equal to the
      average of the highest ($0.125) and lowest ($0.111) quoted selling prices of
      the
      Company's common stock on June 1, 2006, multiplied by 110%. The options were
      granted to the following individuals in the following amounts:





o
            Max
                Maxwell, our former president and Director was granted 750,000 qualified
                options and 3,250,000 non-qualified options (for 4,000,000 total
                options),
                which options were to vest at the rate of 500,000 options every three
                months, with the qualified options to vest first, in consideration
                for
                services to be rendered to the Company as the Company's president
                and
                Director. The options were to expire if unexercised on June 1, 2009,
                or at
                the expiration of three months from the date of the termination of
                his
                employment with the Company.  All of Mr. Maxwell’s options have
                since expired unexercised;




o
            Frank
                Jacobs, our former Director was granted 4,000,000 non-qualified options,
                which options were to vest at the rate of 500,000 options every three
                months, in consideration for services to be rendered to the Company
                as the
                Company's Director. The options were to expire if unexercised on
                June 1,
                2009, or at the expiration of three months from the date of the
                termination of his employment with the Company.  Mr. Jacobs
                resigned from the Company effective June 14, 2007, and as such all
                2,000,000 of his vested options expired unexercised on September
                14,
                2007;





o
            Brian
                Alexander, our former Chief Financial Officer and Director was granted
                1,000,000 non-qualified options, which options vested upon Mr. Alexander's
                execution of a deed of release and settlement between Mr. Alexander
                and
                the Company in connection with his resignation from his positions
                as the
                Company's Chief Financial Officer and Director. The options expired
                unexercised on July 1, 2007; and








o
            Mr.
                Terje Reiersen then working as a consultant to the Company was granted
                1,000,000 non-qualified options, which options were to vest at the
                rate of
                250,000 options every three months, in consideration for consulting
                services to be rendered to the Company in connection with corporate
                advice
                in relation to a secondary listing amongst other things. The options
                were
                to expire if unexercised on June 1, 2009, or at the expiration of
                three
                months from the date of the termination of his employment with the
                Company.  All of Mr. Reiersen’s options have since expired
                unexercised.





F-13


Additionally,
      on June 1, 2006, the Board of Directors approved the issuance of 2,000,000
      options to another consultant to the Company in consideration for investor
      relations services rendered to the Company. The options granted to the
      consultant were not granted pursuant to the Plan. The options have an exercise
      price of $0.13 per share, vest at a rate of 250,000 options every three months
      and expire if unexercised on June 1, 2009.





The
      following is a summary of the option activity during the year ended September
      30, 2006:








Number
            
            
            AverageOf
            
            
            ExerciseOptions
            
            
            PriceOutstanding
                at October 1, 2005
            
            
            -
            
            
            
            -Granted
            
            
            12,000,000
            
            
            $
            0.13Balance
                at September 30, 2006
            
            
            12,000,000
            
            
            $
            0.13





Compensation
      costs associated with the issuance of options to purchase shares of common
      stock
      to employees, directors or consultants is measured at fair value at the date
      of
      issuance based upon the options vested and expensed during the current
      period.





During
      the third quarter, we granted a total of 12,000,000 options  to
      purchase shares at $0.13 per share to our employees, directors and consultants
      2,000,000 of which had a term of three years, and 10,000,000 of which had a
      term
      of the earlier of (a) three years, or (b) three months from the date of such
      employees and directors termination of employment with the Company. As
      of  September 30, 2006,  2,500,000 of the options were
      vested. Based on our knowledge as of the date of this filing, we have applied
      a
      forfeiture rate of 90% to the vested options.  We  accrued
      $12,964 in expense for options in our current financial statements. The trading
      price of our stock was $0.09 per share on September 30, 2006.  The
      Black-Scholes option model with the following assumptions:  weighted
      average risk-free interest rate of 4.25%, estimated volatility of 127%,
      weighted-average expected life of two years and no expected dividend yield,
      resulted in a fair value per option of $0.0518.





**6.  ACQUISITIONS**





On
      November 5, 2004, the Board of Directors completed the agreement with Capersia
      Pte. Ltd. to acquire a 40% interest of Black Swan Petroleum Pty. Ltd. (“Black
      Swan”) for 14,000,000 new investment shares (56,000,000 shares subsequent to the
      forward split explained above) of Texhoma common stock.  As previously
      described above, Texhoma recorded the value of this acquisition at $464,441,
      and
      the Company has since disposed of its interest in Black Swan.





On
      or
      about December 10, 2005, the Company entered into a 6% participation agreement
      with the "Clovelly Joint Venture.”  On February 2, 2006, we executed a
      Sale and Purchase Agreement (the “Clovelly SPA”) with Sterling Grant Capital,
      Inc. pursuant to which we acquired a further 5% (five percent) working interest
      in the Clovelly South prospect located in Lafourche Parish,
      Louisiana.  We funded Clovelly SPA through a Joint Operating
      Agreement, the issuance to Sterling Grant of 2,000,000 shares of Company common
      stock and payment of $15,000.




On  March  15,  2006,  Texhoma’s
      wholly-owned  subsidiary,  Texaurus Energy, Inc., which was
      formed in March 2006
      as  a  Delaware  corporation  ("Texaurus"),  entered  into  a
      Sales and Purchase Agreement  with  Structured Capital
      Corp., a Texas corporation to purchase certain oil and gas leases in Vermillion
      Parish,  Louisiana,  which  represent  a  10%
      working interest (7.3% net revenue interest) in such leases.  The
      agreed purchase price of the Little White Lake Property was a) two million
      five
      hundred thousand dollars ($2,500,000) and b) the issuance of 37,500,000 shares
      of our common stock.  This purchase had an effective date of April 1,
      2006.




F-14





On
      March  28,  2006,  with  an effective
      date of January 1, 2006, Texaurus closed  a  Sales &
Purchase Agreement to purchase certain interests from Kilrush
      Petroleum,  Inc. in Allen Parish, Louisiana and Calcasieu Parish,
      Louisiana, for
      aggregate  consideration  of  $5,225,000.  Texaurus
      paid the $5,225,000 purchase price with proceeds received from its sale of
      the
      Secured Term Note with Laurus Master Fund, Ltd. (“Laurus”).





On
      March
      28, 2006 Texaurus entered into a Securities Purchase Agreement and a
      Registration Rights Agreement, issued a Common Stock Purchase Warrant;
      entered into a Master Security Agreement with Laurus; and sold Laurus a
      Secured Term Note in the amount of $8,500,000 as well as
      various other agreements.  Additionally, in connection with the
      closing, we issued Laurus Common Stock Purchase Warrants to purchase up to
      10,625,000 shares of Texhoma common stock and up to 49% of Texaurus’ common
      stock.





In
      March
      2006, the Company issued 1,062,500 warrants to purchase 1,062,500 shares at
      $0.04 cents per share and expiring in five years.  The warrants were
      issued to Energy Capital Solutions for raising capital for the
      Company.





A
      Letter
      of Intent was executed by Texhoma on April 28, 2006, agreeing to participate
      in
      a 25% working interest in the exploration of the Bayou Choctaw oil and gas
      project, located in Iberville Parish, Louisiana.  In July 2006, Texhoma
      executed a new Letter of Intent increasing its agreement of participation to
      41.667% in the project.   Texhoma identified that the exposure
      was in excess of its corporate guidelines and assigned its right to the interest
      to Morgan Creek Energy Corp. in exchange for $250,000 and 200,000 shares of
      Morgan Creek Energy.





On
      May
      31, 2006, Texhoma entered into six (6) participation agreements to purchase
      various oil and gas leases from Sunray Operating Company LLC (“Sunray”). In June
      and August 2006, Texhoma closed the purchase of three (3) of the participation
      agreements, entering into Assignments and Bill of Sales for purchase from Sunray
      the following Leases:






            Leases
                covering approximately 196 acres of land in Brazoria County, Texas.
                In the
                purchase,         Texhoma
                acquired an undivided 37.5% interest, subject to existing overriding
                royalty interests equal to 25% of 8/8.   Additionally, Sunray is
                entitled to a five-eighth of eight-eighths (62.5% of 8/8) working
                interest, proportionally reduced at
                payout.






            Leases
                covering approximately 20 acres of land in Brazoria County, Texas.
                In the
                purchase, Texhoma acquired an undivided 35% interest in the leases,
                subject to existing overriding royalty interests equal to 25% of
                8/8.






            Leases
                covering approximately 280 acres of land in Brazoria County, Texas.
                In the
                purchase, Texhoma acquired an undivided 72.5% interest in the leases,
                subject to existing overriding royalty interests equal to 28% of
                8/8.
                Texhoma simultaneously sold a 42.5% interest leaving a 30%
                interest.






            Texhoma
                declined to participate in the purchase of the leases covering
                approximately 80 acres in Brazoria County. In September 2006, this
                well
                was a dry hole and participation in subsequent wells was
                declined.  However, Texhoma continues to hold a 12.5% back in
                Working Interest.





            Two
                leases for another 160 acre site and a 60 acre site which were
                subsequently declined by Texhoma, retaining a 12.5% back in Working
                Interest.





In
      conjunction with the acquisition of three of the Sunray properties, we issued
      375,000 shares of common stock and granted warrants to purchase 375,000 shares
      of common stock at an exercise price of $0.15 per share expiring in one
      year.  Subsequent to the acquisition of the Sunray properties, we
      executed an agreement to sell a percentage of our working interest in the
      properties to Matrixx, thereby reducing our cash investment and liability for
      future cash calls.  Additionally, we agreed to pay Sunray $113,161 in
      cash, of which $50,624 remained outstanding as of October 31, 2007.




F-15





In
      September 2006, drilling on the properties acquired in the Sunray agreement
      proved to be unsuccessful and the investment was retired.





**7.
      RELATED PARTIES**





Texhoma,
      Black Swan, and Black Swan Thai had management and directors in common with
      its
      shareholders. At the end of 2004, Mr. Frank Jacobs was a director and the CEO
      of
      Black Swan and Black Swan Thai and on January 25, 2005 became a director and
      the
      CEO of Texhoma Energy, Inc., and has subsequently resigned.  Mr. Brian
      Alexander was the CFO of Black Swan and Black Swan Thai as well as a director
      and the CFO of Texhoma; however Mr. Alexander has subsequently
      resigned.





On
      October 1, 2003 the Company had approximately $7,300 of outstanding advances
      payable to Henry Rolling, a former officer.  On September 30, 2004 the
      Company received further advances of $431,000 from Mr. Rolling and subsequently
      issued 5,177,488 shares of its common stock for the settlement of $350,000
      of
      advances payable.





During
      the three months ended December 31, 2004, $161,700 of debt was settled by the
      issuance of 6,336,256 post split shares of common stock, which left an
      approximately $18,000 consulting fee outstanding payable to a former director
      of
      Texhoma, which amount has subsequently been written off.




On
      December 7, 2004, the Company borrowed $50,000 from a related party, MFS
      Technology.  The loan is evidenced by a convertible promissory note, see
      Note 8 for additional information.




On
      or
      about December 10, 2005, the Company entered into a 6% participation agreement
      with the "Clovelly Joint Venture," of which ORX Resources, Inc. is the Operator.
      Our former President and Director Max Maxwell served as Vice President of the
      Operator at the time we entered into the participation agreement.  On
      February 14, 2006 the Company increased its working interest to 11% through
      the
      purchase of a further 5% working interest in this property from Sterling
      Grant.  We funded this additional interest through a Joint Operating
      Agreement, issuance to Sterling Grant of 2,000,000 shares of Texhoma common
      stock at $0.04 per share and payment of $15,000.





On  March  24,
      2006, Mr. Jacobs, the Company’s former Chief Executive Officer, subscribed for
      7,500,000 shares of the Company's common  stock at $0.04 per share,
      for an aggregate consideration of $300,000, which funds were immediately used
      by
      the Company as a portion  of  the  consideration
      paid by the Company for the purchase of certain oil and gas interests from
      Kilrush Petroleum, Inc., located in Allen
      Parish,  Louisiana  and  Calcasieu  Parish,  Louisiana.





