**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, 2007




**[
       ] 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 #200**


**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**




1


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
      [X]
      No [   ].





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 [  ].





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, 2007 were
      $1,847,647.




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 December 26, 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
      December 26, 2007, there were 231,412,224  shares of the issuer's
      common stock outstanding, which amount does not include 18,000,000 shares of
      common stock which were held by Valeska Energy Corp. as of December 26, 2007,
      which the Registrant and Valeska have since cancelled.


2


**TABLE
      OF CONTENTS**




PART
      I





ITEM
                1.
            DESCRIPTION
                OF BUSINESS
            4ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            16ITEM
                3.
            LEGAL
                PROCEEDINGS
            21ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            21




PART
      II





ITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            22ITEM
                6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            23ITEM
                7
            FINANCIAL
                STATEMENTS
            F-1ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            35ITEM
                8A.
            CONTROLS
                AND PROCEDURES
            36ITEM
                8B.
            OTHER
                INFORMATION
            36




PART
      III




ITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(A) OF THE EXCHANGE ACT
            35ITEM
                10
            EXECUTIVE
                COMPENSATION
            37ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            39ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            42ITEM
                13.
            EXHIBITS
            50ITEM
                14
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            53SIGNATURES
            
            55











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,
      2007.  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”).




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.


4





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.




**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 December
      26, 2007, the Contract Rate is nine and one-quarter percent (9.25%) per year,
      with the Prime Rate at seven and one-quarter percent
      (7.25%).


5





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  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 were unable to file to date, due to the fact that
      we
      were not current in our filings with the Commission. 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.




**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.


6





**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. As part payment of the note we exchanged our
      remaining interest in Buck Snag and 5% of  our interest in Sandy Point
      to Polaris, in consideration for a reduction in the loan in the amount of
      $90,000.As  of the filing of this report the note has been paid in
      full





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 us 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.  They did not
      declare an event of default and the note has been repaid in full.





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 remains due to Sunray as of the date of
      this filing, in connection with the purchase of the Leases.




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").




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.


9





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.  The Jacobs’s Note
      was subsequently forgiven in connection with the Jacobs Settlement, described
      below.





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 did not
      receive 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 President 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
      Corp., 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.




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.


11


Cooperation
      Agreement and Mutual Release





On
      or
      about July 12, 2007, LOGI; Mr. Maxwell; Meredith Maxwell, Mr. Maxwell’s daughter
      and our former consultant; 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 prepared 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, which certification Mr. Maxwell later
      made, for the periods from June 30, 2006 to March 31, 2007.




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 10,408,163 shares, out
      of a
      total number of 20,408,163 shares.





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;·
            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).


13





In
      connection with the Reiersen Release, we paid Reiersen $2,500 and issued
      Reiersen 250,000 restricted shares of our common stock.





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.





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 been paid to date), and issue Reiersen 250,000 restricted shares
      of
      our common stock, which shares have 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, which date we
                were able
                to become current by;(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.





14


On
      or
      about November 28, 2007, we entered into a Settlement Agreement and Mutual
      Release (the “Jacobs Agreement”) by and between the Company, Frank A. Jacobs,
      our former officer and Director (“Jacobs”), and Jacobs Oil & Gas Limited, a
      British Columbia corporation (“JOGL” and collectively with Jacobs, the “Jacobs
      Parties”), Clover Capital, a creditor of the Company (“Clover”), Capersia Pte.
      Ltd., a Singapore company and a significant stockholder of the Company
      (“Capersia”), Peter Wilson, an individual and a former Director of the Company
      (“Wilson”), and Sterling Grant Capital, Inc., a British Columbia corporation,
      controlled by Mr. Wilson (“SGC” and collectively with Clover, Capersia and
      Wilson, the “Non-Jacobs Parties,” and with the Jacobs Parties, the “Interested
      Parties”).  We had various disputes with the Interested Parties
      relating to the issuances of and transfers of various shares of our common
      stock
      and various of the Interested Parties had alleged that we owed them
      consideration (the “Disputes”).  We entered into the Jacobs Agreement
      to settle the Disputes with the Interested Parties.





In
      consideration for the Company agreeing to enter into the Jacobs Agreement,
      the
      Jacobs Parties agreed to the following terms: the Jacobs Parties would return
      to
      the Company for cancellation 5,000,000 of the 7,500,000 shares purchased by
      Jacobs in March 2006 (the “Jacobs Shares”), which shares have not been cancelled
      to date, and are therefore included in the number of issued and outstanding
      shares disclosed throughout this report; all debt owed by Texhoma to the
      Jacobs Parties, known or unknown, was discharged and forgiven, including the
      total outstanding amount of the approximately $500,000 Promissory Note owed
      to
      Frank A. Jacobs by the Company (the “Jacobs Note”); the Company owes Jacobs no
      rights to contribution and/or indemnification in connection with Jacobs
      employment with the Company; Jacobs also certified the accuracy and correctness
      of the Company’s previously prepared annual and interim financial statements and
      periodic reports, relating to the time period of his employment from the period
      ending September 30, 2005 to the period ending March 31, 2007; the Jacobs
      Parties agreed they have no interest in and will not interfere with the issuance
      of or any subsequent transfers of shares to or from Lucayan Oil and Gas
      Investments, Ltd. (the “LOGI Shares”), a Bahamas corporation; Jacobs agreed to
      use his best efforts to answer the Company’s questions and produce documents in
      the future regarding operations and financials of the Company; Jacobs agreed
      that he no longer holds any exercisable options of the Company; the Voting
      Agreement entered into between various parties in June 2007, including Jacobs,
      remains in full affect and force against Jacobs; and Jacobs has no interest
      in
      any shares other than the aforementioned 2,500,000 shares.





Additionally,
      in consideration for the Company agreeing to enter into the Jacobs Agreement,
      the Non-Jacobs Parties agreed to the following terms: any and all debts owed
      by
      Texhoma to Clover, which purportedly totaled approximately $60,000, Capersia,
      which purportedly totaled $60,000 or any of the Non-Jacobs Parties (including
      approximately $20,000 purportedly owed to Wilson) was discharged and forgiven;
      the Non-Jacobs Parties agreed that they have no interest in and will not
      interfere with the issuance of the LOGI Shares; the Voting Agreement remains
      in
      full force and effect against Capersia; and in connection with the 30,000,000
      shares of Company stock in Capersia’s possession received through Texhoma’s
      previous purchase of a 40% interest in Black Swan Petroleum Pty. Ltd. (the
      “Capersia Shares”), Capersia will not transfer shares in excess of 2% of
      Texhoma’s then outstanding shares in any three (3) month period, until the
      second anniversary of the Jacobs Agreement.





Lastly,
      in consideration for the Jacobs Parties and the Non-Jacobs Parties agreeing
      to
      the terms of the agreement, Texhoma agreed to the following terms: Jacobs will
      retain the remaining 2,500,000 shares of Company stock and Capersia will retain
      the aforementioned 30,000,000 shares of Company stock free and clear of any
      claims to such shares by the Company; and JOGL shall retain all rights to the
      200,000 shares of Morgan Creek Energy Corp. (“Morgan Creek”) shares held in
      trust by JOGL as collateral for a promissory note issued to JOGL by the Company
      (the “Jacobs Note” and “Morgan Creek Shares”), the Company will release all
      claims to said shares or any additional shares of Morgan Creek that the Company
      may be due as a result of stock splits or share distributions.





Further,
      pursuant to the Jacobs Agreement, the Interested Parties agreed to release
      the
      Company from any and all rights, obligations, claims, demands and causes of
      action, known or unknown, asserted or unasserted relating to the Disputes or
      the
      Company or its current or former Directors, and the Company agreed to release
      the Jacobs Parties and the Non-Jacobs Parties from any and all rights,
      obligations, claims, demands,
      and causes of action arising from or relating to the Capersia Shares, Jacobs’
employment with the Company, the Jacobs Note, the Jacobs Shares, the Morgan
      Creek shares, and the LOGI Shares.





As
      a
      result of the Jacobs Agreement, the Company was able to settle approximately
      $640,000 in debt which it purportedly owed to the various Interested Parties
      and
      to settle any and all other claims which such parties, in return for the
      consideration discussed above, which mainly consisted of assigning the rights
      to
      the 200,000 shares of Morgan Creek Energy Corp. stock to Frank A. Jacobs, which
      shares had an approximate value of $92,000 based on the trading price of Morgan
      Creek Energy Corp.’s common stock on the date of the Jacobs Agreement of
      $0.46.





