U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                    ----------------------------------------

                                   FORM 10-KSB

|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934

For the fiscal year ended September 30, 2005

|_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

For the transition period from October 1, 2004 to September 30, 2006

Commission File No. 0-32335

                  TX HOLDINGS, INC. (formerly R Wireless, Inc.)
                 (Name of small business issuer in its charter)

                           Georgia                    58-2558702
                (State or Other Jurisdiction       (I.R.S. Employer
                             of                   Identification No.)
                      Incorporation or
                        Organization)


                        1701 North Judge Ely Blvd. #6420
                              Abilene, Texas 79601
                    (Address of Principal Executive Offices)

                                 (682) 286 3116
              (Registrant's Telephone Number, Including Area Code)

              Securities Registered Under Section 12(b) of the Act:

                                      None

              Securities Registered Under Section 12(g) of the Act:

                                  Common Stock
                                (Title of class)

     Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.

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

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of 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. [ ]

     The Registrant's did not have revenues for the fiscal year ended September
30, 2005

     The aggregate market value of the Common Stock held by non-affiliates,
based on the average closing bid and asked price of the Common Stock on December
8, 2006, was $11,033,480.


                                       1
<PAGE>


     There are approximately 13,966,431 shares of common voting stock of the
Registrant held by non-affiliates. On December 8, 2006 the average bid and asked
price was $ 0.79

     As of December 8, 2006, there were 27,002,558 shares of common stock
outstanding.



                                       2
<PAGE>

Forward-Looking Statements and Cautionary Words

This annual report on Form 10-KSB ("Annual Report") for the period ending
September 30, 2005 ("fiscal year 2005"), contains forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995 and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements speak only as of the date of this Form 10-KSB or the amendment
thereto in which they appear, as the case may be. The Company expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect any
change in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based. In
addition, particular attention is called to cautionary words such as "may,"
"will," "expect," "anticipate," "estimate" and "intend" where they appear
herein. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors" that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

Disclosure Regarding Forward-Looking Statements Included in this report are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements, other than statements of historical facts, included
in this Form 10-KSB which address activities, events or developments which we
expect or anticipate will or may occur in the future are forward-looking
statements.

As used in this Annual Report, the terms "we", "us", and "our" mean TX
Holdings, Inc.

Glossary of Terms
We are engaged in the business of exploring for and producing oil and natural
gas. Oil and gas exploration is a specialized industry. Many of the terms used
to describe our business are unique to the oil and gas industry. The following
glossary clarifies certain of these terms that may be encountered while reading
this report:

"Bbl" means barrel or barrels, used in this annual report to refer to crude oil
or other liquid hydrocarbons.

"Bcf" means billion cubic feet, used in this annual report in reference to
gaseous hydrocarbons. "BcfE" means billions of cubic feet of gas equivalent,
determined using the ratio of six thousand cubic feet of gas to one barrel of
oil, condensate or gas liquids.

"Farmout" involves an entity's assignment of all or a part of its interest in or
lease of a property in exchange for consideration such as a royalty.

"Gross" oil or gas well or "gross" acre is a well or acre in which we have a
working interest. "Mcf" means thousand cubic feet, used in this annual report to
refer to gaseous hydrocarbons.

"McfE" means thousands of cubic feet of gas equivalent, determined using the
ratio of six thousand cubic feet of gas to one barrel of oil, condensate or gas
liquids.

"MMcf" means million cubic feet, used in this annual report to refer to gaseous
hydrocarbons. "MBbl" means thousand barrels, used in this annual report to refer
to crude oil or other liquid hydrocarbons.

"Net" oil and gas wells or "net" acres are determined by multiplying "gross"
wells or acres by our percentage interest in such wells or acres.

                                       3
<PAGE>

"Oil and gas lease" or "Lease" means an agreement between a mineral owner, the
lessor, and a lessee which conveys the right to the lessee to explore for and
produce oil and gas from the leased lands. Oil and gas leases usually have a
primary term during which the lessee must establish production of oil and or
gas. If production is established within the primary term, the term of the lease
generally continues in effect so long as production occurs on the lease. Leases
generally provide for a royalty to be paid to the lessor from the gross proceeds
from the sale of production.

"Prospect" means a location where both geological and economical conditions
favor drilling a well. "Proved oil and gas reserves" are the estimated
quantities of crude oil, natural gas and natural gas liquids which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions, i.e. prices and costs as of the date the estimate is made. Prices
include consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions. Reservoirs
are considered proved if economic recovery by production is supported by either
actual production or conclusive formation test. The area of a reservoir
considered proved includes (A) that portion delineated by drilling and defined
by gas-oil and/or oil-water contacts, if any, and (B) the immediately adjoining
portions not yet drilled, but which can reasonably be judged as economically
productive on the basis of available geological and engineering data. In the
absence of information on fluid contacts the lowest known structural occurrence
of hydrocarbons controls the lower proved limit of the reservoir.

"Proved developed oil and gas reserves" are those proved reserves that can be
expected to be recovered through existing wells with existing equipment and
operating methods. Additional oil and gas reserves expected to be obtained
through the application of fluid injection or other improved secondary or
tertiary recovery techniques for supplementing the natural forces and mechanisms
of primary recovery are included as "proved developed reserves" only after
testing by a pilot project or after the operation of an installed recovery
program has confirmed through production response that increased recovery will
be achieved.

"Proved undeveloped oil and gas reserves" are those proved reserves that are
expected to be recovered from new wells on undrilled acreage, or from existing
wells where a relatively major expenditure is required. Reserves on undrilled
acreage are limited to those drilling units offsetting productive units that are
reasonably certain of production when drilled. Proved reserves for other
undrilled units are claimed only where it can be demonstrated with reasonable
certainty that there is continuity of production from the existing productive
formation. Estimates for proved undeveloped reserves attributable to any acreage
do not include production for which an application of fluid injection or other
improved recovery technique is required or contemplated, unless such techniques
have been proved effective by actual tests in the area and in the same
reservoir.

"Royalty interest" is a right to oil, gas, or other minerals that are not
burdened by the costs to develop or operate the related property.

"Working interest" is an interest in an oil and gas property that is burdened
with the costs of development and operation of the property.


                                       4
<PAGE>
<TABLE>
<CAPTION>

                                   FORM 10-KSB
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2005

                                      INDEX


<S>                                                                                                               <C>
PART I____________________________________________________________________________________________________________6

   Item 1 Description of Business_________________________________________________________________________________6

   Item 2 Description of Property________________________________________________________________________________19

   Item 3 Legal Proceedings______________________________________________________________________________________21

   Item 4 Submission of Matters to a Vote of Security Holders____________________________________________________21

PART II__________________________________________________________________________________________________________21

   Item 5 Market for Common Equity and Related Stockholder Matters_______________________________________________21

   Item 6 Management's Discussion and Analysis or Plan of Operations_____________________________________________24

   Item 7 Financial Statements___________________________________________________________________________________27

   Item 8 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure___________________57

   Item 8A Controls and Procedures_______________________________________________________________________________58

   Item 8B Other Information_____________________________________________________________________________________58

PART III_________________________________________________________________________________________________________59

   Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
   Exchange Act__________________________________________________________________________________________________59

   Item 10 Executive Compensation________________________________________________________________________________60

   Item 11 Security Ownership of Certain Beneficial Owners and Management________________________________________62

   Item 12 Certain Relationships and Related Transactions________________________________________________________63

   Item 13 Exhibits and Reports on Form 8-K______________________________________________________________________65

   Item 14 Principal Accountants Fees and Service________________________________________________________________67
</TABLE>

                                       5
<PAGE>

                                     PART I

Item 1 Description of Business

Overview of Business

TX Holdings, Inc. ("TX Holdings" or the "Company"), formerly named R Wireless,
Inc. ("RWLS") and, prior to that, named HOM Corporation ("HOM"), is a Georgia
corporation incorporated on May 4, 2000, as a holding company. On December 5,
2004 the Company began to structure itself into an oil & gas production and
exploration company. The Company acquired oil & gas leases and has begun
development of oil & gas producing operations as of November 5, 2006.

History and Corporate Structure

TX Holdings was incorporated on May 4, 2000 as HOM Corporation ("HOM"), a
Georgia corporation as a holding company to control two wholly-owned operating
subsidiaries, Homes By Owners, Inc. ("Homes"), a Georgia corporation
incorporated December 6, 1999, and Direct Lending, Inc. ("Direct"), a Georgia
corporation incorporated January 9, 1997. Homes publishes and distributes a
monthly magazine, HOMES BY OWNERS, listing residential properties in the
Augusta, Georgia/Aiken, South Carolina metropolitan area for sale by their
owners, as well as listing these homes on its website, www.homesbyowners.net.
Direct is a licensed mortgage broker working with various financial institutions
and underwriters.

Pursuant to Georgia law, on July 5, 2000 the Chairman Robert S. Wilson
established HOM Corporation with minimal initial investment such that Direct
shareholders became shareholders of HOM (TX Holdings) and Direct became a wholly
owned subsidiary of HOM (TX Holdings). Simultaneously, Homes shareholders became
shareholders of HOM (TX Holdings) and Home became a wholly owned subsidiary of
HOM (TX Holdings).

On December 12, 2002, MA&N acquired control of the Company through purchase of
4,647,626 shares of common stock representing 51%of the 9,112,992 outstanding
shares of common stock in HOM (TX Holdings) and causing the majority of the
directors of HOM (TX Holdings) to be persons associated with MA&N. The name of
the Company was changed from HOM Corporation to R Wireless, Inc. effective as of
January 22, 2003. The consideration for this purchase was (a) the provision of
Internet Service Provider, or ISP, wireless service from not less than 5 nodes,
(b) MA&N would provide consulting services for at least two years on financial
and management matters to the Company, (c) arrange for personnel to manage the
Company, (d) development of a business plan by MA&N to acquire additional
business operations in the ISP wireless business and the subsequent
administration of such plan, and (e) fund the accounting and legal costs
associated with compliance to United States Securities and Exchange Commission
regulations. Furthermore, the following changes were implemented: CUSIP number
was changed to 74976E 10 4 as of February 4, 2003, and the trading symbol was
changed to RWLS as of February 19, 2003.

In early 2003 the Company contemplated business opportunities in the wireless
fidelity business, more commonly known as Wi-Fi industry (the term is used
generically when referring to any type of 802.11 network, whether 802.11b,
802.11a, dual-band, etc.). Due to the competitive nature of the Wi-Fi business,
resulting from numerous entries of large companies with significant research and
development capabilities, TX Holdings has not been able to establish itself in
this industry. Various acquisitions have been considered, some of which required
extensive due diligence and research, but none of these were completed.

On December 5, 2004, the Company announced plans to change business direction
based on recent global political and economic developments that drastically
increased the price of energy. The reduced supply of oil and gas from OPEC
member countries and other exporters led to the surge in energy prices. These
trends opened new opportunities for local companies in the oil and gas sector
and the company decided to pursue this opportunity. In connection with this
decision, the Company subsequently announced its name change to "TX Holdings,
Inc." and acceptance of such with the Secretary of the State of Georgia on
September 1, 2005. Management believes the new name reflects the new business
direction of the Company, specifically the acquisition of producing oil and gas
properties. Furthermore, the following changes were implemented: CUSIP number
changed to 873 11R 101 as of September 6, 2005, and the trading symbol changed
to TXHG as of September 19, 2005.

                                       6
<PAGE>

On September 4, 2003, the Company signed an agreement with Jim Evans ("Evans"),
sole owner of Freedom Homes, Inc. ("Old Freedom"), established in Wrens, Georgia
and currently based in Augusta, Georgia, a manufactured housing dealer. The
agreement was for the acquisition of Old Freedom by Freedom Homes, Inc.
("Freedom"), formerly named Homes By Owner, Inc., in exchange for stock of
Freedom that gave Evans 70% of the outstanding common stock of Freedom, left TX
Holdings with 25% of the outstanding common stock of Freedom, and gave Robert W
Wilson ("Wilson") 5% of the outstanding common stock of Freedom for services in
connection with the transaction and otherwise. (SEE EXHIBIT 2.3). The
transaction was subject to a condition subsequent that a financing for Freedom
of $500,000 must be completed by March 5, 2004, which subsequently was extended
to April 5, 2004 (SEE EXHIBIT 2.5). The condition subsequent was not fulfilled,
and consequently the shares of Freedom were returned to Evans, and the shares of
Homes were returned to TX Holdings. As a result, TX Holdings owned 95% of the
outstanding common stock of Freedom and Wilson owned 5%.

Effective March 25, 2005, Jim Evans ("Evans", the owner of all the outstanding
common stock of Old Freedom), Old Freedom, TX Holdings (the owner of 95% of the
outstanding common stock of Freedom), Freedom and Robert Wilson ("Wilson", the
owner of 5% of the outstanding common stock of Freedom) executed an Agreement to
Merge that provided for the merger of Old Freedom into Freedom, with Freedom
(then named Homes By Owners, Inc.) taking the name Freedom Homes, Inc. following
the effectiveness of the merger. (SEE EXHIBIT 10.4) As a result of the merger,
Evans would own 4,100, 000 shares (63.1%), TX Holdings would own 2,100,000
shares (32.3%) and Wilson would own 300,000 shares (4.6%) of the outstanding
common stock of Freedom. That agreement contemplated that an additional 500,000
shares of Freedom common stock would be issued in a private placement at $1.00 a
share for a total of $500,000 (which has not been accomplished but which TX
Holdings, Freedom and Old Freedom agreed to use their best efforts to
accomplish), and TX Holdings, Freedom, Evans and Old Freedom undertook to use
their respective best efforts to cause at least 50% (and possibly all) of the
2,100,000 shares of common stock of Freedom that TX Holdings held to be spun off
to its shareholders (which cannot currently be legally done in view of the
financial situation of Freedom). In implementation of the Agreement to Merge,
Freedom and Old Freedom entered into an Agreement and Plan of Merger dated as of
May 12, 2005, which became effective May 26, 2005 through the filing of a
Certificate of Merger of Old Freedom and Freedom with the Corporations Division
of the Georgia Secretary of State. The Agreement and Plan of Merger provides for
a statutory merger under Georgia law, which is designed to qualify as a tax-free
reorganization for Federal and Georgia tax purposes. The resulting corporation
is named Freedom Homes, Inc.

In February 2006 TX Holdings entered into a Memorandum of Understanding to
acquire Oil & Gas Leases located in Texas. The negotiations and due diligence
under the Memorandum of Understanding were concluded on November 1, 2006
resulting in TX Holdings acquiring a turn key operation for the acquisition of
the prospect known as Contract Area #1 located in Callahan County, Texas. On
August 1, 2006 TX Holdings acquired the Williams Lease, located in Callahan
County, Texas. On April 11, 2006 TX Holdings acquired the Parks Lease, located
in Callahan County, Texas.

On March 28, 2006, 2006 TX Holdings elected to its Board of Directors Bobby
Fellers who has worked in the Oil & Gas business for more than thirty years. Mr.
Fellers has assisted TX Holdings in the acquisition of the above referenced
leases and owns a forty percent working interest position in the Contract Area
#1 lease and a twenty-five percent working interest in the Parks Lease. In
addition Mr. Fellers is employed by Masada Oil & Gas a Texas corporation who is
the current operator of all three leases that TX Holdings owns.

On March 28, 2006 TX Holdings appointed Douglas C. Hewitt to its Board of
Directors. Mr. Hewitt has in excess of twenty years in the Oil and Gas business
and more than eighteen years in the organizing and building of energy and
technology businesses. Mr. Hewitt is currently an operator and owner of an
independent oil & gas production and exploration company.

On March 28, 2006 TX Holdings appointed Michael A. Cederstorm as the interim
Chief Financial Officer of TX Holdings. Mr. Cederstrom has served as the Chief
Financial Officer for several oil & gas companies over the past 10 years. Mr.
Cederstrom has been appointed interim Chief Financial Officer while TX Holdings
completes it reorganization as an exploration and production company. Once oil &
gas production has been instituted a new Chief Financial Officer will be sought.

On August 2, 2006 TX Holdings appointed W.A. ("Bill") Alexander as the Chief
Operating Officer. Mr. Alexander is a licensed Petroleum Engineer with over 30
years of experience. Mr. Alexander is experienced in all areas of exploration
and production of oil & gas fields.

                                       7
<PAGE>

Proposed Wi-Fi Business Activities

In accordance with MA&N's strategic plan, the Company attempted to enter the
Wi-Fi business. Wi-Fi allows personal computers and other hand held devices to
connect to the Internet without wires at high speeds comparable to DSL and Cable
access, so that the Internet becomes easier to connect to and more accessible to
Internet users. Wi-Fi antennas act as wireless Internet-access transmitters and
receivers, creating "hotspots". A hotspot is a public access point - typically
in a hotel, airport, restaurant or other public locations -- that allows
wireless-enabled computers and other devices to access the Internet. The user
pays for this service by buying a "day pass" from the hotspot operator, or by
signing up for a monthly subscription that allows use of the Internet from
anywhere in a network of access points. There are hotspots, such as those
located in airport clubs, parks and hotels which provide free Internet service.
Wi-Fi Internet Access is becoming an increasingly popular method of accessing
the web. Users of the Wi-Fi networks operate on a set of unlicensed radio
frequencies set aside by the government for everyone who follows a simple set of
design rules, formally known as 802.11 technology, operating at up to 11 million
bits per second. While Wi-Fi does not offer the same amount of mobility as a
cell phone (e.g. a moving car), it is far less expensive than the multi-billion
dollar mobile 3G high-speed wireless networks currently being rolled out by the
wireless phone companies.

Due to the competitive nature of the Wi-Fi business and lack of profits in the
development stage of this technology, TX Holdings decided that it will not be
able to meet the capital requirements to sustain the operations of the Company
during the first few years of establishing a network. The Company's strategy to
provide Wi-Fi services and not Wi-Fi related hardware required a relatively long
period of substantial investments without accompanying revenues. As a result,
management has decided to seek alternative opportunities, and has recently
focused on oil and gas business activities.

Proposed Oil and Gas Business Activities

On August 30, 2005 oil prices reached a high of $70.85 although since that time
prices have increased some and have subsequently declined, at December 8, 2006
oil closed on the New York Mercantile Exchange at approximately $62.00 a barrel.
At these prices, secondary recovery, or the recovery accomplished by injecting
gas or water into a reservoir to replace produced fluids and thus maintain or
increase the reservoir pressure, becomes financially viable. The current
corporate direction is to acquire through purchase, merger and option, fields
with proven reserves and excellent development prospects. Concurrently the
Company is exploring options for the acquisition of operational expertise and
equipment.

This strategy is contingent upon the Company's ability to obtain sufficient
capital to fund the high start up costs of testing, analyzing, acquiring capital
equipment and lease acquisition. On May 11, 2006 the Company announced that it
had entered into a private placement agreement with Brill Securities, Inc.
Pursuant to the private placement agreement the Company completed the sale
4,166,667 of units, during the 3rd quarter of 2006 and at a price of $0.30 per
unit. Each unit includes one share of common stock and a warrant to purchase an
additional share at the price of $0.50 per share. This infusion of capital
allowed the Company to pursue its strategy of acquiring oil and gas producing
properties.

On September 1, 2005 TX Holdings announced an agreement whereby W.D. Von Gonten
& Co of Houston, Texas will advise the Company on economics and future value
projections of prospective wells and producing properties. An essential
component of Von Gonten's service offerings is the provision of certified
reserve reports.

Current Oil and Gas Activities

We are actively engaged in the exploration, development, production and
acquisition of crude oil and natural gas in the counties of Callahan and
Eastland, Texas. In November 2006 we entered into a Joint Operating Agreement
with Masada Oil & Gas, Inc. ("Masada") Masada will serve as the operating
contractor in the three leases that TX Holdings currently holds in the counties
of Callahan and Eastland , Texas. The leases and the current working interest of
TX Holdings in each lease are as follows:

         a. Contract Area # 1, 60% Working Interest;
         b. Park's Lease, 75% Working Interest;
         c. Williams Lease, 100% Working Interest

                                       8
<PAGE>

         (For a discussion of leases see section "Oil and Gas Leases" under Item
2: Description of property).

Principal Products or Services and Markets

The principal markets for our crude oil and natural gas will be refining
companies, pipeline companies, utility companies and private industry end users.
The point of delivery of our crude oil is at tank batteries located at or near
well sites on the leases. Our customers will be found throughout the state of
Texas. Currently the Company is only producing oil. Sufficient quantities of
natural gas are not produced at this time to warrant the cost of installing a
collection system.

We anticipate that our products will continue to be sold to our customers;
however, no assurance can be given of such or that if we do, we will be able to
receive a price that is sufficient to make our operations profitable.

Distribution Methods of Products or Services

Crude oil is stored in tanks at our well site located on our leases, until the
purchaser takes delivery of the crude oil by tanker truck.

Competitive Business Conditions

Our oil and gas exploration activities in Texas are undertaken in a highly
competitive and speculative business environment. In seeking any other suitable
oil and gas properties for acquisition, we compete with a number of other
companies located in Texas and elsewhere, including large oil and gas companies
and other independent operators, many with greater financial resources.

Although, our management generally does not foresee difficulties in procuring
logging of wells, cementing and well treatment services in the area of our
operations, several factors, including increased competition in the area, may
limit the availability of logging equipment, cementing and well treatment
services in the future. If such an event occurs, it may have a significant
adverse impact on the profitability of our operations.

