**UNITED STATESSECURITIES EXCHANGE COMMISSIONWashington, D.C. 20549**

 

**FORM 10-QSB**

 

**ý****             ****QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**FOR THEQUARTERLY PERIOD ENDING AUGUST 31, 2003**

 

**o****             ****TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGEACT**

 

**For the transition period from            to           .**

 

**Commission FileNumber 0-30746**

 

**TBX RESOURCES, INC.**

(Exact name of small businessissuer as specified in its charter)

 

| **Texas**                                                       |   | **75-2592165**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **12300 Ford Road  Suite 194  Dallas, TX 75234**                |
| (Address of principal executive offices)                        |
|                                                            |   |                                  |
| Issuer’s telephone number **(972)  243-2610**              |

 

Check whether the issuer: (1)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes       ý            No          o

 

State the number of shares outstanding of each of the issuer’s classes ofcommon equity, as of the latest practicable date: 30,819,701 on October 14,2003

 

Transitional Small Business Disclosure Format (check one) Yes o No ý

 

 

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**TBX Resources, Inc.**

 

**Index**

 

 
| PART I – Financial  Information |
|--------------------------------------|
|                                 |   |   |
|                                 | Item 1. | Financial Statements |
|                                 |   |   |
|                                 |   | Balance  Sheet |
|                                 |   |   |
|                                 |   | Statements of Operations |
|                                 |   |   |
|                                 |   | Statements of Cash Flows |
|                                 |   |   |
|                                 |   | Statement  of Changes In Stockholders’ Equity |
|                                 |   |   |
|                                 |   | Notes to  Financial Statements |
|                                 |   |   |
|                                 | Item 2. | Management’s Discussion  and Analysis of Plan of Operations |
|                                 |   |   |
| PART II – Other Information     |
|                                 |   |   |
| SIGNATURES                           |
|                                      |  |  |  |

 

i

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PART I –FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

**TBXRESOURCES, INC.BALANCE SHEETAUGUST 31, 2003**(Unaudited)

 
| **ASSETS**                                                                                                      |   |       | ** ** |
|-----------------------------------------------------------------------------------------------------------------|--------|------------|------------|
| **Current Assets**                                                                                              |   |       |       |
| Cash and equivalents                                                                                            |   | $          | 568        |   |
| Trade accounts receivable                                                                                       |   | 17,864     |       |
| Loans to affiliates                                                                                             |   | 6,369      |       |
| Prepaid consulting fees                                                                                         |   | 100,710    |       |
| Total current assets                                                                                            |   | 125,511    |       |
|                                                                                                            |   |       |       |
| **Equipment and Property**                                                                                      |   |       |       |
| Office furniture, fixtures  and equipment                                                                       |   | 117,693    |       |
| Oil and gas properties,  using successful efforts accounting Proved properties and related equipment            |   | 1,578,986  |       |
|                                                                                                            |   | 1,696,679  |       |
| Less accumulated  depreciation, depletion and amortization                                                      |   | 643,384    |       |
| Total equipment and property                                                                                    |   | 1,053,295  |       |
|                                                                                                            |   |       |       |
| **Prepaid Consulting and Other**                                                                                |   | 255,369    |       |
| **Total Assets**                                                                                                |   | $          | 1,434,175  |   |
|                                                                                                            |   |       |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                   |   |       | ** ** |
| **Current Liabilities**                                                                                         |   |       |       |
| Trade accounts payable                                                                                          |   | $          | 101,605    |   |
| Loan from affiliate                                                                                             |   | 145,000    |       |
| Taxes payable                                                                                                   |   | 17,795     |       |
| Deferred income-Grasslands                                                                                      |   | 205,295    |       |
| Total current liabilities                                                                                       |   | 469,695    |       |
|                                                                                                            |   |       |       |
| **Commitments and Contingencies**                                                                               |   | —     |       |
|                                                                                                            |   |       |       |
| **Stockholders’ Equity**                                                                                   |   |       |       |
| Preferred stock- $.01 par  value; authorized 10,000,000 shares; no shares outstanding                           |   | —     |       |
| Common stock- $.01 par  value; authorized 100,000,000 shares; 30,575,373 shares outstanding at August  31, 2003 |   | 308,197    |       |
| Additional paid-in capital                                                                                      |   | 8,558,426  |       |
| Accumulated deficit                                                                                             |   | (7,902,143 | )          |
| Total stockholders’ equity                                                                                 |   | 964,480    |       |
| **Total Liabilities and Stockholders’ Equity**                                                             |   | $          | 1,434,175  |   |

 

The accompanying notes are an integral part ofthese financial statements.