15


**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 was $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.





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.





Texhoma
      separately holds an interest in the Clovelly project, located in LaFourche,
      Louisiana, which consists of two drilling locations.  One of these
      locations is classified as proved undeveloped (“PUD”), and the other one is an
      exploratory drill site.  Texhoma’s interests in the lease are
      approximately an 11% working interest and a 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:




16


**Texhoma
      Energy, Inc.**


**Estimated
      Net Reserves and Income Data**


**Attributable
      to Certain Leasehold Interests**


**As
      of January 1, 2008**




**Proved
                Developed**
            **Total**Producing
            Behind
                Pipe
            Undeveloped
            Proved**Remaining
                Reserves****Oil/Condensate
                - MBbls**
            66
            4
            -
            70**Gas-MMCF**
            259
            21
            -
            280





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.





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.


17





**Reserves
      Reported to Other Agencies**





The
      Company has not filed or reported reserve information to any federal authority
      or agency other than the Securities and Exchange Commission.





**Productive
      Wells and Acreage**




The
      total
      gross and net wells, expressed separately for oil and gas, and the total gross
      and net developed acres as of January 1, 2008, were as follows:




**Productive
                Wells**
            **Developed
                Acres****Geographic
                Area**
              
              
              
              **Louisiana**
            Gross
              Oil       Gas
              
              
              8         
                0
            Net
              Oil          Gas
              
              
              1      
                0
            Gross
              Oil           Gas
              
              ­­­­
              1,498       0
            Net
              Oil           Gas
              
              
              141.4        0





Wells
      that produce both oil and gas are treated as oil wells herein.  Of the 8
      gross wells, all are producing oil and gas.








**Undeveloped
      Acreage**




At
      January 1, 2008, the Company held interests in 160 gross (18.8 net) undeveloped
      acres in the United States, as summarized below:




**Geographic
                Area**
              
              **Louisiana**
            **Gross
                Acres**
              
              160
            **Net
                Acres**
              
              18.8





All
      the
      acreage shown is held by production from the Company’s wells that were producing
      as of January 1, 2008.




18


**Production**






The
      following table sets forth, by geographic area, for the fiscal years 2007 and
      2006:  1) the Company’s portion of the net quantities of oil in barrels,
      and gas in thousands of cubic feet (“MCF”), produced from properties in which
      the Company had an interest; 2) the average sales price per barrel of oil and
      MCF of gas shown separately; and 3) the average lifting cost per unit of
      production of oil and gas shown together on an equivalent basis. The unit of
      production for purposes of averaging costs is barrels (“Bbls”) for oil, or
      barrels-of-oil equivalent (“BOE”) for gas.  One BOE equals 6 MCF of
      gas.




**2007**
            **2006****Oil         
              Gas**
            **Oil        
              Gas****1)
              Net Quantities:**
              **(Bbls or MCF)**
              **Louisiana**
            14,460      
              92,853
            14,240    
                81,054**2)
              Average Sales Price/Bbl or MCF:**
              **Louisiana**
            $65.88      
              $8.63
            $67.86     
               $8.52**3)
              Average Lifting Cost/Bbl or BOE:**
              **Louisiana**
            $14.85
            $14.45





19





**Drilling
      Activity**





Drilling
      activity for 2007 included work over of the Little White Lakes’
field,  Intracoastal SL #3, but resulted in a shut in well due to
      excessive water production.  The Barnes Creek property well was
      successfully worked over and is currently producing at full
      potential.  Peoples’ Energy, who operated the Edgerly Field, was
      acquired by El Paso during the year.  As a result their future
      drilling activities have not been determined, resulting in two wells that were
      included in our production last year not being included in the current year,
      namely North American Land #5 and 6.





In
      fiscal
      2006, the Company participated in drilling activity in the Allain Lebreton
      #2
      well on a prospect close to the existing Clovelly oil and gas field in
      Louisiana.  This drilling program was unsuccessful and the well was
      abandoned.  The Company has not participated in any further
      exploratory drilling during the two years ended September 30, 2007.














20


**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
      not expected to be drilled in the Clovelly Prospect in 2008.





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 and Director of ORX.  ORX has not filed any
      formal proceeding against the Company, and the Company hopes to work with
      ORX  to settle 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.




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




None
      during the period of this report.






21


**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, now that the Company has become current in its periodic filings with
      the
      Commission.  As of December 26, 2007, the Company had approximately
      231,412,224  shares of common stock outstanding held by approximately
      184 shareholders of record, which amount does not include 18,000,000 shares
      of
      common stock previously held by Valeska Energy Corp. as of December 26, 2007,
      which the Company and Valeska have cancelled to date.




Recent
      Sales Of Unregistered Securities




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 “cashless” options to purchase 60,000,000 shares of our common
      stock at an exercise price of $0.02 per share which price was greater than
      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  been
      issued.   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.





On
      or
      about November 28, 2007, we entered into a Subscription Agreement with Pagest
      Services SA, a Swiss Company, pursuant to which we agreed to sell two units
      consisting of $125,000 in Convertible Promissory Notes with a conversion price
      of $0.0125 per share, convertible at the option of Purchaser, into the Company’s
      common stock, and Class A and Class B Warrants to purchase 5,000,000 shares
      of
      common stock with an exercise price of $0.02 and $0.03 per share, respectively,
      exercisable for a period of two years from the date of the Subscription
      Agreement (the “Units”).  One Unit was sold immediately to the
      Purchaser, and one Unit was sold to Purchaser shortly after December 15,
      2007.  The Convertible Promissory Notes bear interest at the rate of
      2% per annum, until paid in full, which amount will increase to 15% per annum,
      upon the occurrence of an Event of Default (as defined in the Convertible
      Promissory Notes).  The Convertible Promissory Notes are due on the
      first anniversary of the date they are sold, with the first $125,000 in
      Convertible Promissory Notes being due on November 28, 2008, and the second
      on
      December 19, 2008, unless converted into shares of our common
      stock.  In the event that our common stock trades on the market or
      exchange on which it then trades, at a trading price of more than $0.02 per
      share, for any 10 day trading period, the Convertible Promissory Note will
      automatically convert into shares
      of
      our common stock at the rate of one share for each $0.0125 owed to the
      subscriber.  We also agreed to provide the subscriber piggy-back
      subscription rights in connection with the sale of the Units. We
      claim
      an exemption from registration afforded by Regulation S of the Securities Act
      of
      1933, as amended ("Regulation S") for the above issuances since the issuances
      were made to a non-U.S. person (as defined under Rule 902 section (k)(2)(i)
      of
      Regulation S), pursuant to an offshore transaction, and no directed selling
      efforts were made in the United States by us, a distributor, any respective
      affiliates, or any person acting on behalf of any of the
      foregoing.


22


**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 seek
      a quotation of the Company’s common stock on the OTCBB, continue to get the
      Company’s accounting and controls and procedures in order, and work to decrease
      the Company’s current liabilities. In addition, the Company is aggressively
      seeking opportunities for acquisitions to grow the asset base of the Company
      and
      increase revenue and shareholder value.





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
      three 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 will need to raise additional capital in Texaurus to repay the interest
      and
      principal on 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, 2007 COMPARED
      TO THE FISCAL YEAR ENDED SEPTEMBER 30, 2006**




We
      reported revenues of $1,848,000 for the year ended September 30, 2007 compared
      with $2,258,000 for the year ended September 30, 2006.  The decrease
      in revenues for the year ended September 30, 2007, compared to the year ended
      September 30, 2006, was due to the fact that for the year ended September 30,
      2007 we incurred  revenue of $90,000 from the promotion and sale of
      our oil and gas lease investments as compared with revenue of $650,000 for
      the
      year ended September 30, 2006.  This was offset by a $150,000 increase
      in production revenue due to our Little White Lake property, due to a full
      year
      of earning for the property during the year ended September 30, 2007, compared
      to only nine months for the year ended September 30, 2006.  The result
      of the decrease in revenues from the promotion of oil and gas lease investments,
      offset by the increase in production revenue was a net decrease of $410,000
      in
      revenue for the year ended September 30, 2007 as compared with the year ended
      September 30, 2006.