The prices of our products are controlled by the world oil market; thus,
competitive pricing behaviors in this regard are considered unlikely; however,
competition in the oil and gas exploration industry exists in the form of
competition to acquire the most promising acreage blocks and obtaining the most
favorable prices for completion of wells and drilling costs.

Dependence on One or a Few Major Customers

We are dependent on local purchasers of hydrocarbons to purchase our products in
the areas where our properties are located. The loss of one or more of our
primary purchasers may have a substantial adverse impact on our sales and on our
ability to operate profitably.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts

Royalty agreements relating to oil and gas production are standard in the
industry. The amounts of the royalty payments which are paid vary from lease to
lease. (See Description of Business - "Current Business" in this Annual Report.)

Governmental Approval and Regulation

The production and sale of oil and gas are subject to regulation by
federal, state and local authorities. None of the principal products that we
offer require governmental approval, although permits are required for the
drilling of oil and gas wells. In addition testing of well integrity is required
on a routine basis.

                                       9
<PAGE>

When and if we begin to sell natural gas we will be affected by intrastate
and interstate gas transportation regulation. Beginning in 1985, the Federal
Energy Regulatory Commission ("FERC"), which sets the rates and charges
transportation and sale of natural gas, adopted regulatory changes that have
significantly altered the transportation and marketing of natural gas. The
stated purpose of FERC's changes is to promote competition among the various
sectors of the natural gas industry. In 1995, FERC implemented regulations
generally grandfathering all previously approved interstate transportation rates
and establishing an indexing system for those rates by which adjustments are
made annually based on the rate of inflation, subject to certain conditions and
limitations. These regulations may tend to increase the cost of transporting oil
and natural gas by pipeline. Every five years, FERC will examine the
relationship between the change in the applicable index and the actual cost
changes experienced by the industry. We are not able to predict with certainty
what effect, if any, these regulations will have on us.

Texas law requires that we obtain state permits for the drilling of oil and
gas wells and to post a bond with the Texas Railroad Commission (the "RRC") to
ensure that each well is reclaimed and properly plugged when it is abandoned.
The reclamation bond amount is $50,000 for up to ninety-nine wells. The company
is currently arranging for a letter of credit to be issued in the amount of
$50,000 to meet the requirements for the bond.

The state and regulatory burden on the oil and natural gas industry
generally increases our cost of doing business and affects our profitability.
While we believe we are presently in compliance with all applicable federal,
state and local laws, rules and regulations, continued compliance (or failure to
comply) and future legislation may have an adverse impact on our present and
contemplated business operations. Because such federal and state regulation are
amended or reinterpreted frequently, we are unable to predict with certainty the
future cost or impact of complying with these laws.

Research and Development

The company expands funds for the research of and locating potential producing
and previously producing fields to acquire. The research consists of obtaining
production records, reviewing well logs and evaluating geological information on
sites. The information is evaluated by Petroleum Engineers to determine well
locations and potential recoveries.

During 2004 we did not incur any research and development expenditures.

Intellectual Property
None.

Environmental Compliance

We are subject to various federal, state and local laws and regulations
governing the protection of the environment, such as the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), and the Federal Water Pollution Control Act of 1972, as amended (the
"Clean Water Act"), which affect our operations and costs. In particular, our
exploration, development and production operations, our activities in connection
with storage and transportation of oil and other hydrocarbons and our use of
facilities for treating, processing or otherwise handling hydrocarbons and
related wastes may be subject to regulation under these and similar state
legislation. These laws and regulations:

     o   restrict the types, quantities and concentration of various substances
         that can be released into the environment in connection with drilling
         and production activities;

     o   limit or prohibit drilling activities on certain lands lying within
         wilderness, wetlands and other protected areas; and

     o   impose substantial liabilities for pollution resulting from our
         operations.


Failure to comply with these laws and regulations may result in the
assessment of administrative, civil and criminal fines and penalties or the
imposition of injunctive relief. Changes in environmental laws and
regulations occur regularly, and any changes that result in more stringent and
costly waste handling, storage, transport, disposal or cleanup requirements
could materially adversely affect our operations and financial position, as well
as those in the oil and natural gas industry in general. While we believe that
we are in substantial compliance with current applicable environmental laws and
regulations and that continued compliance with existing requirements would not
have a material adverse impact on us, there is no assurance that this trend will
continue in the future.

                                       10
<PAGE>

As with the industry generally, compliance with existing regulations increases
our overall cost of business. The areas affected include:

     o   unit production expenses primarily related to the control and
         limitation of air emissions and the disposal of produced water;

     o   capital costs to drill exploration and development wells primarily
         related to the management and disposal of drilling fluids and other oil
         and natural gas exploration wastes; and

     o   capital costs to construct, maintain and upgrade equipment and
         facilities.

CERCLA, also known as "Superfund," imposes liability for response costs and
damages to natural resources, without regard to fault or the legality of the
original act, on some classes of persons that contributed to the release of a
"hazardous substance" into the environment. These persons include the "owner" or
"operator" of a disposal site and entities that disposed or arranged for the
disposal of the hazardous substances found at the site. CERCLA also authorizes
the Environmental Protection Agency ("EPA") and, in some instances, third
parties to act in response to threats to the public health or the environment
and to seek to recover from the responsible classes of persons the costs they
incur. It is not uncommon for neighboring landowners and other third parties to
file claims for personal injury and property damage allegedly caused by the
hazardous substances released into the environment. In the course of our
ordinary operations, we may generate waste that may fall within CERCLA's
definition of a "hazardous substance." We may be jointly and severally liable
under CERCLA or comparable state statutes for all or part of the costs required
to clean up sites at which these wastes have been disposed.

We currently lease properties that for many years have been used for the
exploration and production of oil and natural gas. Although we and our
predecessors have used operating and disposal practices that were standard in
the industry at the time, hydrocarbons or other wastes may have been disposed or
released on, under or from the properties owned or leased by us or on, under or
from other locations where these wastes have been taken for disposal. In
addition, many of these properties have been operated by third parties whose
actions with respect to the treatment and disposal or release of hydrocarbons or
other wastes were not under our control. These properties and wastes disposed on
these properties may be subject to CERCLA and analogous state laws. Under these
laws, we could be required:

     o   to remove or remediate previously disposed wastes, including wastes
         disposed or released by prior owners or operators;

     o   to clean up contaminated property, including contaminated groundwater;
         or to perform remedial operations to prevent future contamination.

     o   to clean up contaminated property, including contaminated groundwater;
         or to perform remedial operations to prevent future contamination.

At this time, we do not believe that we are associated with any Superfund site
and we have not been notified of any claim, liability or damages under CERCLA.

The Resource Conservation and Recovery Act ("RCRA") is the principal federal
statute governing the treatment, storage and disposal of hazardous wastes. RCRA
imposes stringent operating requirements and liability for failure to meet such
requirements on a person who is either a "generator" or "transporter" of
hazardous waste or an "owner" or "operator" of a hazardous waste treatment,
storage or disposal facility. At present, RCRA includes a statutory exemption
that allows most oil and natural gas exploration and production waste to be
classified as non-hazardous waste. A similar exemption is contained in many of
the state counterparts to RCRA. As a result, we are not required to comply with
a substantial portion of RCRA's requirements because our operations generate
minimal quantities of hazardous wastes. At various times in the past, proposals
have been made to amend RCRA to rescind the exemption that excludes oil and
natural gas exploration and production wastes from regulation as hazardous
waste. Repeal or modification of the exemption by administrative, legislative or
judicial process, or modification of similar exemptions in applicable state
statutes, would increase the volume of hazardous waste we are required to manage
and dispose of and would cause us to incur increased operating expenses.

                                       11
<PAGE>

The Clean Water Act imposes restrictions and controls on the discharge of
produced waters and other wastes into navigable waters. Permits must be obtained
to discharge pollutants into state and federal waters and to conduct
construction activities in waters and wetlands. The Clean Water Act requires us
to construct a fresh water containment barrier between the surface of each
drilling site and the underlying water table. This involves the insertion of a
seven-inch diameter steel casing into each well, with cement on the outside of
the casing. The cost of compliance with this environmental regulation is
approximately $10,000 per well. Certain state regulations and the general
permits issued under the Federal National Pollutant Discharge Elimination System
program prohibit the discharge of produced waters and sand, drilling fluids,
drill cuttings and certain other substances related to the oil and natural gas
industry into certain coastal and offshore waters. Further, the EPA has adopted
regulations requiring certain oil and natural gas exploration and production
facilities to obtain permits for storm water discharges. Costs may be associated
with the treatment of wastewater or developing and implementing storm water
pollution prevention plans.

The Clean Water Act and comparable state statutes provide for civil, criminal
and administrative penalties for unauthorized discharges for oil and other
pollutants and impose liability on parties responsible for those discharges for
the costs of cleaning up any environmental damage caused by the release and for
natural resource damages resulting from the release. We believe that our
operations comply in all material respects with the requirements of the Clean
Water Act and state statutes enacted to control water pollution.

Our operations are also subject to laws and regulations requiring removal and
cleanup of environmental damages under certain circumstances. Laws and
regulations protecting the environment have generally become more stringent in
recent years, and may in certain circumstances impose "strict liability,"
rendering a corporation liable for environmental damages without regard to
negligence or fault on the part of such corporation. Such laws and regulations
may expose us to liability for the conduct of operations or conditions caused by
others, or for acts which may have been in compliance with all applicable laws
at the time such acts were performed. The modification of existing laws or
regulations or the adoption of new laws or regulations relating to environmental
matters could have a material adverse effect on our operations.

In addition, our existing and proposed operations could result in liability for
fires, blowouts, oil spills, discharge of hazardous materials into surface and
subsurface aquifers and other environmental damage, any one of which could
result in personal injury, loss of life, property damage or destruction or
suspension of operations. We have an Emergency Action and Environmental Response
Policy Program in place. This program details the appropriate response to any
emergency that management believes to be possible in our area of operations. We
believe we are presently in compliance with all applicable federal and state
environmental laws, rules and regulations; however, continued compliance (or
failure to comply) and future legislation may have an adverse impact on our
present and contemplated business operations.

The foregoing is only a brief summary of some of the existing environmental
laws, rules and regulations to which our business operations are subject, and
there are many others, the effects of which could have an adverse impact on our
business. Future legislation in this area will no doubt be enacted and revisions
will be made in current laws. No assurance can be given as to what effect these
present and future laws, rules and regulations will have on our current future
operations.

Insurance

Our operations are subject to all the risks inherent in the exploration for, and
development and production of oil and gas including blowouts, fires and other
casualties. We maintain insurance coverage customary for operations of a similar
nature, but losses could arise from uninsured risks or in amounts in excess of
existing insurance coverage.

Former Business of TX Holdings.

                                       12
<PAGE>

Business of Freedom Homes, Inc.

The principal business of Freedom is the retailing of manufactured homes, which
has been its principal business since the merger of Old Freedom into Freedom
effective May 26, 2005. Freedom also publishes FOR SALE BY OWNER, Homes'
periodic magazine. Prior to the effective dates of the Freedom Merger,
publishing the magazine was the only business of Freedom, so that for the
periods covered by the financial statements herein and until May 26, 2005, none
of the operations of Old Freedom are included in the financial statements of the
Company. From May 26, 2005, the operations of Freedom are not consolidated with
the financial statements of the Company since Freedom no longer is a subsidiary,
and is under the control of Jim Evans, not TX Holdings. Old Freedom began to
sell pre-owned manufactured homes in the Augusta, Georgia market in February
2002. In June, 2004, it became a retailer of new homes manufactured by Horton
Homes and subsequently has also sold new homes manufactured by Southern Energy
Homes and Precision Homes. TX Holdings owns a 32.3% interest in Freedom Homes
and TX Holdings management has determined to value it interest in Freedom Homes
at a value of $0.00. TX Holdings has not received any revenue, dividends or
distributions from Freedom Homes since its merger on February 26, 2005. Freedom
Homes is a private company that is not publicly traded with limited investors
and no market for its stock. The liquidation value of Freedom Homes would be
difficult to determine and no market is currently available for the transfer of
TX Holdings' shares.

Business of Direct Lending, Inc.

Direct Lending, Inc. was a mortgage broker company. It located sources of
capital willing to grant home mortgage loans to clients of Direct. Direct acted
as a broker and was paid a fee only upon the closing of a loan to a customer.
These fees were typically in the range of $2,000 for each loan closed by Direct
and are the result of origination fees, and yield spread income.

Sources of capital that provided home mortgage loans to clients of Direct
included finance companies, banks and wholesale lenders. When a lending
institution indicated an interest in providing a loan to a Direct client, Direct
provided the appropriate documents and assisted their client's completion of the
documentation and the process to complete the loan. Direct would attend the
closing of the loan, providing value by facilitating the entire loan process.

Sale of the Assets and Business of Direct Lending, Inc.

In Fiscal 2002, in an environment of sharply declining interest rates,
residential housing became more affordable to new home buyers as monthly
mortgage payments fell and existing homeowners made the decision to refinance
their old mortgages with new low rate loans. Direct management increased its
personnel, leased additional space and incurred other additional expenses to
capture a share of the new growth in the mortgage brokerage business. In October
2002 management decided to sell Direct, and on November 25, 2002, completed the
sale of Direct to Stuckey Enterprises, Inc., an unaffiliated entity,
("Stuckey"). The sale included all of the assets of Direct other than its
corporate records, but including the name, Direct Lending. TX Holdings assumed
the past liabilities of Direct. Mortgage transactions originating prior to
October 25, 2002 were for the account of TX Holdings and subsequent transactions
were for the account of Stuckey. Stuckey assumed responsibility for the
employees and premises and equipment costs from October 25, 2002, thus relieving
TX Holdings of these expenses. Stuckey agreed to pay a $5,000 down payment and
$484 per month for thirty six months. Following the initial down payment of
$5,000, Stuckey made two payments of $484. In January 2003, the terms of the
original agreement were renegotiated, and on January 14, 2003 Stuckey made a
payment of $10,000 as an agreed upon lump sum payment. The total amount received
from Stuckey was $15,968.

Company Employees and Other Workers

As of December 20, 2006 we had 3 employees. Mark S. Neuhaus the Chairman of the
Board of Directors and President of TX Holdings. On March 28, 2006 Michael A.
Cederstrom was appointed the interim Chief Financial Officer of TX Holdings. Mr.
Cederstrom works on a part time basis with the understanding that once full
scale oil and gas production is achieved a permanent chief financial officer
will be named. Mr. Cederstrom also provides legal services through his law firm,
Dexter and Dexter. On August 2, 2006 TX Holdings appointed W.A. "Bill" Alexander
as the Chief Operating Officer. Other specialized functions are provided as
necessary through the engagement of independent consulting contractors.

At September 30, 2005 we had 2 employees. Mark Neuhaus as the Chief Executive
Officer and Darren Bloom as the Chief Financial Officer. In March 2005 Mr. Bloom
resigned.

                                       13
<PAGE>

Risk Factors Relating to the Company's Business

Due to the competitiveness of the oil and gas industry, the lack of acquisitions
and uncertainty of the present negotiations, and the nature of the Company's
business, it encounters many risk factors. Each of these factors, as well as
matters set forth elsewhere in this Form 10-KSB, could adversely affect the
business, operating results and financial condition of the Company.

Any investment in our Common Stock involves a high degree of risk. You should
carefully consider the risks and uncertainties described below and the other
information included in this Annual Report. Although the risks described below
are the risks that we believe are material, they are not the only risks relating
to our business and our Common Stock. Additional risks and uncertainties,
including those that are not yet identified or that we currently believe are
immaterial, may also adversely affect our business, financial condition or
results of operations. If any of the events described below occur, our business
and financial results could be materially and adversely affected. The market
price of our Common Stock could decline due to any of these risks, perhaps
significantly, and you could lose all or part of your investment.

General Risks Related To Our Business

Our business may fail if we do not succeed in our efforts to develop and replace
oil and gas reserves.

Our future success will depend upon our ability to find, acquire and
develop additional economically recoverable oil and gas reserves. Our proved
reserves will generally decline as they are produced, except to the extent that
we conduct revitalization activities, or acquire properties containing proved
reserves, or both. To increase reserves and production, we must continue our
development drilling and completion programs, identify and produce previously
overlooked or bypassed zones in shut-in wells, acquire additional properties or
undertake other replacement activities. Our current strategy is to increase our
reserve base, production and cash flow through the development of our existing
oil and gas fields and selective acquisitions of other promising properties
where we can use new or existing technology. Despite our efforts, our planned
revitalization, development and acquisition activities may not result in
significant additional reserves, and we may not be able to discover and produce
reserves at economical exploration and development costs. If we fail in these
efforts, our business may also fail.

Our revenues may be less than expected if our oil and gas reserve estimates are
inaccurate.

Oil and gas reserve estimates and the present values attributed to these
estimates are based on many engineering and geological characteristics as well
as operational assumptions that generally are derived from limited data. Common
assumptions include such matters as the anticipated future production from
existing and future wells, future development and production costs and the
ultimate hydrocarbon recovery percentage. As a result, oil and gas reserve
estimates and present value estimates are frequently revised to reflect
production data obtained after the date of the original estimate. If reserve
estates are inaccurate, production rates may decline more rapidly than
anticipated, and future production revenues may be less than estimated. In
addition, significant downward revisions of reserve estimates may hinder our
ability to borrow funds in the future, or may hinder other financing
arrangements that we may consider.

In addition, any estimates of future net revenues and their present value are
based on period ending prices and on cost assumptions that only represent our
best estimate. If these estimates of quantities, prices and costs prove
inaccurate and we are unsuccessful in expanding our oil and gas reserves base,
or if oil and gas prices decline or become unstable, we may have to write down
the capitalized costs associated with our oil and gas assets. We will also
largely rely on reserve estimates when we acquire producing properties. If we
overestimate the potential oil and gas reserves of a property to be acquired, or
if our subsequent operations on the property are not successful, the acquisition
of the property could result in substantial losses.

We are implementing a growth strategy which, if successful, will place
significant demands on us and subject us to numerous risks.

Growing businesses often have difficulty managing their growth. If our growth
strategy is successful, significant demands will be placed on our management,
accounting, financial, information and other systems and on our business. We
will have to expand our management and recruit and employ experienced executives
and key employees capable of providing the necessary support. In addition, to
manage our anticipated growth we will need to continue to improve our financial,
accounting, information and other systems in order to effectively manage our
growth, and in doing so could incur substantial additional expenses that could
harm our financial results. We cannot assure you that our management will be
able to manage our growth effectively or successfully, or that our financial,
accounting, information or other systems will be able to successfully
accommodate our external and internal growth. Our failure to meet these
challenges could materially impair our business.

                                       14
<PAGE>

We may not be able to compete successfully in acquiring prospective reserves,
developing reserves, marketing oil and natural gas, attracting and retaining
quality personnel and raising additional capital.

Our ability to acquire additional prospects and to find and develop reserves in
the future will depend on our ability to evaluate and select suitable properties
and to consummate transactions in a highly competitive environment. In addition,
there is substantial competition for capital available for investment in the oil
and natural gas industry. Our inability to compete successfully in these areas
could have a material adverse effect on our business, financial condition or
results of operations.

A substantial or extended decline in oil and natural gas prices could reduce our
future revenue and earnings. The price we receive for future oil and natural gas
production will heavily influence our revenue, profitability, access to capital
and rate of growth. Oil and natural gas are commodities and their prices are
subject to wide fluctuations in response to relatively minor changes in supply
and demand. Historically, the markets for oil and natural gas have been volatile
and currently oil and natural gas prices are significantly above historic
levels. These markets will likely continue to be volatile in the future and
current record prices for oil and natural gas may decline in the future. The
prices we may receive for any future production, and the levels of this
production, depend on numerous factors beyond our control. These factors include
the following:

     o   changes in global supply and demand for oil and natural gas;

     o   actions by the Organization of Petroleum Exporting countries, or OPEC;

     o   political conditions, including embargoes, which affect other
         oil-producing activities;

     o   levels of global oil and natural gas exploration and production
         activity;

     o   levels of global oil and natural gas inventories;

     o   weather conditions affecting energy consumption;

     o   technological advances affecting energy consumption; and

     o   prices and availability of alternative fuels.

Lower oil and natural gas prices may not only decrease our future revenues but
also may reduce the amount of oil and natural gas that we can produce
economically. A substantial or extended decline in oil or natural gas prices may
reduce our earnings, cash flow and working capital.

Drilling for and producing oil and natural gas are high risk activities with
many uncertainties that could substantially increase our costs and reduce our
profitability.

Oil and natural gas exploration is subject to numerous risks beyond our control;
including the risk that drilling will not result in any commercially viable oil
or natural gas reserves. Failure to successfully discover oil or natural gas
resources in properties in which we have oil and gas leases may materially
adversely affect our operations and financial condition.

                                       15
<PAGE>

The total cost of drilling, completing and operating wells will be uncertain
before drilling commences. Overruns in budgeted expenditures are common risks
that can make a particular project uneconomical. Further, many factors may
curtail, delay or cancel drilling, including the following:

     o   delays imposed by or resulting from compliance with regulatory
         requirements;

     o   pressure or irregularities in geological formations;

     o   shortages of or delays in obtaining equipment and qualified personnel;

     o   equipment failures or accidents;

     o   adverse weather conditions;

     o   reductions in oil and natural gas prices;

     o   land title problems; and

     o   limitations in the market for oil and natural gas.