On
      April
      10, 2006, Texhoma entered into a $735,000 Debt Conversion Agreement with Lucayan
      Oil and Gas Investments, Ltd., a Bahamas corporation ("LOGI"). Texhoma
      owed  $895,000  to  LOGI  as  of  the  date  of
      the Debt Conversion Agreement in
      connection  with  money  advanced to the Company
      in March 2005 for the fulfillment of   a portion of the cash call
      commitments for the drilling by Black Swan Thai.  Pursuant to the Debt
      Conversion Agreement, the Company and LOGI agreed to convert
      $160,000  of  the  $895,000
      of  which  LOGI was owed into an aggregate of 4,000,000
      shares  (or  one  (1)  share  for  each
      $0.04 of debt converted) of newly issued


shares
      of
      the Company's restricted common stock. Mr. Max Maxwell, our former President
      is
      a 50% owner of LOGI.





On  May  15,  2006,
      LOGI provided the  Company  notice  of its desire
      to convert its $735,000 Promissory Note, which amount remained from LOGI’s Debt
      Conversion Agreement entered into with Texhoma in April 2006, into 
18,375,000  shares  of  the  Company's  common  stock  and  as  a
      result of such conversion, which shares were subsequently issued to
      LOGI.




F-16





On  June  1,  2006,
      the Company's Board of Directors approved the issuance of an
      aggregate  of  10,000,000  options  to  the  Company's  officers,  directors
      and
      employees,  pursuant  to  the  Company's
      2006 Stock Incentive Plan and an additional 2,000,000 options for a
      consultant. All options expire if unexercised on June 1, 2009, or
      three (3) months from the date of the termination of employment with the
      Company.





All
      options were issued at an exercise price of $0.13 per share, which was equal
      to
      the average of the highest ($0.125) and lowest ($0.111) quoted selling prices
      of
      the Company’s common stock on June 1, 2006, multiplied by
      110%.  Options of 4,000,000 were granted to Max Maxwell and Frank
      Jacobs, and options of 1,000,000 were granted to Brian Alexander, and Terje
      Reiersen.  On June 7, 2006, the Board of Directors approved the grant
      of an additional 1,000,000 options to Peter Wilson, which amount was later
      amended to include 2,000,000 options, which expire if unexercised on June 1,
      2009.





On
      September 19, 2006, Mr. Brian Alexander decided not to seek re-election as
      a
      director of the Company due to other business and work
      commitments.  In connection with monies we owed Mr. Alexander in
      director and consulting fees, 300,000 shares of restricted common stock were
      issued to Mr. Alexander in lieu of cash.  In addition Mr. Alexander’s
      vesting was accelerated such that his options were fully vested with a new
      expiration date of June 1, 2007.   Mr. Alexander and the Company
      executed a letter of Mutual Release when Mr. Alexander resigned as an officer
      and director of the Company on September 27, 2006.   Mr.
      Alexander did not exercise his option rights and those options expired on June
      1, 2007.





In
      March
      2007, Capersia Pte. Ltd. transferred 10,000,000 of its shares of Texhoma stock
      to Pacific Spinner Ltd.





Mr.
      Maxwell resigned from the Company on May 1, 2007, did not exercise any of his
      option rights and as a result all option grants expired on August 1,
      2007.  Frank Jacobs resigned on June 14, 2007 and his options expired
      unexercised on September 14, 2007.





In
      June
      2007, Valeska Energy Corp. entered into a management agreement with Texhoma
      for
      a minimum period of three months.  Mr. William Simmons is the Chief
      Executive Officer of Valeska.  In exchange for these services, Valeska
      was issued 15,200,000 shares of Texhoma’s stock as payment and
      retainer.  On June 8, 2007, Capersia transferred 1,000,000 shares of
      Texhoma stock to Mr. William Simmons and 1,000,000 shares to Valeska Energy,
      Corp.




In
      July
      2007, 500,000 shares were issued to Mr. Ibrahim Nafi Onat in consideration
      for
      his entry into a consulting agreement with us.




On
      or
      about August 13, 2007, we entered into a Second Amendment to Management Services
      Agreement with Valeska Energy Corp. (“Valeska” and the “Second
      Amendment”).





Pursuant
      to the Second Amendment, we and Valeska agreed to extend the term of the
      Management Services Agreement until September 30, 2008, and to pay Valeska
      the
      following consideration in connection with agreeing to perform the services
      required by the original Management Services Agreement, and in consideration
      for
      allowing Daniel Vesco and William M. Simmons to serve as Directors of the
      Company, bringing on personnel to assist the Company with the day to day
      operations of the Company, and helping bring the Company current in its filings
      (the “Services”):






            1,000
                shares of the Company’s Series A Preferred
                Stock;



            A
                monthly fee of $20,000 per month during the extended term of the
                Second
                Amendment, plus reasonable and actual costs incurred by Valeska (or
                individuals or designees brought on by Valeska, including lodging,
                car
                rental and telephone expenses therewith) in connection with such
                Services;



            10,000,000
                restricted shares of the Company’s common stock; and
            60,000,000
                options to purchase shares of the Company’s common stock, which shall have
                a cashless exercise provision, shall be valid for a period of three
                years
                from their grant date, and had an exercise price of $0.02 per share,
                equal
                to greater than 110% of the trading price of the Company’s common stock on
                the Pinksheets on the day of such
                grant.




All
      of
      the above transactions may have been entered into at terms which may not have
      been available to unrelated parties.





F-17


**8.  NOTES
      PAYABLE AND CONVERTIBLE LOANS**





On
      December 7, 2004, the Company borrowed $50,000 from a related
      party.  The loan is evidenced by a convertible promissory
      note.  The loan bears interest at 5% per annum calculated 6 months
      after the advancement of funds.  $25,000 was due on June 7, 2005 and
      the remaining balance, plus interest was due on December 7, 2005.  The
      loan has not been repaid, extended or converted. The lender has the option
      during the term of the loan, and any extension, to convert the principle and
      interest into shares of common stock at a conversion price of $0.30 per
      shares.





As
      discussed earlier, in March 2005, the Company received $895,000 from LOGI to
      fund Black Swan Thailand oil and gas exploration.  This loan was later
      converted into 22,375,000 shares of common stock in accordance with the
      agreement between the Company and LOGI (See Related Party).





The
      Laurus Master Fund, Ltd (“Laurus”) note accrues interest at the Prime Rate plus
      two percent (2.0%) as published in The Wall Street Journal, but shall not at
      any
      time be less than eight percent (8.0%).  Payments of accrued interest
      and principal equal eighty (80%) of the Net Revenue paid to Texaurus in respect
      of oil, gas and/or other hydrocarbon production in which Texaurus has an
      interest and each payment is applied first to accrued interest due and then
      to
      the principal balance of the note.





In
      conjunction with the purchase of the Little White Lake oil and gas property,
      we
      executed a short term note payable with Polaris Capital in the amount of
      $2,500,000 to be repaid through the funding provided by Laurus.  The
      note was repaid in April 2006 from the funds received from Laurus.





On
      April
      10, 2006, Texhoma Energy, Inc. (the "Company") entered into a Debt Conversion
      Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation,
      formerly Devon Energy Thai Holdings, Ltd. ("LOGI"). The Company owed $895,000
      to
      LOGI as of the date of the Debt Conversion Agreement in connection with money
      received by the Company for the drilling in Thailand in March 2005, which debt
      was transferred by Fidelio Business, S.A. and Quick Assets and Cash Corp. (Bank
      Sal Oppenheim) to LOGI in November 2005. Pursuant to the Debt Conversion
      Agreement, the Company and LOGI agreed to convert $160,000 of the $895,000
      which
      LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each
      $0.04 of debt converted) of newly issued shares of the Company's restricted
      common stock. The Director and 50% owner of LOGI is Max Maxwell, who became
      a
      Director of the Company on April 10, 2006, President of the Company on April
      12,
      2006, and Chief Executive Officer of the Company on June 5, 2006, and resigned
      as President, Chief Executive Officer and Director on May 1, 2007.





On
      April
      10, 2006, the Company entered into a convertible note with LOGI evidencing
      the
      $735,000 of debt which remained outstanding. The convertible note provided
      that
      LOGI could convert the $735,000 debt into Company common stock at the rate
      of
      one share of common stock for each $0.04 of outstanding debt.  In
      May  2006, LOGI converted  the $735,000 remaining under the
      Promissory Note into 18,375,000 shares of the Company's common
      stock.




**9.  NET
      LOSS PER SHARE**





Restricted
      shares and warrants are included in the computation of the weighted average
      number of shares outstanding during the periods presented.  The net
      loss per common share is calculated by dividing the consolidated loss by the
      weighted average number of shares outstanding during the
      periods.  Because we report net losses, the inclusion of options and
      warrants in the calculation would be anti-dilutive, and they are excluded from
      the computation presented in the financial statements.




F-18





**10.  WARRANTS**





The
      following is a summary of the warrant activity during the year ended September
      30, 2006:





WeightedNumber
            
            
            AverageOf
            
            
            ExerciseWarrants
            
            
            PriceOutstanding,
                October 1, 2005
            
            -
            
            
            -Granted
            
            
            11,687,500
            
            
            $
            0.04Granted
            
            
            5,175,000
            
            
            $
            0.15Outstanding
                at September 30, 2006
            
            
            16,862,500
            
            
            $
            0.074





Costs
      attributable to the issuance of share purchase warrants are measured at fair
      value at the date of issuance and expensed with a corresponding increase to
      additional Paid-in-Capital at the time of issuance.  When the warrant
      is exercised, the receipt of consideration is an increase in common share
      capital and Paid-in-Capital.





During
      the year, we granted 4,800,000 warrants in conjunction with subscriptions of
      our
      common stock,.  Another 375,000 warrants were granted as part of the
      consideration given for the Sunray purchase.  Additionally, a total of
      11,687,500 warrants were granted to Laurus and related parties in conjunction
      with the $8,500,000 funding to further our oil and gas property
      acquisitions.





The
      trading price of our stock was $0.09 per share on September 30,
      2006.  Warrants were originally issued at $0.04 and $0.15 per share
      with a weighted average price of $0.074 per share.  The Black-Scholes
      option model with the following assumptions:  weighted average
      risk-free interest rate of 4.25%, estimated volatility of 127%, weighted-average
      expected life of 3.1 years and no expected dividend yield, resulted in a fair
      value per warrant of $0.0701.





The
      fair
      value of the warrants granted and vested during the year, based upon the
      Black-Scholes option pricing model was $1,165,211 and as such we reflected
      the
      expense incurred in our current financial statements.





The
      earnings per share presentation reflects only the weighted average loss per
      share, because including the warrants when a loss is being reported has an
      anti-dilutive effect on earnings (loss) per share calculations.





**11.
      COMMITMENTS AND CONTINGENCIES**





As
      discussed previously, management wound down Black Swan’s operations in Thailand
      and Australia after unsuccessful drilling in the Concession.  A
      determination has not been made as to the financial or legal consequence to
      Texhoma or its officers or its shareholders, for subsequent obligations, if
      any,
      to persons or governmental entities which may arise from doing business or
      owning or leasing property in Thailand and Australia.




F-19







**12.  SUPPLEMENTAL
      OIL AND GAS INFORMATION (UNAUDITED)**





The
      following supplemental information regarding the oil and gas activities of
      Texhoma Energy, Inc. is presented pursuant to the disclosure requirements
      promulgated by the SEC and Statement of Financial Standards (“SFAS”) No. 69,
      Disclosures About Oil and Gas Producing Activities.





The
      following estimates of reserve quantities and related standardized measure
      of
      discounted net cash flows are estimates only, and are not intended to reflect
      realizable values or fair market values of the Texhoma’s reserves. Texhoma
      emphasizes that reserve estimates are inherently imprecise and that estimates
      of
      new discoveries are more imprecise than producing oil and gas properties.
      Additionally, the price of oil has been very volatile and downward changes
      in
      prices can significantly affect quantities that are economically recoverable.
      Accordingly, these estimates are expected to change as future information
      becomes available and these changes may be significant.