We
      had
      oil and gas exploration expenses of $445,000 for the year ended September 30,
      2007 compared to $4,003,000 for the year ended September 30, 2006, a
      decrease of $3,558,000 from the prior period.  The oil and gas
      exploration expenses for the year ended September 30, 2006, were higher than
      the
      year ended September 30, 2007, due to $920,000 in 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, which was not represented
      for the year ended September 30, 2007.





Depletion
      of $1,036,000 was recorded for the year ended September 30, 2007 as compared
      with $1,302,000 for the year ended September 30, 2006.  The reduced
      expense reflects the reduction in the value of Little White Lake Property as
      a
      result of recognizing the impairment at September 30, 2006.





We
      had
      total general and administrative expenses of $1,997,000 for the year ended
      September 30, 2007, compared to $810,000 for the year ended September 30, 2006,
      an increase of $1,187,000 from the prior period.  The increase in
      general and administrative expenses was mainly due to $800,000 of option
      expense, $180,000 of accounting and legal expense incurred as a result of
      efforts to bring our filings current, and management fees of approximately
      $503,000 in the form of stock issued to Valeska Energy, which were not present
      during the year ended September 30, 2006.





In
      connection with our raising the necessary capital funding to pursue our planned
      oil and gas purchases we issued stock warrants to new subscribers of our common
      stock as well and our lenders.  As a result of  the
      expiration of some of these warrants during the year ended September 30, 2007,
      we recognized an $859,000 reduction in related stock accretion expense for
      the
      year ended September 30, 2007, as compared with accretion expense of $1,165,000
      for the year ended September 30, 2006.


23




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 for the year ended September 30,
      2007.  As part of the proceeds from selling working interests in 2006,
      we accepted 200,000 shares of Morgan Creek Energy (“MCRE”) common stock with a
      value of $350,000.  As of September 30, 2007 the trading price MCRE
      was trading at $0.50 per share and as such we reported an impairment of the
      investment of $250,000.  Subsequent to the year ended September 30,
      2007, we released all rights to the MCRE shares to our former officer and
      Director, Frank Jacobs, in connection with our entry into the Jacobs Agreement,
      described above.





We
      incurred net interest expense of $1,158,000 for the year ended September 30,
      2007,  in connection with the Laurus Note as compared with $583,000 of
      net interest expense for the year ended September 30, 2006.  The
      increase in interest expense associated with the Laurus Note was due to the
      fact
      that the Laurus Note was outstanding and accruing interest for all of the year
      ended September 30, 2007, compared to only nine months of the year ended
      September 30, 2006.





We
      incurred a net loss of $2,188,000 for the year ended September 30, 2007 as
      compared to a net loss of $5,443,000 for the year ended September 30, 2006,
      a
      decrease in net loss of $3,255,000 from the prior period.  The
      decrease in net loss was mainly due to the reduction in oil and gas exploration
      expenses and the reduction in stock accretion and impairment expenses and the
      reduction in depletion and depreciation offset by the increase in interest
      expense due on the Laurus note and option expense and the increase in general
      and administrative expenses.




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      September 30, 2007, we had total assets of $5,870,000, consisting of cash of
      $45,000 and restricted cash, in connection with the funding by Laurus, which
      cash is only distributable with the consent of Laurus of $219,000, accounts
      receivable of $434,000, net oil and gas properties of $4,556,000 and other
      assets of $616,000.





We
      had
      current liabilities of $2,159,000, consisting of accounts payable of
      $503,000, accrued expenses of $1,203,000 and notes payable related parties
      of
      $453,000, and a long term note payable of $8,155,000, representing the amount
      due to Laurus under the Laurus Note at September 30, 2007.  Our notes
      payable to related parties included notes which were payable to Capersia, Clover
      Capital and MFS Technology, of which the notes payable to Capersia, and Clover
      Capital were subsequently forgiven in connection with our entry into the Jacobs
      Agreement.





The
      approximately $493,000 note payable to Frank Jacobs, our former officer and
      Director, is comprised of a portion of the accrued expenses and notes payable
      described above,  netted with advances to Mr. Jacobs which are
      included in accounts receivable.  The full amount of the funds owed to
      Mr. Jacobs was forgiven by him as a result of the Jacobs Settlement described
      above.





We
      had
      negative working capital of $1,461,000 and a retained deficit of $15,005,000
      as
      of September 30, 2007.





For
      the
      year ended September 30, 2007, we had cash provided by operating activities
      of
      $103,000, which consisted mainly of $714,594 of accrued expenses, $1,031,853
      of
      depletion, $514,001 of stock issued for services, $323,018 of depreciation
      and
      amortization and $210,728 of other, offset by $2,187,921 of net loss and
      $858,573 of stock accretion gain.





We
      used
      cash for investing activities of $250,000, which amount reflects the impairment
      of the MCRE common stock investment.





We
      used
      $79,000 in cash for financing activities for the year ended September 30, 2007,
      a result of $381,391of repayments of loans from Laurus and from affiliates,
      offset by $297,500 of proceeds from the sale of common stock and warrants during
      the year ended September 30, 2007, which funds were raised to support our
      operating activities.





24


**FUNDING
      TRANSACTIONS:**





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
      raised
      an aggregate of $125,000 through the sale of a convertible note and warrants
      to
      an investor (described in greater detail above) subsequent to the year ended
      September 30, 2007.  The same investor has also invested an additional
      $125,000 on similar terms on or about December 19, 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 do not currently have sufficient funds to continue to pay the
      interest payments required on the Secured Term Note with Laurus, through the
      payment of production payments on the properties owned by Texaurus on an ongoing
      basis.  As such, we are currently in negotiations with Laurus to amend
      the terms of the Secured Term Note, which there can be no assurance will be
      amended.  Additionally, 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.  As such, if we are unable to come to terms with
      Laurus regarding the amendment and/or revision of the terms of the Secured
      Term
      Note, we will likely not be able to continue our business operations for more
      than approximately three months.  Not including the substantial funds
      we will require to repay the principal on the Secured Term Note and/or that
      we
      will require to make the required interest payments on the Secured Term Note,
      we
      will require approximately $300,000 of additional capital to  continue
      our planned oil and gas operations and seek out new acquisitions.





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.


25


**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 we do not currently have sufficient funds to continue to pay the
      interest payments required on the Secured Term Note with Laurus, through the
      payment of production payments on the properties owned by Texaurus on an ongoing
      basis.  As such, we are currently in negotiations with Laurus to amend
      the terms of the Secured Term Note, which there can be no assurance will be
      amended.  Additionally, 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.  As such, if we are unable to come to terms with
      Laurus regarding the amendment and/or revision of the terms of the Secured
      Term
      Note, we will likely not be able to continue our business operations for more
      than approximately three months.  Not including the substantial funds
      we will require to repay the principal on the Secured Term Note and/or that
      we
      will require to make the required interest payments on the Secured Term Note,
      we
      will require approximately $300,000 of additional capital to continue our
      planned oil and gas operations and seek out new acquisitions.





Additionally,
      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,
      our current production will be sufficient to repay the interest (or principal)
      on the Laurus Note, 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.




Finally,
      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 9.25% per year (as
      of
      December 26, 2007), which is due and payable on March 27, 2009, and which
      principal and interest 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.


26





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 or such interest 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.




**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.




**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.




27


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
      have
      become 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.




**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.


28


****


**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.




**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.





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.





30


**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. 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 approximately
      240,857,776 voting shares.  As a result, Mr. Simmons is able to vote a
      total of approximately 268,057,776 voting shares based on approximately
      472,270,000 voting shares outstanding (representing
      231,412,224  shares of common stock outstanding and approximately
      240,857,776 shares of stock which the Series A Preferred Stock are able to
      vote)
      representing approximately 61.6% 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 may differ from the interests of the other stockholders
      and thus result in corporate decisions that are adverse to other
      shareholders.




**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 Corp. (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 $20,000 per
      month.


31


**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:







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.