Oil and gas operations involve many physical hazards.

Natural hazards, such as excessive underground pressures, may cause costly and
dangerous blowouts or make further operations on a particular well financially
or physically impractical. Similarly, the testing and completion of oil and gas
wells involves a high degree of risk arising from operational failures, such as
blowouts, fires, pollution, collapsed casing, loss of equipment and numerous
other mechanical and technical problems. Any of these hazards may result in
substantial losses to us or liabilities to third parties. These could include
claims for bodily injuries, reservoir damage, loss of reserves, environmental
damage and other damages to people or property. Any successful claim against us
would probably require us to spend large amounts on legal fees and any
successful claim may make us liable for substantial damages.

Our dependence on outside equipment and service providers may hurt our
profitability. We need to obtain logging equipment and cementing and well
treatment services in the area of our operations. Several factors, including
increased competition in the area, may limit their availability. Longer waits
and higher prices for equipment and services may reduce our profitability.

The oil and gas industry is highly competitive and there is no assurance that we
will be successful in acquiring any further leases.

The oil and gas industry is intensely competitive. We compete with numerous
individuals and companies, including major oil and gas companies, which have
substantially greater technical, financial and operational resources and staffs.
Accordingly, there is a high degree of competition for desirable oil and gas
leases, suitable properties for drilling operations and necessary drilling
equipment, as well as access to funds. We cannot predict if the necessary funds
can be raised. There are also other competitors that have operations in our
potential areas of interest and the presence of these competitors could
adversely affect our ability to acquire additional leases.

Oil and gas operations are subject to comprehensive regulation which may cause
substantial delays or require capital outlays in excess of those anticipated,
causing an adverse effect on our Company.

                                       16
<PAGE>

Oil and gas operations are subject to federal, state, and local laws relating to
the protection of the environment, including laws regulating removal of natural
resources from the ground and the discharge of materials into the environment.
Oil and gas operations are also subject to federal, state, and local laws and
regulations which seek to maintain health and safety standards by regulating the
design and use of drilling methods and equipment. Various permits from
government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. Environmental
standards imposed by federal, provincial, or local authorities may be changed
and any such changes may have material adverse effects on our activities.
Moreover, compliance with such laws may cause substantial delays or require
capital outlays in excess of those anticipated, thus causing an adverse effect
on us. Additionally, we may be subject to liability for pollution or other
environmental damages. To date we have not been required to spend any material
amount on compliance with environmental regulations. However, we may be required
to do so in future and this may affect our ability to expand or maintain our
operations.

Risks Related To Our Common Stock

The limited trading volume in our common stock may depress our stock price.
Our common stock is currently traded on a limited basis on the Pink Sheets
("PS"). The quotation of our common stock on the PS does not assure that a
meaningful, consistent and liquid trading market currently exists. We cannot
predict whether a more active market for our common stock will develop in the
future. In the absence of an active trading market, investors may have
difficulty buying and selling our common stock. Market visibility for our common
stock may be limited. A lack of visibility of our common stock may have a
depressive effect on the market price for our common stock.

The issuance of shares upon exercise of outstanding warrants may cause immediate
and substantial dilution of our existing shareholders.

The issuance of shares upon exercise of warrants may result in substantial
dilution to the interests of other shareholders since the selling shareholders
may sell the full amount issuable on exercise. In addition, such shares would
increase the number of shares in the "public float" and could depress the market
price for our Common Stock.

We have failed to remain current on our reporting requirements, we have been
removed from the OTC Bulletin Board limiting the ability of broker-dealers to
sell our securities and the ability of shareholders to sell their securities in
the secondary market.

On February 19, 2004 the Company was delisted from the OTC Bulletin Board due to
failure to file current financial statements with the Securities and Exchange
Commission in an acceptable format. The Company's stock trades are reported on
Pink Sheets.

Companies trading on the OTCBB, must be reporting issuers under Section 12 of
the Securities Exchange Act of 1934, as amended, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the
OTCBB. We have failed to remain current on our reporting requirements and have
been removed from the OTCBB. As a result, the market liquidity for our
securities could be severely adversely affected by limiting the ability of
broker-dealers to sell our securities and the ability of shareholders to sell
their securities in the secondary market.

We have never declared or paid cash dividends on our Common Stock. We currently
intend to retain future earnings to finance the operation, development and
expansion of our business.

We do not anticipate paying cash dividends on our Common Stock in the
foreseeable future. Payment of future cash dividends, if any, will be at the
discretion of our board of directors and will depend on our financial condition,
results of operations, contractual restrictions, capital requirements, business
prospects and other factors that our board of directors considers relevant.
Accordingly, investors will only see a return on their investment if the value
of our securities appreciates.

Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the
Trading Market in Our Securities is Limited, Which Makes Transactions in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:

                                       17
<PAGE>

     o    that a broker or dealer approve a person's account for transactions in
          penny stocks; and

     o    that broker or dealer receives from the investor a written agreement
          to the transaction, setting forth the identity and quantity of the
          penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:

     o    obtain financial information and investment experience objectives of
          the person; and

     o    make a reasonable determination that the transactions in penny stocks
          are suitable for that person and the person has sufficient knowledge
          and experience in financial matters to be capable of evaluating the
          risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

     o    sets forth the basis on which the broker or dealer made the
          suitability determination; and

     o    that the broker or dealer received a signed, written agreement from
          the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more difficult
for investors to dispose of our Common Stock and cause a decline in the market
value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.

Brief Operating History - No Assurance of Profitability

The Company has a brief operating history. Although we commenced operations in
1997, original management has been replaced as previous operations have not been
profitable. The Wi-Fi business contemplated subsequent to the acquisition of a
controlling interest in the Company by MA&N did not materialize. The Company has
recently completed the acquisition of its initial oil & gas leases. The Company
has encountered unforeseen costs, expenses, problems, difficulties and delays
frequently associated with new ventures, and these may continue. There is no
assurance that the Company's business ventures will be successful or that the
Company will be able to produce and acquire sufficient productive wells to meet
its goals. The Company anticipates that its operating expenses will increase if
and as its business expands, and it will need to generate revenues sufficient to
meet all of its expenses to achieve profitability.

Competition Could Negatively Affect Revenues

The proposed business of the Company is highly competitive. Additional
competitors may also enter the market and future competition may intensify. Most
of these competitors have substantially greater financial resources than the
Company, and they may be able to accept more financial risk than the Company
feels is prudent.

Concentration of Share Ownership Gives Insiders Control

Our management owns a significant amount of the Common Stock, giving them
influence or control in corporate transactions and other matters, and their
interests could differ from those of other stockholders. Our President, Mark
Neuhaus and/or his wife, Nicole B. Neuhaus beneficially controls approximately
28% of the Existing Common Stock and 100% of the Preferred Stock. The Preferred
Stock has voting rights the entitle Mr. Neuhaus to effectively control the
company. As a result, Mr. Neuhaus is in a position to significantly influence or
control the outcome of matters requiring a stockholder vote, including the
election of directors, the adoption of any amendment to the Certificate of
Incorporation and By-Laws, and the approval of significant corporate
transactions. This control may delay or prevent a change of control on terms
favorable to our other stockholders.

                                       18
<PAGE>

Possibility That No Public Market or Only a Limited Public Market Will Be
Established For the Common Stock of TX Holdings

On August 14, 2002, NASD Regulation, Inc. cleared a broker's request for an
un-priced quotation on the OTC Bulletin Board for TX Holdings' common stock.
Sales have been sporadic and have ranged from $.05 to $1.08 a share. See MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

On February 19, 2004, the Company was delisted from the OTC Bulletin Board due
to failure to file current financial statements with the Securities and Exchange
Commission in an acceptable format. The Company's stock trades are reported by
Pink Sheets.

Limited Access to Qualified Personnel

To be effective, the Company needs persons with the skills necessary to conduct
the proposed oil and gas business. The Company is continually trying to attract
and retain qualified personnel to conduct the proposed oil and gas business. The
Company has lacked the resources to train personnel, so it needs to find persons
with the required experience, understanding, ability and effectiveness. The
Company's financial position has made this difficult and the inability to
attract and retain appropriate personnel may have a materially adverse effect
upon the Company and its operations.

Legal and Regulatory Risk

Laws and regulations, including securities laws and regulations, applicable to
the Company's business and operations are extensive and complex. As a start up
business with limited personnel and funding, the Company has taken actions
without being able to fully ascertain their legal effect and potential conflict
with applicable law and regulations. The Company believes that this situation
often pertains to minimally-funded new businesses which are in a financial
position similar to that of the Company. As a result, actions taken by the
Company could subject it to regulatory review and challenge, and involve it in
legal or administrative proceedings, that could have a material adverse affect
on the Company.

Item 2 Description of Property

The Company has moved its principal offices to Abilene, Texas. The Company is
currently utilizing space within the offices of Masada Oil, a company that Bobby
Fellers has a beneficial interest in and that currently performs our field
operations. All research and activities as related to the oil and gas business
are being conducted from this office. The company's headquarters are located
1701 North Judge Ely Blvd., Suite 6420, Abilene, Texas 79601. Our telephone
number is 682 - 286 - 3116. In addition we maintain an office in Miami, Florida.
The office in Miami is provided by Mark Neuhaus. The company has paid the
utilities and improvements only associated with the offices and no rent.
Management believes that this property will be sufficient for its current and
immediately foreseeable administrative needs. The Company does not hold any
investments or interests in real estate other than the Oil & Gas Leases it holds
for its operational needs. The company currently seeks additional oil and gas
leases for operational purposes, although at this time there are no leases to be
acquired.


We are an oil and gas exploration and production company that uses the history
of old fields, geophysical exploration and development techniques to identify
oil and gas wells that are now considered to be economical feasible based on the
current and predicted future price of oil and gas. It is the Company's current
plan to re-entry old wells in a confined area and then utilize water flood
techniques to produce the Wells. Water flood techniques work well on shallow
wells to push the oil to the producing wells to facilitate recovery. The leases
currently owned by the Company allow the Company to produce to a depth of a
depth of 1,000 feet from the surface. It is the Company's intention to initially
place these leases into production in the shallow development to produce cash
flow for the Company. Once these wells are in production the Company will then
consider the opportunity for deeper drilling.

                                       19
<PAGE>

We are presently developing leases referred to as the Contract Area # 1; Parks
Lease; and the Williams Lease. The Contract Area # 1 Lease contains four leases
containing a total of 247 acres. The Park's Lease is a single lease containing
320 acres. The Williams Lease contains 4 leases containing a total of
approximately 843 acres. All three fields are located in Callahan County, Texas.

Lease and Royalty Terms

Contract Area # 1

Located in Callahan County Texas, this lease includes the turn key development
of the field. The Purchase and Sale Contract provides for a total investment of
up to $7,200,000. To reach this purchase price Masada Oil & Gas will need to
procure an additional 1186 acres in Callahan County, Texas which is contiguous
to the Company's currently owned 247 acres. In addition the Purchase and Sale
agreement contemplates that Masada Oil & Gas will perform all of the work on the
field to put into production a minimum of 121 wells within 21 months. This
production schedule is conditioned upon the Company providing the funds
necessary to complete the work on a timely basis and Masada Oil & Gas' ability
to acquire the additional acreage. If Masada Oil & Gas is unable to deliver the
additional acreage the Purchase and Sale Agreement will be adjusted to reduce
the price of the purchase. This field is carried on the financial statements at
the amount that has been paid to date for the field and not at the price
contained in the Purchase and Sale Agreement. The ultimate total price is
conditioned upon performance and future acquisitions. TX Holdings currently own
a 60% working interest in the field and Masada Oil and Gas owns a 40%working
interest. The ORRI on each lease varies, thus the net revenue interest the
Company will receive from the wells of the respective leases will also vary. The
table below sets forth the royalty interest for each lease, the net working
interest and the gross acreage of each lease within Contract Area # 1:
<TABLE>
<CAPTION>

------------------------------------------------------- --------------- ---------------- ----------------- -----------
Description                                             ORRI            Working          Net Revenue       Gross
                                                                        Interest         Interest          Acreage
------------------------------------------------------- --------------- ---------------- ----------------- -----------
<S>                  <C>                                <C>             <C>              <C>               <C>
Roy Adams Lease RRC #01470                              17.97%          60%              49.22%            160
------------------------------------------------------- --------------- ---------------- ----------------- -----------
W. Isenhower Lease RRC# 20398                           20.00%          60%              48.00%            20
------------------------------------------------------- --------------- ---------------- ----------------- -----------
Isenhower Lease RRC# 21474                              26.25%          60%              44.25%            22
------------------------------------------------------- --------------- ---------------- ----------------- -----------
Isenhower Estate Lease RRC # 30700                      20.00%          60%              48.00%            45
------------------------------------------------------- --------------- ---------------- ----------------- -----------
</TABLE>

As of November 25, 2006, there were eighteen producing oil wells on the leases.
The production of the wells is minimal, from 1 to 2 bbls per day. The Company
has not completed the development of the water flood program. The water flood
will inject water into the field through injection wells. The water will force
the oil towards the production wells so that it can be recovered. The Company's
wells on this field are considered shallow wells and only produce to a depth of
1000 feet.

Parks Lease

This lease includes 320 acres in which we have a 75% working interest and a 63%
net revenue interest in the oil & gas produced from this field. The land owners
of this lease own a 12.5% royalty interest in the production. Masada Oil and Gas
owns a 25 % working interest in the lease. There are currently 30 wells on this
lease and none of the wells are currently producing. The lease provides that TX
Holdings is limited to production from 1,000 feet and above.

Williams Lease

This lease contains 843 acres with a working interest of 89% owned by the
Company. The lease was acquired through a foreclosure sale on August 1, 2006 for
the sum of $68,221.56. The lease carries an ORRI to the land owners of 25%. The
Company's net Revenue interest on the wells contained in this lease is 75%. This
lease is limited to production from 1,000 feet and above.

Oil and Gas Reserve Analyses

Currently the leases that have been acquired have not been developed in a way
that allows our Petroleum Engineers to assign estimated net proved oil and gas
reserves and the present value of estimated cash flows from those reserves. The
Company is currently performing work on each lease to provide the required
information of logging each well to provide the information to the Petroleum
Engineers. The leases were acquired during the third and forth quarter of 2006
and operations on the leases commenced in November 2006.

                                       20
<PAGE>

Item 3 Legal Proceedings

Management is currently aware of one pending, past or present litigation which
would be considered to have a material effect on the Company. Management does
not know of any outstanding bankruptcy or receivership issues and is not aware
of any securities law violations other than the failure to file timely Form
10-KSB for 2005 and timely Form 10-QSB for the quarterly periods in 2005 and
2006.

TX Holdings has filled an action in Dade County, Florida in District Circuit
#11, case number 06-14396CA04 entitled TX Holdings, Inc vs. Darren Bloom. The
Company has brought an action against Mr. Bloom for breach of contract, damages
and for the cancellation of common stock issued to Mr. Bloom pursuant to a three
year employment contract. Mr. Bloom resigned from the Company on March 17, 2006
after serving only 9 months. Mr. Bloom currently owns 2,000,000 shares of TX
Holdings common stock. Management believes that this matter can be resolved and
will have no material effect on the Company operations. The cancellation of
shares, if granted, will have a positive effect on Earnings Per Share.

Except as disclosed above, the Company has no material legal proceedings in
which any director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company.

Item 4 Submission of Matters to a Vote of Security Holders

None.

                                     PART II

Item 5 Market for Common Equity and Related Stockholder Matters

Market Information

The common stock of TX Holdings is currently traded on Pink Sheets, under the
symbol TXHG.

The following table sets forth the high and low bid prices of our Common Stock
for the periods indicated. The quotations set forth below reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent
actual transactions.

                                         Bid Prices ($)
                                         --------------
                                      High            Low
                                      ----            ---
Quarter Ended:

September 30, 2006                     0.99            0.55
June 30, 2006                          1.07            0.33
March 31, 2006                         0.47            0.19

December 30, 2005                      0.37            0.16
September 30 , 2005                    0.55            0.05
June 30, 2005                          0.15            0.06
March 31, 2005                         0.15            0.04

December 31, 2004                      0.12            0.04
September 30, 2004                     0.15           0.035
June 30, 2004                          0.08            0.04
March 31, 2004                         0.18            0.05

                                       21
<PAGE>

As of December 8, 2006 there were approximately 184 holders of record of our
common stock

On January 21, 2005, the company signed a subscription agreement with Pink
Sheets LLC for Real Time Inside Quote and Full Level II Quote Montage on
www.pinksheets.com. The service keeps investors up-to-date by providing real
time quotes of the Company's common stock. All expenses associated with this
service were paid by the Company.

The ability of an individual shareholder to trade his or her shares in a
particular state may be subject to various rules and regulations of that state.
A number of states require that an issuer's securities be registered in their
state or appropriately exempted from registration before the securities are
permitted to trade in that state. The Company has no present plans to register
its securities in any particular state, although it may take action that will
allow it to receive appropriate exemption.

The shares of TX Holdings' common stock are subject to the provisions of Section
15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), commonly referred to as the "penny stock" rule. The Commission
generally defines penny stock to be any equity security that has a market price
less than $5.00 per share, subject to specified exceptions. Section 15(g) sets
forth requirements for transactions in penny stocks and Rule 15g-9(d)(1)
incorporates the definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act. Rule 3a51-1 provides that any equity security is considered to be
a penny stock unless that security is registered and traded on a national
securities exchange meeting specified criteria set by the Commission; authorized
for quotation on The NASDAQ Stock Market; issued by a registered investment
company; excluded from the definition on the basis of price (at least $5.00 per
share) or the issuer's net tangible assets; or exempted from the definition by
the Commission. As a result, trading in TX Holdings' common stock is subject to
additional sales practice requirements on broker-dealers who sell penny stocks
to persons other than established customers and accredited investors, generally
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or $300,000 together with their spouse.

For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in TX Holdings's common stock and may affect the
ability of shareholders to sell their shares.

Dividends

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.

Holders

As of September 30, 2006, TX Holdings has issued and outstanding 24,065,893
shares of common stock. Warrants were issued to Baker Johnston & Wilson LLP for
1,434,088 shares; Douglas C. Hewitt for 300,000 shares; Michael A. Cederstrom
for 200,000 shares; Bobby Fellers for 300,000 shares; W.A. ("Bill") Alexander
for 250,000 shares; purchasers of common stock from the Private Placement
totaling 4,633,324 shares all of which have not been exercised. Of the total
27,002,558 shares outstanding as of December 8, 2006, 16,550,124 were deemed
"restricted securities," as defined by the Act when issued to their registered
owner and continues to have their restricted status noted on the books of TX
Holdings' transfer agent. Certificates representing such shares bear an
appropriate restrictive legend and their sale is subject to Rule 144 under the
Act.

                                       22
<PAGE>

In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned restricted shares of the
Company for at least one year, is entitled to sell, within any three-month
period, an amount of shares that does not exceed the greater of (i) the average
weekly trading volume in the Company's common stock, as reported through the
automated quotation system of a registered securities association, during the
four calendar weeks preceding such sale or (ii) 1% of the shares then
outstanding. A person who is not deemed to be an "affiliate" of the Company (as
the term "affiliate" is defined in the Act), and has not been an affiliate for
the most recent three months, and who has held restricted shares for at least
two years would be entitled to sell such shares without regard to the resale
limitations of Rule 144.

Recent Sales of Unregistered Securities

As of September 30, 2006, TX Holdings has issued and outstanding 24,065,893
shares of common stock as of September 30, 2005, TX Holdings had issued and
outstanding 16,705,593 shares of common stock. On December 12, 2002, MA&N
acquired control of the Company through purchase of 4,647,626 shares of common
stock representing 51%of the 9,112,992 outstanding shares of common stock of the
Company.

Robert S. Wilson the Chairman and Chief Executive Officer of the Company since
its inception June 16, 2000, until December 12, 2002. He resigned as a member of
the Board of Directors on April 30, 2003. Mr. Wilson had agreed to accept
options to purchase 294,341 shares of the Company's common stock in lieu of
compensation due him for his tenure with the Company. In December 2005, Mr.
Wilson exercised all of his options.

On February 19, 2003, the Company issued to Mark Neuhaus the chief executive
officer of the company, 3,000,000 shares of its common stock as compensation to
Mr. Neuhaus for services provided to the company and were registered under
Securities and Exchange Commission Form S-8 under the Securities Act of 1933.

On February 19, 2003, the Company issued 1,500,000 shares of the Company's
Common Stock to Ned Baramov, Secretary - Treasurer were registered under
Securities and Exchange Commission Form S-8 under the Securities Act of 1933.
Mr. Baramov resigned from the Company on June 24, 2005.

On August 2, 2004, the Company issued 500,000 shares of common stock of the
Company to S2 Consulting, The shares were issued as payment of $35,000 in fees
for past and future advisory services provided to the Company in relation to the
evaluation of potential merger and acquisition targets. Such services include,
but are not limited to advising, evaluating and developing corporate strategy,
providing company guidance, and assisting in developing relationships and
opportunities. S2 Consulting is an accredited investor. The sale was exempt
pursuant to Section 4 (2) of the Securities Act of 1933.