Proved
      reserves are estimated reserves of crude oil and natural gas that geological
      and
      engineering data demonstrate with reasonable certainty to be recoverable in
      future years from known reservoirs under existing economic and operating
      conditions. Proved developed reserves are those expected to be recovered through
      existing wells, equipment and operating methods.





The
      standardized measure of discounted future net cash flows is computed by applying
      year-end prices of oil and gas (with consideration of price changes only to
      the
      extent provided by contractual arrangements) to the estimated future production
      of proved oil and gas reserves, less estimated future expenditures (based on
      a
      year-end costs) to be incurred in developing and producing the proved reserves,
      less estimated future income tax expenses. The estimated future net cash flows
      are then discounted using a rate of 10% per year to reflect the estimated timing
      of the future cash flows.





**Capitalized
      Costs Related to Oil and Gas Activities**





Aggregate
      capitalized costs at September 30, 2006 relating to Texhoma's crude oil and
      natural gas producing activities, including asset retirement costs and related
      accumulated DD&A are shown below:





Unproved
                properties
            
            $
            -Proved
                properties
            
            
            9,318,395Less
                accumulated DD&A and impairment reserve
            
            
            3,983,768Net
                capitalized costs
            
            $
            5,334,627





**Costs
      Incurred in Oil and Gas Activities**





Costs
      incurred in connection with Texhoma's crude oil and natural gas acquisition,
      exploration and development activities are shown below:


**September
                30, 2006**Property
                acquisitionUnproved
            
            $
            -Proved
            
            
            9,318,395Exploration
            
            
            916,000Development
            
            
            -Total
                costs incurred
            
            $
            10,234,395





**September
                30, 2005**Property
                acquisitionUnproved
            
            $
            -Proved
            
            
            -Exploration
            
            
            1,709,234Development
            
            
            -Total
                costs incurred
            
            $
            1,709,234





F-20


**Results
      of Operations for Producing Activities**





The
      following schedule includes only the revenues from the production and sale
      of
      gas, oil, condensate and Natural Gas Liquids (“NGLs”). The income tax expense is
      calculated by applying the current statutory tax rates to the revenues after
      deducting costs, which include Depletion, Depreciation & Amortization
      (“DD&A”) allowances, after giving effect to permanent differences. Due to
      significant net operating loss carryforwards related to producing activities,
      income taxes have not been provided at September 30, 2006. The results of
      operations exclude general office overhead and interest expense attributable
      to
      oil and gas activities.





2006
            
            
            2005Net
                revenue from production
            
            $
            2,258,425
            
            
            $
            -Production
                costs
            
            
            1,321,119
            
            
            
            -DD&A
            
            
            1,301,574
            
            
            
            -Impairment
                reserve
            
            
            2,682,194
            
            
            
            -Total
                costs
            
            
            5,304,887
            
            
            
            -Loss
                before income tax
            
            
            (3,046,462
            )
            
            
            (-
            )DD&A
                rate per Barrel of Oil  Equivalency “BOE”
            
            
            4.18
            
            
            
            n/aDD&A
                and impairment rate per BOE
            
            
            12.79
            
            
            
            n/a





**Proved
      Reserves**





The
      following reserve schedule summarizes Texhoma's net ownership interests in
      estimated quantities of proved oil reserves and changes in proved reserves,
      all
      of which are located in the continental United States. Reserve estimates for
      crude oil contained below were prepared by RA Lenser & Associates, Inc.,
      independent petroleum engineers.





Proved
                reserves:
            
            Equivalent
                bblsBalance
                - September 30, 2005
            
            
            -Revisions
                of  previous estimates
            
            
            -Purchases
                of minerals in place
            
            
            311,558Extensions,
                discoveries and other additions
            
            
            -Production
            
            
            (27,750
            )Balance,
                September 30, 2006
            
            
            283,808


F-21


**Standardized
      Measure of Discounted Future Net Cash Flows**





The
      following table presents the standardized measure of future net cash flows
      from
      proved oil reserves in accordance with SFAS No. 69. All components of the
      standardized measure are from proved reserves, all of which are located within
      the continent of the United States. As prescribed by this statement, the amounts
      shown are based on prices and costs at September 30, 2006, and assume
      continuation of existing economic conditions. Future income taxes are based
      on
      year-end statutory rates, adjusted for tax credits
      and carryforwards. A discount factor of 10 percent was used to reflect the
      timing of future net cash flows. Extensive judgments are involved in estimating
      the timing of production and the costs that will be incurred through the
      remaining lives of the fields. Accordingly, the estimates of future net revenues
      from proved reserves and the present value thereof may not be materially correct
      when judged against actual subsequent results. Further, since prices and costs
      do not remain static, and no price or cost changes have been considered, and
      future production and development costs are estimated to be incurred in
      developing and producing the estimated proved oil reserves, the results are
      not
      necessarily indicative of the fair market value of estimate proved reserves,
      and
      the results may not be comparable to estimates by other oil
      producers.





Future
                cash inflows
            
            $
            16,014,020Future
                production costs
            
            
            (3,299,660
            )Future
                development costs
            
            
            (542,250
            )Future
                income tax expenses
            
            
            (-
            )Future
                net cash flows
            
            
            12,172,11010%
                annual discount for estimated timing of cash flows
            
            
            3,486,959Standardized
                measure of discounted future cash flows
            
            $
            8,685,151





The
      standardized measure of discounted future net cash flows as of September 30,
      2006 was calculated using $62.91 per barrel of oil and $6.42 per thousand cubic
      feet (“mcf”) of gas.





**Sources
      of Changes in Discounted Future Net Cash Flows**





Principal
      changes in the aggregate standardized measure of discounted future net cash
      flows attributable to Texhoma's proved crude oil reserves, as required by SFAS
      No. 69, at September 30, 2006 are set forth in the table below. There was
      no production or proved reserves for the year ended September 30,
      2005.








Standardized
                measure of discounted future net cash flowsSeptember
                30, 2005
            
            $
            -Purchases
                of minerals in place
            
            
            9,996,000Changes
                in estimated future development costs
            
            
            (81,000
            )Sales
                of oil and gas, net of production
            
            
            (937,000
            )Revisions
                of previous quantity estimates
            
            
            (615,000
            )Accretion
                of discount, other
            
            
            337,000Standardized
                measure of discounted future net cash flowsSeptember
                30, 2006
            
            $
            8,685,000








**13.
      SUBSEQUENT EVENTS**





On
      October 10, 2006, ORX Resources, Inc., operator of the Clovelly Prospect well,
      notified Texhoma that the jointly owned well had been plugged and abandoned
      on
      September 23, 2006.





On
      or
      about October 19, 2006, we issued a Promissory Note to Mr. Frank Jacobs, our
      then Director, in the amount of $493,643.77, which amount represented funds
      advanced to the Company by Mr. Jacobs during the 2006 calendar year and
      management fees owed to Mr. Jacobs for his services to the Company during the
      2006 calendar year (the “Jacobs' Note”). The Jacobs' Note bears interest at the
      rate of 6% per annum until paid, and is payable by the Company at any time
      on
      demand. The Jacobs' Note may be pre-paid at any time without penalty. Any
      amounts not paid on the Jacobs' Note when due shall bear interest at the rate
      of
      15% per annum.




F-22


On
      or
      about June 5, 2007, we entered into an Agreement with Jacobs Oil & Gas
      Limited (“Jacobs”), pursuant to which Jacobs agreed that no interest would be
      due from us and/or accrue on the principal or accrued interest to date on his
      outstanding Promissory Note for the period of one (1) year from the date of
      the
      Agreement and that he would not try to collect the principal and/or accrued
      interest on such note for a period of one (1) year.





The
      Company also entered into a Security Agreement with Mr. Jacobs pursuant to
      which
      the Company assigned 200,000 shares of the common stock of Morgan Creek Energy
      Corp., which shares were held by the Company, to Mr. Jacobs as security for
      the
      money that is owed to Mr. Jacobs under the Jacobs' Note.





In
      March
      2007, Capersia Pte. Ltd. transferred 10,000,000 of its shares of Texhoma stock
      to Pacific Spinner Ltd.





In
      May
      2007, 4,800,000 shares of our common stock, at $0.0125, were subscribed for
      in
      consideration for $60,000.





In
      May
      2007, Valeska Energy Corp. entered into a management agreement with Texhoma
      for
      a minimum period of three months.  Mr. William Simmons is the Chief
      Executive Officer of Valeska.  In exchange for these services, Valeska
      was issued 15,200,000 shares of Texhoma’s stock as payment and
      retainer.  On June 8, 2007, a Capersia transferred 1,000,000 shares of
      Texhoma stock to Mr. William Simmons and 1,000,000 shares to Valeska Energy
      Corp.





In
      June
      2007, 18,000,000 shares of our common stock were purchased  at $0.0125
      per share by Hobart Global Ltd., a British Virgin Islands corporation in
      exchange for $225,000.





In
      July
      2007, additional shares of common stock were sold to Camecc A/S, a Norwegian
      company for $12,500 or $0.0125 per share and another 500,000 shares were issued
      to Mr. Ibrahim Nafi Onat in consideration for his entry into a Consulting
      Agreement with us.




On
      or
      about August 13, 2007, we entered into a Second Amendment to Management Services
      Agreement with Valeska Energy Corp. (“Valeska” and the “Second
      Amendment”).





Pursuant
      to the Second Amendment, we and Valeska agreed to extend the term of the
      Management Services Agreement until September 30, 2008, and to pay Valeska
      the
      following consideration in connection with agreeing to perform the services
      required by the original Management Services Agreement, and in consideration
      for
      allowing Daniel Vesco and William M. Simmons to serve as Directors of the
      Company, bringing on personnel to assist the Company with the day to day
      operations of the Company, and helping bring the Company current in its filings
      (the “Services”):






            1,000
                shares of the Company’s Series A Preferred Stock;
            A
                monthly fee of $20,000 per month during the extended term of the
                Second
                Amendment, plus reasonable and actual costs incurred by Valeska (or
                individuals or designees brought on by Valeska, including lodging,
                car
                rental and telephone expenses therewith) in connection with such
                Services;



            10,000,000
                restricted shares of the Company’s common stock; and
            60,000,000
                options to purchase shares of the Company’s common stock, which shall have
                a cashless exercise provision, shall be valid for a period of three
                years
                from their grant date, and had an exercise price of $0.02 per share
                which
                was greater than 110% of the trading price of the Company’s common stock
                on the Pinksheets on the day of such
                grant.








**14.
      GOING CONCERN ISSUES**





We
      cannot
      provide any assurances that the Company will be able to secure sufficient funds
      to satisfy the cash requirements for the next 12 months. The inability to secure
      additional funds would have a material adverse effect on the
      Company.




F-23





These
      financial statements are presented on the basis that the Company will continue
      as a going concern.   Other than the previously disclosed
      impairments, no adjustments have been made to these financial statements to
      give
      effect to valuation adjustments that may be necessary in the event the Company
      is not able to continue as a going concern.  The effect of those
      adjustments, if any, could be substantial.





The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States of America which
      contemplate continuation of the Company as a going concern.  The
      Company incurred net losses from operations of $5, 443,000 for the current
      fiscal year and has incurred $12,817,000 in cumulative
      losses.  Further, the Company has inadequate working capital to
      maintain or develop its operations, and is dependent upon funds from its
      stockholders and third party financing.





These
      factors raise substantial doubt about the ability of the Company to continue
      as
      a going concern.  The financial statements do not include any
      adjustments that might result from the outcome of these
      uncertainties.  There is no assurance that the Company will receive
      the necessary loans required to funds its exploration plans.