 

F-1

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**TBX RESOURCES, INC.**

**STATEMENTSOF OPERATIONS**

(Unaudited)

 
|                                                      |   | **For The Three Months Ended** |     | **For The Nine Months Ended** |   |
|-----------------------------------------------------------|--------|--------------------------------|----------|-------------------------------|--------|
|                                                      |   | **Aug. 31, 2003**              |     | **Aug. 31, 2002**             |   | **Aug. 31, 2003** |   | **Aug. 31, 2002** |   |
|                                                      |   |                           |     |                          |   |   |   |   |   |
| **Revenues:**                                             |   |                           |     |                          |   |   |   |   |   |
| Oil and gas sales                                         |   | $                              | 33,444   |                          | $      | 26,656 |   | $ | 147,539 |   | $ | 101,780 |   |
| Joint venture management fees                             |   | 152,287                        |     | —                        |   | 152,287 |   | — |   |
| Gain on sale of oil & gas properties                  |   | —                         |     | —                        |   | — |   | 46,071 |   |
| Total revenues                                            |   | 185,731                        |     | 26,656                        |   | 299,826 |   | 147,851 |   |
|                                                      |   |                           |     |                          |   |   |   |   |   |
| **Expenses:**                                             |   |                           |     |                          |   |   |   |   |   |
| Lease operating and taxes                                 |   | 32,477                         |     | 19,113                        |   | 76,549 |   | 84,986 |   |
| Joint venture expenses                                    |   | 89,098                         |     | —                        |   | 89,098 |   | — |   |
| General and administrative                                |   | 130,993                        |     | 224,291                       |   | 452,191 |   | 674,917 |   |
| Loss on sale and abandonment of oil & gas  properties |   | —                         |     | —                        |   | 671,197 |   | — |   |
| Depreciation, depletion and amortization                  |   | 81,543                         |     | 50,837                        |   | 245,285 |   | 115,827 |   |
| Total expenses                                            |   | 334,111                        |     | 294,241                       |   | 1,534,320 |   | 875,730 |   |
| **Operating  Loss**                                       |   | (148,380                       | )        | (267,585                      | )      | (1,234,494 | ) | (727,879 | ) |
| **Other  Income (Expense):**                              |   |                           |     |                          |   |   |   |   |   |
| Interest and other                                        |   | 95                             |     | 2,964                         |   | 488 |   | 671 |   |
| **Net  Loss Before Provision for Income Taxes**           |   | (148,285                       | )        | (264,621                      | )      | (1,234,006 | ) | (727,208 | ) |
| Provision for income taxes                                |   | —                         |     | —                        |   | — |   | — |   |
| **Net  Loss**                                             |   | $                              | (148,285 | )                             | $      | (264,621 | ) | $ | (1,234,006 | ) | $ | (727,208 | ) |
|                                                      |   |                           |     |                          |   |   |   |   |   |
| **Net  Loss Per Common Share, Basic and Diluted**         |   | $                              | (0.00    | )                             | $      | (0.01 | ) | $ | (0.04 | ) | $ | (0.03 | ) |
| Weighted average common shares used in calculations:      |   |                           |     |                          |   |   |   |   |   |
| **Basic  and diluted**                                    |   | 30,120,620                     |     | 24,300,037                    |   | 30,120,620 |   | 24,300,037 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

F-2

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**TBX RESOURCES, INC.**

**STATEMENTS OF CASH FLOWS**

(Unaudited)

 
|                                                                           |   | **For The Nine Months Ended** |       |
|--------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                           |   | **Aug. 31, 2003**             |       | **Aug. 31, 2002** |   |
|                                                                           |   |                          |       |   |   |
| **Cash Flows From Operating Activities:**                                      |   |                          |       |   |   |
| Net loss                                                                       |   | $                             | (1,234,006 | ) | $ | (727,208 | ) |
| Adjustments to reconcile  net loss to net cash flow from operating activities: |   |                          |       |   |   |
| Loss (gain) on the disposal  of oil and gas interests                          |   | 671,197                       |       | (46,071 | ) |
| Depreciation, depletion and  amortization                                      |   | 245,285                       |       | 115,827 |   |
| Non-cash  consulting services                                             |   | 96,469                        |       | 234,680 |   |
| Changes in operating assets  and liabilities:                                  |   |                          |       |   |   |
| Decrease (increase) in:                                                        |   |                          |       |   |   |
| Trade receivables                                                              |   | (10,640                       | )          | 180 |   |
| Affiliate receivables                                                          |   | 18,631                        |       | — |   |
| Other receivables                                                              |   | —                        |       | (48,614 | ) |
| Other current assets                                                           |   | 4,952                         |       | 48,067 |   |
| Increase (decrease) in:                                                        |   |                          |       |   |   |
| Accounts payable                                                               |   | (3,984                        | )          | (32,288 | ) |
| Loans from affiliates                                                          |   | (15,000                       | )          | 159,899 |   |
| Taxes payable                                                                  |   | 2,563                         |       | 1,796 |   |
| Deferred income and accrued  expenses                                          |   | 86,772                        |       | 12,904 |   |
| Net cash provided by (used)  for operating activities                          |   | (137,761                      | )          | (280,828 | ) |
|                                                                           |   |                          |       |   |   |
| **Cash Flows From Investing Activities:**                                      |   |                          |       |   |   |
| Cash used in the  acquisition and development of properties                    |   | (3,556                        | )          | (269,169 | ) |
| Cash provided by sale of  oil and gas interests                                |   | —                        |       | 255,530 |   |
|                                                                           |   | (3,556                        | )          | (13,639 | ) |
| **Cash Flows From Financing Activities:**                                      |   |                          |       |   |   |
| Cash provided by the  issuance of common stock                                 |   | 107,568                       |       | 192,938 |   |
|                                                                           |   | 107,568                       |       | 192,938 |   |
| **Net Increase (Decrease) In Cash**                                            |   | (33,749                       | )          | (101,529 | ) |
| Cash at beginning of period                                                    |   | 34,317                        |       | 111,451 |   |
| Cash at end of period                                                          |   | $                             | 568        |   | $ | 9,922 |   |
|                                                                           |   |                          |       |   |   |
| **SUPPLEMENTAL  SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES**       |   |                          |       |   |   |
|                                                                           |   |                          |       |   |   |
| Fair value of consulting services acquired for  common stock                   |   | $                             | —     |   | $ | 500,000 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