On May 11, 2005 Company issued 100,000 shares of common stock of the Company to
Frank Shafer. The shares were issued as payment of $12,000 in fees for past and
future advisory services provided to the Company in relation to financial
aspects of the Company's plans for expansion, acquisitions, and business
opportunities. Frank Shafer is an accredited investor. The sale was exempt
pursuant to Section 4 (2) of the Securities Act of 1933.

On July 1, 2005, the Company authorized the issuance of 350,000 shares of TX
Holdings common stock to Ned Baramov for services, valued at $28,000, in
relation to the preparation of SEC filings. Mr. Baramov's role includes
assisting the Company in record keeping, accounting and data management. Mr.
Baramov is an accredited investor. The sale was exempt pursuant to Section 4 (2)
of the Securities Act of 1933.

On July 21, 2005, a warrant to purchase 1,434,088 shares of TX Holdings stock
("Warrant") was issued to Baker, Johnston & Wilson LLC (now Baker & Johnston LLC
("B & J")) at an exercise price of $.15 a share. The Warrant provided that it
expires June 30, 2010, was callable by the Company on or after February 1, 2006
if the per share market value of TX Holdings common stock has been at least 2
1/2 times the exercise price for 20 consecutive trading days. The Warrant was
issued pursuant to a Forbearance Agreement between B & J and TX Holdings whereby
B & J agreed not to seek collection of $215,113.20 owed to it by TX Holdings for
legal services and expenses until January 21, 2007. The Warrant, if exercised,
provides for a total exercise price of $215,113.30 ($.15 x 1,434,088), exactly
equaling the indebtedness of the Company to B & J and the warrant may be
exercised by application of indebtedness to the exercise price. B & J is an
accredited investor. The sale was exempt pursuant to Section 4(2) of the
Securities Act of 1933. On January 12, 2006 but effective November 1, 2005, (i)
the Warrant was amended to expire December 31, 2010, (ii) to be callable only on
or after August 1, 2006, and (iii) to be exercisable only on or after July 1,
2006 and the Forbearance Agreement was amended to provide for forbearance until
July 21, 2007. On or about May 1, 2006 this Warrant was assigned to David R.
Baker as to 717,041 Warrants and to J. Brooke Johnston, Jr. as to 717,041
Warrants.

                                       23
<PAGE>

On August 5, 2005, 461,942 shares of TX Holdings common stock were issued to
David R. Baker, 361,942 representing settlement of $36,494.20 of legal fees and
expenses of Haskell Slaughter Young & Rediker, LLC that were due to Mr. Baker
(the issuance being 3,000 shares less than required, which additional shares
will be issued in due course) and 100,000 shares representing an accountable
retainer valued at $10,000 for future services and expenses of Haskell Slaughter
Young & Rediker, LLC for which Mr. Baker is accountable to assist the Company in
bringing all required SEC filings up to date. Mr. Baker is an accredited
investor. The sale was exempt pursuant to Section 4(2) of the Securities Act of
1933.

On December 12, 2005, the Company issued 2,000,000 shares of its common stock to
Darren Bloom as his compensation in the role of, CFO, Secretary - Treasurer and
member of the Board of Directors. Mr. Bloom is an accredited investor. The sale
was exempt pursuant to Section 4 (2) of the Securities Act of 1933. TX Holdings
has filed suit against Mr. Bloom for the return of the shares for breach of
contract. The shares were issued pursuant to a three year employment contract
which Mr. Bloom only served for 9 months. (SEE Item 3 Litigation, above)

On March 28, 2006 a warrant to purchase 200,000 shares of common stock of TX
Holdings, Inc. at an exercise price of $0.30 was issued to Michael A Cederstrom.
The warrant expires on March 31, 2010 and is callable by the Company on or after
March 27, 2007 if the market value of TX Holding Stock is has been at least 2
1/2 times the exercise price for 20 consecutive trading days.

On March 28, 2006 a warrant to purchase 300,000 shares of TX Holdings, Inc.
common stock at an exercise price of $0.30 was issued to Douglas C. Hewitt. The
warrant expires on March 27, 2010 and is callable by the Company on or after
March 31, 2007 if the market value of TX Holding Stock has been at least 2 1/2
times the exercise price for 20 consecutive trading days.

On March 28 a warrant to purchase 300,000 shares of common stock of TX Holdings,
Inc. at an exercise price of $0.30 was issued to Bobby Fellers. The warrant
expires on March 31, 2010 and is callable by the Company on or after March 31,
2007 if the market value of TX Holding Stock is has been at least 2 1/2 times
the exercise price for 20 consecutive trading days.

On July 1, 2006 a warrant to purchase 250,000 shares of common stock of TX
Holdings, Inc. at an exercise price of $0.30 was issued to W.A. ("Bill")
Alexander. The warrant expires on March 31, 2010 and is callable by the Company
on or after March 31, 2007 if the market value of TX Holding Stock is has been
at least 2 1/2 times the exercise price for 20 consecutive trading days.

During May 2006 the Company entered into a Private Placement Agreement with
Brill Securities, Inc. to act as a financial advisor for the private placement
of shares of common stock of TX Holdings. Pursuant to the Private Placement
Memorandum approximately $1,250,000 of units were placed. The units contained an
aggregate of 4,166,667 shares of the Company's common stock and 4,166,667common
stock purchase warrants. Each common stock purchase warrant is exercisable for a
period of two years at an exercise price of $.50 per share. In connection with
the offering, the Company paid a placement fee of $70,500 in cash. In addition,
the placing agent was issued warrants to purchase 235,000 shares of common stock
on the same terms and conditions as the investors. The net proceeds of the
offering will be used by the Company to purchase necessary equipment to upgrade,
replace, repair equipment on site at the fields we lease; to search, negotiate
and acquire additional oil and gas leases; and general corporate purposes. All
units placed were sold pursuant to Rule 144 of the act. All purchasers of the
units met the definition of an accredited investor.

Share Repurchases

None.

                                       24
<PAGE>

Item 6 Management's Discussion and Analysis or Plan of Operations

Introduction

The following discussion is intended to facilitate an understanding of our
business and results of operations and includes forward-looking statements that
reflect our plans, estimates and beliefs. It should be read in conjunction with
our audited consolidated financial statements and the accompanying notes to the
consolidated financial statements included herein. Our actual results could
differ materially from those discussed in these forward-looking statements.

The Company has never earned a profit, and has incurred an accumulated deficit
of $2,042,199 as of September 30, 2005 and a deficit of $3,972,697 as of
September 30, 2006. The acquisition of a controlling interest in the Company by
MA&N has given the Company access to additional funds directly from MA&N, and
the business plan envisioned by MA&N has elicit additional funds from third
parties. As of September 30, 2006 the Company has been able to raise
______________ in equity capitalization. The Company has been able to utilize
the capitalization to purchase three oil & gas fields to begin operations as an
oil & gas exploration and production company. It is anticipated that the Company
will beginning sale of oil production in the month of January 2007. The revenue
to be derived from the sale of oil will be limited until the fields are placed
into full production which is estimated to be within one year or by December
2007. During this time period, until the fields are fully producing, it will be
necessary to raise additional capital for the purpose of development of its
fields, purchases of equipment and general administrative expenses.. The Company
will seek both debt financing and equity financing during the fiscal year 2007
to meet the financial needs of the Company. It is anticipated that the Company
will have in excess of 100 wells in operation by December 2007. Each well has
the potential of producing between 2 to 12 bbls per day. As the wells mature and
the Water flood of the fields gain momentum the production from the wells should
increase to the upper end of predicted production. The Company should reach
profitability at approximately 200 bbls of oil produced per day. The Company's
success will be determined by the speed that production can be produced and sold
enabling the Company to utilize its revenue for future expansion. There is no
certainty that the Company will be able to raise additional equity or qualify
for debt financing.

The proposed Wi-Fi business has become very competitive and capital-use
intensive and no longer is being considered for the Company's operations. The
Company has changed its focus to the research of opportunities in the oil and
gas industry. The large number of established companies in the Energy industry
has left only opportunities in the field of secondary recovery, or the recovery
by injecting gas or water into a reservoir to replace produced fluids and thus
maintain or increase the reservoir pressure. Management believes that it has
assembled the right team of experts, successful completion of business
combinations, and the acquisition of fields with proven reserves and excellent
development prospects, the Company will be able to achieve positive results.

The Company's original business, the mortgage banking business conducted by
Direct, was divested in November 2002 See SALE OF THE ASSETS AND BUSINESS OF
DIRECT. The other early business of the Company, the publication of the
magazine, FOR SALE BY OWNER, is currently operating at a small deficit, and is
now managed and majority owned by Freedom Homes, Inc. By terminating the
mortgage banking operations of Direct and by first reducing the expenses of
producing the magazine, FOR SALE BY OWNER, and then by the merger of Old Freedom
into Freedom, the Company has substantially reduced its operating costs.
However, these expense reductions do not eliminate the Company's current
operating deficits. Research of the Wi-Fi business in the past, and of the oil
and gas business as of December 2006, has increased the operating cost of the
Company and any proposed business combinations will require additional
investments.

Capital Expenditures

The Company has no material commitments for capital expenditures and has had no
need, in its previous operations, to make material capital expenditures. The
development of the Company's oil and gas business will require capital
expenditures, the exact extent of which is not now known, although it is
believed that necessary equipment purchases, the principal anticipated capital
expenditures, can be financed to a substantial extent, if the Company can
establish oil production. If the Company cannot establish oil production then it
will be necessary to raise additional capital through equity offerings.


                                       25
<PAGE>

Results of Operations

YEAR ENDED SEPTEMBER 30, 2004 COMPARED WITH YEAR ENDED SEPTEMBER 30, 2005;
QUARTER ENDED DECEMBER 31, 2004 COMPARED TO QUARTER ENDED DECEMBER 31, 2003;
QUARTER ENDED MARCH 31, 2005 COMPARED TO QUARTER ENDED MARCH 31, 2005; QUARTER
ENDED JUNE 30, 2005 COMPARED TO QUARTER ENDED JUNE 30, 2005

Revenues from continuing operations decreased $26,605 from $26,605 in 2004 to
$0.00 in 2005, or 100%, as a result of the merger of FOR SALE BY OWNER into
Freedom Homes. During the year 2005 the ownership in Freedom Homes of 32.3% by
TX Holdings has caused the reclassification of TX Holdings interest in the new
merged Freedom Homes. TX Holdings will no longer consolidate its financials with
Freedom Homes due to its minority interest in Freedom Homes. The investment in
Freedom Homes has been reclassified as an investment in Freedom Homes and all of
the obligations and investments in Freedom Homes have been eliminated from the
books of TX Holdings. The management has determined to completely eliminate its
investment in Freedom as of the Third Quarter of 2005. This decision was made
because the Company only owns a minority position in Freedom, Freedom's stock
has no current market, and Freedom has not and does not anticipate paying any
dividends in the foreseeable future. The elimination of the investment in
Freedom will allow the Company to focus on its oil and gas business.

The most significant event in fiscal 2005 was the merger of the FOR SALE BY
OWNER and Freedom. The Company in the Third Quarter of 2005 made the decision to
completely write off its investment in subsidiaries taking a loss on
discontinued operations of $790,841. In addition to the loss from discontinued
operations the Company sustained an increase in operating loss from continuing
operations increasing $103,127 from $132,653 in 2004 to $235,820 in 2005, or
43%, principally caused by the increase in professional fees from $129,605 in
2004 to $160,706 or 19% and Travel costs which increased from $372 in 2004 to
$30,531 in 2005 or 8200%. These fees increased due to the work on the merger
between FOR SALE BY OWNER and Freedom. The travel was caused by the necessity to
travel between Florida, Georgia and New York to accomplish the Merger.

Since the Merger FOR SALE BY OWNER and Freedom the company has concentrated on
refocusing its business plan. The company has refocused its business plan to
become an oil & gas exploration and production company. It is the Company's
intent to enter into oil & gas leases were the fields have produced in the past
and reentering the wells. (See Item 1 Description of Business)

Net Operating Loss Carryforward for Tax Purposes

As at September 30, 2005, the Company has tax net operating loss carryforwards
of approximately $1,800,000 that expire in 2018 through 2023. Approximately
$1,190,000 of the net operating loss carryforwards were incurred prior to
December 12, 2002 at which date MA&N acquired 51% of the Company and are
consequently subject to certain limitation described in section 382 of the
Internal Revenue Code. The Company estimates that, due to the limitations and
expiration dates, only $424,000 of the net operating losses incurred prior to
December 12, 2002 will be available to offset future taxable income.

Net operating losses after December 12, 2002 through September 30, 2005 were
approximately $838,000. The total net operating losses available to the Company
to offset future taxable income are approximately $1,200,000. In view of the
anticipated losses sustained subsequent to September 2005, the net operating
loss carryforwards will have increased. This amount, tax effected (assuming an
estimated net federal and state tax rate of 34%), together with resulting from
differences in reporting for income tax and financial statement purposes, or a
total of approximately $408,000 as of September 30, 2005 a net deferred tax
asset that may be used against the Company's future income tax. For financial
statement purposes, a valuation allowance of $362,886, or 100%, has been taken
against net deferred taxes as of September 30, 2005. A larger equivalent
valuation will be taken against the larger amount of such assets subsequently.
There can be no assurance that these deferred tax assets can ever be used. A
deferred tax asset can be used only if there is future taxable income, as to
which there can be no assurance in the case of the Company. SEE NOTE 4 - NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS.

Liquidity

At present and historically, the Company has lacked liquidity as a result of
insufficient initial financing and continuing operating deficits. The Company
initially maintained its ability to pay expenses through the sale of common
stock from time to time, principally to its directors, who have made significant
investments. As a result of the change of control of the Company in December
2002, such funding will not continue. Therefore, the Company will need to rely
for its future liquidity on the resources of its new controlling shareholder,
MA&N, until such time as it arranges other financing or becomes profitable. Mr.
Neuhaus has provided loans to the Company providing the Company with $151,661
for operating purposes during 2005. Shareholder Advances increased from $53,036
in 2004 to $214,697 in 2005 for an increase of 75%. The Company has also made an
arrangement with its primary creditor concerning an Account Payable in the
amount of $215,113 to accept Warrants totaling 1,434,088 warrants to purchase
common stock of the Company. (See Recent Sale of Unregistered Securities). The
$215,113 represents 94% of the Company's outstanding Account Payable of $22,272.
During the Third and Fourth quarter of 2006 the Company was able to complete a
Private Placement of common Stock to accredited investors. This placement has
provided the Company with the liquidity to enter into the oil & gas business by
acquiring oil & gas leases. (See Oil & Gas Business).

                                       26
<PAGE>

Item 7 Financial Statements

The Company's consolidated balance sheets as of September 30, 2004 and September
30, 2005 and the related consolidated statements of operations, changes in
stockholders equity (deficit) and cash flows for the year then ended are being
audited by Ham, Langston & Brezina, LLP, independent certified public
accountants. These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
pursuant to Regulation S-B as promulgated by the Securities and Exchange
Commission and are included herein in response to Part F/S of this Form 10-KSB.
The financial statements have been prepared assuming the Company will continue
as a going concern. SEE NOTE 1 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

On February 6, 2006 the Company received permission to file a comprehensive Form
10-KSB which includes the interim financial statements for the quarters ended
December 31, 2004, March 31, 2005 and June 30, 2005 in lieu of filing Forms
10QSB for those quarters. The Company is required to include within its 2005
10-KSB the following information:

     1.   Unaudited condensed financial statements that have reviewed by a PCAOB
          registered accountant in a level of detail consistent with SX rule
          10-01(a) and (b) for the applicable quarters of 2005 and 2005.

     2.   Managements Discussion and Analysis, based on the annual and quarterly
          financial information, explaining operating results, trends and
          liquidity during each interim and annual period presented. Discussions
          relative to interim periods may be incorporated into the annual-period
          discussions or presented separately.

     3.   All material information that would have been available and disclosed
          in the company's delinquent 2005 periodic reports had they been timely
          filed.


                                       27
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND
2005.
TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES

                                TABLE OF CONTENTS


Unaudited Financial Statements:

    Consolidated Balance Sheet at September 30, 2005

    Consolidated Statements of Operations for the Years Ended
    September 30, 2004 and 2005

    Consolidated Statements of Changes in Stockholders' Equity
    (Deficit) For The Years Ended September 30, 2004 And 2005

    Consolidated Statements of Cash Flows for the Years Ended
    September 30, 2004 And 2005

Unaudited Financial Statements for the First Quarter Ended December 31, 2004 and
2005

    Consolidated Balance Sheet at September 30, 2005

    Consolidated Statements of Operations for the Quarters Ended
    December 31, 2004 and 2005

    Consolidated Statements of Changes in Stockholders' Equity
    (Deficit) for the Years Ended December 31, 2004 And 2005

    Consolidated Statements of Cash Flows for the Quarters Ended
    December 31, 2004 And 2005

Unaudited Financial Statements for the Second Quarter Ended March 31, 2004 and
2005

    Consolidated Balance Sheet at September 30, 2005

    Consolidated Statements of Operations for the Quarters Ended
    March 31, 2004 and 2005

    Consolidated Statements of Changes in Stockholders' Equity
    (Deficit) for the Quarters Ended March 31, 2004 And 2005

    Consolidated Statements of Cash Flows for the Quarters Ended
    March 31, 2004 And 2005

Unaudited Financial Statements for the Third Quarter Ended March 31, 2004 and
2005

    Consolidated Balance Sheet at September 30, 2005

    Consolidated Statements of Operations for the Quarters Ended
    June 30, 2004 and 2005


                                       28
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND
2005.
TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES

TABLE OF CONTENTS, CONTINUED

    Consolidated Statements of Changes in Stockholders' Equity
    (Deficit) for the Quarters Ended June 30, 2004 And 2005

    Consolidated Statements of Cash Flows for the Quarters Ended
    June 30, 2004 and 2005

Notes To Consolidated Financial Statements

                                       29
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------


                                                2004            2005
                                             -----------    -----------
ASSETS
Current assets:
    Cash and cash equivalents                $        --    $    10,000
                                             -----------    -----------
      Total current assets                            --         10,000

Property and equipment, net                        3,725          1,080
Other assets                                         250             --
                                             -----------    -----------
         Total assets                        $     3,975    $    11,080
                                             ===========    ===========

  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable and accrued liabilities $   310,627    $   220,277
    Note Payable to a bank                        20,598              0
    Stockholder advances                          53,036        214,697
                                             -----------    -----------

      Total current liabilities                  384,261        434,974
                                             -----------    -----------

Commitments and contingencies

Stockholders' deficit:
    Preferred stock: no par value, 1,000,000
         shares authorized, 1,000 shares issued
         or outstanding                               --             --

    Common stock: no par value, 50,000,000
         shares authorized, 16,705,793 and
         15,793, 651 shares issued and outstanding
         at September 30, 2005 and 2004,
         respectively                          1,532,111      1,618,305

    Subscription receivable                          --              --
    Accumulated deficit                       (1,912,397)    (2,042,199)
                                             -----------   ------------
            Total stockholders' deficit         (380,286)      (423,894)
                                             -----------   ------------
Total liabilities and stockholders' deficit  $     3,975   $     11,080
                                             ===========    ===========


The accompanying notes are an integral part of these consolidated financial
statements

                                       30
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------
                                                 2004            2005
                                             ------------    ------------
Revenue                                      $     26,605    $          0
                                             ------------    ------------
Operating expenses:
    Professional fees                             129,542         160,706
    Salaries, commissions and benefits              1,450           4,202
    Office, travel and other expenses                 372          30,531
    Printing                                       11,746               0
    Insurance                                           0           1,442
    Rent                                            1,863           5,000
    Utilities and telephone                           830           9,116
    Depreciation                                    2,505             480
    Advertising                                       111           2,384
    Moving Expense                                      0           7,545
    Miscellaneous                                  10,879          14,414
                                             ------------    ------------
      Total operating expenses                    159,298         235,820
                                             ------------    ------------

         Loss from operations                    (132,693)       (235,820)
                                             ------------    ------------
Other income and (expense):
    Gain on settlement of accounts payable          1,342              --
    Unsuccessful business combination costs            --               0
    Interest expense                               (7,214)         (2,872)
                                             ------------    ------------
      Total other income and expense, net          (5,872)         (2,872)
                                             ------------    ------------
Loss from continuing operations                  (138,565)       (238,692)
                                             ------------    ------------
Discontinued operations:
    Operating loss of discontinued
         operations                                    --               0
    Gain (loss) from disposal of discontinued
      direct lending operations                      (101)       (790,841)
                                             ------------    ------------
      Income (loss) from discontinued operations     (101)       (790,841)
                                             ------------    ------------
    Net loss                                 $   (138,666)   $ (1,029,533)
                                             ============    ============

Weighted average number of common shares
    outstanding - basic and diluted            15,372,163      15,958,775
                                             ============    ============

Net loss per common share - basic and
 diluted                                     $      (0.01)   $      (0.06)
                                             ============    ============

The accompanying notes are an integral part of these consolidated financial
statements


                                       31
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
<TABLE>
<CAPTION>

                                             Common Stock
                                        -------------------------  Subscription   Accumulated
                                           Shares       Amount      Receivable      Deficit         Total
                                        ------------------------------------------------------------------------


<S>                  <C>                  <C>          <C>             <C>          <C>               <C>
Balance at September 30,2003              15,293,651   1,497,111       (92,159)     (1,773,731)       (368,779)