*
      * * * *
      * * * *










F-24





**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**




Effective
      March 30, 2004, we dismissed Braverman & Company PC as our independent
      public accountant (“Braverman”).  The report of Braverman on our
      financial statements for the fiscal years ended September 30, 2002 and 2003
      did
      not contain any adverse opinions or disclaimer of opinion, and neither of those
      opinions were modified as to uncertainty, audit scope, or accounting
      principals.  There were no disagreements between us and Braverman in
      regard to any aspects of our financial statements.  On August 4, 2004,
      the Board of Directors of the Company approved and authorized the engagement
      of
      Chisholm, Bierwolf & Nilson, as the principal independent accountant for the
      Company.




Effective
      May 26, 2006, we engaged Jewett, Schwartz & Associates, Certified Public
      Accountants ("JSA") as our principal independent public accountant for the
      fiscal years ended September 30, 2005 and September 30, 2006. The decision
      to
      engage JSA was recommended and approved by the Company's Board of Directors
      effective May 26, 2006. JSA succeeded the Company's previous independent
      auditor, Chisholm, Bierwolf & Nilson, LLC, ("CBN") who was dismissed by the
      Company's Board of Directors effective March 3, 2006 (which dismissal is
      described in greater detail in our amended report on Form 8-K filed with the
      Commission on April 13, 2006).





The
      Company had not previously consulted with JSA regarding either (i) the
      application of accounting principles to a specific completed or contemplated
      transaction; (ii) the type of audit opinion that might be rendered on the
      Company's financial statements; or (iii) a reportable event (as provided in
      Item
      304(a)(1)(iv)(B) of Regulation S-B) during the Company's fiscal years ended
      September 30, 2004 and September 30, 2003, and any later interim period,
      including the interim period up to and including the date the relationship
      with
      CBN ceased. JSA reviewed the disclosure required by Item 304 (a) before it
      was
      filed with the Commission and was been provided an opportunity to furnish the
      Company with a letter addressed to the Commission containing any new
      information, clarification of the Company's expression of its views, or the
      respects in which it does not agree with the statements made by the Company
      in
      response to Item 304 (a). JSA did not furnish a letter to the
      Commission.





Effective
      June 1, 2007, the client auditor relationship between the Company and Jewett,
      Schwartz, Wolfe & Associates, Certified Public Accountants, formerly Jewett,
      Schwartz & Associates, Certified Public Accountants ("JSWA") was terminated.
      Effective June 1, 2007, the Company engaged GLO CPAs, LLP, Certified Public
      Accountants ("GLO") as its principal independent public accountant for the
      fiscal year ended September 30, 2007, and the audit of the Company’s previously
      unaudited and unfiled September 30, 2005 and 2006 financial statements. The
      decision to change accountants was recommended and approved by the Company's
      Board of Directors on June 1, 2007.





While
      JSWA never issued a report on the financial statements of the Company, JSWA's
      review of our amended and restated financial statements for the periods ended
      March 31, 2005 and June 30, 2005, and any later interim period, up to and
      including the date the relationship with JSWA ceased, did not contain any
      adverse opinion or disclaimer of opinion and was not qualified or modified
      as to
      uncertainty, audit scope or accounting principles except for concerns about
      the
      Company's ability to continue as a going concern.





In
      connection with the review of our restated financial statements for the
      quarterly periods ended December 31, 2004, March 31, 2005 and June 30, 2005,
      and
      any later interim period, including the interim period up to and including
      the
      date the relationship with JSWA ceased, there were no disagreements between
      JSWA
      and the Company on a matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure, which disagreement, if
      not
      resolved to the satisfaction of JSWA would have caused JSWA to make reference
      to
      the subject matter of the disagreement in connection with its report on the
      Company's financial statements.




36


There
      have been no reportable events as provided in Item 304(a)(1)(iv)(B) of
      Regulation S-B during the Company's fiscal years ended September 30, 2005 and
      September 30, 2006, and any later interim period, including the interim period
      up to and including the date the relationship with JSWA ceased.





The
      Company has authorized JSWA to respond fully to any inquiries of any new
      auditors hired by the Company relating to their engagement as the Company's
      independent accountant. The Company has requested that JSWA review the
      disclosure and JSWA has been given an opportunity to furnish the Company with
      a
      letter addressed to the Commission containing any new information, clarification
      of the Company's expression of its views, or the respect in which it does not
      agree with the statements made by the Company herein. Such letter has been
      incorporated by reference as an exhibit to this Report.





The
      Company has not previously consulted with GLO regarding either (i) the
      application of accounting principles to a specific completed or contemplated
      transaction; (ii) the type of audit opinion that might be rendered on the
      Company's financial statements; or (iii) a reportable event (as provided in
      Item
      304(a)(iv)(B) of Regulation S-B) during the Company's fiscal years ended
      September 30, 2005 and September 30, 2006, and any later interim period,
      including the interim period up to and including the date the relationship
      with
      JSWA ceased. GLO has reviewed the disclosure required by Item 304 (a) before
      it
      was filed with the Commission and has been provided an opportunity to furnish
      the Company with a letter addressed to the Commission containing any new
      information, clarification of the Company's expression of its views, or the
      respects in which it does not agree with the statements made by the Company
      in
      response to Item 304 (a). GLO did not furnish a letter to the
      Commission.





**ITEM
      8A. CONTROLS AND PROCEDURES.**




(a)
      Evaluation of disclosure controls and procedures. Our Chief Executive and
      Principal Financial Officer, after evaluating the effectiveness of our
      "disclosure controls and procedures" (as defined in the Securities Exchange
      Act
      of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered
      by
      this Annual Report on Form 10-KSB (the "Evaluation Date"), have concluded that
      as of the Evaluation Date, our disclosure controls and procedures were not
      effective to provide reasonable assurance that information we are required
      to
      disclose in reports that we file or submit under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      Securities and Exchange Commission rules and forms, and that such information
      is
      accumulated and communicated to our management, including our Chief Executive
      Officer and Chief Financial Officer, as appropriate, to allow timely decisions
      regarding required disclosure. Our controls were not effective because we failed
      to complete the required audit of Black Swan in compliance with GAAP, and failed
      to file our 2005, 2006 and 2007 quarterly and annual reports.





Moving
      forward, our current management intends to allocate sufficient resources to
      bring us current in our reporting obligations with the Commission and to timely
      file our periodic and current reports with the Commission.  We believe
      that once our reports are current, we will be able to timely file all required
      reports on an ongoing basis.





(b)
      Changes in internal control over financial reporting. There were no changes
      in
      our internal control over financial reporting during the fiscal year reported
      by
      this Form 10-KSB, that materially affected, or were reasonably likely to
      materially affect, our internal control over financial reporting.




**ITEM
      8B. OTHER INFORMATION.**




None.




37





**PART
      III**




**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
      AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT.**




The
      current Directors and Officers of the Company are as
      follows:




**Name**
            **Age**
            **Position**William
                M. Simmons
            53
            President,Secretary,
                Treasurer and DirectorDaniel
                Vesco
            53
            Chief
                Executive Officer,,Chief
                Financial Officer andDirectorIbrahim
                Nafi Onat
            61
            Director
                andVice
                President of Operations





**William
      M. Simmons**


*President,
      Secretary, Treasurer and Director*





William
      M. Simmons, age 53, has served as our President since May 17, 2007, as a
      Director of the Company since June 4, 2007 and as Secretary and Treasurer of
      the
      Company since July 26, 2007.  Mr. Simmons currently serves as the
      Chief Executive Officer and President of Valeska Energy Corp., which position
      he
      has held since June 2006, and as President of Loosbrock Offshore International,
      Inc., which position he has held since April 1987, and which company is engaged
      in the offshore drilling industry as a consultant and broker. From June 2005
      until May 2006, Mr. Simmons served as Senior Editor and leader of the energy
      group for Off The Record Research, LLC, a registered investment advisor and
      broker dealer firm.





Mr.
      Simmons obtained his Bachelors degree from Texas A&M University in College
      Station, Texas in Geography in 1980.





**Daniel
      Vesco**


*Chief
      Executive Officer, Chief Financial Officer, and Director*





Daniel
      Vesco, age 53, has served as our Chief Executive Officer since May 17, 2007,
      as
      a Director since June 4, 2007 and as Chief Financial Officer since July 26,
      2007.  Mr. Vesco has been Managing Director of Asset Solutions (Hong
      Kong) Limited, a Hong Kong based boutique investment bank for the past 7 years
      and is a resident of Hong Kong. Asset Solutions is engaged in corporate
      advisory, Mergers and Acquisitions and institutional (non retail) fund raising
      activities principally focused on Asia, including China.




38





**Ibrahim
      Nafi Onat**


*Director
      and Vice President of Operations*





Mr.
      Ibrahim Nafi Onat, age 61, has served as our Director since June 21, 2007 and
      our Vice President of Operations since July 1, 2007.  Mr. Onat has
      been employed by Sure Engineering LLC as a Manager since October 1996. From
      August 1988 to October 1996, Mr. Onat was employed as a Senior Engineer with
      Resource Services International, a consulting firm. From July 1979 to May 1988,
      Mr. Onat was employed as the Vice President of Wenner Petroleum Corporation.
      Mr.
      Onat received his Bachelors degree in Petroleum Engineering in 1968 and his
      Masters Degree in Petroleum Engineering in 1970 from the Middle East Technical
      University in Turkey. He received his Ph.D. in Petroleum Engineering from the
      Colorado School of Mines in 1975. Mr. Onat is a member of the Society of
      Petroleum Engineers.





Mr.
      Simmons and Mr. Vesco are involved in business interests separate from their
      involvement with the Company, including but not limited to Valeska Energy Corp.
      As a result, it is possible that the demands on Mr. Simmons and Mr. Vesco from
      these other businesses could increase with the result that they may not have
      sufficient time to devote to our business. We do not have an employment
      agreement with Mr. Simmons or Mr. Vesco and they are under no requirement to
      spend a specified amount of time on our business. As a result, they may not
      spend sufficient time in their roles as executive officers and Directors of
      our
      company to realize our business plan. If they do not have sufficient time to
      serve our company, it could have a material adverse effect on our business
      and
      results of operations. Furthermore, Mr. Simmons and Mr. Vesco are under no
      obligation to include us in any transactions which they undertake. As a result,
      we may not benefit from connections they make and/or agreements they enter
      into
      while employed by us, and they may profit from transactions which they undertake
      while we do not.





Our
      Directors are elected annually and hold office until our next annual meeting
      of
      the shareholders and until their successors are elected and qualified. Officers
      will hold their positions at the pleasure of the Board of Directors, absent
      any
      employment agreement. Our officers and Directors may receive compensation as
      determined by us from time to time by vote of the Board of Directors. Such
      compensation might be in the form of stock options. Directors may be reimbursed
      by us for expenses incurred in attending meetings of the Board of Directors.
      Vacancies in the Board are filled by majority vote of the remaining
      directors.





Consulting
      Agreement With Mr. Onat





Effective
      July 1, 2007, we entered into a Consulting Agreement with Ibrahim Nafi Onat,
      our
      Director (the “Consulting Agreement”), pursuant to which Mr. Onat agreed to
      serve as our Director and Vice President of Operations for an initial term
      of
      twelve (12) months, which term is renewable month to month thereafter with
      the
      mutual consent of the parties.  Pursuant to the Consulting Agreement
      we agreed to pay Mr. Onat $2,500 per month during the term of the Consulting
      Agreement, to issue him 500,000 restricted shares of common stock in connection
      with his entry into the Consulting Agreement and 500,000 restricted shares
      of
      common stock assuming he is still employed under the Consulting Agreement at
      the
      expiration of six (6) months from the effective date of the Consulting Agreement
      (the “Six Month Issuance”).





Pursuant
      to the Consulting Agreement, Mr. Onat agreed to travel on our behalf through
      North America as requested by the Board of Directors for up to twenty-one (21)
      total days during the initial twelve (12) month term of the Consulting
      Agreement.  Any travel expenses incurred by Mr. Onat will be
      reimbursed by us.  Any additional travel in excess of the twenty-one
      (21) days provided for in the Consulting Agreement will be undertaken by Mr.
      Onat, assuming he is available for such travel, and such travel time and expense
      will be reimbursed by us.