F-3

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**TBXRESOURCES, INC.STATEMENT OF CHANGES INSTOCKHOLDERS’ EQUITY**

(Unaudited)

 
|                                   |   |              |   |           |    | **Additional  Paid-In  Capital** |   | **Accum-  ulated  Deficit** |   | **Total  Stockholders’  Equity** |       |
|----------------------------------------|--------|-------------------|--------|----------------|---------|----------------------------------|--------|-----------------------------|--------|---------------------------------------|------------|
|                                   |   | **Common  Stock** |   |           |    |                             |
|                                   |   | **Shares**        |   | **Par  Value** |    |                             |   |                        |
| **Balance November 30, 2002**          |   | 26,692,373        |   | $              | 266,924 |                             | $      | 8,474,386                   |   | $                                     | (6,668,137 | ) | $ | 2,073,173 |   |
| Issuance of common stock  for cash     |   | 3,808,000         |   | 38,080         |    | 69,488                           |   | —                      |   | 107,568                               |       |
| Issuance of common stock  for services |   | 319,328           |   | 3,193          |    | 14,552                           |   | —                      |   | 17,745                                |       |
| Net loss for period                    |   | —            |   | —         |    | —                           |   | (1,234,006                  | )      | (1,234,006                            | )          |
| **Balance August 31, 2003**            |   | 30,819,701        |   | $              | 308,197 |                             | $      | 8,558,426                   |   | $                                     | (7,902,143 | ) | $ | 964,480 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

F-4

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**TBXRESOURCES, INC.**

**NOTESTO UNAUDITED FINANCIAL STATEMENTS**

**AUGUST31, 2003**

 

**1.****             BUSINESSACTIVITIES:**

 

TBX Resources,Inc., a Texas Corporation, was organized on March 24, 1995. The Company’sprincipal business activity is acquiring and developing oil and gas properties.The Company owns 23 wells and operates another 7 wells located in East Texas.Of the 23 wells located in East Texas, 4 wells are currently producing oil and2 wells have been designated as injection wells.  The remaining 17 wells are either currently shut-in, scheduled tobe brought back into production or are designated as injection wells. Inaddition, the Company has between 12% and 25% interest in 11 East Texaswells.  Also, the Company has aninterest in 6 proven wells in Oklahoma. The Company’s philosophy is to acquireproperties with the purpose of reworking existing wells and/or drillingdevelopment wells to make a profit. In addition, the Company has sponsoredjoint venture development partnerships for the purpose of developing oil and gasproperties for profit.

 

**2.****             SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES:**

 

**Basis of Presentation**– The accompanying unaudited financial statements have been prepared inaccordance with generally accepted accounting principles in the United Statesfor interim financial information and with instructions to Form 10-QSB ofRegulation S-B. They do not include all information and notes required bygenerally accepted accounting principles for complete financial statements.However, the Company believes that the disclosures are adequate to make theinformation presented not misleading. The Company’s quarterly financialstatements should be read in conjunction with the financial statements of theCompany for the year ended November 30, 2002 (including the notes thereto) setforth in Form 10-KSB.

 

In the opinion ofManagement, all adjustments (which include normal recurring adjustments exceptas disclosed herein) necessary to present a fair statement of financialposition as of August 31, 2003, results of operations, cash flows andstockholders’ equity for the nine months ended August 31, 2003 and 2002 havebeen made. Operating results for the nine months ended August 31, 2003 are notnecessarily indicative of the operating results for the full fiscal year or anyfuture period.

 

**Net Loss Per Common Share**-Stock options are excluded from the calculation of net loss per common sharebecause they are antidilutive.

