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UNITED STATES
SECURITIES EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
  TBX RESOURCES, INC.
  Texas
    
    75-2592165(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
   þ o
 o þ
  o þ




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TBX Resources, Inc.
 Index
 Page #PART I  Financial InformationItem 1.
    
    Financial StatementsReport of Independent Registered Public Accounting Firm
    
    F-1Balance Sheet
    
    F-2Statements of Operations
    
    F-3Statements of Cash Flows
    
    F-4Statement of Changes In Stockholders' Equity
    
    F-5Notes to Financial Statements
    
    F-6Item 2.
    
    Management's Discussion and Analysis of Plan of Operations
    
    1Item 3.
    
    Controls and Procedures
    
    6PART II  Other Information
    
    6SIGNATURES
    
    7Certification of CEO/CFO Pursuant to Section 302Certification of CEO/CFO Pursuant to Section 906
  i




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Item 1. Financial Statements
  
 Report of Independent Registered Public Accounting Firm
     
 F-1




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TBX RESOURCES, INC.
BALANCE SHEET
AUGUST 31, 2005
 ASSETSCurrent AssetsCash and equivalents
    
    $
    56,013Trade accounts receivable
    
    
    17,230Deferred compensation expense
    
    
    1,061,992Prepaid consulting fees
    
    
    99,885Total current assets
    
    
    1,235,120Equipment and PropertyOffice furniture, fixtures and equipment
    
    
    107,164Oil and gas properties, using successful efforts accounting
Proved properties and related equipment
    
    
    2,254,9982,362,162Less accumulated depreciation, depletion and amortization
    
    
    1,614,987Total equipment and property
    
    
    747,175Other AssetsDeferred compensation expense: long-term portion
    
    
    1,327,488Prepaid Consulting and Other
    
    
    55,777Total other assets
    
    
    1,383,265Total Assets
    
    $
    3,365,560LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesTrade accounts payable
    
    $
    61,955Loans from affiliates
    
    
    117,593Taxes payable
    
    
    7,583Accrued expenses
    
    
    7,056Total current liabilities
    
    
    194,187Commitments and Contingencies
    
    
    Stockholders EquityPreferred stock- $.01 par value; authorized 10,000,000 shares;no shares outstanding
    
    
    Common stock- $.01 par value; authorized 100,000,000 shares;35,075,310 shares outstanding at August 31, 2005
    
    
    350,752Additional paid-in capital
    
    
    12,223,455Accumulated deficit
    
    
    (9,402,834
    )Total stockholders equity
    
    
    3,171,373Total Liabilities and Stockholders Equity
    
    $
    3,365,560




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TBX RESOURCES, INC.
STATEMENTS OF OPERATIONS
 For The Three Months Ended
    
    
    For The Nine Months EndedAug. 31, 2005
    
    
    Aug. 31, 2004
    
    
    Aug 31, 2005
    
    
    Aug. 31, 2004Revenues:Oil and gas sales
    
    $
    17,629
    
    
    $
    22,567
    
    
    $
    65,149
    
    
    $
    89,351Joint venture income
    
    
    300,000
    
    
    
    277,485
    
    
    
    750,836
    
    
    
    503,988Total revenues
    
    
    317,629
    
    
    
    300,052
    
    
    
    815,985
    
    
    
    593,339Expenses:Lease operating and taxes
    
    
    22,031
    
    
    
    34,879
    
    
    
    102,856
    
    
    
    88,580Joint venture expenses
    
    
    94,487
    
    
    
    94,456
    
    
    
    252,914
    
    
    
    277,508General and administrative
    
    
    890,182
    
    
    
    56,848
    
    
    
    1,032,005
    
    
    
    243,935Depreciation, depletion and amortization
    
    
    27,597
    
    
    
    89,849
    
    
    
    79,889
    
    
    
    214,097Total expenses
    
    
    1,034,297
    
    
    
    276,032
    
    
    
    1,467,664
    
    
    
    824,120Operating Income (Loss)
    
    
    (716,668
    )
    
    
    24,020
    
    
    
    (651,679
    )
    
    
    (230,781
    )Other Income (Expense):Interest and other
    
    
    247
    
    
    
    (3,659
    )
    
    
    (3,350
    )
    
    
    (11,131
    )Net Income (Loss) Before Provision for Income Taxes
    
    
    (716,421
    )
    
    
    20,361
    
    
    
    (655,029
    )
    
    
    (241,912
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (716,421
    )
    
    $
    20,361
    
    
    $
    (655,029
    )
    