32


**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;(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.


33


**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.







34


**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, 2007 and 2006, 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,
      2007.  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, 2007 and 2006, and the results of its operations and cash flows
      for each of the years in the two-year period ended September 30, 2007 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 12 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,
                TexasJanuary
                15, 2008







F-1


**TEXHOMA
      ENERGY, INC. AND SUBSIDIARY**


CONSOLIDATED
      BALANCE SHEETS


September
      30, 2007 and September 30, 2006





**ASSETS**
            
            September
              2007
            
            
            September
              2006Current
                AssetsCash
                and cash equivalents
            
            $
            44,785
            
            
            $
            134,852Restricted
                cash
            
            
            219,088
            
            
            
            355,025Accounts
                receivable-miscellaneous
            
            
            185,350
            
            
            
            378,415Accounts
                receivable-net oil and gas production
            
            
            248,882
            
            
            
            322,402Total
                Current Assets
            
            
            698,105
            
            
            
            1,190,694Oil
                and Gas Properties, net of depletion of $2,333,426 and $1,301,574
                at
                September 30, 2007 and 2006, respectively
            
            
            4,556,305
            
            
            
            5,342,314Other
                Assets
            
            
            615,728
            
            
            
            1,145,328TOTAL
                ASSETS
            
            $
            5,870,138
            
            
            $
            7,678,336**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**Current
                LiabilitiesAccounts
                payable
            
            $
            502,875
            
            
            $
            414,483Accrued
                expenses
            
            
            1,202,438
            
            
            
            387,428Notes
                payable related parties
            
            
            453,432
            
            
            
            603,432Total
                Current Liabilities
            
            
            2,158,745
            
            
            
            1,405,343Long
                term notes payable
            
            
            8,155,280
            
            
            
            8,381,471Commitments
                and Contingencies (Note 10)
            
            
            -
            
            
            
            -Stockholders’
                DeficitPreferred
                stock, $0.001 par value, 1,000,000 shares  authorized, 1,000
                shares issued and outstanding at September 30, 2007
            
            
            1
            
            
            
            -Common
                stock, $0.001 par value, 300,000,000 shares authorized, 231,162,252
                and
                181,662,252 shares issued and outstanding at  September 30,
                2007 and 2006, respectively
            
            
            231,162
            
            
            
            181,662Additional
                paid-in capital
            
            
            10,330,166
            
            
            
            10,527,155Retained
                deficit
            
            
            (15,005,216
            )
            
            
            (12,817,295
            )Total
                Stockholders’ Deficit
            
            
            (4,443,887
            )
            
            
            (2,108,478
            )TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT
            
            $
            5,870,138
            
            
            $
            7,678,336


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, 2007 and 2006








September
                2007
            
            
            September
                2006RevenuesOil
                and gas interests
            
            $
            1,847,647
            
            
            $
            2,258,425Total
                revenues
            
            
            1,847,647
            
            
            
            2,258,425Operating
                expenses:Oil
                and gas exploration
            
            
            444,742
            
            
            
            4,003,313Gross
                Margin (Loss)
            
            
            1,402,905
            
            
            
            (1,744,888
            )Depletion
                and depreciation
            
            
            1,036,000
            
            
            
            1,301,574General
                and administrative expenses
            
            
            1,996,520
            
            
            
            809,612Operating
                income (loss)
            
            
            (1,629,615
            )
            
            
            (3,856,074
            )Other
                income (expenses):Loss
                on sale of furniture and equipment
            
            
            (8,441
            )
            
            
            -Stock
                accretion gain
            
            
            858,573
            
            
            
            (1,165,211Foreign
                currency exchange
            
            
            -
            
            
            
            (211Gain
                on sale of working interest promote
            
            
            -
            
            
            
            161,429Loss
                on impairment of investments
            
            
            (250,000
            )
            
            
            -Interest
                income
            
            
            13,456
            
            
            
            18,947Interest
                expense
            
            
            (1,171,894
            )
            
            
            (601,416Total
                other income (expense)
            
            
            (558,306
            )
            
            
            (1,586,462Income
                (loss) before income taxes
            
            
            (2,187,921
            )
            
            
            (5,442,536
            )Net
                income (loss)
            
            $
            (2,187,921
            )
            
            $
            (5,442,536
            )Weighted
                average common shares outstanding
            
            
            195,395,950
            
            
            
            142,059,991Basic
                earnings (loss) per share:
            
            $
            (0.01
            )
            
            $
            (0.04
            )





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, 2007 and 2006****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, 2005**
            
            
            106,812,252
            
            
            
            106,812
            
            
            
            -
            
            
            
            -
            
            
            
            6,222,794
            
            
            
            -
            
            
            
            -
            
            
            
            (7,374,759
            )
            
            
            (1,045,153
            )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 for warrants
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,165,211
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,165,211**Balance,
                September 30, 2006**
            
            ****
            **181,662,252**
            
            
            ****
            **181,662**
            
            
            ****
            **-**
            
            
            ****
            **-**
            
            
            ****
            **10,527,155**
            
            
            ****
            **-**
            
            
            ****
            **-**
            
            
            ****
            **(12,817,295**
            **)**
            
            ****
            **(2,108,478**
            **)**


F-4





Shares
                issued, June 7,2007 at $0.0125 per share
            
            
            18,000,000
            
            
            
            18,000
            
            
            
            
            
            
            207,000
            
            
            
            
            
            
            225,000Shares
                issued, June 7,2007 at $0.0125 per share
            
            
            4,800,000
            
            
            
            4,800
            
            
            
            
            
            
            55,200
            
            
            
            
            
            
            60,000Shares
                issued, June 10, 2007 for management agreement  at $0.02 per
                share
            
            
            15,200,000
            
            
            
            15,200
            
            
            
            
            
            
            288,800
            
            
            
            
            
            
            304,000Shares
                issued, July  9, 2007 at $0.0125 per share
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            
            
            
            11,500
            
            
            
            
            
            
            12,500Shares
                issued, July 1, 2007 for services agreement at $0.02 per
                share
            
            
            500,000
            
            
            
            500
            
            
            
            
            
            
            9,500
            
            
            
            
            
            
            10,000Shares
                issued August 13, 2007 for management agreement at $0.02 per
                share
            
            
            10,000,000
            
            
            
            10,000
            
            
            
            
            
            
            190,000
            
            
            
            
            
            
            200,000Shares
                issued August 13, 2007 for management agreement at $0.001 per
                share
            
            
            1,000
            
            
            
            
            
            
            
            1
            
            
            
            
            
            
            
            
            
            
            1Net
                (loss) at September 30, 2007
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,187,921
            )
            
            
            (2,187,921
            )Stock
                accretion for warrants
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (958,989
            )
            
            
            
            
            
            
            (958,989
            )**Balance,
                September  30, 2007**
            
            ****
            **231,162,252**
            
            
            ****
            **231,162**
            
            
            ****
            **1**
            
            
            ****
            **10,330,166**
            
            
            ****
            **(15,005,216**
            **)**
            
            ****
            **(4,443,887**
            **)**





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, 2007 and 2006





September
                2007
            
            
            September
                2006Cash
                flows from operating activities:
              Net
                loss
            
            $
            (2,187,921
            )
            
            $
            (5,442,536
            )Adjustments
                to reconcile net loss to
              net
                cash provided by (used in) operating activities:Depletion
            
            
            1,031,853
            
            
            
            1,301,574Depreciation
                and amortization
            
            
            323,018
            
            
            
            162,864Stock
                issued for services
            
            
            514,001
            
            
            
            25,000Stock
                based compensation
            
            
            -
            
            
            
            -Stock
                accretion gain
            
            
            (858,573
            )
            
            
            1,165,211Oil
                and gas exploration costs
            
            
            -
            
            
            
            3,590,082Change
                in assets and liabilities:Accounts
                receivable
            
            
            266,584
            
            
            
            (700,817
            )Accounts
                payable
            
            
            88,393
            
            
            
            387,034Accrued
                expenses
            
            
            714,594
            
            
            
            264,919Other
            
            
            210,728
            
            
            
            (351,578
            )Net
                cash provided by operating activities
            
            
            102,677
            
            
            
            401,753Cash
                flows from investing activities:Investment
                in Black Swan
            
            
            -
            
            
            
            -Oil
                and gas property investments
            
            
            (249,990
            )
            
            
            (11,190,584
            )Other
                assets
            
            
            -
            
            
            
            -Net
                cash used in investing activities
            
            
            (249,990
            )
            
            
            (11,190,584
            )Cash
                flows from financing activities:Loans
                from affiliates
            
            
            5,200
            
            
            
            413,432Loan
                repayment to affiliates
            
            
            (65,200
            )
            
            
            (105,000
            )Notes
                payable proceeds
            
            
            -
            
            
            
            11,250,000Repayment
                of notes payable
            
            
            (316,191
            )
            
            
            (2,723,529
            )Stock
                issued for asset purchase
            
            
            -
            
            
            
            1,610,000Proceeds
                from issuance of common stock
            
            
            297,500
            
            
            
            684,000Net
                cash provided by (used in)  financing activities
            
            
            (78,691
            )
            
            
            11,128,903Increase
                (decrease) in cash and cash equivalents
            
            
            (226,004
            )
            
            
            340,072Cash
                and cash equivalents at beginning of period
            
            
            489,877
            
            
            
            149,805Cash
                and cash equivalents at end of year
            
            $
            263,873
            
            
            $
            489,877





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, 2007 and 2006








**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 March
      2006, Texhoma incorporated a subsidiary, Texaurus Energy, Inc. in Delaware
      for
      the same purpose.