## ** **

**RecentAccounting Pronouncement****–** In January 2003, the FASB issued InterpretationNo. 46, “Consolidation of Variable Interest Entities, an Interpretation ofAccounting Research Bulletin No. 51”. Under the provisions of Interpretation No. 46, certain variable interestentities, often referred to as “Special Purpose Entities”, are required to beconsolidated by the primary beneficiary of the entity if the equity investorsin the entity do no have the characteristics of a controlling financialinterest or do not have sufficient equity at risk for the entity to finance itsactivities without additional subordinated financial support from otherparties. Interpretation No. 46 is effective for all entities created oracquired prior to February 1, 2003. The provisions of Interpretation No. 46must be applied for the first interim or annual period beginning after June 15,2003. The Company has implemented the provisions of FASB Interpretation No. 46and has concluded that the adoption does not have a material impact on theCompany’s financial statements.

 

F-5

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**3.****             SIGNIFICANTTRANSACTIONS:**

 

a.     During the previous quarter, the Companywrote-off most of its investment in the Talco Field property in East Texas. TheCompany wrote-off 75% of the costs of the acreage, wells and relateddepreciation, depletion and amortization and recorded a loss on the property ofapproximately $480,000. This was a non-producing property; accordingly therewere no income or expense items associated with this property during thecurrent fiscal year. In addition, the Company abandoned its Union City prospectin Oklahoma. In this regard the Company wrote-off the costs of the acreage,wells and related depreciation, depletion and amortization and recorded a losson abandonment of approximately $192,000. Union City was a non-producingproperty; accordingly there were no income or expense items associated withthis property during the current fiscal year.

 

b.     During the current quarter, the Companyentered into a management contract with a company in which Mr. Burroughs is thesole shareholder. Under the agreement, the Company performs administrative anddrilling supervision services on a well-by-well basis for a fixed fee. Mr.Burroughs does not accept any remuneration or benefits from this company.

 

c.     During the nine months ended August 31,2003, the Company used the services of consultants who received

 319,328 shareof common stock. The Company recorded the transactions as a $17,745 charge toexpense with an offsetting credit to capital.

 

d.     The Company completed reworking two EastTexas wells at a cost of approximately $15,000. Monthly gross production fromthese wells is projected to be 450 barrels of oil.

 

e.     During the first quarter, the Companypaid back $15,000 of a $40,000 loan from its president, Mr. Tim Burroughs. TheCompany also owes $125,000 to a company in which Mr. Burroughs is the soleshareholder. The Company expects to pay back the loan from operating revenue bythe end of the current fiscal year. In addition, the Company advancedapproximately $39,000 to a company in which Mr. Burroughs is a shareholder. Thefunds advanced were used for marketing activities on behalf of the Company. Asof August 31, 2003, the Company was repaid the $39,000 advanced. Also, theCompany had previously advanced Gulftex Operating Company, a company in whichMr. Burroughs is a shareholder, $25,000 for a performance bond. To date Gulftexrepaid the Company $18,631 leaving a balance due of $6,369. Gulftex plans torepay the balance in the fourth quarter of this year.

 

f.      The Company executed an Employment Agreement for threeyears effective December 1, 1999 with Mr. Tim Burroughs, President. Under theterms of the agreement, Mr. Burroughs received stock options good for fiveyears from the date of issuance to purchase up to 500,000 shares of theCompany’s common stock a year for five years at a price which shall not begreater than 50% of the average bid price for the shares during the previousquarter in which the options are exercised. The options are cumulative thusallowing Mr. Burroughs to exercise the options through November 30, 2004 for atotal of 2,500,000 shares. As of November 30, 2002, Mr. Burroughs has theoption to purchase 1,500,000 shares of the Company’s common stock.  The fair value of the options will be recordedas compensation expense when a reasonable estimate of such costs are availableor the amount Mr. Burroughs has to pay is known. Based on the formula forcalculating the purchase price, material charges to compensation expense may berecorded in future years.

 

g.     On October3, 2002 the Company entered into a consulting agreement with Telvest, Inc.Under the terms of the agreement, Telvest provides advisory services forforeign investments (Regulation S) for a fee of 3% of all funds raised. Theagreement ran through January 31, 2003. The company raised approximately$108,000 in equity capital under this agreement.

 

F-6

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h.     In September of 2002, the Company formedand is acting as the general partner for the “Grasslands I, LimitedPartnership”. The purpose of the partnership is to acquire 2,800 acres for oiland gas development in the Barnett Shale play in the Fort Worth Basin of WiseCounty, Texas. The Company is to be reimbursed on a turnkey basis fororganization and offering cost, lease acquisition costs and administrativeexpenses. Revenue earned to date is $88,477 offset by expenses of $49,233. Asof August 31, 2003 the Company has deferred income of approximately $205,000related to the venture.

 

F-7

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Item2.  Management’s Discussion and Analysis andResults of Operation

 

CAUTIONARY STATEMENT

 

Statements in this report whichare not purely historical facts, including statements regarding the Company’santicipations, beliefs, expectations, hopes, intentions or strategies for thefuture, may be forward-looking statements within the meaning of Section 21E ofthe Securities Act of 1934, as amended. All forward-looking statements in thisreport are based upon information available to us on the date of the report.Any forward-looking statements involve risks and uncertainties that could causeactual results or events to differ materially from events or results describedin the forward-looking statements. Readers are cautioned not to place unduereliance on these forward-looking statements.