Cash and services received from                                         92,159                          92,159
 stockholders

Common stock issued for
 professional services                       500,000      35,000                                        35,000


Net loss                                                                              (138,666)       (138,666)
                                        ------------------------------------------------------------------------
Balance at September 30,2004              15,793,651   1,532,111                    (1,912,397)       (380,286)

Common Stock issued for
 professional services                       450,000      40,000                                        40,000

Common stock issued for
 prepayment of future services               100,000      10,000                                        10,000

Common stock issued to settle
 accounts payable obligation                 361,942      36,194                                        36,194

Elimination of accumulated deficit
from previously consolidated affiliate                                                 576,046         576,046




Net loss                                                                              (705,848)       (705,848)

                                        ------------------------------------------------------------------------
Balance at September 30, 2005             16,705,593   1,618,305                    (2,042,199)       (423,894)
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

                                       32
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                           2004          2005
                                                         ---------   -------------

<S>                                                      <C>         <C>
Cash Flows from operating activities:
            Net loss                                     $(138,666)  $ (1,029,533)
  Adjustment to reconcile net loss to net cash
            used in operating activities:
            Depreciation expense                             2,505            480
            Common stock issued for professional services   35,000             --
            Compensatory common stock issuances to executives   --             --
            Changes in operating assets and liabilities:
        Accounts receivable                                     --             --
        Other assets                                            --             --
        Accounts payable and accrued liabilities             1,920        (39,646)
        Shareholder Advances                                    --        182,696
                                                         ---------    ------------

          Net cash used by continuing operations           (99,140)      (886,003)
          Net cash used by discontinued operations            (101)            --
                                                         ---------    ------------

          Net cash used by operating activities            (99,241)      (886,003)
                                                         ---------    ------------

Cash flows from investing activities:
    Purchase of property and equipment                          --             --
    Proceeds from sale of discontinued
    Freedom and direct lending operations                       --        790,842
                                                         ---------    ------------

          Net cash provided by investing activities             --        790,842
                                                         ---------    ------------

Cash flows from financing activities:
   Proceeds from notes payable                               6,152             --
    Proceeds from sale of common stock                      92,159             --
    Proceeds for payment of Services with common                --         86,194
                                                         ---------    ------------

          Net cash provided by financing activities         98,311         86,194
                                                         ---------    ------------

Increase in cash and cash equivalents                         (930)        (8,967)

Cash and cash equivalents at beginning of year                 930          8,967
                                                         ---------    ------------

Cash and cash equivalents at end of year                 $      --    $        --
                                                         =========    ============

Supplemental Disclosure of Cash Flow Information
    Cash Paid for Interest Expense                       $   2,000    $     2,872
    Cash Paid for Income Taxes                           $      --    $        --
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements


                                       33
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS FOR QUARTER ENDING
DECEMBER 31, 2004 AND AUDITED BALANCE SHEET FOR YEAR ENDING 2004
-----------------------------------------------------------------------------

                                              YEAR ENDED QUARTER ENDED
                                           September 30      December 31
                                                2004            2004
                                             -----------    -----------
ASSETS
Current assets:
    Cash and cash equivalents                $        --    $     7,498
      Due from Affiliates (See Note 1)                --        291,039
                                             -----------    -----------
      Total current assets                            --        298,537

Property and equipment, net                        3,725          1,440
Other assets (See Note 1)                            250        499,801
                                             -----------    -----------
         Total assets                        $     3,975    $   799,778
                                             ===========    ===========

  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable and accrued liabilities $   310,627    $   217,472
    Note Payable to a bank                        20,598              0
    Stockholder advances                          53,036         86,541
    Other Liabilities                                 --            968
                                             -----------    -----------
      Total current liabilities                  384,261        304,981
                                             -----------    -----------

Commitments and contingencies

Stockholders' deficit:
    Preferred stock: no par value, 1,000,000
     shares authorized, 1,000 shares issued
     or outstanding                                   --             --

    Common stock: no par value, 50,000,000
     shares authorized, 15,793,651 and
     15,293,651 shares issued and outstanding
     at September 30, 2004 and 2003,
     respectively                              1,532,111      1,532,111

    Subscription receivable                           --             --
    Accumulated deficit (See Note 1)          (1,912,397)   (1,037,314)
                                             -----------   ------------
            Total stockholders' deficit         (380,286)       494,797
                                            ------------   ------------
Total liabilities and stockholders' deficit  $     3,975        799,778
                                             ===========    ===========


The accompanying notes are an integral part of these consolidated financial
statements

                                       34
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED
DECEMBER 31, 2003 AND 2004
-----------------------------------------------------------------------------
                                             FOR THE THREE MONTHS
                                               ENDED DECEMBER 31,
                                       --------------------------------
                                             2003               2004
                                       -------------      -------------
REVENUES                               $       9,334      $          --
                                       -------------      -------------

OPERATING EXPENSES
  Salaries, commissions and benefits           1,000              2,050
  Professional fees                           13,651              1,493
  Office expense                                 301                 --
  Travel                                          --             12,757
  Rent                                           650                 --
  Magazine printing                            2,681                 --
  Depreciation                                   626                120
  Utilities and telephone                        197              1,476
  Advertising                                    360                595
  Other                                        3,870              5,190
                                       -------------      -------------
                                              23,336             23,681
                                       -------------      -------------
Operating loss from continuing operations    (14,002)           (23,681)
                                       -------------      -------------

OTHER INCOME (EXPENSE)
  Gain on settlement of accounts payable         373                 --
  Interest                                    (1,534)              (968)
                                        ------------      -------------
                                              (1,161)              (968)
                                       -------------      -------------
  Loss from continuing operations before
  income taxes                               (15,163)           (24,649)

PROVISION FOR INCOME TAXES                        --                 --
                                       -------------      -------------
Loss from continuing operations              (15,163)           (24,649)
                                       -------------      -------------

DISCONTINUED OPERATIONS
  Operating loss of discontinued
  Direct Lending operations                       --                 --
  Gain from disposal of discontinued
  Direct Lending operations                       --                 --
                                       -------------      -------------

Net loss from discontinued
Direct Lending operations                         --                 --
                                       -------------      -------------

    Net loss                           $     (15,163)     $     (24,649)
                                       =============      =============

PER SHARE INFORMATION:
  Basic net loss per common share      $       (0.00)     $       (0.00)
                                       =============      =============

Weighted average shares outstanding       15,293,651         15,793,651
                                       =============      =============

The accompanying notes are an integral part of these consolidated financial
statements

                                       35
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                               Common Stock
                                      -------------------------------------
                                                                                Subscription         Accumulated
                                        Shares               Amount              Receivable           Deficit              Total
                                      -------------------------------------------------------------------------------------------
<S>                  <C> <C>                <C>                <C>                  <C>                 <C>              <C>
Balance at September 30, 2003               15,293,651         1,497,111.00         (92,159.00)         (1,773,731.00)   (368,779)
Cash and services received from
stockholder                                         --                   --          92,159.00                     --      92,159
Common stock issued for
professional services                          500,000            35,000.00                 --                     --      35,000
Net loss                                            --                   --                 --            (138,666.00)   (138,666)
---------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2004               15,793,651        $   1,532,111                 --           $ (1,912,397) $ (380,286)
=================================================================================================================================

Common Stock issued for
Professional Services
Common Stock Issued as prepayment of
Future professional services Common Stock
issued to settle accounts payable
Net Loss                                                                                                     ($24,649)   ($24,649)
Balance at December 31, 2004                15,793,651       $    1,632,111                               ($1,937,072)($1,937,072)
=================================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements


                                       36
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED DECEMBER 31, 2003 AND 2004
-----------------------------------------------------------------------------
                                                         FOR THE THREE MONTHS
                                                          ENDED DECEMBER 31,
                                                     ------------------------
                                                        2003           2004
                                                     ---------      ---------
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net loss $(15,163) $(24,649)
 Adjustments to reconcile net loss to net cash
  used in operating activities of continuing
  operations:

  Depreciation                                            626            120
  Professional services received for common stock issued
      in a prior period                                 8,100             --
    Changes in deferred and accrued amounts:
      Accounts receivable                                  --             --
      Other assets                                         --             --
      Accounts payable and accrued expenses              (588)       (31,482)
      Shareholder Advances                                 --         54,541
                                                     ---------      ---------

Net cash used in operating activities of
continuing operations                                  (7,025)        (1,470)
                                                     ---------      ---------
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
  Proceeds from sale of property and equipment             --             --
                                                     ---------      ---------
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
  Proceeds, net of repayments, from short-term notes payable
    and stockholder advances                             (500)            --
  Proceeds from the sale of common stock                   --             --
  Cash received from stockholder for shares issued in
  prior period                                          6,595             --
                                                     ---------      ---------
  Net cash provided by financing activities of
  continuing operations                                 6,095             --
                                                     ---------      ---------

  Net cash (used in ) provided by continuing
  operations                                             (930)            --
                                                     ---------      ---------
  Net (decrease) increase in cash                        (930)        (1,470)

CASH, BEGINNING OF PERIOD                                 930          8,967
                                                     ---------      ---------
CASH, END OF PERIOD                                   $    --       $  7,497
                                                     =========      =========

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION

  Cash paid for interest                             $    560      $     968
                                                    ==========     ==========

  Cash paid for income taxes                         $     --      $      --
                                                    ==========     ==========

Noncash financing activities Common stock issued in
exchange for receivable from stockholder            $      --      $      --
                                                    ==========     ==========

  Common stock issued as repayment for stockholder
  advances                                          $      --      $      --
                                                    ==========     ==========

The accompanying notes are an integral part of these consolidated financial
statements.

                                       37
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS FOR QUARTER ENDING
March 31, 2005 AND AUDITED BALANCE SHEET FOR YEAR ENDING SEPTEMBER 30, 2004
-----------------------------------------------------------------------------
                                                YEAR ENDED         QUARTER ENDED
                                                September 30       March 31
                                                2004               2005
ASSETS
Current assets:
    Cash and cash equivalents                      $      --       $     7,498
      Due from Affiliates (See Note 1)                    --           291,039
                                                 -----------       -----------
      Total current assets                                --           297,182

Property and equipment, net                            3,725             1,320
Other assets (See Note 1)                                250           499,801
                                                 -----------       -----------
         Total assets                            $     3,975        $  798,283
                                                 ===========       ===========

  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable and accrued liabilities     $   310,627        $  219,612
    Note Payable to a bank                            20,598                 0
    Stockholder advances                              53,036            89,879
    Other Liabilities                                     --             1,914
                                                 -----------       -----------
      Total current liabilities                      384,261           311,405
                                                 -----------       -----------

Commitments and contingencies

Stockholders' deficit:
    Preferred stock: no par value, 1,000,000
     shares authorized, 1,000 shares issued
     or outstanding                                       --                --

    Common stock: no par value, 50,000,000
     shares authorized, 15,793,651 and
     15,293,651 shares issued and outstanding
     at September 30, 2004 and 2003,
     respectively                                  1,532,111         1,532,111

    Subscription receivable                               --                --
    Accumulated deficit (See Note 1)              (1,912,397)       (1,045,233)
                                               -------------      ------------
            Total stockholders' deficit             (380,286)          486,878
                                                ------------      ------------
Total liabilities and stockholders' deficit    $       3,975      $    798,283
                                                 ===========       ===========



The accompanying notes are an integral part of these consolidated financial
statements

                                       38
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2004 AND 2005 AND THE SIX MONTHS
ENDED MARCH 31, 2004 AND 2005
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                        FOR THE THREE MONTHS             FOR THE SIX MONTHS
                           ENDED MARCH 31,                ENDED MARCH 31,
                    ------------------------------    ------------------------
                       2004               2005              2004             2005
                   ------------     -------------       -------------   --------------
<S>                <C>               <C>               <C>                <C>
REVENUES           $      7,526      $        --       $      16,860      $         --
                  -------------     -------------      -------------     -------------

OPERATING EXPENSES
  Salaries,
  commissions
  and benefits              450                --              1,450             4,202
  Professional
  fees                   42,428             2,689             56,079             4,182
  Office expense            150             2,064                451             2,064
  Travel                     --               942                 --            13,699
  Rent                      412                --              1,062                --
  Magazine printing       3,834                --              6,515                --
  Depreciation              626               120              1,252               240
  Utilities and telephone   396               332                593             1,808
  Advertising                --               525                360             1,120
  Other                   1,591               300              5,461             5,490
                  -------------     -------------      -------------     -------------
                         49,887             6,972             73,223            30,653
                  -------------     -------------      -------------     -------------

Operating loss from
continuing operations  (42,361)           (6,972)           (56,363)          (30,653)
                  -------------     -------------      -------------     -------------
OTHER INCOME (EXPENSE)
  Gain on settlement
  of accounts payable       --                --                373                --
  Interest              (1,666)             (947)            (3,200)           (1,915)
                  -------------     -------------      -------------     -------------
                        (1,666)             (947)            (2,827)           (1,918)
                  -------------     -------------      -------------     -------------
Loss from continuing
operations before
income taxes           (44,027)           (7,919)           (59,190)          (32,568)

PROVISION FOR
INCOME TAXES                --                --                 --                --
                  -------------     -------------      -------------     -------------
Loss from continuing
operations             (44,027)               --            (59,190)               --
                  -------------     -------------      -------------     -------------

Net loss          $    (44,027)     $     (7,919)      $    (59,190)     $    (32,568)
                  =============     =============      =============     =============

PER SHARE INFORMATION:
Basic net loss
per common share $      (0.00)     $      (0.00)      $      (0.00)     $       (0.00)
                  =============     =============      =============     =============

Weighted average
shares outstanding  15,293,651        15,793,651         15,293,651         15,793,651
                  =============     =============      =============     =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       39
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 2004 AND THE QUARTER ENDED MARCH 31, 2005
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                    Common Stock
                                      -------------------------------------
                                                                             Subscription        Accumulated
                                         Shares           Amount               Receivable          Deficit               Total
                                      ------------------------------------------------------------------------------------------
<S>                  <C> <C>          <C>              <C>                   <C>                <C>                    <C>
Balance at September 30, 2003         15,293,651       1,497,111.00          (92,159.00)        (1,773,731.00)         (368,779)
Cash and services received from
stockholder                                   --                 --           92,159.00                    --            92,159
Common stock issued for
professional services                    500,000          35,000.00                  --                    --            35,000
Net loss                                      --                 --                  --           (138,666.00)         (138,666)
--------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2004         15,793,651       $  1,532,111                  --         $  (1,912,397)        $(380,286)
================================================================================================================================
Common Stock issued for                       --                 --                                                          --
Professional Services
Common Stock Issued as prepayment
of Future professional services               --                 --                                                          --
Common Stock issued to settle
accounts payable                              --                 --                                                          --
Net Loss                                                                                             ($32,568)         ($32,568)
                                      ------------------------------------------------------------------------------------------

Balance at March 31, 2005             15,793,651         $1,532,111                               ($1,944,965)        ($412,859)
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

                                       40
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 2004 AND 2005
-----------------------------------------------------------------------------
                                                        FOR THE SIX MONTHS
                                                          ENDED MARCH 31,
                                                   --------------------------
                                                       2004            2005
                                                   ----------      ----------
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
  Net loss                                         $ (59,190)       $(32,568)
  Adjustments to reconcile net loss to net cash
   used in operating activities of continuing
   operations:

   Depreciation                                        1,252             240
    Expenses settled by issuance of common stock          --              --
    Professional services received for common stock
    issued in a prior period                           6,200              --
    Changes in deferred and accrued amounts:
      Accounts receivable                                 --              --
Accounts payable and accrued expenses                 (2,045)        (28,396)
Shareholder Advances                                      --          57,879

Net cash used in operating activities of continuing
operations                                           (43,783)         (2,845)
                                                   ----------      ----------

FINANCING ACTIVITIES OF CONTINUING OPERATIONS
  Proceeds, net of repayments, from short-term
   notes payable and stockholder advances               (500)             --
  Proceeds from the sale of common stock                  --              --
  Cash received from stockholder for shares issued in
   prior period                                       43,491              --
                                                   ----------      ----------

  Net cash provided by financing activities of continuing
   operations                                         42,991              --
                                                   ----------      ----------

  Net cash (used in) provided by continuing operations  (792)             --
                                                    ---------      ----------

Net (decrease) increase in cash                         (792)         (2,845)

CASH, BEGINNING OF PERIOD                                930           8,967
                                                  ----------      ----------

CASH, END OF PERIOD                               $      138      $    6,122
                                                  ==========     ===========


SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION

Cash paid for interest                            $    1,118      $    1,915
                                                 ===========     ===========

Cash paid for income taxes                        $       --      $       --
                                                 ===========     ===========

The accompanying notes are an integral part of these consolidated financial
statements.

                                       41
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS FOR QUARTER ENDING
JUNE 30, 2005 AND AUDITED BALANCE SHEET FOR YEAR ENDING SEPTEMBER 30, 2004
-----------------------------------------------------------------------------
                                             YEAR ENDED     QUARTER ENDED
                                            September 30       June 30
                                                2004            2005
                                            -------------    -----------
ASSETS
Current assets:
    Cash and cash equivalents               $          --    $     6,022
                                              -----------    -----------
      Total current assets                             --             --

Property and equipment, net                         3,725          1,200
Other assets                                          250         47,079
                                              -----------    -----------
         Total assets                       $       3,975    $    54,301
                                              ===========    ===========

  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable and accrued liabilities $    310,627    $   226,635
    Note Payable to a bank                         20,598              0
    Stockholder advances                           53,036        133,141
    Other Liabilities                                  --          2,872
                                              -----------    -----------

      Total current liabilities                   384,261        362,648
                                              -----------    -----------

Commitments and contingencies

Stockholders' deficit:
    Preferred stock: no par value, 1,000,000
     shares authorized, 1,000 shares issued
     or outstanding                                    --             --

    Common stock: no par value, 50,000,000
     shares authorized, 15,793,651 and
     15,293,651 shares issued and outstanding
     at September 30, 2004 and 2003,
     respectively                               1,532,111      1,544,110

    Subscription receivable                            --             --
    Accumulated deficit                        (1,912,397)    (1,852,457)
                                             -------------   ------------
            Total stockholders' deficit          (380,286)      (308,347)
                                             -------------   ------------
Total liabilities and stockholders' deficit  $      3,975    $    54,301
                                             =============   ============

The accompanying notes are an integral part of these consolidated financial
statements

                                       42
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2004 AND 2005 AND THE NINE MONTHS
ENDED JUNE 30, 2004 AND 2005
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                            FOR THE THREE MONTHS               FOR THE NINE MONTHS
                               ENDED JUNE 30,                      ENDED JUNE 30,
                   ------------------------------      -------------------------------
                       2004               2005               2004             2005
                   ------------     -------------      -------------     -------------
<S>               <C>               <C>                <C>              <C>
REVENUES          $       5,895      $        --        $     22,755     $          --
                  -------------     -------------      -------------     -------------
OPERATING EXPENSES
  Salaries, commissions
   and benefits              --             2,152              1,450             4,202
  Professional fees      23,462            38,383             79,541            42,565
  Office expense             28               124                479             2,188
  Travel                     --             9,384                 --            23,083
  Rent                      401             5,000              1,463             5,000
  Magazine printing       4,590                --             11,105                --
  Depreciation              626               120              1,878               360
  Utilities and telephone   237             5,318                830             7,126
  Advertising               111                --                471             1,120
  Insurance                  --             1,442                 --             1,442
  Other                   2,513               582              7,974             6,072
                  -------------     -------------      -------------     -------------
                         31,968            62,505            105,191            93,158
                  -------------     -------------      -------------     -------------
Operating loss from
continuing
operations              (26,073)          (62,505)           (82,436)          (93,158)
                  -------------     -------------      -------------     -------------
OTHER INCOME (EXPENSE)
  Gain on settlement of
   accounts payable       1,342                --              1,715                --
   Interest              (1,906)             (957)            (5,106)           (2,872)
                  -------------     -------------      -------------     -------------
                           (564)             (987)            (3,391)           (2,872)
                  -------------     -------------      -------------     -------------
Loss from continuing
  Operations before
   income taxes         (26,637)          (63,462)           (85,827)          (96,030)

PROVISION FOR INCOME TAXES   --                --                 --                --
                  -------------     -------------      -------------     -------------
  Loss from continuing
   operations           (26,637)          (63,462)           (85,827)         (96,030)
                  -------------     -------------      -------------     -------------
DISCONTINUED OPERATIONS
Operating loss of
discontinued
Freedom & Direct
Lending operations           --          (743,762)                --          (743,762)
                  -------------     -------------      -------------     -------------

Net Loss from discontinued
Freedom &
Direct Lending
operations                   --          (743,762)                --          (743,762)

Net loss          $     (26,637)     $   (807,224)    $      (85,827)    $    (839,792)
                  =============     =============      =============     =============
PER SHARE INFORMATION:
  Basic net loss per common
  share           $       (0.00)     $      (0.05)    $        (0.01)    $       (0.05)
                  =============     =============      =============     =============

  Weighted average shares
   outstanding       15,293,651        15,814,530         15,293,651       15,798,856
                  =============     =============       =============    =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       43