*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.





*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 instruments, 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





F-7


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.  Little
      White Lakes was purchased effective April 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 leaseholds were as
      follows:





Field
            Total
                Proven Reserves
            Remaining
                at September 30, 2007
            Depletion
                rate for September 30, 2007
            Depletion
                rate for September 30, 2006Barnes
                Creek
            73,310
            51,450
            16.2%
            14.9%Edgerly
            210,574
            51,273
            15.9%
            4.9%Little
                White Lakes
            27,673
            10,159
            50.5%
            20.8%








*Oil
      and Natural Gas Exploration and Development –*Texhoma 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.




Texhoma
      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.




Should
      it
      be 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.





*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 $3,273,000
      deferred income tax asset at September 30, 2007 relating to net operating loss
      carryforwards and deductible temporary differences.  Of that amount,
      an estimated $2,836,000  is related to the net operating loss
      generated for the year ended September  30,
      2007.  Management determined that because the Company has not yet
      generated taxable income, because of the changes in control that have occurred
      and the fact that certain losses were 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.


F-8





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 $8,340,000 expires from 2011 to 2026.  The future
      utilization of the net operating losses is uncertain.




*Earnings
      or (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.





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





*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
      has had 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
      did
      not have a material impact on its financial statements.





**2.  PROPERTY
      AND EQUIPMENT**





No
      acquisitions of oil and gas properties were made during the year ended September
      30, 2007.




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 then ended.


F-9





**3.   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.




*Common
      Stock*– In May 2007, 4,800,000 shares of our common stock were subscribed
      for at $0.0125 per share for a total consideration of $60,000.





In
      May 2007, Valeska Energy Corp.
      entered into a management agreement with Texhoma for a minimum period of three
      months.  Mr. William M. Simmons is the President 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, 1,000,000 shares to Valeska Energy Corp., and 1,000,000 shares to
      Asset
      Solutions (Hong Kong) Ltd.





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, which 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.





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.


F-10


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, was a Director of the Company
      from April 10, 2006 until May 1, 2007 and  President of the Company
      from April 12, 2006 until May 1, 2007 and Chief Executive Officer of the Company
      from June 5, 2006 until 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
      and all warrants have since expired.




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.  Of which all warrants have since
      expired.





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, these warrants
      have since expired.





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 and as of September 30, 2007 these warrants have
      expired.





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.   These warrants have expired as of
      September 30, 2007.





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.





**4.  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:





F-11





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.





The
      following is a summary of the option activity during the years ended September
      30, 2007 and 2006:








Number
            
            
            AverageOf
            
            
            ExerciseOptions
            
            
            PriceOutstanding
                at October 1, 2005
            
            
            -
            
            
            
            -Granted
            
            
            12,000,000
            
            
            $
            0.13Balance
                at September 30, 2006
            
            
            12,000,000
            
            
            $
            0.13Expired
            
            
            10,000,000
            
            
            $
            0.13Granted
            
            
            60,000,000
            
            
            $
            0.02Balance
                at September 30, 2007
            
            
            62,000,000
            
            
            $
            0.0235





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.


F-12





As
      of
      September 30, 2007, 61,250,000 of the options were vested. During the year
      10,000,000 of options issued to former employees and associates expired and
      60,000,000 new options were issued to Valeska Energy Corp. The trading price
      of
      our stock was $0.01375 per share at September 30, 2007 and the Black-Scholes
      option model with the following assumptions:  weighted average
      risk-free interest rate of 4.25%, estimated volatility of 182%, weighted-average
      expected life of 1.667 years and no expected dividend yield, resulted in a
      fair
      value per option of $0.015.  As such we increased the accrual for
      option expense by $811,000 in our current financial statements.





As
      of September 30, 2006, 2,500,000 of options were vested and based on
      our knowledge at that date, we  applied a forfeiture rate of 90% to
      the vested options.  $12,964 of option expense was accrued as of
      September 30, 2006. 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.





**5.  ACQUISITIONS**





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.





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:


F-13





·
            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 December 31,
      2007.





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





**6.
      RELATED PARTIES**





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 7 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.


F-14





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.





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
      President 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-15


**7.  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.





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.  The note further states that any
      unpaid monthly interest becomes payable at the end of the term.





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.





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. As part payment of the note we
      exchanged  our remaining interest in Buck Snag and 5%
      of  our interest in Sandy Point to Polaris, in consideration for a
      reduction of the note in the amount of $90,000.  Since May 2007, the
      balance of the note has been repaid.    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").


F-16








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.





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.







**8.  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.





**9.  WARRANTS**





The
      following is a summary of the warrant activity during the years ended September
      30, 2007 and 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
            
            
            $
            0.074Expired
            
            
            5,175,000
            
            
            $
            0.15Balance
                at September 30, 2007
            
            
            11,687,500
            
            
            $
            0.04





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, and consideration is received, the transaction is recorded as
      an
      increase in Common Shares and Paid-in-Capital.





During
      the year ended September 30, 2007 5,175,000 of warrants granted expired
      unexercised.  The trading price of our stock was $0.01375 and the
      warrants remaining were issued at $0.04 per share. The Black Scholes
      option model with the following assumptions:  weighted average
      risk-free interest rate of 4.25%, estimated volatility of 182%, weighted-average
      expected life of 3.5 years and no expected dividend yield, resulted in a fair
      value per warrant of $0.01767. As a result, based upon the Black-Scholes option
      pricing model we reported a reduction in warrant expense for the year ended
      September 30, 2007 by $858,573.


F-17





During
      the year ended September 30, 2006, 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.








**10.
      COMMITMENTS AND CONTINGENCIES**





As
      discussed in the prior year filings, management wound down operations in
      Thailand and Australia related to their Black Swan investment, 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.




**11.
      SUBSEQUENT EVENTS**





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.  In connection with the Reiersen Release, we paid Reiersen
      $2,500 and issued Reiersen 250,000 restricted shares of our common
      stock.





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.


F-18







On
      or
      about November 28, 2007, we entered into a Settlement Agreement and Mutual
      Release (the “Agreement”) by and between the Company, Frank A. Jacobs, our
      former officer and Director (“Jacobs”), and Jacobs Oil & Gas Limited, a
      British Columbia corporation (“JOGL” and collectively with Jacobs, the “Jacobs
      Parties”), Clover Capital, a creditor of the Company (“Clover”), Capersia Pte.
      Ltd., a Singapore company and a significant stockholder of the Company
      (“Capersia”), Peter Wilson, an individual and a former Director of the Company
      (“Wilson”), and Sterling Grant Capital, Inc., a British Columbia corporation,
      controlled by Mr. Wilson (“SGC” and collectively with Clover, Capersia and
      Wilson, the “Non-Jacobs Parties,” and with the Jacobs Parties, the “Interested
      Parties”).  We had various disputes with the Interested Parties
      relating to the issuances of and transfers of various shares of our common
      stock
      and various of the Interested Parties had alleged that we owed them
      consideration (the “Disputes”).  We entered into the Agreement to
      settle the Disputes with the Interested Parties.