The
      Consulting Agreement shall terminate:








(a)
            in
                the event Mr. Onat suffers an injury, illness, or incapacity of such
                character as to prevent him from performing his duties without reasonable
                accommodation for a period of more than sixty (60) consecutive days
                upon
                us giving at least thirty (30) days written notice of termination
                to
                him;







39


(b)
            upon
                Mr. Onat's death;





(c)
            at
                any time because of (i) the conviction of Mr. Onat of an act or acts
                constituting a felony or other crime involving moral turpitude, dishonesty
                or theft or fraud; or (ii) his negligence in the performance of his
                duties
                under the Consulting Agreement;




(d)
            Mr.
                Onat may terminate his employment for "good reason" by giving us
                ten (10)
                days written notice if: (i) he is assigned, without his express written
                consent, any duties materially inconsistent with his positions, duties,
                responsibilities, or status with us, or a change in his reporting
                responsibilities or titles; (ii) his compensation is reduced; or
                (iii) we
                do not pay any material amount of compensation due under the Consulting
                Agreement and then fails either to pay such amount within the ten
                (10) day
                notice period required for termination hereunder or to contest in
                good
                faith such notice; or





(e)
            at
                any time without cause.





In
      the
      event of the termination of Mr. Onat's employment pursuant to (a), (b) or (c)
      above, he will be entitled to all payments of salary earned through the date
      of
      termination (plus life insurance or disability benefits).





In
      the
      event of the termination of Mr. Onat's employment pursuant to (d) or (e) above,
      he will be entitled to the compensation earned by him as of the date of such
      termination plus the Six Month Issuance, even if such Six Month Issuance had
      not
      vested as of the date of the termination (plus life insurance or disability
      benefits).





Under
      the
      Consulting Agreement, we agreed to indemnify and hold harmless Mr. Onat, his
      nominees and/or assigns against any and all losses, claims, damages,
      obligations, penalties, judgments, awards, liabilities, costs, expenses and
      disbursements (incurred in any and all actions, suits, proceedings and
      investigations in respect thereof and any and all legal and other costs,
      expenses and disbursements in giving testimony or furnishing documents in
      response to a subpoena or otherwise), including without limitation, the costs,
      expenses and disbursements, as and when incurred, of investigating, preparing
      or
      defending any such action, suit, proceeding or investigation that is in any
      way
      related to his employment with us (whether or not in connection with any action
      in which he is a party). Such indemnification does not apply to acts performed
      by Mr. Onat, which are criminal in nature or a violation of law. We also agreed
      that he shall not have any liability (whether direct or indirect, in contract
      or
      tort, or otherwise) to us, for, or in connection with, the engagement of Mr.
      Onat under the Consulting Agreement, except to the extent that any such
      liability resulted primarily and directly from his gross negligence and willful
      misconduct.




40




**ITEM
      10. EXECUTIVE COMPENSATION.**




Summary
      Compensation Table





The
      Summary Compensation Table below reflects those amounts received as compensation
      by the executive officers of the Company during fiscal years ended September
      30,
      2006, 2005, and 2004.  The table above does not reflect the salaries
      of Mr. Vesco or Mr. Simmons, our current executive officers as such executive
      officers were not officers of the Company during any of the years presented
      in
      the table below. The Company presently has no pension, health, annuity,
      insurance, or similar benefit plans.





**Other(1)****Year**
            
            
            
            
            
            
            **Annual**
            
            **Total****Name
                & Principal**
            
            **Ended**
            
            
            
            
            **Restricted
                Stock**
            **Options/**
            **Compen-**
            
            **Compen-****Position**
            
            **September
                30**
            
            **Salary
                ($)**
            
            **Bonus
                ($)**
            **Awards
                ($)**
            **Warrant
                Grants**
            **sation**
            
            **sation****Max
                Maxwell**
            
            2006
            
            $109,060
            
            $25,000
            -
            (A)
            $16,040
                (B)
            
            $150,100Former
                President and Director (2)**Frank
                A. Jacobs**
            
            2006
            
            $80,000
                (C)
            
            -
            -
            (D)
            -
            
            $80,000Former
                Director/CEO/CFO (3)
            
            2005
            
            $99,000
                (C)
            
            -
            -
            -
            -
            
            $99,000**Brian
                Alexander**
            
            2006
            
            $36,000
                (E)
            
            -
            -
            -
            -
            
            $36,000Former
                President / CEO/CFO/Director (4)
            
            2005
            
            $27,000
                (E)
            
            -
            -
            (F)
            -
            
            $27,0002004
            
            -
            
            -
            -
            -
            -
            
            -**Marc
                Applbaum**
            
            2005
            
            -
            
            -
            -
            -
            -
            
            -Former
                President / CEO and Director (5)
            
            2004
            
            -
            
            -
            -
            -
            -
            
            -**Henry
                Rolling**
            
            2004
            
            1,463,166
            
            -
            -
            -
            -
            
            $1,463,166Former
                President / CEO and Director (6)




*
      Does
      not include perquisites and other personal benefits in amounts less than 10%
      of
      the total annual salary and other compensation. Other than the individual listed
      above, we had no executive employees or Directors during the years listed
      above.




(1)
      No
      Executive Officer received any bonus, or nonqualified deferred compensation
      earnings during the years disclosed above, other than as provided
      above.




41


(2)
      Mr.
      Maxwell served as a Director of the Company from April 10, 2006 to May 1,
      2007.  Mr. Maxwell served as the Company’s President from April 12,
      2006 to May 1, 2007 and as Chief Executive Officer of the Company from June
      5,
      2006 to May 1, 2007.




(3)
      Mr.
      Frank A. Jacobs was appointed as a Director of the Company on January 24, 2005,
      and served as a Director of the Company until June 14, 2007.  Mr.
      Jacobs served as Chief Executive Officer of the Company from April 12, 2006
      to
      June 5, 2006.  Mr. Jacobs also served as Chief Executive Officer from
      May 17, 2007 to June 4, 2007 and served as Chief Financial Officer from May
      17,
      2007 to June 14, 2007.




(4)
      Mr.
      Alexander served as the Company’s President from November 2, 2004 to April 12,
      2006 and as a Director of the Company from November 2, 2004 to September 27,
      2006.  He also served as our Chief Financial Officer from April 12,
      2006 to September 27, 2006.




(5)
      Served as President and Chief Executive Officer from approximately May 17,
      2004
      to November 2, 2004.




(6)
      Served as Chief Executive Officer, President and Director of the Company from
      June 30, 2001 to May 17, 2004.




(A)
      Mr.
      Maxwell was granted an aggregate of 3,250,000 Non-Qualified Stock Options and
      750,000 Incentive Stock Options on June 1, 2006.   The Options
      all had an exercise price of $0.13 per share, equal to the mean of the highest
      ($0.125) and lowest ($0.111) quoted selling prices of the Company’s common stock
      on June 1, 2006, multiplied by 110%, which was equal to $0.13 per
      share.  The options were to vest at the rate of 500,000 shares every
      three months, with the Incentive Stock Options granting first, as long as he
      was
      employed by the Company. Mr. Maxwell vested 1,500,000 Options as of May 1,
      2007,
      the date of his resignation from the Company.  The Options were to
      expire if unexercised on June 1, 2009, or three (3) months from the date of
      the
      termination of his employment with the Company, and as such all of his vested
      Options expired unexercised on August 1, 2007.  As a result, the
      Options granted to Mr. Maxwell have no value in the table above.




(B)
      Mr.
      Maxwell received consideration of $16,040 as a bonus in connection with funds
      received from subscription agreements which he was able to obtain for the
      Company.




(C)
      Approximately $90,000 of Mr. Jacobs' salary for the year ended September 30,
      2005 was accrued and remains unpaid.  Approximately $55,000 of Mr.
      Jacobs’ salary for the year ended September 30, 2006 was accrued and remains
      unpaid.




(D)
      Mr.
      Jacobs was granted an aggregate of 4,000,000 Non-Qualified Stock Options on
      June
      1, 2006.   The Options all had an exercise price of $0.13 per
      share, equal to the mean of the highest ($0.125) and lowest ($0.111) quoted
      selling prices of the Company’s common stock on June 1, 2006, multiplied by
      110%, which was equal to $0.13 per share.  The options were to vest at
      the rate of 500,000 shares every three months as long as Mr. Jacobs was employed
      by the Company, and as such Mr. Jacobs vested 2,000,000 Options prior to his
      resignation from the Company on June 14, 2007.  The Options were to
      expire if unexercised on June 1, 2009, or three (3) months from the date of
      the
      termination of his employment with the Company, and as such all of his vested
      Options expired unexercised on September 14, 2007.  The Options were
      issued above the market price of the Company’s common stock on the date of
      issuance, and are currently well above the Company’s trading price on the
      Pinksheets, and as such the issuance of such Options have been given no value
      in
      the table above.




(E)
      Approximately $13,000 of Mr. Alexander’s salary for the year ended September 30,
      2005 and approximately $12,000 of Mr. Alexander’s salary for the year ended
      September 30, 2006 was accrued, and settled in September 2005 through the
      issuance of 300,000 shares of the Company’s restricted common stock to Mr.
      Alexander in consideration for him releasing all claims he had against the
      Company, including claims for past amounts owed.




42


(F)
      Mr.
      Alexander was granted an aggregate of 1,000,000 Non-qualified Stock Options
      on
      June 1, 2006.   The Options all had an exercise price of $0.13
      per share, equal to the mean of the highest ($0.125) and lowest ($0.111) quoted
      selling prices of the Company’s common stock on June 1, 2006, multiplied by
      110%, which was equal to $0.13 per share.  The options were to vest
      upon Mr. Alexander’s execution of a Deed of Release and Settlement between Mr.
      Alexander and the Company, when he resigned from his positions with the Company,
      which he entered into on September 27, 2006.  Once vested, the options
      were to expire if unexercised on June 1, 2007, and all of the Options granted
      to
      Mr. Alexander have since expired unexercised.  The Options granted to
      Mr. Alexander have been given no value in the table above because they were
      granted above the trading price of the Company’s common stock and have expired
      unexercised.







**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.**




The
      following table provides the names and addresses of each person known to own
      directly or beneficially more than a 5% of the outstanding common stock (as
      determined in accordance with Rule 13d-3 under the Exchange Act) as of October
      24, 2007 and by our officer and director, individually and as a group. Except
      as
      otherwise indicated, all shares are owned directly.







**Common
                Stock**(1)
            
            **Percentage**
            
            **Shares
                of Common Stock the Holder of our Series A Preferred Stock is able
                to
                Vote**
            
            **Total
                Voting Percentage Including Preferred Stock Outstanding(2)****William
                M. Simmons**
            
            87,200,000
            (3)
            30.0%
            
            240,584,407
            (4)
            61.6%President
                and Director100
                Highland Park VillageDallas,
                Texas 75205**Daniel
                Vesco**
            
            -
            (5)
            0.0%
            
            -
            
            0.0%Chief
                Executive Officer and Director100
                Highland Park VillageDallas,
                Texas 75205**Ibrahim
                Nafi Onat**
            
            500,000
            
            0.2%
            
            -
            
            0.1%Director100
                Highland Park VillageDallas,
                Texas 75205**Valeska
                Energy Corp.**(6)
            
            86,200,000
            
            29.6%
            
            240,584,407
            (7)
            61.5%1000
                Guadalupe Street #3AKerrville,
                Texas 78028





**Capersia
                Pte. Ltd.**   (8)
            
            30,000,000
            
            13.0%
            
            -
            
            6.4%96A
                Club StreetSingapore
                069464





43


**Structured
                Capital Corporation**   (9)
            
            19,350,000
            
            8.4%
            
            -
            
            4.1%c/o
                Gordon Rees L.L.P.1900
                West Loop, Suite 1100Houston,
                Texas 77027**Lucayan
                Oil and Gas Investments, Ltd.**   (10)
            
            18,500,000
            
            8.0%
            
            -
            
            3.9%**Hobart
                Global Ltd.**   (11)
            
            18,000,000
            
            7.8%
            
            -
            
            3.8%116
                Main Street, B.V.I.**Polaris
                Holdings, Inc.**   (12)
            
            12,000,000
            
            5.2%
            
            -
            
            2.5%2411
                Fountainview Dr. #120Houston,
                Texas 77057**All
                of the Officers and Directors as a Group (3
                persons)**
            
            **87,700,000**
            (3)(5)
            **30.1%**
            
            **240,584,407**
            (4)
            **55.5%**








(1)
      The
      number of shares of common stock owned are those "beneficially owned" as
      determined under the rules of the Commission, including any shares of common
      stock as to which a person has sole or shared voting or investment power and
      any
      shares of common stock which the person has the right to acquire within sixty
      (60) days through the exercise of any option, warrant or right.