<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 2004 AND THE QUARTER ENDED JUNE 30, 2005
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                               Common Stock
                       ----------------------------------
                                                             Subscription         Accumulated
                           Shares            Amount           Receivable           Deficit              Total
                       ----------------------------------------------------------------------------------------------
<S> <C>                 <C>               <C>                  <C>                  <C>                     <C>
Balance at September
30, 2003                15,293,651        1,497,111            (92,159.00)          (1,773,731)             (368,779)
Cash and services
received from
stockholder                     --               --             92,159.00                   --                92,159
Common stock issued
for professional
services                   500,000           35,000                    --                   --                35,000
Net loss                        --               --                    --             (138,666)             (138,666)
---------------------------------------------------------------------------------------------------------------------
Balance at September
30, 2004                15,793,651       $1,532,111                    --          $(1,912,397)            $(380,286)
=====================================================================================================================
Common Stock issued
for
Professional Services      100,000          $12,000                                                          $12,000
Common Stock Issued
as prepayment of
Future professional
services                        --               --                                                               --
Common Stock issued
to settle accounts
payable                        --                --                                                               --
Net Loss                                                                             ($839,792)            ($839,792)
                       ----------------------------------------------------------------------------------------------
Balance at June 30,
2005                    15,893,651       $1,544,111                                ($2,752,189)          ($1,220,078)
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                       44
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED JUNE 30, 2004 AND 2005
-----------------------------------------------------------------------------
                                                            2004         2005
                                                         ---------   ---------

Cash Flows from operating activities:
            Net loss                                     $(138,666)   $(839,792)
  Adjustment to reconcile net loss to net cash
            used in operating activities:
            (Income) loss from discontinued operations         101           --
            Depreciation expense                             2,505          360
            Common stock issued for professional services   35,000           --
            Changes in operating assets and liabilities:
        Accounts payable and accrued liabilities             1,920      (20,416)
            Advances by shareholders                            --      101,141
                                                         ---------    ---------

          Net cash used by continuing operations           (99,140)    (758,707)
          Net cash used by discontinued operations            (101)          --
                                                         ---------    ---------

          Net cash used by operating activities            (99,241)    (758,707)
                                                         ---------    ---------

Cash flows from investing activities:

          Net cash provided by discontinued operations         --       743,762
                                                         ---------    ---------

          Net cash provided by discontinued operations          --      743,762
                                                         ---------    ---------

Cash flows from financing activities:
    Proceeds from notes payable                              6,152           --
    Proceeds from sale of common stock                      92,159       12,000
                                                         ---------    ---------

          Net cash provided by financing activities         98,311       12,000
                                                         ---------    ---------

Increase in cash and cash equivalents                         (930)      (2,945)

Cash and cash equivalents at beginning of year                 930        8,967
                                                         ---------    ---------

Cash and cash equivalents at end of quarter              $      --    $   6,022
                                                         =========    =========

Supplemental Disclosure of Cash Flow Information
    Cash Paid for Interest Expense                       $   2,000    $   2,872
    Cash Paid for Income Taxes                           $      --    $      --

The accompanying notes are an integral part of these consolidated financial
statements


                                       45
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

HISTORICAL BUSINESS ACTIVITIES

TX Holdings, Inc. (formerly R Wireless, Inc. and HOM Corporation) (the
"Company"), incorporated May 4, 2000 in the State of Georgia, is transitioning
from a holding company to a oil and gas production and exploration company. This
transition began during 2005 and is discussed below in "CURRENT BUSINESS
ACTIVITIES". Prior to May 26, 2005 the Company operated as a holding company for
its formerly two wholly owned subsidiaries, Homes By Owners, Inc. ("Homes") and
Direct Lending, Inc. ("Direct"). The Company received approval from the
Secretary of State of Georgia for a certificate of merger between Homes and
Freedom Homes, Inc. ("Freedom"). The Company remains the owner of 32.3% of the
common shares of Homes. The remaining common shares of Homes will be owned as
follows: 63.1% by Jim Evans, owner of Freedom, and 4.6% by Robert S. Wilson,
operating officer of Homes. As of September 30, 2005 the Company management made
the decision to value its 32.3% interest in Freedom as zero. This decision was
based upon the fact that the Company no longer had any operational control of
Freedom, that no dividends have been paid and that there is no market for the
stock of Freedom. As of September 30, 2005 a loss on Discontinued operations was
recognized in the amount of $743,762 bringing the Company's total investment in
Freedom to $0.00.

Clarification of Freedom Homes was incorporated in the State of Georgia in
December, 1999 and operates in the real estate market as an advertiser of real
estate listed as "for sale by owner" ("FSBO"). Homes has published a periodic
magazine which contains FSBO and other advertising, and Homes offers an Internet
web page that serves as an advertising venue for FSBO residential and commercial
real estate in the Central Savannah River Area.

During 2003, the Company made a decision to discontinue its Direct Lending
operations. On November 25, 2002, the Company sold to Stuckey Enterprises, Inc.
("Stuckey") for $15,968 substantially all of the assets and the name, "Direct
Lending", of Direct, the Company's wholly owned subsidiary that operated as a
licensed mortgage broker for various financial institutions.

Certain office equipment of Direct was sold for $650 and certain accounts
payable were settled for less than the invoiced amounts. A gain of $16,287 has
been recognized on the disposal of the discontinued Direct Lending operations.
Revenues from Direct were $18,961 in 2003. The Company has accounted for its
Direct Lending operations as discontinued operations and the accompanying
financial statements have been restated to report separately the operating
results of the discontinued Direct Lending operations. At September 30, 2003,
the subsidiary, Direct, was inactive.


                                       46
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED

CURRENT BUSINESS ACTIVITIES

Management seeks to acquire producing oil and gas properties in and around
Texas, Louisiana and Oklahoma that will define the operational holdings of The
Company. Management has defined a number of criteria for acquisition which
include:

          o    Wells must be currently Producing

          o    Production must be broadly distributed across lease o Lease must
               show a 24 month payback (or better)

          o    Wells must show upside potential (proved undeveloped reserves of
               approximately 20%)

These criteria were developed in conjunction with major energy lending
institutions in order to mitigate risk for TX Holdings, Inc. and its investors.

In order to finance these acquisitions management has been able to raise
$1,250,000in a Private Placement offering during the months of June through
August of 2006. The funds raised in 2006 have been utilized to purchase an
interest in 3 oil & gas fields located in Texas. Development of the fields began
on November 1, 2006. The Company has experienced substantial costs for
engineering and other professional services during 2005 and 2006 in making the
transition to an oil and gas production and exploration company. The Company
plans to continue to use a combination of debt, and equity finance. Currently,
management cannot provide assurance for the development of the oil & gas fields
acquired the completion of additional acquisitions or the continued ability to
raise funds; however it is endeavoring to complete field work on the fields
acquired, acquire additional fields and finance the operations to the best of
their abilities.

GOING CONCERN ISSUES

The Company, with its prior subsidiaries, has suffered recurring losses while
devoting substantially all of its efforts to raising capital, identifying and
pursuing businesses opportunities and management currently believes its best
opportunities are in the oil and gas business. The Company's total liabilities
exceed its total assets and the Company's liquidity is substantially dependent
on raising capital.

These factors raise substantial doubt about the Company's ability to continue as
a going concern. The accompanying consolidated financial statements have been
prepared on a going concern basis, which contemplates continuing operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. The Company's ability to continue as a going concern is dependent upon
its ability to raise sufficient capital to implement a successful business plan
and to generate profits sufficient to become financially viable. The
consolidated financial statements do not include adjustments relating to the
recoverability of recorded assets or liabilities that might be necessary should
the Company be unable to continue as a going concern.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries during 2004 and the recognition to the loss on
discontinuation of the Company's investment in subsidiaries in 2005. All
significant inter-company balances and transactions have been eliminated in
consolidation.

USE OF ESTIMATES

The consolidated financial statements include estimates and assumptions that
affect the Company's financial position and results of operations and disclosure
of contingent assets and liabilities. Actual results could differ from these
estimates.


                                       47
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Major renewals and betterments are
capitalized, while maintenance and repairs that do not materially improve or
extend the useful lives of the assets are charged to expense as incurred. Costs
relating to the initial design and implementation of the Internet web page have
been capitalized while the costs of web page maintenance are expensed as
incurred. Assets are depreciated over their estimated useful lives using the
straight-line method. The Company records impairment losses on long-lived assets
used in operations when events and circumstances indicate that the assets might
be impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.

START-UP ACTIVITIES

Costs associated with the organization and start-up activities of the Company
are expensed as incurred.

REVENUE RECOGNITION

Advertising revenues from commercial advertisers are recognized ratably over the
agreed upon advertising period. Advertising revenues from FSBO advertisers are
recognized ratably over the agreed upon advertising period, unless the FSBO
property is sold prior to the end of the agreed upon advertising period, at
which time the revenue is recognized in full. Mortgage origination revenues were
recognized at loan closing.

Currently the Company has no revenue from oil & gas operations. When the Company
begins to receive revenue from oil & gas operations it will be recognized upon
the delivery of the oil or gas to the purchaser of the oil or gas.

INCOME TAXES

Income taxes are estimated for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the financial reporting basis and
income tax basis of assets and liabilities. Deferred tax assets and liabilities
represent future tax consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
Deferred taxes may also be recognized for operating losses that are available to
offset future taxable income. Deferred taxes are adjusted for changes in tax
laws and tax rates when those changes are enacted.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during periods in which
temporary differences become deductible. Management considers the reversal of
any deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the current year presentation. These
reclassifications had no effect on reported net loss or accumulated deficit.

                                       48
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
----------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED

BASIC NET LOSS PER COMMON SHARE

Basic net loss per common share from continuing operations is computed by
dividing the net loss from continuing operations by the weighted average number
of common shares outstanding during the period. Basic net loss per common share
from discontinued Direct Lending operations is computed by dividing the net loss
from discontinued Direct Lending operations by the weighted average number of
common shares outstanding during the period.

Common shares issuable upon exercise of the stock options have not been included
in the computation (diluted loss per common share) because their inclusion would
have reduced the loss per common share (anti-dilutive) applicable to the loss
from continuing operations and discontinued operations for all periods
presented.

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for
Stock-based Compensation--Transition and Disclosure", an amendment of FASB
Statement No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. SFAS No. 148 also
amends the disclosure provisions of SFAS No. 123 and Accounting Pronouncement
Board ("APB") Opinion No. 28, "Interim Financial Reporting", to require
disclosure in the summary of significant accounting policies of the effects of
an entity's accounting policy with respect to stock-based employee compensation
on reported net income and earnings per share in annual and interim financial
statements.

While SFAS No. 148 does not amend SFAS No. 123 to require companies to account
for employee stock options using the fair value method, the disclosure
provisions of SFAS No. 148 are applicable to all companies with stock-based
employee compensation, regardless of whether they account for that compensation
using the fair value method of SFAS No. 123 or the intrinsic value method of APB
Opinion No. 25. The provisions of SFAS No. 148 are effective for annual
financial statements for fiscal years ending after December 15, 2002, and for
financial reports containing condensed financial statements for interim periods
beginning after December 15, 2002. The adoption of SFAS No. 148 did not have any
effect on the Company's financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts and loan commitments that relate to the
origination of mortgage loans held for sale, and for hedging activities under
SFAS No. 133. SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003. The adoption of SFAS No. 149 did not have any
impact on the financial condition or operating results of the Company.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances.) Many of those instruments
were previously classified as equity. SFAS No. 150 is generally effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. The adoption of SFAS No. 150 did not have any impact on the financial
condition or operating results of the Company.

                                       49
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED  CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED

RECENTLY ISSUED ACCOUNTING STANDARDS, CONTINUED

In November 2002, the FASB issued Interpretation ("FIN") No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". FIN No. 45 requires a company, at the
time it issues a guarantee, to recognize an initial liability for the fair value
of obligations assumed under the guarantee and elaborates on existing disclosure
requirements related to guarantees and warranties. The initial recognition
requirements of FIN No. 45 are effective for guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial
statements of periods ending after December 15, 2002. The adoption of FIN No. 45
did not have any effect on the Company's financial position or results of
operations.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities." FIN No. 46 requires a variable interest entity to be consolidated by
a company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns, or both. FIN No. 46 also requires disclosures about
variable interest entities that a company is not required to consolidate, but in
which it has a significant variable interest. FIN No. 46 provides guidance for
determining whether an entity qualifies as a variable interest entity by
considering, among other considerations, whether the entity lacks sufficient
equity or its equity holders lack adequate decision-making ability. The
consolidation requirements of FIN No. 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
existing entities in the first fiscal year or interim period beginning after
June 15, 2004. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The adoption of FIN No. 46 did not have a
significant effect on the Company's financial position or results of operations.

In March 2004, the Financial Accounting Standards Board ("FASB") approved the
consensus reached on the Emerging Issues Task Force Issue ("EITF") No. 03-01,
"The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." EITF 03-01 provides guidance on determining when an investment is
considered impaired, whether that impairment is other-than-temporary and the
measurement of an impairment loss. EITF 03-01 also provides new disclosure
requirements for other-than-temporary impairments on debt and equity
investments. In September 2004, the FASB delayed until further notice the
effective date of the measurement and recognition guidance contained in EITF
03-01, however the disclosure requirements of EITF 03-01 are currently
effective. Our adoption of EITF 03-01 is not expected to have a material impact
on our financial position or results of operations.

In December 2004, the FASB issued FAS No. 123R, "Share-Based Payment." The
statement replaces FAS No. 123, "Accounting for Stock-Based Compensation" and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." This
statement focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions. The adoption of
the statement will result in the expensing of the fair value of stock options
granted to employees in the basic financial statements. The statement is
effective for the years commencing after January 1, 2006 and management is
currently assessing its impact.


                                       50
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

RECENTLY ISSUED ACCOUNTING STANDARDS, CONTINUED

The statement applies to new equity awards and to equity awards modified,
repurchased, or cancelled after the effective date. Additionally, compensation
cost for the portion of awards for which the requisite service has not been
rendered that are outstanding as of the effective date shall be recognized as
the requisite service is rendered on or after the effective date. The
compensation cost for that portion of awards is based on the grant-date fair
value of those awards as calculated from the pro forma disclosures under
Statement No. 123. Changes to the grant-date fair value of equity awards granted
before the effective date of this statement are precluded. The compensation cost
for those earlier awards shall be attributed to periods beginning on or after
the effective date of this statement using the attribution method that was used
under Statement No. 123, except that the method of recognizing forfeitures only
as they occur shall not be continued. Any unearned or deferred compensation
(contra-equity accounts) related to those earlier awards shall be eliminated
against the appropriate equity accounts. Additionally, common stock purchased
pursuant to stock options granted under our employee stock purchase plan is
expensed based upon the fair market value of the stock option.

The statement also allows for a modified version of retrospective application to
periods before the effective date. Modified retrospective application may be
applied either (a) to all prior years for which Statement No. 123 was effective
or (b) only to prior interim periods in the year of initial adoption. An entity
that chooses to apply the modified retrospective method to all prior years for
which Statement No. 123 was effective shall adjust financial statements for
prior periods to give effect to the fair-value-based method of accounting for
awards granted, modified, or settled in cash in fiscal years beginning after
December 15, 1994, on a basis consistent with the pro forma disclosures required
for those periods by Statement No. 123. Accordingly, compensation cost and the
related tax effects will be recognized in those financial statements as though
they had been accounted for under Statement No. 123. Changes to amounts as
originally measured on a pro forma basis are precluded.

In December 2004, the FASB issued FAS No. 153, "Exchange of Nonmonetary Assets",
which is an amendment to APB Opinion No. 29. The guidance in APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that opinion, however, included certain
exceptions to that principle. This statement amends APB Opinion No. 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The adoption of FAS No. 153 is not
expected to have a material impact on our financial position or results of
operations.

In February 2006 the FASB issued SFAS No 155 "Accounting for Certain Hybrid
Financial Instruments - an amendment of FASB Statements No 133 and 140". This
Statement amends FASB Statements No 133, "Accounting for Derivative Instruments
and Hedging Activities" and No 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities". This Statement revolves
around issues addressed in Statement No 133 Implementation Issue No D1,
"Application of Statement 133 to Beneficial Interests in Securitized Financial
Assets". This Statement is effective for all financial instruments acquired or
issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006. Adoption of SFAS No 155 is not expected to have a material
effect on the Company's results of operations, financial condition or cash
flows.

In March 2006 the Financial Accounting Standards Board ("FASB") issued SFAS No
156 "Accounting for Servicing of Financial Assets - an amendment of FASB
Statement No 140. SFAS No 156 amends SFAS No 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", with respect
to accounting for separately recognized servicing assets and servicing
liabilities. SFAS No 156 is effective for fiscal years that begin after
September 15, 2006, with early adoption permitted as of the beginning of an
entity's fiscal year. The Company does not have any servicing assets or
servicing liabilities and, accordingly, the adoption of SFAS No 156 will not
have any effect on the results of operations, financial condition or cash flows.



                                       51
<PAGE>

Financial Accounting Standards Board Interpretation No. 48 ("FIN 48"),
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109, was issued in July 2006 and will be effective for the Company on
January 1, 2007. FIN 48 defines the threshold for recognizing the benefits of
uncertain tax return positions in the financial statements. The Company has not
yet determined the impact this Interpretation will have on its financial
position, results of operations or cash flows.


Other accounting standards that have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future date are
not expected to have a material impact on the consolidated financial statements
upon adoption.

PRINCIPLES OF CONSOLIDATION

In 2005 the company sold its majority interest in its wholly owned subsidiaries
and does not report consolidated financial statements. The 2004 financials
statements includes the accounts of the Company and its Wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.

DISCONTINUED OPERATIONS

In 2005 the company sold a 67.7% interest in Freedom Homes and Direct and has
elected to account for the remaining 32.3% interest under the equity method of
accounting. The company wrote-down the remaining 32.3% equity value of $80,984.
The write-down was based on management judgment that the equity investment has
experienced a permanent reduction in value.

                                       52
<PAGE>


TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 30, 2004 and 2005:

                                            LIFE            2004          2005
                                         -----------    -----------   ----------

      Software and web page             3 years        $     36,650     $ 36,650
      Furniture and office equipment  5-7 years              13,288       13,288
                                                         -----------  ----------
        Total                                                49,938       49,938

Less accumulated depreciation and
Amortization                                                 46,213       48,958
                                                         -----------  ----------
                                                       $      3,725   $    1,080
                                                         ===========  ==========


NOTE 3 - SHORT-TERM NOTES PAYABLE

Short-term notes payable at September 30, 2004 consists of a short term note
payable to Georgia Bank & Trust Company. Interest only payments are due monthly
at prime plus 1.0% (5.75% on September 30, 2004 and 5.00% on September 30,
2003). The note is guaranteed and is secured by the primary residence of a
former director and current stockholder of the Company. On October 13, 2004, a
former director and current stockholder paid off the balance of the loan,
including $141 in accrued interest.

NOTE 4 - INCOME TAXES

The tax effects of temporary differences that give rise to deferred taxes are as
follows at September 30, 2004 and 2005:

                                                       2004            2005
                                                    ---------       ---------
      DEFERRED TAX ASSETS:
        Net operating losses                        $ 340,155       $     -
        Accrued wages                                  17,149             -
        Basis of intangible assets                      5,863             -
        Valuation allowance                          (362,886)           (-)
                                                    ---------       ---------
      Total deferred tax assets                           281             -

      DEFERRED TAX LIABILITIES:
        Basis of property and equipment                   281              --
                                                    ---------       ---------
    Net deferred tax asset                          $      --       $      --
                                                    =========       =========

The Company has tax net operating loss carryforwards totaling approximately
$1,800,000, expiring in 2018 through 2024. Approximately $1,190,000 of net
operating losses was incurred prior to December 12, 2002 at which date MA&N
acquired 51% of the Company and are consequently subject to certain limitation
described in section 382 of the Internal Revenue Code. The Company estimates
that, due to the limitations and expiration dates, only $424,000 of the net
operating losses incurred prior to December 12, 2002 will be available to offset
future taxable income.

                                       53
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 4 - INCOME TAXES, CONTINUED

Net operating losses after December 12, 2002 through September 30, 2005 were
approximately $608,000. The total net operating losses available to the Company
to offset future taxable income is approximately $1,000,000. Following is a
reconciliation of the tax benefit at the federal statutory rate to the amount
reported in the statement of operations

                                     2004                        2005
                                  ---------                   ---------

                              AMOUNT      PERCENT       AMOUNT       PERCENT
                            ----------   ----------   ----------   ----------
Benefit for income tax
at federal statutory rate   $   47,146         34 %   $      ---         34 %

Change in valuation
allowance                      (74,964)       (54)           (--)        (--)

Limitations on availability
of net operating loss
carryforward                        --         --       (100,257)       (20)

Non-deductible compensation     11,900          9             --         --
Other                           15,918         11             --         --
                            ----------   ----------   ----------   ----------
                            $       --         -- %   $       --         -- %
                            ==========   ==========   ==========  ===========

There were no income taxes due or receivable from operations for the years ended
September 30, 2004 and 2003, and the Company's reported benefit for income taxes
differs from the amount computed by applying statutory tax rates to loss before
income taxes due to changes in the valuation allowance for financial reporting
purposes. Other differences relate to expense items or portions of items not
deductible, such as meals and entertainment.