In
      consideration for the Company agreeing to enter into the Agreement, the Jacobs
      Parties agreed to the following terms: the Jacobs Parties would return to the
      Company for cancellation 5,000,000 of the 7,500,000 shares purchased by Jacobs
      in March 2006 (the “Jacobs Shares”); all debt owed by Texhoma to the Jacobs
      Parties, known or unknown, was discharged and forgiven, including the total
      outstanding amount of the approximately $500,000 Promissory Note owed to Frank
      A. Jacobs by the Company (the “Jacobs Note”); the Company owes Jacobs no rights
      to contribution and/or indemnification in connection with Jacobs employment
      with
      the Company; Jacobs agreed to certify the accuracy and correctness of the
      Company’s previously prepared annual and interim financial statements and
      periodic reports, relating to the time period of his employment from
      approximately January 2005 to June 2007; the Jacobs Parties agreed they have
      no
      interest in and will not interfere with the issuance of or any subsequent
      transfers of shares to or from Lucayan Oil and Gas Investments, Ltd. (the “LOGI
      Shares”), a Bahamas corporation; Jacobs agreed to use his best efforts to answer
      the Company’s questions and produce documents in the future regarding operations
      and financials of the Company; Jacobs agreed that he no longer holds any
      exercisable options of the Company; the Voting Agreement entered into between
      various parties in June 2007, including Jacobs, remains in full affect and
      force
      against Jacobs; and Jacobs has no interest in any shares other than the
      aforementioned 2,500,000 shares.





Additionally,
      in consideration for the Company agreeing to enter into the Agreement, the
      Non-Jacobs Parties agreed to the following terms: any and all debts owed by
      Texhoma to Clover, which purportedly totaled approximately $60,000, Capersia,
      which purportedly totaled $60,000 or any of the Non-Jacobs Parties (including
      approximately $20,000 purportedly owed to Wilson) was discharged and forgiven;
      the Non-Jacobs Parties agreed that they have no interest in and will not
      interfere with the issuance of the LOGI Shares; the Voting Agreement remains
      in
      full force and effect against Capersia; and in connection with the 30,000,000
      shares of Company stock in Capersia’s possession received through Texhoma’s
      previous purchase of a 40% interest in Black Swan Petroleum Pty. Ltd. (the
      “Capersia Shares”), Capersia will not transfer shares in excess of 2% of
      Texhoma’s then outstanding shares in any three (3) month period, until the
      second anniversary of the Agreement.





Lastly,
      in consideration for the Jacobs Parties and the Non-Jacobs Parties agreeing
      to
      the terms of the agreement, Texhoma agreed to the following terms: Jacobs will
      retain the remaining 2,500,000 shares of Company stock and Capersia will retain
      the aforementioned 30,000,000 shares of Company stock free and clear of any
      claims to such shares by the Company; and JOGL shall retain all rights to the
      200,000 shares of Morgan Creek Energy Corp. (“Morgan Creek”) shares held in
      trust by JOGL as collateral for a promissory note issued to JOGL by the Company
      (the “Jacobs Note” and “Morgan Creek Shares”), the Company will release all
      claims to said shares or any additional shares of Morgan Creek that the Company
      may be due as a result of stock splits or share distributions.





Further,
      pursuant to the Agreement, the Interested Parties agreed to release the Company
      from  any and all rights, obligations, claims, demands and causes of
      action, known or unknown, asserted or unasserted relating to the Disputes or
      the
      Company or its current or former Directors, and the Company agreed to release
      the Jacobs Parties and the Non-Jacobs Parties from any and all rights,
      obligations, claims, demands, and causes of action arising from or relating
      to
      the Capersia Shares, Jacobs’ employment with the Company, the Jacobs Note, the
      Jacobs Shares, the Morgan Creek shares, and the LOGI Shares.





As
      a
      result of the Agreement, the Company was able to settle approximately $640,000
      in debt which it purportedly owed to the various Interested Parties and to
      settle any and all other claims which such parties, in return for the
      consideration discussed above, which mainly consisted of assigning the rights
      to
      the 200,000
      shares of Morgan Creek Energy Corp. stock to Frank A. Jacobs, which shares
      had
      an approximate value of $92,000 based on the trading price of Morgan Creek
      Energy Corp.’s common stock on the date of the Agreement of
      $0.46.


F-19





On
      or
      about November 28, 2007, we entered into a Subscription Agreement with Pagest
      Services SA, a Swiss Company, pursuant to which we agreed to sell two units
      consisting of $125,000 in Convertible Promissory Notes with a conversion price
      of $0.0125 per share, convertible at the option of Purchaser, into the Company’s
      common stock, and Class A and Class B Warrants to purchase 5,000,000 shares
      of
      common stock each, with an exercise price of $0.02 and $0.03 per share,
      respectively, exercisable for a period of two years from the date of the
      Subscription Agreement (the “Units”).  One Unit was sold immediately
      to the Purchaser, and one Unit was sold to Purchaser shortly after December
      15,
      2007.  The Convertible Promissory Notes bear interest at the rate of
      2% per annum, until paid in full, which amount will increase to 15% per annum,
      upon the occurrence of an Event of Default (as defined in the Convertible
      Promissory Notes).  The Convertible Promissory Notes are due on the
      first anniversary of the date they are sold, with the first $125,000 in
      Convertible Promissory Notes being due on November 28, 2008 and the second
      due
      on December 19, 2008, unless converted into shares of our common
      stock.  In the event that our common stock trades on the market or
      exchange on which it then trades, at a trading price of more than $0.02 per
      share, for any 10 day trading period, the Convertible Promissory Note will
      automatically convert into shares of our common stock at the rate of one share
      for each $0.0125 owed to the subscriber.  We also agreed to provide
      the subscriber piggy-back subscription rights in connection with the sale of
      the
      Units.





**12.
      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.





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 $2,188,000 for the current fiscal
      year and has incurred $15,005,000 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.




*
      * * * * * * *




**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.


F-20





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, 2007 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
            
            
            9,571,925Less
                accumulated DD&A and impairment reserve
            
            
            5,015,620Net
                capitalized costs
            
            $
            4,556,305





**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, 2007**Property
                acquisitionUnproved
            
            $
            -Proved
            
            
            253,531Exploration
            
            
            -Development
            
            
            -Total
                costs incurred
            
            $
            253,531





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








F-21


**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, 2007 and 2006. The results
      of operations exclude general office overhead and interest expense attributable
      to oil and gas activities.





**2007**
            
            
            
            **2006**Net
                revenue from production
            
            $
            1,757,647
            
            
            $
            2,258,425Production
                costs
            
            
            444,742
            
            
            
            1,321,119DD&A
            
            
            1,031,851
            
            
            
            1,301,574Impairment
                reserve
            
            
            -
            
            
            
            2,682,194Total
                costs
            
            
            1,476,593
            
            
            
            5,304,887Gain
                (Loss) before income tax
            
            
            281,054
            
            
            
            (3,046,462
            )DD&A
                rate per Barrel of Oil  Equivalency “BOE”
            
            
            7.23
            
            
            
            4.18DD&A
                and impairment rate per BOE
            
            
            7.23
            
            
            
            12.79





**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
                bbls**Balance
                - September 30, 2006
            
            
            283,808Revisions
                of  previous estimates
            
            
            (140,990
            )Purchases
                of minerals in place
            
            
            -Extensions,
                discoveries and other additions
            
            
            -Production
            
            
            (29,936
            )Balance,
                September 30, 2007
            
            
            112,882





**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.





F-22


Future
                cash inflows
            
            $
            7,666,217Future
                production costs
            
            
            (1,231,649
            )Future
                development costs
            
            
            (33,358
            )Future
                income tax expenses
            
            
            (-
            )Future
                net cash flows
            
            
            6,401,21010%
                annual discount for estimated timing of cash flows
            
            
            1,781,386Standardized
                measure of discounted future cash flows
            
            $
            4,619,824





F-23


The
      standardized measure of discounted future net cash flows as of September 30,
      2006 was calculated using $81.77 per barrel of oil and $6.87 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, 2007 and 2006 are set forth in the table
      below.








Standardized
                measure of discounted future net cash flowsSeptember
                30, 2006
            
            $
            8,685,000Purchases
                of minerals in place
            
            
            245,000Changes
                in estimated future development costs
            
            
            (509,000
            )Sales
                of oil and gas, net of production
            
            
            (1,313,000
            )Revisions
                of previous quantity estimates
            
            
            (1,287,000
            )Accretion
                of discount, other
            
            
            (1,200,000
            )Standardized
                measure of discounted future net cash flowsSeptember
                30, 2007
            
            $
            4,621,000





*
      * * * *
      * * * *










F-24


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




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.




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.


35





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




(a)
      Evaluation of disclosure controls and procedures. Our Chief Executive Officer
      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
      timely.





Moving
      forward, our current management intends to allocate sufficient resources to
      allow us to timely file our periodic and current reports with the
      Commission.





(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.