(2)
      Based
      on 497,934,131 total voting shares, including 23,1149,724 shares of common
      stock
      outstanding as of October 24, 2007 and one thousand (1,000) shares of Series
      A
      Preferred Stock outstanding, which is able to vote in aggregate, voting as
      a
      group, an amount of voting shares equal to 51% of our total voting
      shares.





(3)
      Includes 1,000,000 shares which Mr. Simmons owns directly, 26,200,000 shares
      of
      common stock, and 60,000,000 warrants to purchase shares of our common stock
      at
      an exercise price of $0.02 per share, which Mr. Simmons is deemed to
      beneficially own through Valeska Energy Corp. (“Valeska”), of which he serves as
      the President.




(4)
      Includes one thousand (1,000) shares of Series A Preferred Stock which are
      held
      by Valeska, and which Mr. Simmons is deemed to beneficially own, and which
      voting in aggregate are able to vote an amount of voting shares equal to 51%
      of
      our outstanding voting stock.




44




(5)
      Daniel Vesco, the Company’s Chief Executive Officer owns a majority of the
      outstanding shares of common stock of Valeska though an entity which he
      controls, and is a Director of Valeska; however, Mr. Vesco does not have voting
      and/or dispositive control over the shares of common stock held by
      Valeska.




(6)
      William M. Simmons, the President and a Director of the Company, is the
      President of Valeska and is deemed to beneficially own the shares of common
      and
      preferred stock held by Valeska.  Valeska holds 26,200,000 shares of
      common stock, 60,000,000 warrants to purchase shares of our common stock at
      an
      exercise price of $0.02 per share, and one thousand (1,000) shares of Series
      A
      Preferred Stock which voting in aggregate are able to vote an amount of voting
      shares equal to 51% of our outstanding voting stock




(7)
      Includes one thousand (1,000) shares of Series A Preferred Stock which are
      held
      by Valeska, which voting in aggregate are able to vote an amount of voting
      shares equal to 51% of our outstanding voting stock.





(8)
      The
      beneficial owner of Capersia Pte. Ltd. is Sino Atlantic Limited (“Atlantic”) and
      the Director of Capersia Pte. Ltd. is Richard N. Wilson.




(9)
      The
      beneficial owner of Structured Capital Corporation is
      Jostein  Hauge.




(10)
      The
      beneficial owners of Lucayan Oil and Gas, Ltd. (“LOGI”) are the Company's former
      President and Director, Max Maxwell, who is a 50% owner and Director of LOGI
      and
      A.E. "Buzz" Jehle,  who is a 50% owner and Director of
      LOGI.




(11)
      The
      beneficial owner of Hobart Global Ltd. is AIBWorthytrust Limited as Trustees
      of
      the Tyser 1998 Discretionary Settlement.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




The
      following “Certain Relationships and Related Transactions” represent material
      transactions in which any related person had or will have a direct or indirect
      material interest, which are known to the Company’s current management
      team.  There may however be various other material transactions
      regarding the Company which the Company’s current management is not aware
      of.





Changes
      in Officers





On
      May
      17, 2004, Henry Rolling resigned as Chief Executive Officer, President and
      Director of the Company.





On
      May
      17, 2004, Marc Applbaum was appointed as President, Chief Executive Officer
      and
      Director of the Company.





On
      November 2, 2004, Marc Applbaum resigned as President, Chief Executive Officer,
      and Director.





On
      November 2, 2004, Brian Alexander was appointed as President and Director of
      the
      Company.





On
      January 21, 2005, Mr. Peter G. Wilson tendered his resignation as a Director
      of
      the Company.





On
      January 24, 2005, Frank A. Jacobs was appointed as a Director of the
      Company.





45


On
      April
      10, 2006, Max Maxwell was appointed as a Director of the Company.





On
      April
      12, 2006, Frank A. Jacobs was appointed as Chief Executive Officer of the
      Company.





On
      April
      12, 2006, Brian Alexander resigned as President of the Company and was appointed
      as Chief Financial Officer of the Company.





On
      April
      12, 1006, Max Maxwell was appointed as President of the Company.





On
      June
      5, 2006, Frank A. Jacobs resigned as Chief Executive Officer of the
      Company.





On
      June
      5, 2006, Mr. Maxwell was appointed as Chief Executive Officer of the
      Company.





On
      September 27, 2006 Brian Alexander resigned as Chief Financial Officer of the
      Company.





On
      May 1,
      2007, Max Maxwell resigned as a Director, President and Chief Executive Officer
      of the Company.





On
      May
      17, 2007, Frank A. Jacobs was appointed as Chief Executive Officer and Chief
      Financial Officer of the Company.





On
      June
      4, 2007, Frank A. Jacobs resigned as Chief Executive Officer of the
      Company.





On
      June
      4, 2007, Daniel Vesco was appointed as Chief Executive Officer and as a Director
      of the Company.





On
      June
      4, 2007, William M. Simmons was appointed as President and as a Director of
      the
      Company.





On
      June
      14, 2007, Frank A. Jacobs resigned as a Director and as Chief Financial Officer
      of the Company.





On
      June
      21, 2007 Ibrahim Nafi Onat was appointed as a Director of the
      Company.





On
      July
      26, 2007, William M. Simmons was appointed as Secretary and Treasurer of the
      Company.





On
      July
      26, 2007, Mr. Vesco was appointed as our Chief Financial Officer.





Mr.
      Simmons and Mr. Vesco are involved in business interests separate from their
      involvement with the Company, including but not limited to Valeska Energy Corp.,
      which we have entered into a Management Services Agreement with as otherwise
      described herein. As a result, it is possible that the demands on Mr. Simmons
      and Mr. Vesco from these other businesses could increase with the result that
      they may not have sufficient time to devote to our business. We do not have
      an
      employment agreement with Mr. Simmons or Mr. Vesco and they are under no
      requirement to spend a specified amount of time on our business. As a result,
      they may not spend sufficient time in their roles as executive officers and
      Directors of our company to realize our business plan. If they do not have
      sufficient time to serve our company, it could have a material adverse effect
      on
      our business and results of operations. Furthermore, Mr. Simmons and Mr. Vesco
      are under no obligation to include us in any transactions which they undertake.
      As a result, we may not benefit from connections they make and/or agreements
      they enter into while employed by us, and they may profit from transactions
      which they undertake while we do not.




46








**OTHER
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




During
      the three months ended December 31, 2004, $161,700 of debt was settled by the
      issuance of 6,336,256 post split shares of common
      stock.





On
      October 5, 2004, the Company issued 7,600,000 shares in settlement of $38,000
      in
      debt with a consultant of the Company. Charges of approximately $542,800 were
      recorded in the statement of operations as services for the three-month period
      ended December 31, 2004.





On
      October 27, 2004, the Company entered into a Share Sale and Purchase Agreement
      (the "Agreement") to acquire a 40% shareholding in the capital of Black Swan
      Petroleum Pty. Ltd. ("BSP"), which held a 100% interest in Block B7/38, a
      Petroleum Exploration Concession (the "Petroleum Concession") in offshore
      Thailand. In connection with the Agreement, the Company agreed to issue
      56,000,000 shares of common stock and to pay $150,000 to Capersia Pte. Ltd.
      ("Capersia"). At the time of the Company's entry into the Agreement, Capersia
      was 50% owned by our former Chief Executive Officer and Director, Frank A.
      Jacobs', brother Peter Jacobs, and 50% owned by Mr. Jacobs' wife, Anna
      Jacobs.





On
      December 7, 2004, the Company borrowed $50,000 from a related party, MFS
      Technology.  The loan is evidenced by a convertible promissory
      note.  The loan bears interest at 5% per annum calculated 6 months
      after the advancement of funds.  $25,000 was due on June 7, 2005 and
      the remaining balance, plus interest was due on December 7, 2005.  The
      loan has not been repaid, extended or converted. The lender has the option
      during the term of the loan, and any extension, to convert the principle and
      interest into shares of common stock at a conversion price of $0.30 per
      share.





On
      or
      about December 10, 2005, the Company entered into a participation agreement
      with
      the "Clovelly Joint Venture," of which ORX, whom our former President and
      Director, Max Maxwell used to serve as Vice President and served as a Director
      of at the time of the parties entry into the agreement, is the Operator. The
      Company agreed to a 6%-participation in the drilling of the Allain Lebreton
      #2
      well on a prospect close to the existing Clovelly oil and gas field in
      Louisiana. On February 14, 2006, the Company announced it had increased its
      working interest to 11% through the purchase of a further 5% working interest
      in
      this prospect.





On
      January 20, 2006, we divested our shareholding in Black Swan Petroleum Pty.
      Ltd.
      and Black Swan Petroleum (Thailand) Limited by transferring such shares to
      Pacific Spinner Limited. Pacific Spinner had, pursuant to a Letter Agreement,
      agreed to use its best efforts to further sell such shares and to pay us 20%
      (twenty percent) of any proceeds received from such sale. However, the Company
      has learned that Black Swan has deregistered itself as an active company in
      Australia whilst Black Swan Thai has gone into voluntary receivership with
      little chance of the Company receiving any further benefit from the
      divestment.





In
      January 2006, Texhoma agreed to participate in a 25% working interest in the
      exploration of the Bayou Choctaw oil and gas project, located in Iberville
      Parish, Louisiana.  Texhoma identified that the exposure was in excess
      of its corporate guidelines and assigned its right to the interest to Morgan
      Creek Energy Corp. in exchange for $250,000 and 200,000 shares of Morgan Creek
      Energy.





In
      March
      2006, our Executive Chairman and Director, Frank Jacobs subscribed for 7,500,000
      shares of our common stock at $0.04 per share, for aggregate consideration
      of
      $300,000, which funds were immediately used by us in connection with the Closing
      of the Kilrush Property (described above).





On
      April
      10, 2006, Texhoma Energy, Inc. (the "Company") entered into a Debt Conversion
      Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation,
      formerly Devon Energy Thai Holdings, Ltd. ("LOGI"). The Company owed $895,000
      to
      LOGI as of the date of the Debt Conversion Agreement in connection with money
      received by the Company for the drilling in Thailand in March 2005, which debt
      was transferred by Fidelio Business, S.A. and Quick Assets and Cash Corp. (Bank
      Sal Oppenheim) to LOGI in November 2005. Pursuant to the Debt Conversion
      Agreement, the Company and LOGI
      agreed to convert $160,000 of the $895,000 which LOGI was owed into an aggregate
      of 4,000,000 shares (or one (1) share for each $0.04 of debt converted) of
      newly
      issued shares of the Company's restricted common stock. As of the date of this
      filing, the Company still owes LOGI $735,000. The Director and 50% owner of
      LOGI
      is Max Maxwell, who became a Director of the Company on April 10, 2006,
      President of the Company on April 12, 2006, and Chief Executive Officer of
      the
      Company on June 5, 2006, and resigned as President, Chief Executive Officer
      and
      Director on May 1, 2007.




47





On
      April
      10, 2006, the Company entered into a convertible note with LOGI evidencing
      the
      $735,000 of debt which remains outstanding. The convertible note provides that
      LOGI may convert the $735,000 debt into Company common stock at the rate of
      one
      share of common stock for each $0.04 of outstanding debt.





On
      May
      15, 2006, Lucayan Oil and Gas Investments, Ltd. ("LOGI") provided the Company
      notice of its desire to convert its $735,000 Promissory Note into 18,375,000
      shares of the Company's common stock. The Company's Board of Directors approved
      such issuance on May 18, 2006.