 

RECENT DEVELOPMENTS

 

During the currentquarter, the Company entered into a management contract with a company in whichMr. Burroughs is the sole shareholder. Under the agreement, the Companyperforms administrative and drilling supervision services on a well-by-wellbasis for a fixed fee. The Company has earned approximately $152,000 andincurred costs of approximately $89,000 through August 31,2003. During theprevious quarter, the Company recorded a loss on its Talco Field property inEast Texas due to expired leases. The Company wrote-off 75% of the costs of theacreage, wells and related depreciation, depletion and amortization andrecorded a loss of approximately $484,424. By abandoning the property at thistime, the Company was able to avoid a remedial liability estimated to beapproximately $200,000. The property was shut-in; accordingly, there were noincome or expense items associated with this property during the current fiscalyear. The property is currently being leased by a company in which ourpresident, Tim Burroughs is the sole shareholder. The Company has between 12%and 25% working interest in the property that is valued at $161,475 (25% of theNovember 28, 2002 net book value). Thus, the Company will participate in thepotential increased production from this property without incurring anydevelopment costs. Management is of the opinion this interest in the developedproperty may yield net income of approximately $400,000 in the first full yearof production alone. In addition, the Company plugged and abandoned its UnionCity prospect that was located in Oklahoma. In this regard the Companywrote-off the costs of the acreage, wells and related depreciation, depletionand amortization and recorded a loss on abandonment of approximately $191,511.Union City was a non-producing property; accordingly, there were no income orexpense items associated with this property during the current fiscal year.

 

In September of the previous year, we obtained anoption to purchase 2,800 acres of oil and gas leases in the Barnett Shale playin the Fort Worth Basin of Wise County, Texas. In October 2002, we formed the“Grasslands I, Limited Partnership” in which we are acting as the GeneralPartner for the purpose of acquiring the Wise County acreage for developmentdrilling. The Company has a 20% interest in the Partnership and is reimbursedon a turnkey basis for 100% of the organization and offering costs, leaseacquisition costs and administrative expenses. Our cumulative revenue from thePartnership is $88,477 offset by our expenses of $49,233. On October 3, 2002, we entered into a consultingagreement with Telvest, Inc. Under the terms of this agreement, Telvestprovides advisory services for foreign investments (Regulation S) for a fee of3 % of all funds raised. The agreement ran through January 31, 2003.

 

DESCRIPTION OF PROPERTIES

 

GENERAL: The following isinformation concerning production from our oil and gas wells, and ourproductive wells and acreage and undeveloped acreage. Our oil and gasproperties are located within the northern part of the east Texas salt basin.The earliest exploration in this area dates back to the early 1920s and 1930s,when frontier oil producers were exploring areas adjacent to the famous “eastTexas field” located near the town of Kilgore, Texas. We have leasehold rightsin three oil and gas fields located in Gregg, Hopkins, Franklin, Panola, andWood Counties, Texas. We also acquired several wells and acreages in Oklahoma,which are described below after the Texas properties.

 

RESERVES REPORTED TO OTHERAGENCIES. We are not required and do not file any estimates of total, provednet oil or gas reserves with reports to any federal authority or agency.

 

1

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PROPERTIES. The following is abreakdown of our properties:

 

| **Name of Field**                    |   | **Gross Producing Well Count** |   | **Net Producing Well Count** |
|--------------------------------------|--------|--------------------------------|--------|------------------------------|
|                                 |   |                           |   |                         |
| East Texas Field                     |   | 0                              |   | 0                            |
| Mitchell Creek & Talco Field (1) |   | 1                              |   | 1                            |
| Manziel & Quitman Field (1)      |   | 3                              |   | 3                            |

 

The following informationpertains to our properties as of August 31, 2003:

 
| **NAME OF**  FIELD                |   | **PROVED**  RESERVES:  OIL  (bbls) |       | **PROVED**  RESERVES:  GAS  (mcf) |       | **PROVED**  DEVELOPED  RESERVES:  OIL  (bbls) |       | **PROVED**  DEVELOPED  RESERVES:  GAS  (mcf) |       | **CURRENT**  PRODUCTION  OIL:  (bbls) (1) |       | **PERCENTAGE OF**  RESERVES IN FIELD  TO TOTAL RESERVES  HELD BY THE  COMPANY |       |
|-----------------------------------|--------|------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
|                              |   |                               | ** ** |                              | ** ** |                                          | ** ** |                                         | ** ** |                                      | ** ** |                                                                          | ** ** |   | ** ** |
| East Texas Field                  |   | 8,332                              |       | 0                                 |       | 8,332                                         |       | 0                                            |       | 0                                         |       | oil                                                                           |       | 4.9 |   |
|                              |   |                               |       |                              |       |                                          |       |                                         |       |                                      | gas        |                                                                          | 0          |   |
|                              |   |                               |       |                              |       |                                          |       |                                         |       |                                      |       |                                                                          |       |   |   |
| Mitchell  Creek & Talco Field |   | 43,805                             |       | 0                                 |       | 43,805                                        |       | 0                                            |       | 294                                       |       | oil                                                                           |       | 14.7 |   |
|                              |   |                               |       |                              |       |                                          |       |                                         |       |                                      | gas        |                                                                          | 0          |   |
|                              |   |                               |       |                              |       |                                          |       |                                         |       |                                      |       |                                                                          |       |   |   |
| Manziel  &  Quitman Field     |   | 136,952                            |       | 0                                 |       | 136,952                                       |       | 0                                            |       | 310                                       |       | oil                                                                           |       | 80.4 |   |
|                              |   |                               |       |                              |       |                                          |       |                                         |       |                                      | gas        |                                                                          | 0          |   |

 

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(1)  The current production figurespecified above is for the production for the month of August 2003.

 

2

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PRODUCTIVE WELLS AND ACREAGE 

 
| **Geographic Area** |   | **Total Gross****Oil Wells** |   | **Net****Productive  Oil Wells** |   | **Total Gross****Gas Wells** |   | **Net Productive****Gas Wells** |   | **Total Gross****Developed  Acres** |   | **Net****Developed  Acres** |
|---------------------|--------|------------------------------|--------|----------------------------------|--------|------------------------------|--------|---------------------------------|--------|-------------------------------------|--------|-----------------------------|
|                |   |                         |   |                             |   |                         |   |                            |   |                                |   |                        |
| East Texas Region   |   | 32                           |   | 23.75                            |   | 0                            |   | 0                               |   | 1,166.34                            |   | 920.34                      |

 

Notes:

 

1. Total Gross Oil Wells were calculated by subtracting 8 wellsdesignated as Injection Wells and 21 wells either sold or plugged and abandonedfrom the 69 wells owned and/or operated by TBX Resources, Inc as of November30, 1999.

 

2. Net Productive Oil Wells were calculated by multiplying the workinginterest held by TBX Resources, Inc. in each of the 32 Gross Oil Wells andadding the resulting products.

 

3. Total Gross Developed Acres is equal to the total surface acres of theproperties in which TBX Resources, Inc. holds an Interest.

 

4. Net Developed Acres is equal to the Total Gross Developed Acresmultiplied by the percentage of the total working interest held by TBXResources, Inc. in the respective properties.

 

5. All acreage in which we hold a working interest as of November 30,1999 had existing wells located thereon; thus all acreage leased by TBXResources, Inc. may be classified as developed.

 

| **Geographic  Area** |   | **Gross Acres** |   | **Net Acres** |
|----------------------|--------|-----------------|--------|---------------|
| East Texas Region    |   | 1,166.34        |   | 920.34        |

 

Note:

 

1. Acreage that has existing wells and may be classified as developed mayalso have additional development potential based on the number of produciblezones beneath the surface acreage.

 

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ANADARKO BASIN- WESTERN OKLAHOMA

 

No additional working interests were purchased in the current fiscalyear. Four of the six wells we currently hold an interest in are producing gas.Although the wells are currently producing natural gas there can be noassurance that they will continue to do so. During the current quarter, aseventh well was plugged and abandoned.

 

In addition to the above described wells we own working interests in twolease tracts; one located in Ellis County, Oklahoma with a gross acreageinterest of 27.5% in 1,505 acres and the second located in Canadian County,Oklahoma, constituting a gross acreage interest of 20% in 240 acres. The leaseswere purchased for the sum of $83,700 and $19,200, respectively. The Companyalso has a 3% interest in 640 acres in Beckham County, Oklahoma.

 

CRITICAL ACCOUNTING POLICIES

 

A summary of significantaccounting policies is included in Note 2 to the audited financial statementsincluded on Form 10-KSB for the year ended November 30, 2002 as filed with theUnited States Securities and Exchange Commission. Management believes that theapplication of these policies on a consistent basis enables the Company toprovide useful and reliable financial information about our operating resultsand financial condition.

 

The preparation of financialstatements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results may differ from thoseestimates.

 

RESULTS OF OPERATIONS

 

The Company incurredan operating loss of $1,234,494 for the nine months ended August 31, 2003 ascompared to an operating loss of $727,879 for the nine months ended August 31,2002. The increase in the operating loss of $506,615, 69.6%, is discussedbelow.

 

**Revenues**– Revenues generated from oil and gas sales, joint venture management fees andthe disposal of oil and gas properties increased $151,975, 102.7%, from  $147,851 for the nine months ended August31, 2002 to $299,826 for the nine months ended August 31, 2003.

 

During the ninemonths ended August 31, 2002, the Company sold its interest in three producingOklahoma properties for approximately $255,000 in cash. The Company wrote offthe costs of the wells and related depreciation, depletion and amortization andreported a net gain of approximately $46,000 on the transactions. The Companyhas no sales of oil and gas properties for the nine months ended August 31,2003.