    $
    (241,912
    )Net Income (Loss) Per Common Share, Basic and Diluted
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.01
    )Weighted average common shares used in calculations:Basic and diluted
    
    
    33,948,577
    
    
    
    30,772,537
    
    
    
    33,948,577
    
    
    
    30,772,537




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TBX RESOURCES, INC.
STATEMENTS OF CASH FLOWS
 For The Nine Months EndedAug. 31, 2005
    
    
    Aug. 31, 2004Cash Flows From Operating Activities:Net Loss
    
    $
    (655,029
    )
    
    $
    (241,912
    )Adjustments to reconcile net loss to net cash
flow from operating activities:Depreciation, depletion and amortization
    
    
    79,889
    
    
    
    214,097Compensation cost- common stock options
    
    
    796,495
    
    
    
    Non-cash consulting services and other
    
    
    75,434
    
    
    
    71,544Changes in operating assets and liabilities:Decrease (increase) in:Trade receivables
    
    
    349
    
    
    
    (7,716
    )Other current assets
    
    
    115
    
    
    
    (4,352
    )Increase (decrease) in:Accounts payable
    
    
    (104,650
    )
    
    
    13,933Taxes payable
    
    
    
    
    
    
    105Accrued expenses
    
    
    (12,700
    )
    
    
    30,445Deferred income
    
    
    
    
    
    
    114,508Net cash provided by for operating activities
    
    
    179,903
    
    
    
    190,652Cash Flows From Investing Activities:Cash used in the acquisition and development of properties
    
    
    
    
    
    
    (208,980
    )
    
    
    
    (208,980
    )Cash Flows From Financing Activities:Loans from affiliates
    
    
    (132,733
    )
    
    
    12,362(132,733
    )
    
    
    12,362Net Increase (Decrease) In Cash
    
    
    47,170
    
    
    
    (5,966
    )Cash at beginning of period
    
    
    8,843
    
    
    
    7,438Cash at end of period
    
    $
    56,013
    
    
    $
    1,472Supplemental Schedule of Non Cash Transactions:Common stock issued for partnership interests
    
    $
    396,610
    
    
    $
    Interest paid
    
    $
    23,714
    
    
    $
    
  F-4




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TBX RESOURCES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 Additional
    
    
    Accum-
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    ulated
    
    
    Stockholders'Shares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance November 30, 2004
    
    
    33,272,537
    
    
    
    332,725
    
    
    
    8,658,897
    
    
    
    (8,747,805
    )
    
    
    243,817Common stock issued for oil and gas
interests
    
    
    1,802,773
    
    
    
    18,027
    
    
    
    378,583
    
    
    
    
    
    
    
    396,610Common stock options granted in period
    
    
    
    
    
    
    
    
    
    
    3,185,975
    
    
    
    
    
    
    
    3,185,975Net loss for period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (655,029
    )
    
    
    (655,029
    )Balance August 31, 2005
    
    
    35,075,310
    
    
    $
    350,752
    
    
    $
    12,223,455
    
    
    $
    (9,402,834
    )
    
    $
    3,171,373
  F-5




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TBX RESOURCES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2005
 1. BUSINESS ACTIVITIES:
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 Stock-Based Compensation 
 Net Loss Per Common Share
 Recent Accounting Pronouncement 
    F-6




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3. SIGNIFICANT TRANSACTIONS:
 a.
    
    The Company has a management contract with a company in which Mr. Burroughs is
the sole shareholder. Under the agreement, the Company performs project generation,
administrative and drilling supervision services on a well-by-well basis for an agreed
upon fee. During the nine months ended August 31, 2005, the Company generated $750,836
in revenues from joint venture management fees and incurred expenses of $252,914. For
the nine months ended August 31, 2004, the Company generated 503,988 in revenues from
joint venture management fees and incurred expenses of $277,508.b.
    
    The Companys operating loan (previously included in loans from affiliates) from
its president, Mr. Tim Burroughs was paid in the current quarter. The principal paid was
$104,802 plus accrued interest of $23,714 for a total of $128,516.c.
    
    In October of 2002, the Company formed and is acting as the general partner for
the Grasslands I, Limited Partnership. The purpose of the partnership is to acquire
leases for oil and gas development in the Barnett Shale play in the Fort Worth Basin of
Texas. As of August 31, 2005 the Partnership is due approximately $114,296 in advances
that the Company used to fund operations and is included in loans from affiliates. The
Company is required to repay the advance by the end of this fiscal year.d.
    