On
      June
      1, 2006, the Company's Board of Directors approved the grant of an aggregate
      of
      10,000,000 options to the Company's then officers, Directors and employees,
      pursuant to the Company's 2006 Stock Incentive Plan (the "Plan"). All of the
      options were granted at an exercise price of $0.13 per share, which was equal
      to
      the average of the highest ($0.125) and lowest ($0.111) quoted selling prices
      of
      the Company's common stock on June 1, 2006, multiplied by 110%. The options
      were
      granted to the following individuals in the following amounts:





o
            Max
                Maxwell, our former president and Director was granted 750,000 qualified
                options and 3,250,000 non-qualified options (for 4,000,000 total
                options),
                which options were to vest at the rate of 500,000 options every three
                months, with the qualified options to vest first, in consideration
                for
                services to be rendered to the Company as the Company's president
                and
                Director. The options were to expire if unexercised on June 1, 2009,
                or at
                the expiration of three months from the date of the termination of
                his
                employment with the Company.  All of Mr. Maxwell’s options have
                since expired unexercised;




o
            Frank
                Jacobs, our former Director was granted 4,000,000 non-qualified options,
                which options were to vest at the rate of 500,000 options every three
                months, in consideration for services to be rendered to the Company
                as the
                Company's Director. The options were to expire if unexercised on
                June 1,
                2009, or at the expiration of three months from the date of the
                termination of his employment with the Company.  Mr. Jacobs
                resigned from the Company effective June 14, 2007, and as such all
                2,000,000 of his vested options expired unexercised on September
                14,
                2007;





o
            Brian
                Alexander, our former Chief Financial Officer and Director was granted
                1,000,000 non-qualified options, which options vested upon Mr. Alexander's
                execution of a deed of release and settlement between Mr. Alexander
                and
                the Company in connection with his resignation from his positions
                as the
                Company's Chief Financial Officer and Director. The options expired
                unexercised on July 1, 2007; and





o
            Mr.
                Terje Reiersen then working as a consultant to the Company was granted
                1,000,000 non-qualified options, which options were to vest at the
                rate of
                250,000 options every three months, in consideration for consulting
                services to be rendered to the Company in connection with corporate
                advice
                in relation to a secondary listing amongst other things. The options
                were
                to expire if unexercised on June 1, 2009, or at the expiration of
                three
                months from the date of the termination of his employment with the
                Company.  All of Mr. Reiersen’s options have since expired
                unexercised.





Additionally,
      on June 1, 2006, the Board of Directors approved the issuance of 2,000,000
      options to another consultant to the Company in consideration for investor
      relations services rendered to the Company. The options granted to the
      consultant were not granted pursuant to the Plan. The options have an exercise
      price of $0.13 per share, vest at a rate of 250,000 options every three months
      and expire if unexercised on June 1, 2009.





Our
      former Director, Mr. Brian Alexander decided not to seek re-election as a
      director of the Company due to other business and work commitments at the annual
      shareholders meeting which was held on September 19, 2006. In connection with
      monies we owed Mr. Alexander in directors and consulting fees, we and Mr.
      Alexander agreed that we would issue 300,000 shares of our restricted common
      stock to Mr. Alexander in lieu of the amounts owed to him in such fees. In
      connection with the issuance of the shares and Mr. Alexander's departure, the
      parties entered into a Mutual Release letter agreement (the "Mutual Release")
      on
      September 27, 2006. Pursuant to the Mutual Release, Mr. Alexander agreed to
      release and forever discharge us, our officers and Directors and we agreed
      to
      release Mr. Alexander from all actions, claims, demands and costs, which either
      party may have had or my have at any time in the future in connection with
      Mr.
      Alexander's employment with us. Additionally, pursuant to the terms of Mr.
      Alexander's 1,000,000 non-qualified options granted to him in consideration
      for
      services rendered for his services as the Company's Financial Officer on June
      1,
      2006, which options were to purchase shares at $0.13 per share, all of the
      options were immediately vested to Mr. Alexander upon his entry into the Mutual
      Release and such options later expired unexercised on June 1, 2007.





On
      or
      about October 19, 2006, we issued a Promissory Note to Mr. Frank Jacobs, our
      then Director of the Company, in the amount of $493,643.77, which amount
      represented funds advanced to the Company by Mr. Jacobs during the 2006 calendar
      year and management fees owed to Mr. Jacobs for his services to the Company
      during the 2006 calendar year (the “Jacobs' Note”). The Jacobs' Note bears
      interest at the rate of 6% per annum until paid, and is payable by the Company
      at any time on demand. The Jacobs' Note may be pre-paid at any time without
      penalty. Any amounts not paid on the Jacobs' Note when due shall bear interest
      at the rate of 15% per annum.





**Subsequent
      Events**





On
      or
      about June 5, 2007, we entered into an Agreement with Jacobs Oil & Gas
      Limited (“Jacobs”), pursuant to which Jacobs agreed that no interest would be
      due from us and/or accrue on the principal or accrued interest to date on his
      outstanding Promissory Note for the period of one (1) year from the date of
      the
      Agreement and that he would not try to collect the principal and/or accrued
      interest on such note for a period of one (1) year.





The
      Company also entered into a
      Security Agreement with Mr. Jacobs under which Agreement the Board of Directors
      ratified the assignment of 200,000 shares of the common stock of Morgan Creek
      Energy Corp., which shares were held by the Company, to Mr. Jacobs as security
      for the money that is owed to Mr. Jacobs under the Jacobs'
      Note.





On
      or
      about May 15, 2007, we entered into a Management Services Agreement with Valeska
      Energy Corp. (“Valeska”), whose Chief Executive Officer is William M. Simmons,
      who became an officer and Director of us on or about June 4, 2007, as described
      below, which was subsequently amended on or about June 1, 2007 (collectively
      the
“Management Agreement”).





Pursuant
      to the Management Agreement, we agreed to enter into a Joint Venture agreement
      with Valeska (the “Joint Venture”), described below; Valeska agreed to provide
      us management services and act as a Management Consultant to us, for a monthly
      fee of $10,000 (plus expenses), or 15% of any revenue we generate, whichever
      is
      greater (excluded from this definition however are asset sales and/or income
      of
      a capital nature, and included in the definition are 20% of the revenues we
      receive from our Joint Venture with Laurus Master Fund, Ltd.); and we also
      agreed to issue Valeska 15,200,000 restricted shares of our common stock. We
      also agreed pursuant to the Management Agreement, as amended, that we would
      issue Valeska
      an additional 18,200,000 shares of our common stock upon such time as we are
      able to bring our public reporting requirements current with the Commission
      and
      seek reinstatement on the Over-The-Counter Bulletin Board. The Management
      Agreement has a minimum term of three months, beginning on May 1, 2007. The
      Management Services Agreement was later amended and extended by the parties’
entry into the Second Amendment to Management Services Agreement with Valeska
      Energy Corp. in August, 2007, as described below.




48





Joint
      Venture Agreement





On
      or
      about May 15, 2007, we entered into a Joint Venture Relationship Agreement
      with
      Valeska (the “Joint Venture Agreement”), pursuant to which we and Valeska agreed
      to form a new Texas limited partnership (the “Joint Venture”), of which Valeska
      will serve as general partner. The Joint Venture Agreement contemplates that
      Valeska will cause funds to be invested, arrange financial and strategic
      partnerships, and that both parties would bring investment opportunities to
      the
      Joint Venture. Pursuant to the Joint Venture Agreement, Valeska has
      co-investment rights in the Joint Venture. Any distributions from the Joint
      Venture will be paid first to Valeska and the Company, in an amount equal to
      8%
      to Valeska and 2% to the Company, subject to investor approval; then to any
      investors as negotiated therewith; and finally Valeska and the Company will
      share any remaining distributions, with Valeska receiving 80% of such
      distributions and the Company receiving 20% of such distributions.





The
      Joint
      Venture Agreement also provides that Valeska has the right to require us to
      purchase its interest in the Joint Venture at any time, in exchange for shares
      of our common stock. In the event that Valeska exercises this right, the
      valuation of the Joint Venture will be valued in a negotiated manner or at
      30%
      greater than the gross acquisition cost of any property acquired by the Joint
      Venture, and the number of shares exchangeable for such interest will be equal
      to the market price of our shares of common stock on the date that such right
      is
      exercised by Valeska.





Additionally,
      we have the right, pursuant to the Joint Venture Agreement, to veto any deal
      which Valeska proposes to include in the Joint Venture.





Voting
      Agreement





On
      or about June 5, 2007, certain of
      our largest shareholders, including Capersia Pte. Ltd.; Frank A. Jacobs, our
      former officer and Director; and Valeska Energy, Inc., which is controlled
      by
      William M. Simmons, the President and Director of the Company, and is majority
      owned by Daniel Vesco, the Company’s Chief Executive Officer and a Director of
      the Company, through an entity which he controls (“Valeska” and collectively the
“Shareholders”) entered into a Voting Agreement (the “Voting
      Agreement”).  Pursuant to the terms of the Voting Agreement the
      Shareholders agreed that for the Term of the Voting Agreement, as defined below,
      no Shareholder would vote any of the shares of common stock (the “Shares”) which
      they hold for (i.e. in favor of) the removal of William M. Simmons or Daniel
      Vesco, our Directors (the “New Directors”).  The Shareholders also
      agreed that in the event of any shareholder vote of the Company (either by
      Board
      Meeting, a Consent to Action with Meeting, or otherwise) relating to the removal
      of the New Directors; the re-election of the New Directors; and/or the increase
      in the number of directors of the Company during the Term of the Voting
      Agreement, that such Shareholders would vote their Shares against the removal
      of
      the New Directors; for the re-election of such New Directors; and/or vote
      against the increase in the number of directors of the Company, without the
      unanimous consent of the New Directors, respectively.





The
      Voting Agreement further provided that in the event that either of the New
      Directors breaches his fiduciary duty to the Company, including, but not limited
      to such Director’s conviction of an act or acts constituting a felony or other
      crime involving moral turpitude, dishonesty, theft or fraud; such Director’s
      gross negligence in connection with his service to the Company as a Director
      and/or in any executive capacity which he may hold; and/or if any Shareholder
      becomes aware of information which would lead a reasonable person to believe
      that such Director has committed fraud or theft from the Company, or a violation
      of the Securities laws, the Voting Agreement shall not apply, and the
      Shareholders may vote their Shares as they see fit.




49





The
      Term
      of the Voting Agreement is until June 5, 2009 (the “Term”).  The
      Shareholders agreed to enter into the Voting Agreement in consideration for
      the
      New Directors agreeing to serve the Company as Directors of the
      Company.





On
      or
      about July 12, 2007, another one of our significant shareholders, Lucayan Oil
      and Gas Investments, Ltd. (“LOGI”), which is 50% owned by Max Maxwell, our
      former President and Director, entered into a Voting Agreement with us, which
      was amended by a First Amendment to Voting Agreement, which provided that the
      shares of common stock held by LOGI would be subject to the identical terms
      of
      our June 5, 2007 Voting Agreement with the Shareholders.





Cooperation
      Agreement and Mutual Release





On
      or
      about July 12, 2007, LOGI; Mr. Maxwell; Meredith Maxwell, Mr. Maxwell’s daughter
      and our former employee; and A.E. Buzz Jehle, our former consultant
      (collectively the “Former Interested Parties”) entered into a Cooperation
      Agreement and Mutual Release (the “Release”) with us and Texaurus Energy, Inc.
      (“Texaurus”), our wholly owned Delaware subsidiary (for the purposes of the
      description of the Release, all references to “we,” “us,” the “Company” or
      similar words include Texaurus).  In connection with the Release, we
      and the Former Interested Parties agreed to release each other (including
      employees, officers, directors, representatives, employees and assigns) from
      any
      and all claims, rights, causes of action and obligations which were known or
      unknown at the time of the entry into the Release, subject only to the
      Assignment by the Former Interested Parties of their rights, causes of actions
      or demands against any former officers or Directors of us to the Company and
      the
      New Directors (the “Assignment”) and the Extension.  The release we
      provided to the Former Interested Parties was against any and all claims,
      rights, causes of action and obligations which were known at the time of the
      entry into the Release, or which are not brought to the attention of the New
      Directors or the Company by 5:00 P.M. Central Standard Time, on September 30,
      2007 (the “Extension”).