                                       54
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 5 - NON-CASH TRANSACTIONS

During the years ended September 30, 2004 and 2005 the Company issued shares of
common stock in exchange for services and as repayment for shareholders in
non-cash financing and investing transactions as follows:


                                                        2005           2004
                                                    ----------       ----------
      Common stock issued to settle notes
      payable and related accrued interest          $     76,194   $  33,372

      Common stock issued to settle cash
      advances and related accrued interest               10,000      73,585

NOTE 6 - SEGMENT INFORMATION

In previously issued financial statements, the Company presented segment
information for Homes, an advertising segment that provides advertising services
for FSBO real estate and for businesses, and presented segment information for
Direct, a mortgage segment that provided mortgage services to individuals and
small businesses as a mortgage broker. As discussed in Note 1 - Summary of
Significant Accounting Policies and Activities, the Company discontinued its
Direct Lending operations and sold substantially all of the assets of Direct. At
September 30, 2004, the Company had operations in a single industry segment,
Homes, which was subsequently merged with Freedom Homes, Inc. (See Business of
Homes By Owners, Inc.). As of September 30, 2006 the Company's only operation
were in the oil & gas operations.

The Company did acquire certain assets at a total cost of $2,400 to begin
operations in the Wi-Fi industry, but at September 30, 2004, the Company had no
operating activities in this segment. The Company had no operating activities in
the proposed oil and gas business as of September 30, 2005.

NOTE 7 - UNSUCCESSFUL BUSINESS COMBINATION COSTS

On August 2, 2004 the Company and S2 Consulting executed a Management Consulting
Agreement, pursuant to which the consulting firm agreed for a six-month period
to provide consulting services to the Company in relation to the evaluation of
potential merger and acquisition targets. The services provided under the
agreement include advising, evaluating and developing corporate strategy,
providing company guidance, and assisting in developing relationships and
opportunities. In consideration for the contracted services and services
previously provided, valued at $35,000, the Company agreed to issue 500,000
shares of its common stock to the consulting firm.

The costs incurred during the years ended September 30, 2004 and 2005, on
proposed business combinations are reported as other expense in the statement of
operations.


                                       55
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------

NOTE 8 - STOCKHOLDERS' EQUITY

COMMON STOCK

During the years ended September 30, 2004 and 2005, the Company issued Common
stock to raise capital, compensate employees and professionals, and to settle
liabilities. Following is a description of stock issuances in 2004 and 2005:

     (1) On December 12, 2002, the Company issued MA&N, LLC ("MA&N"), a Nevada
limited liability company, 4,647,626 shares of common stock, representing, at
the time of the transaction, 51% of the total of the Company's 9,112,992 shares
issued or issuable at that date. In exchange for the shares, the Company was to
receive total consideration of $232,000, in the form of payment of current
expenses and past obligations on behalf of the Company and providing certain
internet services and certain management and consulting services for a period of
at least two years. As of September 30, 2004, the Company has received funds,
including payments directly to vendors, of $174,600 and management and
consulting services of $57,400.

     (2) On February 19, 2003, the Company issued 3,000,000 shares of common
stock to Mark Neuhaus, Chairman and CEO of the Company and recognized $150,000
of stock compensation.

     (3) On February 19, 2003, the Company also issued 1,500,000 shares of
common stock to Ned Baramov, Secretary - Treasurer and recognized $75,000 of
stock compensation.

     (4) On August 2, 2004 the Company and S2 Consulting executed a Management
Consulting Agreement, pursuant to which the consulting firm agreed for a
six-month period to provide consulting services to the Company in relation to
the evaluation of potential merger and acquisition targets.

The services provided under the agreement include advising, evaluating and
developing corporate strategy, providing company guidance, and assisting in
developing relationships and opportunities. In consideration for the contracted
services and services previously provided, valued at $35,000, the Company issued
500,000 shares of its common stock to the consulting firm.

STOCK OPTIONS

In December 2002, the Company awarded 294,341 common stock options to a former
director and current shareholder of the Company that are exercisable at $0.01
per share and expire in five years, as settlement for $73,585 of cash advances
and related accrued interest and unpaid compensation that was recognized prior
to September 30, 2002. The options are exercisable at $0.01 per share and expire
in five years. No options have been exercised as of September 30, 2005.


                                       56
<PAGE>

TX HOLDINGS, INC. (FORMERLY R WIRELESS, INC.) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2005
-----------------------------------------------------------------------------
NOTE 9 -- SUBSEQUENT EVENTS

On December 12, 2002, the award of 5-year options to purchase 294,341 shares of
TX Holdings Common Stock at $0.01 per share to Robert Wilson, then Chairman and
Chief Executive Officer of the Company was authorized in lieu of $54,000 in
compensation earned during calendar year 2001, and cash advances and accrued
interest of $19,585 for a total of $73,585. The options were exercised in
December 2005. Mr. Wilson was an accredited investor. The sale was exempt
pursuant to Section 4 (2) of the Securities Act of 1933

On March 28, 2006 the Company entered into a Contract with Michael A. Cederstrom
for services as the part time interim Chief Financial Officer. Mr. Cederstrom
was granted warrants to purchase 200,000 shares of TX Holdings Company Stock at
an exercise price of $0.30 per share. The warrants will expire on March 27,
2010. In addition, Mr. Cederstrom performs legal services for the Company
through his law firm, Dexter and Dexter. The company pays to Dexter and Dexter
the sum of $15,000 per month for legal representation.

On March 28, 2006 the Company entered into a consulting agreement with Douglas
C. Hewitt to provide technical support and advice in setting up the oil & gas
operations. Mr. Hewitt was granted warrants to purchase 300,000 shares of TX
Holdings Common Stock at an exercise price of $0.30 per share. The warrants will
expire on March 27, 2010.

On March 28, 2006 the Company entered into a consulting agreement with Bobby
Fellers to provide technical support and advice in setting up the oil & gas
operations. Mr. Fellers was granted warrants to purchase 300,000 shares of TX
Holdings Common Stock at an exercise price of $0.30 per share. The warrants will
expire on March 27, 2010.

In May, 2006 an employment agreement was entered into with Mr. Neuhaus the
president, CEO and chairman of the Board. The agreement provides that Mr.
Neuhaus shall be compensated at the rate of $25,000 per month plus bonus based
on oil & gas production. In addition the employment agreement provides to Mr.
Neuhaus 1,000 shares of preferred stock with no rights of conversion to common
stock. The preferred stock documents provide Mr. Neuhaus with voting rights
equivalent to 50% of the common shares of issued by company. During the fiscal
year 2006 Mr. Neuhaus waived his monthly salary.

In September 1, 2006 the Company entered into a consulting agreement with W.A.
("Bill") Alexander to provide technical support and advice in setting up the oil
& gas operations. Mr. Alexander was granted warrants to purchase 250,000 shares
of TX Holdings Common Stock at an exercise price of $0.30 per share. The
warrants will expire on March 27, 2010.

Item 8 Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure

Effective August 9, 2005, the Registrant engaged Ham Langston & Brezina L.L.P.,
11550 Fuqua, Suite 475, Houston Texas 77034 as its auditors to replace its
former auditors, Elliott Davis LLC. The former auditor was notified of their
dismissal on August 09, 2005.

Elliott Davis, LLC audited the financial statements for the Company for the
fiscal years ending September 30, 2002, and September 30, 2003. The audit report
of Elliott Davis, LLC for the year ended September 30, 2003 did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles, except the audit report
prepared by Elliott Davis LLC did contain a going concern qualification; such
financial statements did not contain any adjustments for uncertainties stated
therein.

In connection with the audit for the fiscal years ended September 30, 2002,
September 30, 2003 and the subsequent interim period ended August 9, 2005, there
were no disagreements with Elliott Davis, LLC on any matter of accounting
principles or practices, financial statement disclosures or auditing scope or
procedure, which if not resolved to the satisfaction of Elliott Davis LLC, would
have caused it to make reference to the subject matter of the disagreement in
connection with its reports except that Elliott Davis advised the Company's
board of directors that internal controls necessary to develop reliable
financial statements did not exist.

                                       57
<PAGE>

During the fiscal years ended September 30, 2002, September 30, 2003 and the
subsequent interim period ended August 9, 2005, there were no "Reportable
Events" as defined in Regulations S-K Item 304 (a)(1)(v) other than the advice
referred to in the previous paragraph that internal controls necessary to
develop reliable financial statements did not exist.

The Registrant has complied with the requirements of Item 304(a)(3) of
Regulation SB with regard to providing the former accountant with a copy of the
disclosure it is making in response to this Item and has requested the former
accountant to furnish a letter addressed to the Commission stating whether it
agrees with the statements made by the registrant and, if not, stating the
respects in which it does not agree.

The change in accountants was approved by the board of directors.

During the registrant's two most recent fiscal years and the subsequent interim
period prior to the August 9, 2005 appointment of Ham Langston & Brezina L.L.P,
neither the company nor anyone on its behalf consulted with Ham Langston &
Brezina L.L.P regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the company's financial statements, and
neither a written report nor oral advice was provided to the company by Ham
Langston & Brezina L.L.P that was an important factor considered by the company
in reaching a decision as to any accounting, auditing or financial reporting
issue; or (ii) any matter that was either the subject of a disagreement, as that
term is defined to Item 304 (a)(1)(iv) of Regulation S-K and the related
instructions to 304 of Regulation S-K, or a reportable event, as that term is
defined in Item (a)(1)(v) of Regulation S-K.

There were no disagreements with accountants on accounting and financial
disclosure.

Item 8A Controls and Procedures

Effectiveness of Disclosure and Procedures

The chief executive officer and the chief financial officer, after evaluating
the Company's "disclosure controls and procedures" (as defined in Securities
Exchange Act of 1934 (the "Exchange Act") Rules 13a-14(c) and 15-d-14(c)) as of
September 30, 2006, have concluded that the Company's disclosure controls and
procedures are not effective to ensure that information required to be disclosed
in reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Because of the limited staff of the
Company, all transactions are recorded, processed, and summarized by management.
Consequently the accuracy of all records is guaranteed, and management has
certified the correctness of all facts set forth herein, to the best of their
knowledge. However, the reporting accuracy has been achieved at the expense of
time, and the Company has been very pressed to meet reporting deadlines.

Changes in Internal Controls

During 2006 the Company's management identified material weaknesses in the
Company's disclosure procedures and has taken corrective actions. Management has
already implemented disclosure procedural improvements, which will guarantee the
effectiveness, accuracy, and timeliness of the Company's financial reporting
systems in the future.

Item 8B Other Information

On March 24, 2004, the SEC filed a civil complaint seeking a temporary
restraining order ("TRO") and other relief, alleging an illegal distribution to
the public of common stock of Universal Express, Inc. ("Universal"), an
unaffiliated organization, by Universal's chief executive officer, its general
counsel and four others, including Mark Neuhaus, the Company's Chairman and
Chief Executive Officer.

Mr. Neuhaus is alleged to have violated Sections 5(b) and (c) and Sections
17(a)(1), (2) and (3) of the Securities Act of 1933 and Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Mr. Neuhaus denies
violation of any applicable law in connection with his resale of Universal
common stock. The Company believes there is no connection between the Company
and Universal other than Mr. Neuhaus' position with the Company and the fact
that Mr. Neuhaus was a consultant to Universal and received and resold shares of
its common stock.

                                       58
<PAGE>

PART III

Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers
The following table shows the names, ages and positions held by our executive
officers, directors and significant employees at September 30, 2005

Name                         Age          Position
----                         ---          --------
Mark Neuhaus                 50           Chairman of the Board of Directors and
                                          President (Chief Executive Officer)


The following table shows the names, ages and positions held by our executive
officers, directors and significant employees at December 19, 2006

Name                         Age          Position
----                         ---          --------
Mark Neuhaus                 51           Chairman of the Board of Directors and
                                          President (Chief Executive Officer)

Michael A. Cederstrom        54           Interim Chief Financial Officer

W.A. Alexander               70           Chief Operating Officer
Bobby S. Fellers             57           Director

Douglas C. Hewitt            49           Director



Business Experience of Executive Officers and Directors

Mark S. Neuhaus, Chairman of the Board of Directors and Chief Executive Officer
- Mr. Neuhaus has served as Chairman and Chief Executive Officer since December
12, 2002 when MA&N acquired a controlling interest in TX Holdings. Mr. Neuhaus
and his wife, Nicole B. Neuhaus, own 100% of MA&N and other investment funds
specializing in small cap public companies, which Mr. Neuhaus manages and had
been his principal occupation since 1995 until his involvement in TX Holdings.
Prior to 1995, Mr. Neuhaus founded several startup companies including Solar
Engineering in 1987, which later became US Electric Car. Mr. Neuhaus was also
one of the founding shareholders of Interactive Motorsports and Entertainment.

W. A. "Bill" Alexander, PE, Chief Operating Officer - Mr. Alexander joined TX
Holdings on August 2, 2006 as Chief Operating Officer. Mr. Alexander has worked
at Shell Oil, Inc and Kirby Exploration, as well consulting in his own practice,
Alexander Engineering. Mr. Alexander received his Bachelor of Science degree in
Mining Engineering from the University of Wisconsin.

Michael A Cederstrom, Esq., Chief Financial Officer - Mr. Cederstrom joined TX
Holdings as part time interim Chief Financial Officer on March 28, 2006 and will
assist the company with its reorganization as an oil and gas company. Mr.
Cederstrom has served as the Chief Financial Officer for several oil & gas
companies over the past 10 years. Mr. Cederstrom received his Bachelor of
Science degree in finance with honors from the University of Utah. In addition
he received his Juris Doctorate degree from Southwestern University.

Douglas C. Hewitt, Member Board of Directors - Mr. Hewitt joined TX Holdings as
a member of the board of directors on March 28, 2006. Mr. Hewitt has
approximately 20 years experience in the energy and technology industries
holding various positions including chief executive officer at public companies.

Bobby S. Fellers, Member Board of Directors - Mr. Fellers Joined TX Holdings on
March 28, 2006 as a member of the board of directors. Mr. Fellers has over 30
years experience in the oil and gas industry in both field and offshore
operations. Currently, Mr. Fellers is the principal of the Masada Family of
Companies which includes Masada Oil and Gas Company, Ltd.

                                       59
<PAGE>

Term of Office

All directors hold office until the next annual meeting of shareholders and
until their successors have been duly elected and qualified. Directors will be
elected at the annual meetings to serve for one-year terms. The Company does not
know of any agreements with respect to the election of directors. The Company
has not compensated its directors for service on the Board of Directors of TX
Holdings or any of its subsidiaries or any committee thereof. Any non-employee
director of TX Holdings or its subsidiaries is reimbursed for expenses incurred
for attendance at meetings of the Board of Directors and any committee of the
Board of Directors, although no such committee has been established. Each
executive officer of TX Holdings is appointed by and serves at the discretion of
the Board of Directors.

None of the officers or directors of TX Holdings is currently an officer or
director of a company required to file reports with the Securities and Exchange
Commission, other than TX Holdings.

Ned Baramov, a former director, resigned on June 24, 2005. Mr. Baramov received
1,500,000 shares for his services as Secretary Treasurer, for the period January
15, 2003 - June 24, 2005.

Darren Bloom, former director, chief financial officer, Secretary and Treasurer
resigned on March 17, 2006. Mr. Bloom received 2,000,000 shares of stock. The
Company is seeking the return of the shares.

Audit Committee

The Company's Board of Directors has determined that TX Holdings does not
currently have a separately-designated standing audit committee established or a
committee performing similar functions, nor an audit committee financial expert.

Compliance with Section 16(a)

Based solely upon a review of Forms 3 and 4 (there have been no amendments)
furnished to the Company during the year ended September 30, 2006 (no Forms 5
having been furnished with respect to such year) and written representation
furnished to the Company as provided in paragraph (b)(2)(i) of Item 405 of Form
10-KSB, there are no persons who need to be identified under this Item as having
failed to file on a timely basis reports required by Section 16(a) of the
Securities Exchange Act of 1934 during the fiscal years ended September 2005 and
2004, except that Darren Bloom, a former Secretary-Treasurer and past member of
the Board of Directors, and former Chief Financial Officer failed to make timely
filing of a Form 3, which filing he has since made.

Code of Ethics

On February 24, 2004, the Company adopted a Code of Ethics that applies to all
officers, directors and employees of the Company. See exhibit 33.1 for the full
text of the Company's Code of Ethics. The Company will provide to any person,
without charge, a copy of its code of ethics upon request to:

                  TX Holdings, Inc.
                  1701 North Judge Ely Blvd. #6420
                  Abilene, Texas 79601

                                       60
<PAGE>

Item 10 Executive Compensation
         The following table sets forth all compensation paid in respect of our
Chief Executive Officer and those individuals who received compensation in
excess of $100,000 per year (collectively, the "Named Executive Officers") for
our last four completed fiscal years.
<TABLE>
<CAPTION>

                                                SUMMARY COMPENSATION TABLE
                                                --------------------------

                                                                                 Long Term Compensation
                                                                                 ----------------------

                                 Annual Compensation                          Awards                Payouts
                  ---------------------------------------------------- ----------------------------------------------
                                                                                    Securities
                                                        Other          Restricted     Under-
 Name And                                                Annual           Stock       Lying     LTIP    All Other
 Principal                    Salary     Bonus         Compensation     Compensation  Options/ Payouts  Compensation
  Position           Year      ($)        ($)             ($)              ($)       SARs (#)   ($)        ($)
--------------------------------------------------------------------------------------------------------------------
<S>                  <C>         <C>        <C>           <C>
Mark                 2006       -0-        -0-           -0-              N/A         N/A      N/A        N/A
Neuhaus,             2005       -0-        -0-           -0-              N/A         N/A      N/A        N/A
Chief                2004       -0-        -0-           -0-              N/A         N/A      N/A        N/A
Executive            2003       -0-        -0-           -0-              N/A         N/A      N/A        N/A
Officer and
Chairman
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
</TABLE>
The preceding table does not include any amounts for non-cash compensation,
including personal benefits, paid to any of the foregoing officers during the
periods covered herein. The Company believes that the value of such non-cash
benefits and compensation paid during the periods presented did not exceed the
lesser of $50,000 or 10% of the annual salary reported for them.
Mark Neuhaus entered into an employment agreement on January 15, 2003 for a
specified monthly salary. However, said salary was rescinded by the board of
directors on December 23, 2003. No amounts were paid to Mr. Neuhaus.

Equity Compensation Plan Information - Employment Agreements

In May, 2006 an employment agreement was entered into with Mr. Neuhaus the
president, CEO and chairman of the Board. The agreement provides that Mr.
Neuhaus shall be compensated at the rate of $25,000 per month plus bonus based
on oil & gas production. In addition the employment agreement provides to Mr.
Neuhaus 1,000 shares of preferred stock with no rights of conversion to common
stock. The preferred stock documents provide Mr. Neuhaus with voting rights
equivalent to 50% of the common shares of issued by company. During the fiscal
year 2006 Mr. Neuhaus waived his monthly salary.

On January 15, 2003, the Company issued 3,000,000 shares of the Company's Common
Stock for the compensation of Mark Neuhaus, Chief Executive Officer The basis
per share used in the estimation of salary expense for the two executives was
$0.05, management's estimate of the fair value, which estimate considered the
stock price on January 15, 2003. Mark Neuhaus was also authorized a salary of
$25,000 per month, which the Company was to pay when cash flow is sufficient,
according to an employment agreement signed on January 15, 2003. No amount was
paid under this authorization and on December 23, 2003, the Company's Board
unanimously resolved to rescind Mr. Neuhaus' salary.

On March 28, 2006 the Company entered into a Contract with Michael A. Cederstrom
for services as the part time interim Chief Financial Officer. Mr. Cederstrom
was granted warrants to purchase 200,000 shares of TX Holdings Company Stock at
an exercise price of $0.30 per share. The warrants will expire on March 27,
2010. In addition, Mr. Cederstrom performs legal services for the Company
through his law firm, Dexter and Dexter. The company pays to Dexter and Dexter
the sum of $15,000 per month for legal representation.

On March 28, 2006 the Company entered into a consulting agreement with Douglas
C. Hewitt to provide technical support and advice in setting up the oil & gas
operations. Mr. Hewitt was granted warrants to purchase 300,000 shares of TX
Holdings Common Stock at an exercise price of $0.30 per share. The warrants will
expire on March 27, 2010.

On March 28, 2006 the Company entered into a consulting agreement with Bobby
Fellers to provide technical support and advice in setting up the oil & gas
operations. Mr. Fellers was granted warrants to purchase 300,000 shares of TX
Holdings Common Stock at an exercise price of $0.30 per share. The warrants will
expire on March 27, 2010.

                                       61
<PAGE>

On July 1, 2006 the Company entered into a consulting agreement with W.A.
("Bill") Alexander to provide technical support and advice in setting up the oil
& gas operations. Mr. Alexander was granted warrants to purchase 250,000 shares
of TX Holdings Common Stock at an exercise price of $0.30 per share. The
warrants will expire on March 27, 2010.

On December 12, 2005, the Company issued 2,000,000 shares of the Company's
Common Stock for the compensation of Darren Bloom, CFO, Secretary/Treasurer and
member of the Board of Directors. The shares were issued pursuant to a three
year employment contract which Mr. Bloom only served for 9 months. TX Holdings
has filed suit against Mr. Bloom for the return of the shares for breach of
contract.