    During the current quarter, the Company purchased a total of 22.5 partnership
units in the Johnson No. 1-H., Johnson No, 2-H and Hagansport Unit Joint Ventures from
third parties. The Company issued 1,802,773 Common Stock shares with a value of
$396,610. In September of his year the Company purchased a total of 33.5 units and
issued 2,749,702 common stock shares valued at approximately $461,174. The units were
valued at the Companys share price on the date of the Companys acceptance of the
purchase/sales agreement.e.
    
    The Company executed an amended Employment Agreement effective August 4, 2005
with Mr. Tim Burroughs, President, for three years. Under the terms of the agreement,
Mr. Burroughs is entitled to receive an annual compensation of $150,000, and other items
enumerated in the agreement, plus bonuses of up to 10% for material changes to the
Company; for example, when the Company completes a major acquisition, funding or
financing. Under the terms of the employment agreement, Mr. Burroughs received stock
options good for five years beginning with the current 2005 year, at an option price no
greater than 50% of the closing price for the shares as of the date of the amendment. As
determined by the OTCBB, the closing price on August 4, 2005, is $0.14 per share.
500,000 shares are vested on December 1st of each year (beginning December
1st 2005) for a total of 2,500,000 shares of the Companys common stock over
five years. The options are cumulative and allow Mr. Burroughs to exercise his options at any time after
vesting. The Company recorded the value of the options granted Mr. Burroughs under FASB
Statement No. 123
 F-7




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Accounting For Stock-Based Compensation. The Company calculated the fair value of
the options using the Black-Scholes option pricing model that resulted in an option value
of $1.2744 per share. Total deferred compensation cost was calculated to be $3.186
million (with an offsetting credit to Additional Paid-In Capital) that will be recognized
over Mr. Burroughs service period of three years. The total compensation cost reported
in the Statement of Operations for the three and nine months ended August 31, 2005 is
$796,495.The deferred tax asset for these options is $1,083,231. However, future
realization of this asset is uncertain; accordingly, the Company has established a
valuation allowance of $1,083,231.f.
    
    The Company amended its Articles of Incorporation in September 2005 after
receiving shareholder approval at the Companys annual shareholder meeting on August 31,
2005. Article II of the Articles of Incorporation was amended to affect a 1-for-10
reverse split of the Companys Common Stock. The effective date of the split is
September 29, 2005.
 F-8




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st st
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Name of Field
    
    Gross Producing Well Count
    
    Net Producing Well CountEast Texas Field
    
    0
    
    0Mitchell Creek & Talco Field (1)
    
    1
    
    1Manziel & Quitman Field (1)
    
    4
    
    4
  PROVED
    
    
    PROVED
    
    
    
    
    
    
    PERCENTAGE OFPROVED
    
    
    PROVED
    
    
    DEVELOPED
    
    
    DEVELOPED
    
    
    CURRENT
    
    
    RESERVES IN FIELDRESERVES:
    
    
    RESERVES:
    
    
    RESERVES:
    
    
    RESERVES:
    
    
    PRODUCTION
    
    
    TO TOTAL RESERVESNAME OF FIELD
    
    OIL
    
    
    GAS
    
    
    OIL
    
    
    GAS
    
    
    OIL:
    
    
    HELD BY THE(bbls)
    
    
    (mcf)
    
    
    (bbls)
    
    
    (mcf)
    
    
    (bbls) (1)
    
    
    COMPANYEast Texas Field
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    oil
    
    
    0gas
    
    
    0Mitchell Creek &
Talco Field
    
    
    494
    
    
    
    0
    
    
    
    494
    
    
    
    0
    
    
    
    0
    
    
    oil
    
    
    2.0gas
    
    
    0Manziel &
Quitman Field
    
    
    23,185
    
    
    
    0
    
    
    
    23,185
    
    
    
    0
    
    
    
    156
    
    
    oil
    
    
    98.0gas
    
    
    0
   Net
    
    
    
    
    
    
    
    
    
    Total Gross
    
    NetTotal Gross
    
    Productive
    
    Total Gross
    
    Net Productive
    
    Developed
    
    DevelopedGeographic Area
    
    Oil Wells
    
    Oil Wells
    
    Gas Wells
    
    Gas Wells
    
    Acres
    
    AcresEast Texas Region
    
    
    21
    
    
    
    21
    
    
    
    0
    
    
    
    0
    
    
    
    843.2
    
    
    
    838.34
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Geographic Area
    
    Gross Acres
    
    Net AcresEast Texas Region
    
    
    843.2
    
    
    
    838.34
          3




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Revenues
   Expenses
     Other Income (Expense)
 4




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Provision for Income Taxes 
 Net Income (loss) 
        5




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6




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*
 
     /s/ Tim Burroughs
 7