Additionally,
      in connection with the Release, Mr. Maxwell personally agreed, to the best
      of
      his ability, to cooperate with us in connection with an audit of us and
      Texaurus; to provide a list of the known liabilities of the Company which Mr.
      Maxwell was aware of; and to personally certify the accuracy and completeness
      any financial statements which the Company prepares covering the time period
      during which Mr. Maxwell was President of the Company, in a form similar to
      the
      Certification Of Chief Executive Officer and Chief Financial Officer Pursuant
      To
      Section 302 of The Sarbanes-Oxley Act Of 2002 and Certification of Chief
      Executive Officer; and (ii) Certification of Chief Financial Officer Pursuant
      To
      18 U.S.C. Section 1350, as Adopted Pursuant To Section 906 Of The Sarbanes-Oxley
      Act Of 2002, which reporting companies are required to file as attachments
      to
      each periodic filing with the Commission.





Mr.
      Maxwell also agreed pursuant to the terms of the Release that any options which
      he vested pursuant to the June 2006 options which he was granted by us would
      expire if unexercised on August 1, 2007; and that we owe him no rights to
      contribution or indemnification in connection with his service to the Company.
      Mr. Maxwell also certified that the shares of common stock granted to LOGI
      were
      issued for valid consideration and fully paid and non-assessable (the
“Certification”).  Additionally, pursuant to the terms of the Release,
      we agreed to indemnify Mr. Maxwell and Mr. Jehle against any dispute regarding
      the shares issued to LOGI, provided that such Certification is valid and
      correct.





Consulting
      Agreement





Effective
      July 1, 2007, we entered into a Consulting Agreement with Ibrahim Nafi Onat,
      our
      Director (the “Consulting Agreement”), pursuant to which Mr. Onat agreed to
      serve as our Director and Vice President of Operations for an initial term
      of
      twelve (12) months, which term is renewable month to month thereafter with
      the
      mutual consent of the parties.  Pursuant to the Consulting Agreement
      we agreed to pay Mr. Onat $2,500
      per month during the term of the Consulting Agreement, to issue him 500,000
      restricted shares of common stock in connection with his entry into the
      Consulting Agreement and 500,000 restricted shares of common stock assuming
      he
      is still employed under the Consulting Agreement at the expiration of six (6)
      months from the effective date of the Consulting Agreement (the “Six Month
      Issuance”).  The Consulting Agreement is described in greater detail
      above.




50





On
      or
      about August 13, 2007, we entered into a Second Amendment to Management Services
      Agreement with Valeska Energy Corp. (“Valeska” and the “Second
      Amendment”).





Pursuant
      to the Second Amendment, we and Valeska agreed to extend the term of the
      Management Services Agreement until September 30, 2008, and to pay Valeska
      the
      following consideration in connection with agreeing to perform the services
      required by the original Management Services Agreement, and in consideration
      for
      allowing Daniel Vesco and William M. Simmons to serve as Directors of the
      Company, bringing on personnel to assist the Company with the day to day
      operations of the Company, and helping bring the Company current in its filings
      (the “Services”):





·
            1,000
                shares of the Company’s Series A Preferred Stock;·
            A
                monthly fee of $20,000 per month during the extended term of the
                Second
                Amendment, plus reasonable and actual costs incurred by Valeska (or
                individuals or designees brought on by Valeska, including lodging,
                car
                rental and telephone expenses therewith) in connection with such
                Services;


·
            10,000,000
                restricted shares of the Company’s common stock; and·
            60,000,000
                options to purchase shares of the Company’s common stock, which have a
                cashless exercise provision, are valid for a period of three years
                from
                their grant date, and have an exercise price of greater than 110%
                of the
                trading price of the Company’s common stock on the Pinksheets on the day
                of such grant, equal to $0.02 per
                share.







**ITEM
      13. EXHIBITS**




**A)           THE
      EXHIBITS LISTED BELOW ARE FILED AS PART OF THIS ANNUAL
      REPORT.**






**Exhibit
                Number**
            **Description
                of Exhibit**3.1(t)
            Certificate
                of Amendment to Articles of Incorporation increasing the authorized
                shares
                of common stock to 300,000,000 shares3.2(13)
            Series
                A Preferred Stock Designation10.1(1)
            Sale
                and Purchase Agreement, dated as of January 20, 2006, by and between
                Sterling Grant Capital Inc. and Texhoma Energy, Inc.10.2(1)
            Letter
                Agreement, dated as of December 31, 2005 by and between Pacific Spinner
                Limited and Texhoma Energy, Inc.10.3(2)
            Sales
                and Purchase Agreement with Structured Capital Corp.10.4(2)
            Sales
                & Purchase Agreement with Kilrush Petroleum10.5(2)
            Securities
                Purchase Agreement








51


10.6(2)
            Secured
                Term Note10.7(2)
            Warrant
                Agreement (Texaurus)10.8(2)
            Warrant
                Agreement (Texhoma)10.9(2)
            Registration
                Rights Agreement10.10(2)
            Stock
                Pledge Agreement10.11(2)
            Side
                Letter Agreement10.12(2)
            Guaranty
                of Texaurus10.13(2)
            Personal
                Guaranty of Frank Jacobs10.14(2)
            Warrant
                with Energy Capital Solutions, LLC10.15(2)
            Frank
                Jacobs Subscription Agreement10.16(5)
            Sales
                and Purchase Agreement with Structured Capital Corp.10.17(6)
            First
                Amendment to Sales and Purchase Agreement10.18(6)
            Mortgage,
                Security Agreement, Finance Statement and Assignment of
                Production10.19(6)
            Collateral
                Assignment10.16(7)
            Debt
                Conversion Agreement with Lucayan Oil and Gas Investments,
                Ltd.10.17(7)
            Note
                with Lucayan Oil and Gas Investments, Ltd.10.18(8)
            Promissory
                Note to Frank Jacobs10.19(8)
            Security
                Agreement with Frank Jacobs10.20(10)
            Letter
                Agreement with Matrixx Resource Holdings Inc. regarding the sale
                of the
                Clovelly Prospect10.21(11)
            Agreement
                Regarding Frank A. Jacobs’ Note10.22(11)
            Joint
                Venture Relationship Agreement10.23(11)
            Management
                Services Agreement with Valeska and Amendment thereto10.24(12)
            Jacobs
                Oil & Gas Limited Promissory Note10.25(13)
            Voting
                Agreement10.26(13)
            Voting
                Agreement with LOGI





52


10.27(13)
            First
                Amendment to Voting Agreement with LOGI10.28(13)
            Cooperation
                Agreement and Mutual Release





10.28(13)
            Consulting
                Agreement with Ibrahim Nafi Onat10.29(14)
            Promissory
                Note and Security Agreement with Polaris10.30(16)
            Second
                Amendment to Management Services Agreement10.31(17)
            Option
                Agreement10.32*
            Cooperation
                Agreement and Mutual Release with Terje Reiersen10.33*
            First
                Amendment to Securities Purchase Agreement, Secured Term Note and
                Registration Rights Agreement with Laurus16.1(15)
            Letter
                from Braverman & Company, PC16.2(3)
            Letter
                from Chisholm, Bierwolf & Nilson, LLC16.3(4)
            Letter
                from Chisholm, Bierwolf & Nilson, LLC16.4(9)
            Letter
                from Jewett, Schwartz, Wolfe & Associates21.1*
            Subsidiaries31.1*
            Certificate
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200232.1*
            Certificate
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002





*
      Filed
      herewith.





(t)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on September
                22,
                2006, and incorporated herein by
                reference.





(1)
            Filed
                as exhibits to the Company’s Form 8-K filed with the Commission on
                February 14, 2006, and incorporated herein by
                reference.





(2)
            Filed
                as exhibits to the Company’s Form 8-K filed with the Commission on April
                4, 2006, and incorporated herein by
                reference.





(3)
            Filed
                as an exhibit to our Form 8-K filing, filed with the Commission on
                April
                5, 2006, and incorporated herein by
                reference.





(4)
            Filed
                as an exhibit to our Form 8-K filed with the Commission on April
                13, 2006,
                and incorporated herein by
                reference.




(5)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on April
                4, 2006,
                and incorporated herein by
                reference.





53


(6)
            Filed
                as exhibits to our Form 8-K, filed with the Commission on April 26,
                2006,
                and incorporated herein by
                reference.





(7)
            Filed
                as exhibits to our Form 8-K, filed with the Commission on May 24,
                2006,
                and incorporated herein by
                reference.





(8)
            Filed
                as exhibits to our Form 8-K, filed with the Commission on February
                13,
                2007, and incorporated herein by
                reference.





(9)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on June
                21, 2007,
                and incorporated herein by
                reference.





(10)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on May 25,
                2007,
                and incorporated herein by
                reference.





(11)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on June
                8, 2007,
                and incorporated herein by
                reference.





(12)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on October
                20,
                2006, and incorporated herein by
                reference.





(13)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on July
                30, 2007,
                and incorporated herein by
                reference.





(14)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on June
                13, 2007,
                and incorporated herein by
                reference.





(15)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on May 17,
                2004,
                and incorporated herein by
                reference.





(16)
            Filed
                as an exhibit to our Form 10-KSB, filed with the Commission on August
                21,
                2007, and incorporated herein by
                reference.





(17)
            Filed
                as an exhibit to our Form 10-QSB, filed with the Commission on September
                11, 2007, and incorporated herein by
                reference.








b)     REPORTS
      ON FORM 8-K





We
      filed
      a report on Form 8-K on July 13, 2006, to report our closure of certain of
      the
      previously reported participation agreements with Sunray Operating Company
      LLC.





We
      filed
      a report on Form 8-K/A on September 21, 2006, to include updated financial
      statements for our acquisition of Black Swan, and updated disclosure in
      connection therewith.





We
      filed
      a report on Form 8-K on September 22, 2006, to report the departure of Brian
      Alexander as a Director of the Company, the results of a shareholder meeting
      which occurred on September 20, 2006, and our filing of an amendment to our
      Articles of Incorporation to increase our authorized shares.




54




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND
      SERVICES.**




**AUDIT
      FEES**




During
      fiscal year ended September 30, 2006, the Company incurred approximately $69,736
      in fees to its principal independent accountants for professional services
      rendered in connection with preparation and audit of the Company's financial
      statements for fiscal year ended September 30, 2006 and for the review of the
      Company's unaudited quarterly financial statements as filed in the Company’s
      reports on Form 10-QSB for the year ended September 30, 2006.




During
      the fiscal year ended September 30, 2005, the Company incurred approximately
      $75,000 in fees to its principal independent accountant for professional
      services rendered in connection with preparation and audit of the Company's
      financial statements for fiscal year ended September 30, 2005 and for the review
      of the Company's unaudited quarterly financial statements as filed in the
      Company’s reports on Form 10-QSB for the year ended September 30,
      2005.




**AUDIT
      RELATED FEES**




None.




**TAX
      FEES**




None.




**ALL
      OTHER FEES**




None.




55






**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**TEXHOMA ENERGY, INC.**




*/s/
      Daniel Vesco*


Daniel
      Vesco


Chief
      Executive Officer


(Principal
      Executive Officer)


Date:
      November 9, 2007




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.







**SIGNATURE**
            **TITLE**
            **DATE***/s/
                Daniel Vesco***Daniel
                Vesco**
            **Chief
                Executive Officer**
            **November
                9, 2007****Chief
                Financial Officer,****(Principal
                Financial Officer) and****Director***/s/
                William M. Simmons***William
                M. Simmons**
            **President,**
            **November
                9, 2007****Secretary,
                Treasurer and****Director**






56