 

During the ninemonths ended August 31, 2003, the Company generated approximately $147,539 inrevenue from oil and gas sales as compared to $101,780 for the nine monthsended August 31, 2002. The $45,759, 45.0%, increase was due to the payment ofapproximately $52,000 in prior years oil runs for the correction of an error byone of the Company’s oil purchasers. During the past nine months, oil sales onthe Texas properties increased approximately $48,000 due to the production fromtwo additional wells brought on-line during the current fiscal year. Themajority of the Texas wells remain shut-in awaiting re-work or the designationas injection wells. Revenue from the Company’s Oklahoma properties decreasedapproximately $54,000 in the current fiscal year that resulted from last year’ssale of the Company’s interest in three producing properties (see above) and adecline in production from the remaining properties.

 

During the currentquarter, the Company entered into a management contract with a company in whichMr. Burroughs is the sole shareholder. Under the agreement, the Companyperforms administrative and drilling supervision services on a

 

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well-by-well basis for afixed fee. The Company has earned approximately $152,000 and incurred costs ofapproximately $89,000 through August 31,2003.

 

**Expenses–** Total expenses increased $658,590, 75.2%, from $875,730 forthe nine months ended August 31, 2002 to $1,534,320 for the nine months endedAugust 31, 2003.

 

Lease operatingand taxes decreased $8,437, 9.9%, from $84,986 for the nine months ended August31, 2002 to $76,549 for the nine months ended August 31, 2003. The decrease isprimarily the result of decreased expenses for the Texas oil wells and to alesser extent the sale of the Company’s interest in three Oklahoma gas wells.

 

During the currentquarter, the Company entered into a management contract with a company in whichMr. Burroughs is the sole shareholder. Under the agreement, the Companyperforms administrative and drilling supervision services on a well-by-wellbasis for a fixed fee. The Company has earned approximately $152,000 andincurred costs of approximately $89,000 through August 31,2003.

 

Generaland administrative expenses decreased approximately $128,515, 28.8%, from$446,965 for the nine months ended August 31, 2002 to $318,450 for the ninemonths ended August 31, 2003. The decrease is primarily due to lower consultingfees, professional fees, public relations and contract labor expenses offsetsomewhat by higher compensation and employee related costs, and generalexpenses.

 

Losson oil and gas properties was $671,197 for the nine months ended August31, 2003. The Company wrote-off 75% of the costs of the acreage, wells andrelated depreciation, depletion and amortization and recorded a loss onabandonment of $479,686. In addition, the Company plugged and abandoned itsUnion City prospect that was located in Oklahoma. In this regard the Companywrote-off the costs of the acreage, wells and related depreciation, depletionand amortization and recorded a loss on abandonment of $191,511. There were nocomparable losses for the same period last year.

 

Depreciation,depletion and amortization increased $129,458, 111.8%, from $115,827 for thenine months ended August 31, 2002 to $245,285 for the nine months ended August31, 2003. The increase is due to a change in estimate of future lives of ourproperties. Future charges to depreciation, depletion, and amortization may besubstantially higher as a result of increased production or changes in reserveprices and/or quantities.

 

**OtherIncome** - Other income decreased from $671 for the nine monthsended August 31, 2002 to $488 for the nine months ended August 31, 2003. The$183 decrease is attributable a reduction in the Company’s money market cashaccount.

## ** **

## **Provisionfor Income Taxes –**The Company has not provided for tax benefits associatedwith its losses for the nine months ended August 31, 2003 and August 31, 2002.

 

## **Netloss –**The Company’s net loss increased approximately $506,798, 69.7%; from$727,208 for the nine months ended August 31, 2002 to $1,234,006 for the ninemonths ended August 31, 2003. The increase in the loss is primarilyattributable to the abandonment of the Company’s Talco and Union Cityproperties and to a much lesser extent compensation and employee related costsand general expenses offset by decreases in consulting and professional fees,public relations and contract labor costs.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of August 31, 2003, we havetotal assets of $1,434,175 of which net oil and gas properties amount to$1,011,357 or 70.0% of the total assets. The Company’s accumulated lossesthrough August 31, 2003 totaled $7,902,143. At August 31, 2003, we have $568 incash and money market accounts. Our ratio of current assets to currentliabilities is 0.3:1; we have no long-term debt. As of August 31, 2003, ourshareholders equity was a positive $964,480.

 

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We have funded operations fromcash generated from the sale of common stock, the sale of oil and gasproperties, joint venture management fees and loans from affiliates. TheCompany’s cash used for operating activities totaled $137,761 and $280,828 forthe nine months ended August 31, 2003 and August 31, 2002, respectively. Cashprovided by the disposal of oil and gas properties totaled $255,530 in theprevious year while there were no sales for the same period this year. TheCompany’s capital investments totaled $3,556 and $269,169 for the nine monthsended August 31, 2003 and August 31, 2002, respectively. Cash provided by the saleof common stock totaled $107,568 during the nine months ended August 31, 2003while cash provided by the sale of common stock totaled $192,938 for the sameperiod last year.