36


**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**
            54
            President,Secretary,
                Treasurer and Director**Daniel
                Vesco**
            54
            Chief
                Executive Officer,,Chief
                Financial Officer andDirector**Ibrahim
                Nafi Onat**
            61
            Director
                andVice
                President of Operations





**William
      M. Simmons**


*President,
      Secretary, Treasurer and Director*





William
      M. Simmons, age 54, 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 has served as a Director of
      Texaurus since June 30, 2007.  Mr. Simmons currently serves as the
      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 54, 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 served as Chief Executive Officer and as a
      Director of our wholly owned subsidiary, Texaurus Energy, Inc. since June 30,
      2007 (“Texaurus”). 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.




**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.


37





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;




(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.





38


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.






**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 the fiscal years ended September
      30, 2007, 2006, and 2005.   The Company presently has no pension,
      health, annuity, insurance, or similar benefit plans.





**Other****Year**
            
            
            
            
            
            
            **Annual**
            
            **Total*****Name
                & Principal**
            
            **Ended**
            
            
            
            
            **Restricted
                Stock**
            **Options/**
            **Compen-**
            
            **Compen-****Position**
            
            **September
                30**
            
            **Salary
                ($)**
            
            **Bonus
                ($)**
            **Awards
                ($)**
            **Warrant
                Grants**
            **sation**
            
            **sation****Daniel
                Vesco**
            
            2007(1)
            
            -
            
            -
            -
            -
            -
            
            -CEO,
                CFO and Director**William
                M. Simmons**
            
            2007(1)
            
            -
            
            -
            -
            -
            -
            
            -President
                and Director**Ibrahim
                Nafi Onat**
            
            2007(6)
            
            $30,000
            
            -
            $10,000
                (6)
            -
            -
            
            $40,000Director**Max
                Maxwell**
            
            2007
            
            $138,804(G)
            
            -
            -
            -
            -
            
            $138,804(G)Former
                President and Director (2)
            
            2006
            
            $109,060
            
            $25,000
            -
            (A)
            $16,040
                (B)
            
            $150,100**Frank
                A. Jacobs**
            
            2007
            
            $0
            
            -
            -
            -
            -
            
            -Former
                  Director/CEO/CFO (3)
            
            2006
            
            $80,000
                (C)
            
            -
            -
            (D)
            -
            
            $80,000


2005
            
            $99,000
                (C)
            
            -
            -
            -
            -
            
            $99,000**Brian
                Alexander**
            
            2006
            
            $36,000
                (E)
            
            -
            -
            -
            -
            
            $36,000Former
                President / CEO/CFO/Director (4)
            
            2005
            
            $27,000
                (E)
            
            -
            -
            (F)
            -
            
            $27,000**Marc
                Applbaum**
            
            2005
            
            -
            
            -
            -
            -
            -
            
            -Former
                  President, CEO and Director




*
      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.
      No Executive Officer received any bonus, or nonqualified deferred compensation
      earnings during the years disclosed above, other than as provided above. 
No executive Director of the Company received any separate consideration for
      his
      service to the board other than what he received as an executive
      officer.





39


(1)Mr.
      Vesco and Mr. Simmons are not paid a salary from the Company, they have
      not  been directly issued any restricted shares or options or warrants
      from the Company, and they are reimbursed by the Company directly or indirectly
      for any Company expenses.  They are paid however through the
      Management Services Agreement with Valeska, which Mr. Simmons serves as
      President of and Mr. Vesco beneficially owns through an entity which he
      controls.  Additionally, Valeska has been issued restricted common
      stock by the Company, and has been granted warrants to purchase shares of common
      stock as described in greater detail herein.  Finally, through the
      Management Services Agreement, Valeska may be reimbursed directly for the
      reasonable business expenses of Mr. Vesco and/or Mr. Simmons in connection
      with
      their services to the Company.  The Management Services Agreement, as
      amended, is described in greater detail below under “Other Certain Relationships
      and Related Transactions.”  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 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.





(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)
      Effective July 1, 2007, the Company entered into a one year consulting agreement
      with Mr. Nafi to serve as a Director of the Company, pursuant to which he was
      to
      be paid $2,500 per month, 500,000 restricted shares of common stock (valued
      at
      $0.02 per share or $10,000), which have been issued to date, and 500,000
      restricted shares of common stock assuming he was still employed by the Company
      six months after the effective date of the agreement, which he was, but which
      shares have not been issued to date or included in the number of issued and
      outstanding shares disclosed throughout this report.





(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.


40




(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.  All
      of Mr. Jacobs’ accrued and unpaid salary was extinguished by Mr. Jacobs in
      connection with Mr. Jacobs entry into the Settlement Agreement and Mutual
      Release, described above.




(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 as such Options expired unexercised, the grant 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.




(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.





(G)
      This
      amount included $43,392 which was paid to Mr. Maxwell, and $95,412 which was
      accrued and later extinguished in connection with the Settlement Agreement
      entered into with Mr. Maxwell as described in greater detail above.





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




**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 December
      26, 2007 and by our officers and directors, individually and as a group. Except
      as otherwise indicated, all shares are owned directly.


41





**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)
            29.9%
            
            240,857,776   
                (4)
            
            61.6%President,
                Secretary, Treasuer and Director100
                Highland Park VillageDallas,
                Texas 75205**Daniel
                Vesco**
            
            0
            (5)
            0.0%
            
            -
            
            0.0%Chief
                Executive Officer, Chief Financial Officer and Director100
                Highland Park VillageDallas,
                Texas 75205**Nafi
                Onat**
            
            500,000
            
            0.2%
            
            -
            
            0.1%Director100
                Highland Park VillageDallas,
                Texas 75205**Valeska
                Energy Corp.**
            (6)
            86,200,000
            
            29.6%
            
            240,857,776   
                (7)
            
            61.4%1000
                Guadalupe Street #2CKerrville,
                Texas 78028**Capersia
                Pte. Ltd.**
            (8)
            30,000,000
            
            13.0%
            
            -
            
            6.4%96A
                Club StreetSingapore
                069464**Pagest
                Services SA**
            (9)
            40,000,000
            
            9.9%
            
            -
            
            8.4%rue
                Thalberg 2, c/oFinova
                Associes SA,Geneva
                Switerland**Structured
                Capital Corporation**
            (10)
            19,350,000
            
            8.4%
            
            -
            
            4.1%c/o
                Gordon Rees L.L.P.1900
                West Loop, Suite 1100Houston,
              Texas 77027


42




**Lucayan
                Oil and Gas Investments, Ltd.**
            (11)
            18,500,000
            
            8.0%
            
            -
            
            3.9%**Hobart
                Global Ltd.**
            (12)
            18,000,000
            
            7.8%
            
            -
            
            3.8%116
                Main Street, B.V.I.**Polaris
                Holdings, Inc.**
            (13)
            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%**
            
            **240,857,776**
            **(4)**
            **61.7%**





*
      Approximate.





(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 approximately 231,412,224  shares of common stock outstanding 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.




(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




43


(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 Pagest Services SA (“Pagest”) is Jacques Point. The amount
      of common stock beneficially owned by Pagest includes 20,000,000 shares issuable
      in connection with the conversion of $250,000 of Convertible Promissory Notes
      at
      a conversion price of $0.0125 per share, which Convertible Notes are convertible
      at the option of the holder, and 10,000,000 Class A and 10,000,000 Class B
      warrants to purchase shares of the Company’s common stock at an exercise price
      of $0.02 and $0.03, respectively.  Pursuant to the terms of the
      Convertible Promissory Notes and Warrants held by Pagest, Pagest is not able
      to
      convert the Convertible Promissory Notes or exercise the Warrants, if such
      conversion or exercise, respectively, would cause it to own more than 9.9%
      of
      the Company’s common stock, provided however, that Pagest may waive such
      ownership limitation by providing us at least 75 days prior written notice
      of
      its intention to waive such limitation.




(10)
      The
      beneficial owner of Structured Capital Corporation is
      Jostein Hauge.




(11)
      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.




(12)
      The
      beneficial owner of Hobart Global Ltd. is AIBWorthytrust Limited as Trustees
      of
      the Tyser 1998 Discretionary Settlement.





(13)
      The
      beneficial owner of Polaris Holdings, Inc. is Ingolfe Grinde.








**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
      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.





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.


44


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.




45


**OTHER
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




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.




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.


46


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.


47





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.