Option Grants During 2005 Fiscal Year

The Company did not grant any options during Fiscal Year 2005.

Option Warrant Grants During 2006 Fiscal Year

The following table provides information related to options and warrants granted
to the named executive officers and directors during the 2006 fiscal year. The
Company does not have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>

                                  No. of               % of Total
                               Securities                 Options
                                Underlying              Granted to
                                Options                 Employees       Exercise
                                Granted               in Fiscal            Price         Expiration
  Name                            (#)                     Year            ( $/Sh)            Date
--------------------------------------------------------------------------------------------------------------------
<S>                             <C>                       <C>             <C>                   <C>
W.A. Alexander                  250,000                   23.8            $0.30           March 27, 2010
Michael A. Cederstrom           200,000                     19            $0.30           March 27, 2010
Bobby S. Fellers                300,000                   28.6            $0.30           March 27, 2010
Douglas C. Hewitt               300,000                   28.6            $0.30           March 27, 2010
</TABLE>

Messer Fellers and Hewitt were granted warrants to purchase securities of
the company for consulting services provided to the company.

Aggregated Option Exercises During 2005 Fiscal Year and Fiscal Year-End Option
Values

During the fiscal year 2005 no executive officers or director exercised options
or held such options at fiscal year end.


Aggregated Option Exercises During 2006 Fiscal Year and Fiscal Year-End Option
Values

The following table provides information related to employee options exercised
by the named executive officers during the 2006 fiscal year and number and value
of such options held at fiscal year-end.
<TABLE>
<CAPTION>

                                                Number of Securities
                                               Underlying Unexercised       Value of Unexercised In-the-Money
                                               Options at Fiscal Year-           Options at Fiscal Year-
                                                       End (#)                         End ($) (1)
                                            ------------------------------ ------------------------------------
                        Shares
                       Acquired
                      on Exercise  Value
       Name               (#)      Realized Exercisable    Unexercisable    Exercisable      Unexercisable
---------------------------------------------
<S>                                           <C>                <C>          <C>                   <C>
W.A. Alexander            N/A         N/A     250,000           -0-           100,000              -0-
Michael
A.Cederstrom              N/A         N/A      200,000          -0-            80,000              -0-
Bobby S. Fellers          N/A         N/A     300,000           -0-           120,000              -0-
Douglas C. Hewitt         N/A         N/A     300,000           -0-            120,00              -0-

(1)   Based on the closing price of $0.70 at September 30, 2006.
</TABLE>

                                       62
<PAGE>

Item 11 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

The following table sets forth information, to the best of the Company's
knowledge, as of December 30, 2005 with respect beneficially ownership (as such
term is defined in Item 403 of Regulation S-B under the Securities Exchange Act
of 1934) of the outstanding TX Holdings common stock by (i) each person to own
more than 5%, (ii) each director, each executive officer and (iii) all directors
and officers as a group.
<TABLE>
<CAPTION>

                                                               Amount and Nature of
Name and Address of Beneficial Owner (1)                       Beneficial Ownership         Percent of Class(2)
--------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                           <C>
Mark Neuhaus                                                         7,662,626(3)                  19.7%

Darren Bloom                                                         2,000,000                     7.4%

Nicole B. Neuhaus                                                    4,647,626(4)                  8.6%

MA&N LLC                                                             4,647,626                    17.2%

                                                                       940,100                     3.5%

Ned Baramov



All directors and executive officers ( 2 persons)                   10,587,726                     39.2%
</TABLE>
     *   Represents less than 1% of our outstanding common stock.
(1)      Unless otherwise indicated, the Company has been advised that each
         person above has sole investment and voting power over the shares
         indicated above. The address of each beneficial owner is c/o TX
         Holdings, 1701 North Judge Ely Blvd., #6480, Abilene, Texas 79601.
(2)      Based upon 18,999,934 shares of common stock outstanding as of December
         30, 2005, together with securities exercisable or convertible into
         shares of common stock within 60 days of December , 2006 for each
         stockholder. Beneficial ownership is determined in accordance with the
         rules of the Securities and Exchange Commission and generally includes
         voting or investment power with respect to securities. Shares of common
         stock that are currently exercisable or exercisable within 60 days of
         December , 2006 are deemed to be beneficially owned by the person
         holding such securities for the purpose of computing the percentage of
         ownership of such person, but are not treated as outstanding for the
         purpose of computing the percentage ownership of any other person.
(3)      Of which 4,647,626, shares are owned by MA&N. Mr. Neuhaus has a 50%
         equity interest in MA&N.15,000 shares were acquired in the open market
         Mr. Neuhaus disclaims any beneficial interest in the 2,323,813 shares
         allocable to his wife's beneficial interest.
(4)      Represents shares held by MA&N in which Mrs. Neuhaus has a 50% equity
         interest and her husband, Mark S. Neuhaus, also has a 50% equity
         interest. Mrs. Neuhaus disclaims any beneficial interest in the
         2,323,813 shares allocable to her husband's beneficial interest.


The following table sets forth information, to the best of the Company's
knowledge, as of December 8, 2006 with respect beneficially ownership (as such
term is defined in Item 403 of Regulation S-B under the Securities Exchange Act
of 1934) of the outstanding TX Holdings common stock by (i) each person to own
more than 5%, (ii) each director, each executive officer and (iii) all directors
and officers as a group.
<TABLE>
<CAPTION>

                                                               Amount and Nature of
Name and Address of Beneficial Owner (1)                       Beneficial Ownership          Percent of Class
--------------------------------------------------------------------------------------------------------------------
<S>          <C>                                                    <C>                           <C>
Mark Neuhaus (*)                                                    7,662,626(3)                  19.7%

Darren Bloom                                                        2,000,000                      7.4%

Nicole B. Neuhaus                                                   4,647,626(4)                   8.6%

MA&N LLC                                                            4,647,626                     17.2%

Ned Baramov
                                                                      940,100                      3.5%
Michael A. Cederstrom                                                 200,000(5)                     *

Bobby S. Fellers                                                      300,000(5)                     *
Douglas C. Hewitt                                                     300,000(5)                     *
W.A. Alexander                                                        250,000(5)                     *

All directors and executive officers ( 5 persons)                  10,587,726                      43.1%
 ---------
</TABLE>

     * Represents less than 1% of our outstanding common stock.

     (1)  Unless otherwise indicated, the Company has been advised that each
          person above has sole investment and voting power over the shares
          indicated above. The address of each beneficial owner is c/o TX
          Holdings, 1701 North Judge Ely Blvd., #6480, Abilene, Texas 79601.

     (2)  Based upon 27,005,558 shares of common stock outstanding as of
          December 8, 2006, together with securities exercisable or convertible
          into shares of common stock within 60 days of December 8, 2006 for
          each stockholder. Beneficial ownership is determined in accordance
          with the rules of the Securities and Exchange Commission and generally
          includes voting or investment power with respect to securities. Shares
          of common stock that are currently exercisable or exercisable within
          60 days of December 8, 2006 are deemed to be beneficially owned by the
          person holding such securities for the purpose of computing the
          percentage of ownership of such person, but are not treated as
          outstanding for the purpose of computing the percentage ownership of
          any other person.

     (3)  Of which 4,647,626, shares are owned by MA&N. Mr. Neuhaus has a 50%
          equity interest in MA&N.15,000 shares were acquired in the open market
          Mr. Neuhaus disclaims any beneficial interest in the 2,323,813 shares
          allocable to his wife's beneficial interest.

     (4)  Represents shares held by MA&N in which Mrs. Neuhaus has a 50% equity
          interest and her husband, Mark S. Neuhaus, also has a 50% equity
          interest. Mrs. Neuhaus disclaims any beneficial interest in the
          2,323,813 shares allocable to her husband's beneficial interest.

     (5)  Represents warrants issued to each individual for their specific role
          with the company during fiscal year 2006.


No Director, executive officer, affiliate or any owner of record or beneficial
owner of more than 5% of any class of voting securities of the Company is a
party adverse to the Company or has a material interest adverse to the Company.

Item 12 Certain Relationships and Related Transactions

Particular Transactions

There have been no transactions during the last two years between the Company
and any officer, director, nominee for election as director, or any shareholder
owning more than 5% of the Company's outstanding shares, or any member of any
such individual's immediate family, as to which the amount involved in the
transaction or a series of similar transactions exceeded $60,000, except as set
forth below:

(1)      During 2006 the Company entered into agreements to purchase from a
         company beneficially owned by Bobby S. Fellers two fields. Mr. Fellers
         is a Member of the Board of Directors of the Company. The Contract Area
         #1 field and the Park's Lease field. Mr. Fellers through his company
         has retained a 40% working interest in the Contract Area #1 field and a
         25% working interest in the Park's Lease. The Management believes that
         the agreements were entered at arms length and upon terms that would be
         common for the industry and location of the fields.

(2)      On March 28, 2006 the Company entered into a consulting agreement with
         Mr. Bobby S. Fellers, a Member of the Company's Board of Directors, to
         provide technical support and advice in organizing the Company's oil
         and gas operations. Mr. Fellers received warrants to purchase 300,000
         shares of the Company's common stock at an exercise price of $0.30 per
         share.

(3)      On December 12, 2005 the Company issued 2,000,000 shares of TX Holdings
         Common Stock to Darren Bloom, Mr. Bloom was Secretary-Treasurer and
         member of the Board of Directors. The shares represented $100,000 of
         stock compensation for 2005. Mr. Bloom is the brother of Nicole B.
         Neuhaus, the wife of Mark Neuhaus, the Company Chief Executive Officer
         and Chairman of the Board of Directors. Subsequently, Mr. Bloom
         resigned from all positions with the Company. The Company has filed
         suit for return all of the shares of Company Common Stock.

                                       63
<PAGE>

(4)      The law firm of Dexter and Dexter, located in the state of Utah, has
         been engaged by the Company and is paid $15,000 per month for legal
         services. Mr. Michael A. Cederstrom, the Company's part time interim
         Chief Financial Officer is a partner with Dexter and Dexter.

(5)      On March 28, 2006 the Company entered into a consulting agreement with
         Mr. Douglas C. Hewitt, a Member of the Company's Board of Directors, to
         provide technical support and advice in organizing the Company's oil
         and gas operations. Mr. Hewitt received warrants to purchase 300,000
         shares of the Company's common stock at an exercise price of $0.30 per
         share.

(6)      As of August 1, 2005, TX Holdings and David R. Baker ("Baker") executed
         the Services Settlement Agreement whereby TX Holdings agreed to issue,
         and Baker agreed on behalf of himself and his firm, Haskell Slaughter
         Young & Rediker, LLC, to accept $6,888.22 in cash and 464,942 in shares
         of TX Holdings common stock in full satisfaction of statements for
         legal services and expenses of that firm (for which Baker had full
         benefit and responsibility) aggregating $43,382.43 and an accountable
         retainer for future legal services and expenses of $10,000, which
         payment and stock issuances have been made except that the stock
         issuance was 3,000 shares less than the Services Settlement Agreement
         provided.

(7)      As of July 21, 2005, TX Holdings and Baker & Johnston LLP ("BJ," then
         called Baker, Johnston & Wilson LLP) executed the Forbearance Agreement
         whereby BJ agreed to forbear collection of the indebtedness to it of TX
         Holdings of $215,113.20 until January 21, 2007 in consideration of a
         warrant (which has been issued to BJ) to purchase 1,434,088 shares of
         TX Wireless common stock exercisable from January 1, 2006 at $0.15 a
         share and callable at $.001 per underlying share from February 1, 2006
         if on 20 consecutive trading days ending within 5 trading days of the
         call the per share market value of TX Holdings common stock is at least
         2 1/2 times the then exercise price. If the warrants are fully
         exercised, the aggregate exercise price would equal the indebtedness of
         TX Holdings to BJ for the past legal services. On January 12, 2006,
         effective November 1, 2005, Baker and Johnson agreed to forbear
         collection of the indebtedness of the company to it until July 21, 2007
         and the Warrant was amended to delay the exercise date until July 1,
         2006 and the call date to August 1, 2006.

(8)      On February 19, 2003, the Company issued 3,000,000 shares of the
         Company's Common Stock to Mark Neuhaus, Chairman and CEO of the Company
         (SEE EXHIBIT 99.8). The shares represent $150,000 of stock compensation
         for 2003, and were registered under an S-8 Registration Statement under
         the Securities Act of 1933.

(9)      On February 19, 2003, the Company issued 1,500,000 shares of the
         Company's Common Stock to Ned Baramov, Secretary - Treasurer (SEE
         EXHIBIT 99.7). The shares represent $75,000 of stock compensation for
         2003, and were registered under an S-8 Registration Statement under the
         Securities Act of 1933.

Controlling Persons

Mark S. Neuhaus, as a director and Chief Executive Officer of TX Holdings, the
owner of a 50% interest in MA&N LLC and the owner of shares of TX Holdings, all
as reflected in Items 9 and 11 hereof; Nicole B. Neuhaus as the owner of a 50%
interest in MA&N LLC as reflected in Item 11 hereof, and MA&N LLC as the owner
of shares of TX Holdings as reflected in Item 11 hereof, may all be deemed to be
controlling persons of TX Holdings. There are no agreements or understandings
between any of the foregoing that they will act as a group, although from time
to time they may act in concert.

                                       64
<PAGE>

Item 13 Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>

     EXHIBIT
       NO.                               DESCRIPTION
-------------------       ------------------------------------------------------------------------------------------
<S>    <C>                                                <C>
       2.1                Stock Acquisition Agreement for 51% of the outstanding and issuable Common Stock of R
                          Wireless Corporation dated December 12, 2002 by and between MA&N LLC and R Wireless
                          Corporation (Exhibit B omitted, to be furnished upon request of the Commission) (1)
       2.2                Sale of Assets Agreement dated November 15, 2002 between HOM Corporation and Stuckey
                          Enterprises (list of assets omitted, to be furnished upon request of the Commission) (1)
       2.3                Stock Acquisition Agreement dated September 4, 2003 between Jim Evans, R Wireless, Inc.
                          and Homes by Owner, Inc.
       2.4                Escrow Agreement dated September 4, 2003 between Jim Evans, R Wireless, Inc., Homes by
                          Owner, Inc. and David Baker. (11)
       2.5                Extension Agreement dated March 5, 2004 between Jim Evans, R Wireless, Inc., and Homes
                          by Owner, Inc. (12)
       3.1a               Composite Articles of Incorporation of R Wireless,
                          Inc, as amended to reflect the change of name from HOM
                          Corporation, effective January 22, 2003 (3)
       3.2                By-Laws of HOM Corporation as adopted December 12, 2002 (13)
        4                 Instrument defining rights of holders (See Exhibit No. 3.1a, Articles of Incorporation -
                          Article Four)
       4.2                Warrant to Purchase Shares of Common Stock of R Wireless, Inc. issued to Baker, Johnston
                          and Wilson LLP, dated July 21, 2005
       10.4               Agreement to Merge - Freedom Homes, Inc. - Homes By Owners, Inc., dated March 24,
                          2005(6)
       10.5               Forbearance Agreement between David R. Baker, Baker, Johnston & Wilson LLP, and R
                          Wireless, Inc., dated as of July 21, 2005
                          Services Settlement Agreement between David R. Baker and R Wireless, Inc., dated August
                          1, 2005
       10.6               Amendment to Forbearance Agreement and Warrant between Baker & Johnston LLP, and TX
       10.7               Holdings, Inc., dated as of November 1, 2005
       16.1               Letter of Elliott Davis LLC (8)
       21.1               List of Subsidiaries of R Wireless, Inc. (2)
       31.1               Certification of Mark Neuhaus, CEO of TX Holdings, Inc.
       31.2               Certification of Michael A. Cederstrom, Esq., CFO of TX Holdings, Inc.
       32.1               Certification of Mark Neuhaus pursuant to Section 1350
       32.2               Certification of Michael A, Cederstrom, Esq., pursuant to Section 1350
       33.1               R Wireless, Inc. Code of Ethics adopted February 24, 2004 (7)
       99.7               Employment Agreement between Registrant and Ned Baramov dated January 15, 2003 (5)
       98.8               Employment Agreement between Registrant and Mark Neuhaus dated January 15, 2003 (5)
       99.9               Retainer Agreement between Registrant and Donald N. Rizzuto, Attorney and Counselor at
                          Law dated January 15, 2003 (5)
      99.10               Employment Agreement between Registrant and Darren Bloom dated August, 2005(9)
</TABLE>

(1)      Incorporated by reference to the exhibit as filed with Form 8-K of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         December 27, 2002.

(2)      Incorporated by reference to the exhibit as filed with Form 10-SB of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         February 9, 2001.

(3)      Incorporated by reference to the exhibit as filed with Form 10-QSB of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         February 19, 2003.

(4)      Incorporated by reference to the exhibit as filed with Form 10-SB/A2 of
         R Wireless, Inc., with Securities and Exchange Commission filing date
         of August 31, 2001.

(5)      Incorporated by reference to the exhibit as filed with Form S-8 of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         February 19, 2003.

                                       65
<PAGE>

(6)      Incorporated by reference to the exhibit as filed with Form 8-K of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         March 31, 2005.

(7)      Incorporated by reference to the exhibit as filed with Form 10-KSB of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         March 12, 2004.

(8)      Incorporated by reference to the exhibit as filed with Form 8-K of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         August 19, 2005.

(9)      Incorporated by reference to the exhibit as filed with Form 13D of
         Darren Bloom with Securities and Exchange Commission filing date of
         December 14, 2005.

(10)     Incorporated by reference to the exhibit as filed with Form 10KSB/A of
         R Wireless, Inc., with Securities and Exchange Commission filing date
         of March 12, 2004.

(11)     Incorporated by reference to the exhibit as filed with Form 10KSB/A of
         R Wireless, Inc., with Securities and Exchange Commission filing date
         of March 12, 2004.

(12)     Incorporated by reference to the exhibit as filed with Form 10KSB/A of
         R Wireless, Inc., with Securities and Exchange Commission filing date
         of March 12, 2004.

(13)     Incorporated by reference to the exhibit as filed with Form 10KSB of R
         Wireless, Inc., with Securities and Exchange Commission filing date of
         January 14, 2003.

Reports on Form 8-K

Nicole B. Neuhaus' resignation from the Board of Directors as of November 4,
2003, filed with the Security and Exchange Commission on December 12, 2003.

Agreement to Merge between Homes and Freedom as of March 25, 2005, filed with
the Security and Exchange Commission on March 31, 2005.

Changes in R Wireless' Certifying Accountant as of August 9, 2005 - Elliott
Davis LLC dismissed and Ham, Langston & Brezina LLP engaged; filed with the
Security and Exchange Commission on July 19, 2005.

Forbearance Agreement with Baker, Johnston & Wilson LLP as of July 21, 2005;
Resignation of Ned Baramov as of June 24, 2005, and appointment of Darren Bloom
as member of the Board and Chief Financial Officer; filed with the Security and
Exchange Commission on July 25, 2005.

Appointment of Mr. Douglas Hewitt of Hewitt Energy Group and Mr. Bobby Fellers
of The Masada Oil and Gas Companies as a member of the Board; Appointment of Mr.
Michael Cederstrom as Chief Financial Officer; Resignation of Darren Bloom from
positions as Director, Secretary/Treasurer and Chief Financial Officer; filed
with the Security and Exchange Commission on March 28, 2006.

Acquired first producing oil and gas lease. TX Holdings acquired a 75% working
interest in the "Parks" Lease for 320 acres with approximately 22 existing wells
and estimated reserves of 12M to 13M barrels; filed with the Security and
Exchange Commission on April 11, 2006.

Private Placement Agreement with Brill Securities, Inc. Under the terms of the
agreement, Brill Securities will act as financial advisors for the Company's
private placement offering; filed with the Security and Exchange Commission on
May 16, 2006.

Commencement of legal proceedings against former CFO Darren Bloom in TX
Holdings, Inc. v. Darren Bloom, Case No. 06-14396CA04, 11th Judicial Circuit
Court, Dade County, Florida; filed with the Security and Exchange Commission on
July 31, 2006.

Hiring of W.A. "Bill" Alexander as Chief Operating Officer of TX Holdings, Inc.;
filed with the Security and Exchange Commission on August, 2, 2006.

                                       66
<PAGE>


Item 14 Principal Accountants Fees and Service

The aggregate fees we paid to Ham Langston & Brezina, LLP for the years ended
September 30, 2006, 2005 and 2004 were as follows:

                                              2006          2005         2004
--------------------------------------------------------------------------------
Audit Fees                                $
Audit-Related Fees
Total Audit and Audit-Related Fees

Tax Fees
All Other Fees
Total                                     $

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    TX HOLDINGS, INC.


                                    By: /s/ Mark Neuhaus
                                        Mark Neuhaus
                                        Chief Executive Officer

Dated: December 22, 2006

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>

<S>                                                                                                 <C>
           /s/ Mark Neuhaus              Chairman of the Board of Directors,             December , 2006
           ----------------                and Chief Executive Officer
             Mark Neuhaus

       /s/ Michael A. Cederstrom               Chief Financial Officer                   December , 2006
       -------------------------
         Michael A. Cederstrom

         /s/Douglas C. Hewitt                         Director                           December , 2006
         --------------------
           Douglas C. Hewitt

          /s/Bobby S. Fellers                         Director                           December , 2006
          -------------------
           Bobby S. Fellers
</TABLE>


                                       67