 

PLAN OF OPERATION FOR THEFUTURE. We currently expect to generate sufficient revenues from the sale ofproduction to pay all costs associated with our company for at least thefollowing twelve months. We think that this sufficient revenue will come fromtwo sources: increased prices for oil production and increased number of wells broughton-line. Specifically, over the past twelve months, the price paid for oilproduction in the area in which our wells are located has increasedsignificantly. This increase in oil price has made it to where more of ourwells are capable of commercial production such that those wells that have beenshut in may be reopened and production commenced therefrom, thus additionallyincreasing our revenues. However, our existing plan is subject to alterationsbased on opportunities that may present themselves. These plans may involveincreased joint venture activities and selling additional shares of our commonstock.

 

We may purchase new oil and gasproperties or additional equipment to operate same. Any such additionalpurchases will be done on an “as needed” basis and will only be done in thoseinstances in which we believe such additional expenditures will increase ourprofitability. Our ability to acquire additional properties or equipment isstrictly contingent upon our ability to locate adequate financing to pay forthese additional properties or equipment. There can be no assurance that wewill be able to obtain the opportunity to buy properties or equipment that aresuitable for our investment or that we may be able to obtain financing to payfor the costs of these additional properties or equipment at terms that areacceptable to us. Additionally, if economic conditions justify the same, we mayhire additional employees although we do not currently have any definite plansto make additional hires.

 

The oil and gas industry issubject to various trends. In particular, at times crude oil prices increase inthe summer, during the heavy travel months, and are relatively less expensivein the winter. Of course, the prices obtained for crude oil are dependent uponnumerous other factors, including the availability of other sources of crudeoil, interest rates, and the overall health of the economy. We are not aware ofany specific trends that are unusual to our company, as compared to the rest ofthe oil and gas industry.

 

We do not currently have anymaterial commitments for capital expenditures of which we are aware. However,if we decide to purchase additional oil and gas properties, the funds we wouldneed to acquire such properties could be material. However, we will not acquireproperties without obtaining, in advance, suitable financing to fund thepurchase of such properties. In general, although conditions have improved overthe past nine months, many financial institutions are reluctant to loan amountsto oil and gas companies, primarily based upon the significant oil pricefluctuations during the past twenty-four months. As a general rule, as theprice of oil increases, the ability to obtain financing for projects in the oiland gas industry increases. However, because of the cycles experienced in theoil and gas industry, there can be no assurance that we will be able to obtainfinancing for projects it wishes to pursue, regardless of the economicviability we envision for the project, if institutional funds are notavailable. We currently do not have any firm commitments by anyone to loan orotherwise make available to us funds necessary to conduct our operations.

 

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PARTII. OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS   None.

 

Item 2. CHANGES IN SECURITIES

 

During the nine months ended August 31, 2003, theCompany sold 3,808,000 shares of its common stock under a consulting agreementwith Televest, Inc. that expired on January 31, 2003. In addition, the Companyissued 319,328 shares of common stock to consultants for services rendered.

 

Item 3. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls andProcedures

 

Our President/Chief Financial Officer conducted anevaluation of our “disclosure controls and procedures” (as defined in theSecurities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-14(c)) within 90days of the filing date of this Quarterly Report on Form 10-QSB (the“Evaluation Date”). Based on the evaluation, our President/Chief FinancialOfficer has concluded that as of the Evaluation Date, our disclosure controlsand procedures are effective to ensure that all material information requiredto be filed in this Quarterly Report on Form 10-QSB has been made known to themin a timely fashion.

 

Changes in Internal Controls

 

There have been no significant changes (includingcorrective actions with regard to significant deficiencies or materialweaknesses) in our internal controls or in other factors that couldsignificantly affect these controls subsequent to the evaluation date set forthabove.

 

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS:

 

See attached Schedule 14A, Proxy Statement Pursuant to Section 14(a) ofthe Securities Exchange Act of 1934.

 

Item 5. OTHER INFORMATION

 

None.

 

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

 

No reports on Form 8-K were filed during the period covered by this Form10-QSB.

 

EXHIBITS:

31.1 Certification by Tim P. Burroughs, Chief Executive Officer/ChiefFinancial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002.

 

32.1 Certification by Tim P. Burroughs, Chief Executive Officer/ChiefFinancial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURES

 

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned by the undersigned, hereunto duly authorized.

 
| TBX RESOURCES, INC.                                            |
|----------------------------------------------------------------|
|                                                           |
| DATE:  October 14, 2003                                   |
|                                                           |
| SIGNATURE:                                                     |   /s/ Tim Burroughs |   |
| TIM BURROUGHS, CHIEF EXECUTIVE OFFICER/CHIEF FINANCIAL OFFICER |

 

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