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 President 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.




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.


48


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
      Corp., 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.







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 prepared 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,
      which certification Mr. Maxwell later made, for the periods from June 30, 2006
      to March 31, 2007..


49





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.




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.





**Subsequent
      Events**





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).


50





In
      connection with the Reiersen Release, we paid Reiersen $2,500 and issued
      Reiersen 250,000 restricted shares of our common stock.





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;(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.




On
      or
      about November 28, 2007, we entered into a Settlement Agreement and Mutual
      Release (the “Jacobs Agreement”) by and between the Company, Frank A. Jacobs,
      our former officer and Director (“Jacobs”), and Jacobs Oil & Gas Limited, a
      British Columbia corporation (“JOGL” and collectively with Jacobs, the “Jacobs
      Parties”), Clover Capital, a creditor of the Company (“Clover”), Capersia Pte.
      Ltd., a Singapore company and a significant stockholder of the Company
      (“Capersia”), Peter Wilson, an individual and a former Director of the Company
      (“Wilson”), and Sterling Grant Capital, Inc., a British Columbia corporation,
      controlled by Mr. Wilson (“SGC” and collectively with Clover, Capersia and
      Wilson, the “Non-Jacobs Parties,” and with the Jacobs Parties, the “Interested
      Parties”).  We had various disputes with the Interested Parties
      relating to the issuances of and transfers of various shares of our common
      stock
      and various of the Interested Parties had alleged that we owed them
      consideration (the “Disputes”).  We entered into the Jacobs Agreement
      to settle the Disputes with the Interested Parties.





In
      consideration for the Company agreeing to enter into the Jacobs Agreement,
      the
      Jacobs Parties agreed to the following terms: the Jacobs Parties would return
      to
      the Company for cancellation 5,000,000 of the 7,500,000 shares purchased by
      Jacobs in March 2006 (the “Jacobs Shares”), which shares have not been
      cancelled to date, and are therefore included in the number of issued and
      outstanding shares disclosed throughout this report; all debt owed by
      Texhoma to the Jacobs Parties, known or unknown, was discharged and forgiven,
      including the total outstanding amount of the approximately $500,000 Promissory
      Note owed to Frank A. Jacobs by the Company (the “Jacobs Note”); the Company
      owes Jacobs no rights to contribution and/or indemnification in connection
      with
      Jacobs employment with the Company; Jacobs also certified the accuracy and
      correctness of the Company’s previously prepared annual and interim financial
      statements and periodic reports, relating to the time period of his employment
      from the period ending September 30, 2005 to the period ending March 31, 2007;
      the Jacobs Parties agreed they have no interest in and will not interfere with
      the issuance of or any subsequent transfers of shares to or from Lucayan Oil
      and
      Gas Investments, Ltd. (the “LOGI Shares”), a Bahamas corporation; Jacobs agreed
      to use his best efforts to answer the Company’s questions and produce documents
      in the future regarding operations and financials of the Company; Jacobs agreed
      that he no longer holds any exercisable options of the Company; the Voting
      Agreement entered into between various parties in June 2007, including Jacobs,
      remains in full affect and force against Jacobs; and Jacobs has no interest
      in
      any shares other than the aforementioned 2,500,000 shares.





Additionally,
      in consideration for the Company agreeing to enter into the Jacobs Agreement,
      the Non-Jacobs Parties agreed to the following terms: any and all debts owed
      by
      Texhoma to Clover, which purportedly totaled approximately $60,000, Capersia,
      which purportedly totaled $60,000 or any of the Non-Jacobs Parties (including
      approximately $20,000 purportedly owed to Wilson) was discharged and forgiven;
      the Non-Jacobs Parties agreed that they have no interest in and will not
      interfere with the issuance of the LOGI Shares; the Voting Agreement remains
      in
      full force and effect against Capersia; and in connection with the 30,000,000
      shares of Company stock in Capersia’s possession received through Texhoma’s
      previous purchase of a 40% interest in Black Swan Petroleum Pty. Ltd. (the
      “Capersia Shares”), Capersia
      will not transfer shares in excess of 2% of Texhoma’s then outstanding shares in
      any three (3) month period, until the second anniversary of the Jacobs
      Agreement.


51





Lastly,
      in consideration for the Jacobs Parties and the Non-Jacobs Parties agreeing
      to
      the terms of the agreement, Texhoma agreed to the following terms: Jacobs will
      retain the remaining 2,500,000 shares of Company stock and Capersia will retain
      the aforementioned 30,000,000 shares of Company stock free and clear of any
      claims to such shares by the Company; and JOGL shall retain all rights to the
      200,000 shares of Morgan Creek Energy Corp. (“Morgan Creek”) shares held in
      trust by JOGL as collateral for a promissory note issued to JOGL by the Company
      (the “Jacobs Note” and “Morgan Creek Shares”), the Company will release all
      claims to said shares or any additional shares of Morgan Creek that the Company
      may be due as a result of stock splits or share distributions.





Further,
      pursuant to the Jacobs Agreement, the Interested Parties agreed to release
      the
      Company from  any and all rights, obligations, claims, demands and
      causes of action, known or unknown, asserted or unasserted relating to the
      Disputes or the Company or its current or former Directors, and the Company
      agreed to release the Jacobs Parties and the Non-Jacobs Parties from any and
      all
      rights, obligations, claims, demands, and causes of action arising from or
      relating to the Capersia Shares, Jacobs’ employment with the Company, the Jacobs
      Note, the Jacobs Shares, the Morgan Creek shares, and the LOGI
      Shares.





As
      a
      result of the Jacobs Agreement, the Company was able to settle approximately
      $640,000 in debt which it purportedly owed to the various Interested Parties
      and
      to settle any and all other claims which such parties, in return for the
      consideration discussed above, which mainly consisted of assigning the rights
      to
      the 200,000 shares of Morgan Creek Energy Corp. stock to Frank A. Jacobs, which
      shares had an approximate value of $92,000 based on the trading price of Morgan
      Creek Energy Corp.’s common stock on the date of the Jacobs Agreement of
      $0.46.





**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


10.6(2)
            Secured
                Term Note10.7(2)
            Warrant
                Agreement (Texaurus)10.8(2)
            Warrant
                Agreement (Texhoma)


52





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


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 Onat


53





10.29(14)
            Promissory
                Note and Security Agreement with Polaris10.30(16)
            Second
                Amendment to Management Services Agreement10.31(17)
            Option
                Agreement10.32(18)
            Cooperation
                Agreement and Mutual Release with Terje Reiersen10.33(18)
            First
                Amendment to Securities Purchase Agreement, Secured Term Note and
                Registration Rights Agreement with Laurus10.34(19)
            Settlement
                Agreement and Mutual Release16.1(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.





(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.





54





(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.





(18)
            Filed
                as an exhibit to our Form 10-KSB, filed with the Commission on November
                9,
                2007, and incorporated herein by
                reference.





(19)
            Filed
                as an exhibit to our Form 8-K, filed with the Commission on December
                6,
                2007, and incorporated herein by
                reference.








b)     REPORTS
      ON FORM 8-K





We
      filed
      a report on Form 8-K on June 5, 2007, to report our entry into the Voting
      Agreement, Cooperation Agreement and Mutual Release with Max Maxwell and other
      parties, the entry into the Consulting Agreement with Nafi Onat, our Director,
      the sale of certain shares of unregistered securities, the Designation of our
      Series A Preferred Stock, and the appointment of Daniel Vesco as CEO, Director
      and interim CFO, and William M. Simmons as President, Treasurer and
      Director.




We
      filed
      a report on Form 8-K on December 6, 2007, to report our entry into the
      Settlement Agreement and Mutual Release with Frank Jacobs and related parties
      and the sale of certain units consisting of convertible promissory notes and
      warrants.




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




**AUDIT
      FEES**




During
      the fiscal year ended September 30, 2007, the Company incurred approximately
      $84,000 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, 2007 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,
      2007.





During
      the 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.


55





**AUDIT
      RELATED FEES**




None.




**TAX
      FEES**




None.




**ALL
      OTHER FEES**




None.






56


**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:
      January 15, 2008




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**
            **January
                15, 2008****Chief
                Financial Officer,****(Principal
                Financial Officer) and****Director***/s/
                William M. Simmons***William
                M. Simmons**
            **President,**
            **January
                15, 2008****Secretary,
                Treasurer and****Director**




57